Posted on 02/12/2005 2:20:01 PM PST by SheLion
Concerned about the booming trade in online cigarette sales, New York state officials have begun using a variety of techniques to clamp down on the trade, saying New York City alone is losing more than $75 million a year in uncollected tax revenues because of the sales.
In recent weeks, Attorney General Eliot Spitzer has been pushing local postal officials and private carriers to stop delivering cigarettes bought online. His office has also recently begun negotiations with credit card companies to block transactions of online cigarettes.
These efforts were given added push recently as local officials from the federal Bureau of Alcohol, Tobacco, Firearms and Explosives met with credit card executives to alert them to the various ways in which these transactions are illegal.
"The tone was very cordial and unthreatening," said a city official who participated in the presentation three weeks ago at the bureau's office in Brooklyn. "But in the end they made it crystal clear that now that the credit card companies understood the law, they would be held accountable for processing these transactions."
Mr. Spitzer emphasized that the effort has as much to do with health as money. "These sales present a significant threat to public health because they provide easy access to cheap cigarettes, which increases smoking rates, particularly among children," he said. "These illegal sales also evade state tax requirements."
Whatever their motivation, city and state officials are broadening their efforts to eradicate the business.
Two weeks ago, a judge ruled in one of the city's four lawsuits against online sellers that the city can file a revised racketeering lawsuit against Internet cigarette sellers. The ruling was the first time a federal judge has indicated that Internet sellers can be charged under federal racketeering law, said Eric Proshansky, the city's chief lawyer on the case.
After gleaning the names and the addresses from a Virginia lawsuit against one online cigarette company, the city began sending letters last month to more than 2,600 New Yorkers who officials say bought tax-free cigarettes. The letters, sent to those who bought cigarettes online from July 2002 to April 2004, give the alleged violators 30 days to pay or face interest and penalties of up to $200 a carton.
In November, local law enforcement seized 300,000 cartons of illegal cigarettes at Kennedy International Airport. Joseph G. Green, a spokesman for the A.T.F., said that the seizure was the culmination of a yearlong investigation jointly conducted by the Queens district attorney's office; federal Bureau of Alcohol, Tobacco, Firearms and Explosives; postal inspectors; and city and state tax and finance officials.
Sam Miller, a spokesman for the city's Department of Finance, said that the city loses more than $75 million a year as people duck local taxes by purchasing online. But the crackdown has drawn some criticism.
"New York is simply trying to engage in economic protectionism by limiting cigarette sales to brick-and-mortar sellers," said James L. Bikoff, a lawyer who represents several Internet tobacco sellers. "Most of the folks who are in the online cigarette business are small outfits and they typically advise the consumer to check with their own city and state's laws regarding tax rules."
New York City smokers pay the highest cigarette taxes in the country, as the state charges a $1.50 tax per pack and the city adds an additional $1.50 tax per pack. A carton of cigarettes in the city costs about $70, including $33.30 in excise and sales taxes. Online, cigarettes cost as little as $15 a carton.
Thus far, the city and the state have met with mixed results in their efforts to control the online traffic in cigarettes.
Some banks that process MasterCard transactions have begun blocking sales from certain Internet tobacco sites to customers, said Joshua Peirez, a senior vice president at MasterCard. But other banks do not. American Express currently has no policy that blocks Internet cigarette sales, said Christine Elliott, a spokeswoman for the company.
After sending a letter to credit card executives in August, Mr. Spitzer joined several other state attorneys general to send another letter pressing credit card companies to stop the transactions.
Both letters cited several reasons for the failure of Internet tobacco sellers to comply with applicable laws, including that they make no effort to verify the age of their customers and fail to report shipment of cigarettes to the tobacco tax administrator of the state into which shipments are made.
While the United Parcel Service and other private carriers have been more open to the idea of blocking the delivery of these packages, postal officials have balked at pressure from Mr. Spitzer's office, claiming that they do not have the legal authority to stop the shipments, according to city officials who have been part of the discussions. But Mr. Spitzer's office contends that the postal service indeed has the authority under federal laws that prohibit mail fraud schemes, according to a letter sent by the office.
New York State passed a law that took effect in 2003 prohibiting online and mail-order sales of cigarettes to its residents. The law was largely intended to curb tax evasion and under-age smoking, since many online cigarette sites do virtually nothing to verify the age of customers.
Efforts to stop online sales are complicated, since Internet sites are sometimes based abroad and are therefore difficult to prosecute. City officials estimate that about 80 percent of the online cigarette sales come from sites that claim Indian affiliation, which for sovereignty reasons claim immunity from laws like the Jenkins Act.
ROFL!!!!!
Now I know, 1975 is the current year for us 29 yo's!
I'm not a 1975 baby - I'll just be celebrating the 16th anniversary of my 29th b'day this year!!!
Good going ace!!!
29 INDEED!!!
I have a bad habit of doing that, don't I????
For some strange reason, every year it gets more and more difficut to do the math!!!
LOL
;-)
Every time I cross paths with you at FR it always ends with basically the same statement.
I must put you to sleep Gabz!
LOL...
They have been doing this for 2 or 3 years that I can remember.
I don't know if they (Spitzer et al) have actively persued anyone for NOT reporting or paying, but the question is there.
Do I dare ask........Graduate from WHAT?
(I guess I just dared)
I'll let YOU do the footwork for me!
It's by far to my advantage!
I won't tell you how I did it - I promise!!!!!!!!!
Men...humppppphhhhhhhhh.
Night toots', all!
From High School, my shoulder length hair, my Gibson SG guitar, my skates and hockey stick, my polyester "leisure suites", and my "I don't give a sh!t attitude"!
I'm still however working on my male/female companionship issues which have lately been treating me very well.
LOL..I just realized my mistake!!!
HA....1976.
There IS a reason I am an office assistant and NOT a mathematician!!! ;-)
I hate when my ISP cuts me off..........I had wonderful repartee to you and now it's gone.......
sheesh.
No, my FRiend you don't put me to sleep. I do happen to have to be up early tomorrow morning, because hubby has a very early service call 50 miles away.......and I can't trust remaining asleep with the 6yo and 2 dogs romping around with no supervision - they love it, I hate the aftermath!!!
But I'm not going anywhere real soon.
I appreciate your kind words Neets.
All this time I thought it was just me alone!
Now I understand that I can just blame it on my sex!LoL!
Have a wonderful night and sleep well my FRiend!
EG
Good Lord FRiend!
Stop while your ahead for crying out loud!
You had it right the first time!
story of my life!!!
Spitzer and his ilk have probably made noise about it, but they don't do anything about it until it comes to cigarettes.
The main reason is exactly why smoker bans and smoker taxes get by with "overwhelming" support.....smokers will not get together and form a voting bloc. And small business owners take the attitude "it won't happen here".....
Nite my FRiend.
does this mean I'm stuck with the EG???????? On my own????
My apologizes for my dry humor.
I was just being myself and dripping with sarcasm.
ROFLMAO!!!!!!!
You old man you.........I was class of 78.
You are a piece of work.
I LOVE your humor!!!!!!!
and I adore sarcasm........I drive my husband nuts with it. but he drives me nuts with his dry humor.
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