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NYC:New York Hits Online Sellers of Cigarettes
New York Times.com ^ | 2-12-05 | IAN URBINA

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.


TOPICS: Culture/Society; Government; US: New York
KEYWORDS: addiction; antismokers; asthma; bans; buttout; butts; cigarettes; ecommerce; fda; hackingcough; individualliberty; lawmakers; maine; niconazis; professional; prohibitionists; regulation; rinos; senate; smoking; stench; taxes; tobacco
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To: conservative in nyc

I don't smoke cigarettes, but have I noticed that you can buy a carton of smokes for as little as $10 down here(Biloxi, Mississippi). What gives with the $70 a carton rip-off in New York? If I were a smoker, I'd vote with my feet!!


21 posted on 02/12/2005 2:44:27 PM PST by The Loan Arranger (The modern definition of 'racist' is someone who is winning an argument with a liberal.)
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To: gidget7

meant to say: "I have noticed"


22 posted on 02/12/2005 2:45:02 PM PST by The Loan Arranger (The modern definition of 'racist' is someone who is winning an argument with a liberal.)
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To: Reaganwuzthebest

Those lucky enough to live near Indian reservations in NY can get their smokes a lot cheaper as well.


Here's hoping if they try, the Indians raise holy hell! They are sovereign and do not have to comply with other government tax regulations.


23 posted on 02/12/2005 2:45:26 PM PST by gidget7
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To: conservative in nyc

I don't smoke cigarettes, but I have noticed that you can buy a carton of smokes for as little as $10 down here(Biloxi, Mississippi). What gives with the $70 a carton rip-off in New York? If I were a smoker, I'd vote with my feet!!


24 posted on 02/12/2005 2:45:36 PM PST by The Loan Arranger (The modern definition of 'racist' is someone who is winning an argument with a liberal.)
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To: SheLion

I don't smoke anymore - and I'm going to buy a carton online right now...


25 posted on 02/12/2005 2:46:26 PM PST by ApesForEvolution (I just took a Muhammad and wiped my Jihadist with Mein Koran...come and get me nutbags.)
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To: gidget7
Here's hoping if they try, the Indians raise holy hell! They are sovereign and do not have to comply with other government tax regulations.

That's why they're having such a hard time passing legislation, they haven't figured out a way to get past that pesky sovereignty issue yet.

26 posted on 02/12/2005 2:48:50 PM PST by Reaganwuzthebest
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To: The Loan Arranger
They just keep raising the taxes on them, states and cities, this is what it has gone up to when they are factored in. My relatives live in KY, you can still buy them at their regular price there as well.

MA, CT, NY, NJ, all are up around the same when taxes are added in. They figure its a good way to raise revenue. Trouble is they don't allow smoking anywhere, and a lot have quit. So thats even more money they were counting on and not getting.

It has NOTHING to do with the health factor.
27 posted on 02/12/2005 2:49:55 PM PST by gidget7
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To: Reaganwuzthebest
That's why they're having such a hard time passing legislation, they haven't figured out a way to get past that pesky sovereignty issue yet.


I know, its ridiculous! They actually did raid a store owned by the Narragansett's in RI, and arrested the Indians running it. They tried to seize all cigarettes, don't know how it all turned out.

Like I said, when these idiots stop endorsing and helping shove the homosexual lifestyle down our throats, perhaps we will take their health "concerns" into consideration. Not before.
28 posted on 02/12/2005 2:55:15 PM PST by gidget7
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To: gidget7

The smoking Nazis are on the march.

If demand for 'non-smoking' venues such as restaurants and bars are so great, why doesn't the private sector RISE UP and meet the demand, whilst the government leaves private establishments alone.

I already know the answer...


29 posted on 02/12/2005 2:56:41 PM PST by ApesForEvolution (I just took a Muhammad and wiped my Jihadist with Mein Koran...come and get me nutbags.)
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To: ApesForEvolution
Don't know the answer either. I do know many business have had to close up due to the loss of business from smoking bans.

