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.
Hardly "pathetic". It is terrifying. The police state in action courtesy of Ubergrupenfuhrer Spitzer. Expect him to outdo himself in the future as New York's next Governor.
And yet some people just don't get it!
REAL ID BILL PASSES (Sensenbrenner's illegal alien bill passes, will be attached to Iraq bill)
http://www.freerepublic.com/focus/f-news/1340612/posts
You are right about at least one thing -- this is all about money!
Link, please.
I don't believe it.
I've bought cigarettes on line many times, and the max I could buy with one purchase was two cartons.
Now, I suppose I could have bought two cartons every day for sixty days and had a pretty good stash, but I don't think the profit would have been worth the time.
I also found this older article-
M/C falling in line?:
Attorney General Takes On Internet Cigarette Sales
Mon 02-07-2005 , 6:18 pm
SNIP***
Wisconsin Justice Department officials said Attorney Peg Lautenschlager will soon meet with executives of credit card companies to urge them to review the legality of processing online, cigarette purchases.
Officials said other state attorneys general will also be involved in the meeting. Last month, Lautenschlager and forty two other attorneys general signed on to a letter to credit card company executives which warned them ''virtually all online tobacoo retailers engage in illegal sales.''
SNIP**
http://www.wkowtv.com/$spindb.!query.1listnews.storeview.13993.news
"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."
No, the politicians took the money out of our pockets when they got certifiably stupid with their mega tax hike on cigarettes. This was bot predictable and predicted.
Frankly I'm glad for every cent "stolen"
I was born and raised in PA and moved to NY seven years ago. The taxes here on everything are outrageous. If the state is cracking down on people who buy cigarettes in other states over the internet to save money, why don't they stop cars at the border when they cross into NY after filling up there gas tanks in a state like PA where gas is currently at least 20 cents cheaper per gallon? Why don't they stop my car at the border when I go out of state to purchase clothing that I don't pay taxes on? Instead of spying on law abiding citizens trying to save some money, why don't you crack down on the real crooks? Take a look around your office Mr. Spitzer. What's next? Will you be outlawing coupons used at the grocery stores?
Taking out of YOUR POCKETS????
So. You are from New York. Probably NYC. By taking the taxes out of "your pockets," are you just a little afraid that with the loss of revenue from the smokers, that maybe.............just maybe the City will be taxing something 'you' love pretty soon to make up for the loss of money? Sounds like it to ME!
Spitzer is a creep and everybody knows he's a creep, but few will say so out loud. Too bad.
MOST lawmakers are turning into gluttons! I can't stand them.
I don't think he knows what he is talking about, unless he can prove to us that he does.
I doubt if some people are buying mass quantities. Who can afford the POSTAGE?
Lawyers chime in:
N.Y. Suit Against Internet Cigarette Sellers Dismissed, but City Can Refile
Mark Hamblett
New York Law Journal
01-28-2005
http://www.law.com/jsp/article.jsp?id=1106573741396
And the hits keep coming:
http://www.magicvalley.com/news/worldnation/index.asp?StoryID=11850
Right! It's the American Way to Shop Cheap, that is why Wal-Mart was born.
When the states raised their taxes on cigarettes so high that people didn't like it, then they went elsewhere to find them cheaper.
Be it roll your own or over state lines, Reservations or the Internet.
Follow the money.
If it wasn't for the cash flow, why the likes of Nancy Pelosi would be all for revenue reductions of Bush.
After all, without the access via political clout where would the likes of Nancy get their political funding?
Buyer beware when one tells you you aren't paying enough.
Doesn't do any good. The lawmakers promise us the moon to get our vote. Once they are in office, it's to hell with their constituents.
Don't forget to add Maine to your list. Maine went totally smoke free in January of 2004. And the cigarette taxes are horrible. I roll my own!
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