Philip Morris is despictable. I wish everyone who smoked their products would smoke something else. I wish PM would just sell their cheese and shut the hell up!
Posted on 07/29/2002 4:02:37 PM PDT by SheLion
CHICAGO -- As state and local taxes on their cartons and hard packs waft ever higher, smokers who would rather fight than quit are trying to stave off nicotine fits without breaking the bank.
Politicians in 17 states have raised tobacco levies this year, but nowhere is the challenge of finding reasonably priced cigarettes more difficult than in New York City, which on July 1 raised its cut of the action to heretofore unheard of levels.
The results may please public-health advocates and money-conscious state and local legislators as smokers pay more for their favorite brands. In a win-win situation, the new taxes will induce people to kick the habit while filling state coffers at the same time.
Or not.
Turns out that circumventing the increased duties -- and the goals of those who support them -- can be as easy as firing up a browser or picking up the phone.
Online tobacco sales have been around for as long as e-commerce itself, but there has been an explosion in the number of cigarette-selling Web sites in recent months. With prices sometimes less than half typical retail, these companies operate largely in low-tax states or from the safe harbor of Indian reservations.
The federal government currently gets $3.90 per carton, a sum collected from the manufacturers. Smokers in states such as Virginia and Kentucky, with extra tariffs of 25 cents and 30 cents, respectively, are unlikely to bother with mail order. But in New Jersey ($15), Washington ($14.25), Connecticut ($11.10) and Illinois ($9.80), buying on the Web is looking better and better.
In New York City, it's a no-brainer. The whopping $15 per carton increase -- on top of a state tax of $15 -- means that a pack of Marlboros costs about $7. A moderate smoker is now looking at spending 50 bucks a week, or $2,600 per year, to keep the lungs full. Some folks may give up the cancer-sticks; others find alternative merchants.
And some of the biggest of them are, ironically, located within the Empire State -- albeit on the "sovereign territory" of the Seneca Nation -- and they can barely keep up with demand.
'Holy cow!'
Only one of the half-dozen online tobacco sellers contacted by CBS.MarketWatch.com would talk about their business on the record -- or off it, for that matter.
Bob Benzing, a spokesman for CigarettesExpress, said "we did see an increase in our business when the tax went on. We are now seeing a leveling-off, but at a higher-level than before."
One constraint to growth, however, is that "it is difficult to change people's buying habits of one pack at a time."
A woman who answered the phone at another company was less restrained. "Holy cow! You wouldn't believe how much business we got because of that new tax" she said. "Ummm, I better ask the general manager to call you."
Last week, a journalist living in Manhattan ordered cartons of American Spirit cigarettes from three different online retailers: Cigarettespecials.com, Senecasmokes.com and CigarettesExpress.com.
Each charged just over $36, including shipping, which came to barely half the cost at his local store. Two orders arrived right on time; one was slightly delayed.
According to an apologetic e-mail from CigarettesExpress, "normally, we ship all orders on the next business day after the order is placed. However, due to the new $15 [per] carton tax that took effect in New York City last week, our supplier has been overwhelmed with orders, and has run out of stock of several popular brands."
Another recent purchaser is Steve, a 25-year, pack-a-day Brooklynite. Instead of $7 and up, he said he pays between $3.50 and $3.80 per pack from Cigarettewizard.com.
"Why wouldn't you do it? It's a bargain," he said. "Of course, I would save a lot more if I just quit. But I am not going to just because some politician is twisting my arm."
In the meantime, he said, he has had no problems getting the product on time and as promised. His main complaint is "that if I am not on top of it, I may have to go two or three days buying locally."
More task than force
In theory, he and the thousands of other New Yorkers who have turned to mail order for their tobacco needs could end up on the hook for local taxes -- if the city can figure out how to make them pony up.
The law was one of Mayor Michael Bloomberg's pet projects; he signed it on June 30 with much fanfare, claiming that it will both save lives and generate $111 million in additional revenues next year.
Officials at the New York City Department of Finance could not be reached for comment, but a spokesman for the mayor said such scofflaws may soon be the targets of a special "task force."
Trouble is, it could be more task than force. While some retailers are supposed to turn over customer lists to state and local regulators, few do -- and many brag that they will not reveal them to anyone.
It is not an idle boast.
While a change in federal law, or a successful legal challenge, could compel compliance, tobacco shops located on Indian ground fall well outside of state jurisdiction, and the Senecas have a proud tradition of beating New York in court.
Benzing confirmed that while no one has tried to get his company's customer lists, it has no intention of ever giving them out.
Bill Williams is the founder of Smokinglobby.com, an anti-tax and smokers' rights site where the relative merits of online tobacco retailers are often discussed. He also lives in New York and has been buying his cigarettes online for about two years. Prices have held steady over that time, and he has never had any trouble getting his deliveries.
"Why in the world would I pay so much state tax when I can get them somewhere else?" he said.
Williams said he believes that at least some new online buyers are not only being thrifty but also engaging in a "a form of protest against being singled out by New York City for extra taxation."
And he worries not at all about a knock on the door, confident that "if there is a crackdown, it will have to be done at the federal level."
Manufacturers cautious
The other players in this unfolding drama, of course, are the manufacturers. Big Tobacco has taken quite a beating in the press and in courts over the last few years and takes a cautious stance on this subject.
A spokesman for Philip Morris said it discourages online sales of its products, mostly because of age-verification questions. The company has asked several online retailers to remove its products for that reason, he said, and some, though by no means all, have done it.
At No.2 R.J. Reynolds a spokesman said the company does not have set policy with its distributors about online sales but "we will not support them" with advertising, promotions, artwork or any of the other traditional retail back-up.
However, the boom "is not something that comes as a surprise. We pointed out at the time that with huge tax increases...chances are you are going to see more online sales and cross-border sales."
It IS still a free Country, Kid.
What an idiot.
And he doesn't mean a word of it.
Philip Morris is despictable. I wish everyone who smoked their products would smoke something else. I wish PM would just sell their cheese and shut the hell up!
Becki
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