I read an article the other day, about CT businesses trying to reverse the bans there, for that reason. I am not counting on it working though.
30 posted on 02/12/2005 2:59:30 PM PST by gidget7
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To: SheLion
The whole anti-smoking jihad is all about taxes. Cigarette smokers can be easily taxed "for their own good". Despite all the rhetoric about smoking killing thousands no law maker would seriously consider banning smoking and the sale of cigarettes because of the loss of easy to raise tax revenue.

What's happening in NYC is akin to the story of killing the goose that layed the golden eggs. Greedy law makers seeking to raise revenues by punishing the evil smokers are faced with basic economics. As prices increase buyers will purchase less or look for less costly alternatives. Internet sales are just the tip of the iceberg as I'm sure organized crime is also taking advantage of consumers seeking lower cost smokes.

31 posted on 02/12/2005 3:01:23 PM PST by The Great RJ
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To: conservative in nyc; SheLion

The day that they go after ALL internet sales for state taxes is the day I will sit up and pay attention.

Many people buy expensive items,like computers,from the Internet. I'm sure state taxes aren't added. When they start going after Dell and IBM and Apple I will pay attention and not until then.

They hate smoking,they hate smokers,they want their money----it is as simple as that.


32 posted on 02/12/2005 3:01:36 PM PST by Mears ("Call me irresponsible.)
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To: SheLion
Mr. Spitzer emphasized that the effort has as much to do with health as money.

ROTFLOL..funniest thing I have read for at least a week.
33 posted on 02/12/2005 3:02:12 PM PST by microgood (Washington State: Ukraine without the poison)
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To: gidget7
Like I said, when these idiots stop endorsing and helping shove the homosexual lifestyle down our throats, perhaps we will take their health "concerns" into consideration.

Not just that but other intrusive measures like mandatory seatbelt and helmet laws. They have nothing to do with promoting public health but were passed due to pressure from insurance companies. They're not even trying to hide their hypocrisy any longer, it's all about money.

34 posted on 02/12/2005 3:03:51 PM PST by Reaganwuzthebest
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To: gidget7

The phrase "shove the homosexual lifestyle down our throats" is a bit unsettling. Would you care to rephrase that? :-)


35 posted on 02/12/2005 3:09:34 PM PST by zeugma (Come to the Dark Side...... We have cookies!)
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To: firebrand

"Most of the people ordering cigarettes online are buying them in enormous quantities and reselling them. It is $75 million in tax money they are taking right out of our pockets."

WTF are you talking about? It's not your money in any way.


36 posted on 02/12/2005 3:14:09 PM PST by Pete98 (After his defeat by the Son of God, Satan changed his name to Allah and started over.)
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To: firebrand
It is $75 million in tax money they are taking right out of our pockets.

Looks to me as if YOUR the one in other peoples pockets!

37 posted on 02/12/2005 3:19:21 PM PST by chudogg (www.chudogg.blogspot.com)
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To: SheLion

How do you make everyone a criminal? Just keep passing idiotic laws. Pretty soon you can arrest anyone for anything.


38 posted on 02/12/2005 3:20:44 PM PST by Arkie2
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To: firebrand
Nothing is coming out of your pocket, you don't smoke if I remember correctly.

If your communist government didn't have smell fixations your government extortion's might be a good deal higher. Reminds me of probation.

Love;

Little Bill

39 posted on 02/12/2005 3:21:11 PM PST by Little Bill (A 37%'r, a Red Spot on a Blue State)
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To: firebrand

Well then, raise taxes on junk food and alcohol and candy and anything else you think is bad for the people. And claim it's all for the children.

I've got a news flash for you. They're not taking anything out of your pocket. Anytime you're talking about taxes you're talking about the state taking money out of the peoples' pockets. Seems you're a little mixed up.


40 posted on 02/12/2005 3:24:50 PM PST by Arkie2
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