Posted on 08/03/2005 3:32:02 PM PDT by elkfersupper
OLYMPIA – Grady Russell thought he'd found a great bargain.
A smoker for more than six decades, the retired Ephrata, Wash., carpenter found an Internet company two years ago that sold cigarettes – taxed at the ultra-low Kentucky rate – for slightly more than $1 a pack. Delighted with the savings, Russell started placing orders, 10 cartons at a time.
Then, last year, he got a letter in the mail. The state Department of Revenue told him he owed Washington taxes on all those cigarettes.
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"I hate it," Russell said. But he paid up, dutifully calculating the number of shipments and sending in about $160 in state taxes for each one.
"It was thousands" of dollars, he said. "I'm afraid not to pay it."
He's not alone. Over the past 16 months, Washington tax collectors have sent out more than 8,000 letters like the one Russell got. So far, the state has collected more than $150,000 in unpaid cigarette taxes.
The money is only a tiny fraction of the estimated $140 million the state thinks it loses to contraband cigarettes each year. But collecting back taxes, a Department of Revenue spokesman says, is secondary to the state's larger goal: discouraging Washington residents from trying to avoid state taxes by buying tobacco over the Internet.
"What we're trying to do is educate people so they realize they're breaking the law," said spokesman Mike Gowrylow. The first letter requesting payment "is kind of voluntary," he said.
"We ask you to be a good citizen and pay it, but we don't send it to Collections," Gowrylow said. "But if we see your name again, we will."
Under state law, anyone found in possession of cigarettes without either a Washington state or state-authorized tribal tax stamp is subject to a fine of $250 or $10 a pack, whichever is greater.
Critics – including Russell – say the state simply is targeting an unpopular minority: smokers.
"Why aren't they going after the people who buy wine or tennis shoes or every other product sold over the Internet?" said Norman Kjono, a Redmond, Wash.-based columnist for www.forces.org, an advocacy group opposed to anti-tobacco and anti-obesity regulations.
"Smokers are always the easy, politically safe, no-backlash constituency to leech more money from," Kjono said.
Three years ago, Washington filed its first lawsuit against Internet tobacco dealer www.dirtcheapcig.com. The company – which billed itself as "the last refuge of the persecuted smoker" – was based in Paducah, Ky., where cigarette taxes are less than 3 cents per pack. (Washington's tax recently rose to more than $2.02 per pack.) Smokers like Russell paid the Kentucky tax but not the Washington tax.
Washington turned to a rarely used federal law from 1949: the Jenkins Act. Aimed at mail-order sales, the law requires tobacco companies to disclose lists of their customers in other states.
In recent years, the number of Internet-based tobacco sellers has mushroomed – a 2002 search by the Government Accounting Office found 147 such Web sites. Nearly a third assured buyers that they didn't report purchases to state tax officials.
The federal Internet Tax Freedom Act prohibited new or discriminatory taxes on Internet ventures out of concern that taxes might squelch technological growth. But according to the state and the GAO, the law doesn't shield companies from existing tax laws such as the Jenkins Act. Washington won its case.
Since then, several other larger Internet vendors have turned over lists of Washington customers. In a nationwide first, a tobacco seller based on Seneca Nation of Indians reservation land in New York agreed earlier this year to provide customer names.
"It is our intention to continue to file lawsuits," said Gowrylow. "We've got another one in the works." Against whom, he wouldn't say.
State attorneys general also have gotten several major credit card companies to stop letting people charge cigarette purchases online. And some shipping companies have agreed to stop carrying them, Gowrylow said.
Kjono agrees that the state taxes are due, but he predicts a political backlash from smokers. He says that if you count "social smokers" – peo-ople who might have a couple of cigarettes while drinking at a bar – about a quarter of Washington consumers can be considered smokers. Unfairly targeting smokers, he says, is chilling Internet commerce and angering voters who happen to smoke.
"It's not going to work that much longer," Kjono said.
In a surprise move last week, Wisconsin Gov. Jim Doyle ordered the Wisconsin Department of Revenue to stop trying to collect seven years' worth of back taxes from people who bought from five online vendors.
"We had anticipated collecting about $3 million," said Meredith Helgerson, a department spokeswoman. The state had sent letters to about 1,000 Wisconsin residents and planned to write to 5,000 more.
"It's a legal and legitimate tax claim by the department, ... but the governor gave us a directive to halt, which we have," said Helgerson.
Doyle is "outraged" by the sale of cigarettes online and would like to see such sales banned, according to spokesman Dan Leistikow.
"He thinks it's a good thing that the state has taxes on tobacco, whether it's sold in a store or on the Internet, but that it's not a good use of resources to have the state going after a 70-year-old grandmother who bought a few cigarettes on the Internet," Leistikow said.
As for Russell, he now buys his Pall Mall Ultralight 100s at the grocery store, a pack at a time. At 73, he said, he feels no ill effect from decades of smoking.
He's trying to cut back but says he enjoys his longtime habit too much.
"Once you're in your 70s, you want to enjoy yourself and keep yourself comfortable," he said. "After you've smoked as long as I've smoked, quitting them is like quitting breathing."
