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Oregon Smokers Beware: Web tobacco buyers targeted for back taxes by state
United Pro Smoker's Newsletter ^ | June 23, 2006

Posted on 06/25/2006 8:10:40 PM PDT by SheLion

The state moved to expand its pursuit of tax dollars from smokers who buy cigarettes over the Internet.

The Department of Revenue — at a cost of $88,000 — sent tax bills late last year to 7,500 smokers who bought cigarettes online without paying Oregon’s tax of $1.18 a pack. Roughly 33 percent of the people who received letters paid their taxes, generating $686,000.

On Thursday, a subcommittee of the Legislative Emergency Board gave preliminary approval to the Department of Revenue to spend another $240,000 to send letters to people listed on another 23,000 invoices.

The full Emergency Board, which doles out money when the full Legislature is not in session, is expected to approve the spending.

State Sen. Frank Morse, R-Albany, noting that an 8-to-1 return is enticing, asked agency officials if even more could be invested in such efforts.

“Are there any additional taxes that could be collected that we are not?” he asked.

There could be.
The state is receiving copies of about 1,400 invoices a month from several online dealers, the Department of Revenue said.

Internet cigarette sellers offer cheaper rates in part because they do not collect state taxes. Under legal pressure, they began turning over customer data to states a year ago. A federal law prohibits retailers from delivering tobacco products across state lines without reporting their sales.

Elizabeth Harchenko, the director of the revenue agency, said it’s impossible to say whether the next group of invoices will yield a similar amount of taxes. While only a third of people responded to the first letters, nobody has the option of not paying, she said.

Those who get a letter and do not pay go into the state’s catalog of people who are delinquent on taxes, and will face fines, penalties and interest.

Cigarette taxes in Oregon add up to about $235 million a year, with about half of the money helping to pay for subsidized health care. The money also goes to smoking cessation efforts, cities and counties, and to the state general fund.

The state estimates 500,000 Oregonians are smokers, and that 3 percent of them are buying their cigarettes over the Internet.


TOPICS: Culture/Society; Government; US: Oregon
KEYWORDS: anti; antismokers; augusta; bans; budget; butts; camel; caribou; chicago; cigar; cigarettes; cigarettetax; commerce; epa; fda; governor; individual; interstate; kool; lawmakers; lewiston; liberty; maine; mainesmokers; marlboro; msa; niconazis; osha; pallmall; pipe; portland; prosmoker; pufflist; quitsmoking; regulation; rico; rights; rinos; ryo; sales; senate; smokers; smoking; smokingbans; taxes; tobacco; winston
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To: dalereed
All the dealers that aren't indian reservation connected are forced by law to turn over copies of their sales.

There is a conflict with this.  I have heard that there are several online Smoke Shops that do 'not' turn in anything to the states/FEDS.  Wonder why some do and most don't?

21 posted on 06/26/2006 3:23:57 AM PDT by SheLion ("If you're legal, you can fly with the Eagle!" - Michael Anthony)
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To: DannyTN; DemforBush
It's legal because most states don't have just a sales tax but have a sales and use tax. The use tax basically says that you are responsible for reporting and paying the tax on anything you buy if the seller doesn't collect the tax from you.

Then how come reputable online company (like JC Penny) will add the state tax (such as Maine, when they have an outlet in the state), and make it their responsibility instead of the consumer?

Why is it just the tobacco dealer's that refuse to do this, leaving the consumer out there flapping in the wind?  If a store has an outlet in said state, and when an order is placed over the internet from said company, then the company will add on the state tax.  The consumer doesn't have to bother with it.

Yet, just because it has to do with tobacco and screwing the smokers, smokers who order off of the internet are made to believe this is their responsibility.  How quaint.

22 posted on 06/26/2006 3:27:59 AM PDT by SheLion ("If you're legal, you can fly with the Eagle!" - Michael Anthony)
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To: pennyfarmer
Better hop on that one. Just cause joe shmo got smokes for a buck cheaper you better hack off his arms cause he didn't pay into your crappy cessation course that works as good as a few episodes of sponge bob. GET A GRIP. No one really cares if I smoke or don't smoke. Actually the only ones that care are those making money on their cessation courses.

Cigarettes:  the only legal commodity we can buy and yet are made to feel like criminals for using it!

