Web Cigarette Sales Burn Tax Income

New York Times ^ | 08/12/02 | The Associated Press

[MEGoody]

Web Cigarette Sales Burn Tax Income By THE ASSOCIATED PRESS

Filed at 9:05 p.m. ET BOSTON (AP) -- States are losing millions in tax dollars as more people buy cigarettes from online vendors who routinely ignore a federal law requiring them to report sales to local regulators, a new report says.

The trend could undercut efforts by cash-strapped states to raise revenues by hiking cigarette taxes. In Massachusetts lawmakers recently approved a 75-cent hike on a pack of cigarettes, a move officials hope will bring in an extra $190 million annually. In Illinois, the state boosted cigarette taxes by 40 cents to a total of 98 cents a pack.

New Jersey and New York state both have a $1.50 per pack tax, the nation's highest. Washington state is third, at $1.425.

Federal law requires Internet cigarette sellers to provide state revenue officials with names and addresses of their customers. The officials can then pursue the buyers to make sure they pay local sales taxes.

But Internet cigarette vendors openly flout the law, known as the Jenkins Act, according to a report by the U.S. General Accounting Office to be released Tuesday.

``Our Internet search efforts identified 147 Web site addresses for Internet cigarette vendors based in the United States. None of the Web sites posted information that indicated the vendors complied with the Jenkins Act,'' the report said.

In fact, according to the report, 78 percent of the sites indicated that the vendors do not comply with the law.

The report recommends shifting primary enforcement of the law from the Federal Bureau of Investigations to the Bureau of Alcohol, Tobacco and Firearms, in part because of the FBI's heightened focus on terrorism.

Calls to several Internet cigarette vendors advertising ``tax free cigarettes'' were not returned to The Associated Press on Monday. One Web site told buyers ``We do not report to tax authorities in ANY state. 100% confidential.''

The cost to states can run into the millions, according to the report.

Officials in California estimated a tax loss of approximately $13 million from May, 1999 through September, 2001 because of the failure of Internet cigarette vendors to comply with the federal law.

By 2005, Internet tobacco sales in the United States could exceed $5 billion and states could lose about $1.4 billion in revenues, according to the report.

U.S. Rep. Martin Meehan, D-Mass., requested the report, which he said reveals a burgeoning market of online cigarette sales.

The lack of oversight lets children illegally purchase cigarettes online, said Meehan, who plans to file a bill requiring Internet cigarette shops to verify the age, address and identity of purchasers before shipping tobacco products.

[Grit]

The cost to states can run into the millions, according to the report.

This kind of sh!t drives me insane! This costs the state nothing -- they can just pretend that all smokers that have gone elsewhere for their smokes have simply quit smoking. Wasn't that one of the objectives of the higher taxes?

[Wolfie]

Let's go straight to the Horse's Mouth (or in this case, the BATF, you know, the guys with the guns):

SALES/PURCHASES INVOLVING NATIVE AMERICAN RESERVATIONS

ATF has recently received several inquiries about cigarette sales and purchases that involve Native American reservations. Sales or shipments of cigarettes from Native American Reservations are not exempt from the requirements of the Contraband Cigarette Trafficking Act and the Jenkins Act. Additionally, the application of State taxes and regulatory requirements to sales made on Native American reservations varies depending on the transaction. Accordingly, anytime you engage in transactions involving a Native American Reservation, ATF recommends that you contact your State tobacco tax administrator to determine the extent of your liability for State tobacco tax.

[Grit]

Accordingly, anytime you engage in transactions involving a Native American Reservation, ATF recommends that you contact your State tobacco tax administrator to determine the extent of your liability for State tobacco tax.

Which of course I do. In fact I have my state tobacco tax administrator on speed dial. Although I don't recall voting for him (her?).

So, any word on if Switzerland is exempt from the Jenkins Act? Will the BATF invade / burn down Switzerland?

[Wolfie]

Like I said, the Jenkins Act is National only. As far as the Swiss and the BATF go, the DEA would probablay beat them to it.

[Consort]

[bjs1779]

Native Americans are exempt from the Jenkins Act because they are independent nations

Some tribes do comply with the Jenkins Act from what I've learned. The safest one to do business with is probably the Mohawks in New York, at least they have the courts on their side for now.
Court Decision

[Pagey]

Only the N.Y. Slimes could print this article and include Sentence U.S. Rep. Martin Meehan, D-Mass., requested the report, which he said reveals a burgeoning market of online cigarette sales". Big deal,more expansion of the Gov't into our personal lives.Any elected official who votes for a general Internet tax will LOSE.C'mon Libs bring it on now, we know what you're going to do next.

[altair]

just like we aren't citizens if we are overseas

How do you figure that?