That could get the indians to get out of the casino business!
But really, Missouri (under dim gov's) tried to make the missouri tax payer pay an extra fee for buying goods and services out of state over the internet. Their premise was lost capitol for missouri businesses. What a crock! More people make AND save money!
Didn't Michigan or Wisconsin recently try this same stunt with back taxes on cigs? The gov'r reneged but those who had already paid would not get their money back.
I actually have some faith that this will all work itself out. See link at #34
Uh...cool shit? LOLOL
In Wisconsin (I can't say for sure about other states) it is the LAW that you file a state sales and use tax form with your regular personal state income tax return.
It is a line item that asks you to enumerate how much you spent on out of state purchases and then figure what the WI taxes are that you avoided paying and then pony up . . . .
I imagine they would have trouble enforcing it, but it's there nonetheless.
VA passed a law in 1969, and it's still on the state income tax forms, for you to pay the VA sales tax on goods bought out of state. I say "blank 'em"! When I bought the goods in another state, I paid THEIR sales tax, and when people from other states come here, they pay ours. Seems like a fair trade to me....
But after 25 years of smoking, I got cancer followed by pneumonia and I quit.
I still miss smoking...every day. I suppose it's the price I pay for damn near annihilating my health of my own free will.
I'm sure organized crime will step in to help consumers get what they want without the government's interference. They did just that during Prohibition.
So if a person stops at a store in Portland, Oregon, and buys a pack of cigarettes, and then gets pulled over by the police in Vancouver, Washington, and they notice his cigarettes, then that person is subject to a fine???????????????????????
I have also been told by residents of Alabama, that there is a line on the Alabama state tax return for you to list and pay taxes on any items you purchas out of state. So, if you take a trip down to Florida, you are supposed to report and pay taxes on what you buy. Ummmm....when donkeys fly.
I'm in MN and I know our state (and probably all) say your supposed to file for sales made on Ebay as well. I'm sure everybody does, right?
Yes it will. Read the book about it. The actual cost of products will remain about the same. The sales taxes will replace the embedded taxes. Additionally, the fair tax doesn't call for 30%. It calls for about 23%, which is about what we pay in embedded taxes on all products. You do understand that businesses do not pay taxes? They collect them from individuals who buy their products.
There's trouble on the streets tonight,
I can feel it in my bones.
I had a premonition,
That he should not go alone.
I knew the gun was loaded,
But I didn't think he'd kill.
Everything exploded,
And the blood began to spill.
So baby, here's your ticket,
Put the suitcase in your hand.
Here's a little money now,
Do it just the way we planned.
You be cool for twenty hours
And I'll pay you twenty grand.
I'm sorry it went down like this,
And someone had to lose,
It's the nature of the business,
It's the smuggler's blues.
Smuggler's Blues
The sailors and pilots,
The soldiers and the law,
The pay offs and the rip offs,
And the things nobody saw.
No matter if it's heroin, cocaine, or hash,
You've got to carry weapons
Cause you always carry cash.
There's lots of shady characters,
Lots of dirty deals.
Ev'ry name's an alias
In case somebody squeals.
It's the lure of easy money,
It's gotta very strong appeal.
Perhaps you'd understand it better
Standin' in my shoes,
It's the ultimate enticement,
It's the smuggler's blues,
Smuggler's blues.
See it in the headlines,
You hear it ev'ry day.
They say they're gonna stop it,
But it doesn't go away.
They move it through Miami, sell it in L.A.,
They hide it up in Telluride,
I mean it's here to stay.
It's propping up the governments in Columbia and Peru,
You ask any D.E.A. man,
He'll say There's nothin' we can do,
From the office of the President,
Right down to me and you, me and you.
It's a losing proposition,
But one you can't refuse.
It's the politics of contraband,
It's the smuggler's blues,
Smuggler's blues.
Since when has it been constitutional for a State to tax, place tariffs and regulate interstate commerce?
Oddly enough, they're only going after tobacco, not other goods"<<<
Just step one, they will get around to everything else in due time.
It's the government trying to protect us from ourselves. If they punish smokers hard enough, they'll quit smoking. Well.....that's happening in big time numbers. They just raised the tax another 60 cents a pack. They have to, because there are fewer smokers now to pay the tax. When there are no more smokers, golly gee Wally, where will the government get the money? You don't suppose they'll start putting extra taxes on other stuff, do you? Like cheeseburgers and soda pop? Those are supposed to be bad for you, too. How about skateboards and roller blades? People get hurt on those things, y'know. Gosh, it sure is swell that the government wants to take such good care of us!
>>>"it sure is swell that the government wants to take such good care of us!"<<<
It is amazing that these Politicians never think about "cutting spending" I think I can help them
(1) Term Limits so they have no reason to spend "our" money to buy votes.
(2) A Law that I can support would be that nothing, no Highways, Schools, Bridges, Buildings etc etc etc can be named after any Politician or former Politician until the SOB (or SOB'et) has been dead for at least 20 years.
(3) Fair Tax (one of the things the Fair Tax will do is discourage "Social Engineering")
TT
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