23 posted on 06/26/2006 3:30:01 AM PDT by SheLion ("If you're legal, you can fly with the Eagle!" - Michael Anthony)
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To: The Brush
Smoking is a choice that could kill you, abortion is a choice that will kill someone else.

Do you want to hear a good laugh?  I was listening to Fox News last night.  They gave the census of how many people are in the United States.  I should have written down the number.  But it's enormous  And they say we are multiplying by 1 every "5" minutes.

So!  If smoking and second hand smoke is killing everyone, why are we at a record high for human beings living in America?  The anti's talking out of both sides of their mouths again! heh!

24 posted on 06/26/2006 3:33:02 AM PDT by SheLion ("If you're legal, you can fly with the Eagle!" - Michael Anthony)
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To: SheLion
"Then how come reputable online company (like JC Penny) will add the state tax (such as Maine, when they have an outlet in the state), and make it their responsibility instead of the consumer?"

Because when they have an outlet in the state, the state can audit them wherever their headquarters is. The state has power over them. A state can't force a company in another state that doesn't have a physical presence in their state to report to them.

"Why is it just the tobacco dealer's that refuse to do this, leaving the consumer out there flapping in the wind?"

The tobacco dealers are required to report by law, according to another poster in this thread. If JCPenny didn't have outlets in your state, they would not collect the tax. It's not that they are more reputable, it's that they have physical presence in your state and are therefore required to submit to audits.

The law is unfair to the online tobacco dealers because it makes them report but not other online retailers.

25 posted on 06/26/2006 4:10:38 AM PDT by DannyTN
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To: IncPen

Oregon smokers that sounds like a Frisco title however still funny.


26 posted on 06/26/2006 4:16:29 AM PDT by Vaduz (and just think how clean the cities would become again.)
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To: SheLion

"and even some of our own FReepers think that it's ok to go after people just because they choose to smoke a legal commodity."

You got that right. Some 'FREE'pers.

Everyday I get more shocked by the nanny-state supporters and tax-lovers I see on this board. Un-real.


27 posted on 06/26/2006 4:37:46 AM PDT by 383rr ((those who choose security over liberty deserve neither; GUN CONTROL=SLAVERY)
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To: DannyTN

I think, a state can request/demand sales taxes in which the sale occures within the state's boundaries.
However, the majority of taxes on tobacco are EXCISE taxes. Both federal and state.
If I take a trip out of the country, say, to Jamaica, US Virgin Islands, or Bahamas, I can bring into the country 5 cartons of major brand cigs sans the federal excise taxes. Yes, I realize this is a very expensive way to bring in cigarettes. My question is, and it was not on the custom's form...How many cartons may I bring in personally per year or over ANY period of time?
Secondly, What is the difference of purchasing cartons during a trip, shipping them home, and purchasing cartons over the Internet for home delivery? The point of sale is still out of the jurisdiction of our federal burrocraps and the end use is still personal.
I would appreciate input...


28 posted on 06/26/2006 4:55:32 AM PDT by jcparks (LFOD)
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To: DannyTN
The tobacco dealers are required to report by law, according to another poster in this thread. If JCPenny didn't have outlets in your state, they would not collect the tax. It's not that they are more reputable, it's that they have physical presence in your state and are therefore required to submit to audits.

The law is unfair to the online tobacco dealers because it makes them report but not other online retailers.

 Thanks Danny.

29 posted on 06/26/2006 5:10:46 AM PDT by SheLion ("If you're legal, you can fly with the Eagle!" - Michael Anthony)
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To: 383rr

The anti-smoking crowd will think that this is just fine. But like you say, wait till they get hit up for online purchases like eBay and Amoazon, etc.


30 posted on 06/26/2006 5:17:16 AM PDT by caver (Yes, I did crawl out of a hole in the ground.)
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To: 383rr
Everyday I get more shocked by the nanny-state supporters and tax-lovers I see on this board. Un-real.

Yes.  And it really confuses 'me' as to what being a Conservative is really supposed to mean.  I could never tramp on a fellow Conservative for their legal views and the way they live their lives.  For one thing, I wasn't brought up that way.

31 posted on 06/26/2006 5:28:57 AM PDT by SheLion ("If you're legal, you can fly with the Eagle!" - Michael Anthony)
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To: Gabz; ancient_geezer; SheLion; All

I've no idea how this is done in other states. But on MY state tax form, you have ONE line to enter an amount of purchases for the year that need taxes paid. There is no itemization to show what the purchases were for.

Do other state have an itemization? How is a state determining someone hasn't paid taxes on Net purchases?


32 posted on 06/26/2006 5:32:05 AM PDT by Calpernia (Breederville.com)
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To: dalereed

>>>All the dealers that aren't indian reservation connected are forced by law to turn over copies of their sales.

Are you sure? Look at this:

Seneca Tobacco Faces Taxes Online [07/18-2]

Excerpts from: Seneca Tobacco Faces Taxes Online

By Jerry Zremski, Buffalo News [07/16/05]

The Internet tobacco sales empire based on Seneca Nation land suffered another big blow this week, as one of the tribe's biggest merchants agreed in federal court to turn over his customer list to tax authorities in Washington State who plan to collect sales taxes from those purchasers.

The decision in the case is believed to be the first in the nation forcing a Native American Internet retailer to help a state collect taxes on cigarette purchases.

Seneca merchant Scott Maybee agreed to the settlement with U.S. District Court Judge Franklin D. Burgess in Tacoma, Wash.

Tobacco opponents said the decision would encourage other states to pursue similar cases. And that would put even more pressure on online tobacco merchants, who are already suffering because many credit card companies are now refusing to do business with them.

If states follow Washington's path and are able to collect taxes from people who buy cigarettes on the Internet, the huge price advantage that Internet tobacco merchants have would quickly disappear.

"If this approach is followed by attorneys general in other states, it could have a very significant impact on curtailing cigarette sales," said Eric Lindblom, manager of policy research at the Campaign for Tobacco-Free Kids.

Lindblom said he was surprised that Maybee did not "try to use tribal sovereignty as a shield." Other Indian merchants have contended that tribal sovereignty the principle that Indian tribes are independent nations exempted them from taxation.

But Maybee's lawyer, Margaret A. Murphy of Buffalo, said she advised Maybee to comply with the law because tribal sovereignty clearly doesn't protect tribal merchants from the federal Jenkins Act, which forces all tobacco merchants to report out-of-state sales.


33 posted on 06/26/2006 5:37:12 AM PDT by Calpernia (Breederville.com)
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To: Calpernia

"Other Indian merchants have contended that tribal sovereignty the principle that Indian tribes are independent nations exempted them from taxation."

Seneca got trapped by NY because they are in the state, as for WA they should never have agreed to settle and used the above argument which seems to hold up.

I won't buy from a reservation in CA because if I did they would be forced to report the sale.


34 posted on 06/26/2006 5:43:12 AM PDT by dalereed
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To: SheLion
Oregon smokers who order off of the Internet need to find out just what DEALERS are turning in their customer lists!

Why? so they can be better tax cheats?

35 posted on 06/26/2006 5:45:57 AM PDT by Raycpa
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To: Raycpa

Ray! Did you see my post 32? That is your area no? Any insight?


36 posted on 06/26/2006 5:48:32 AM PDT by Calpernia (Breederville.com)
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To: SheLion
Then how come reputable online company (like JC Penny) will add the state tax (such as Maine, when they have an outlet in the state), and make it their responsibility instead of the consumer?

The reason is nexus. Nexus is established when an entity has a physical presence, like a store, salespeople or a warehouse. When it does, it is subject to the tax laws of that state.

37 posted on 06/26/2006 5:50:17 AM PDT by Raycpa
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To: Calpernia

Which state and I'll check what forms to use?

Keep in mind that many states apply two taxes to cigs. One is a tobacco tax and another is the sales tax.

Many states include a place on income tax returns to report sales tax but I never heard of one that provides for tobacco taxes.


38 posted on 06/26/2006 5:52:42 AM PDT by Raycpa
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To: Raycpa

I'm NJ. I have a line item on my tax form to report sales tax. I always fill that line in.

How does a state prove what I'm claiming if there is no itemization?


39 posted on 06/26/2006 5:54:19 AM PDT by Calpernia (Breederville.com)
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To: Raycpa

>>>One is a tobacco tax and another is the sales tax.

Shouldn't that be a line item then on the state tax form?


40 posted on 06/26/2006 5:55:18 AM PDT by Calpernia (Breederville.com)
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