“CHEAP CIGARETTE PRICES WITH FREE DELIVERY!!!!!!
$9.95 Generic, $15.50 Premiums, No Joke!!
Marlboro, Winston, Camel, Newport”
Chances are if you’ve been on the Internet for more than a nanosecond or so,
you’ve received spam like this. And guess what? So has the government, and
they are not amused.
In fact, state governments are said to be losing millions in tax dollars as
the number of online sales outlets for cigarettes has risen along with the
tax bite on tobacco.
A quick search on Google for the words “cheap cigarettes” turned up dozens of
site offerings, many in Europe, some at so-called duty-free shops, and some
claiming to be affiliated with Native American Indian reservations, such as
“Smoke Signals Sovereign Seneca Territory … Brant, NY…”
The trend is said to be seriously undercutting efforts by some 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 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.
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 that is just not happening, and the U.S. General Accounting Office has
issued a 54-page report saying that giving the bureau of Alcohol, Tobacco and
Firearms more authority may improve reporting and enforcement of laws
relating to tax collection on Internet cigarette sales. The FBI currently has
the responsibility.
Internet cigarette vendors openly flout the law, known as the Jenkins Act,
the GAO says. 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.
“Our Internet search efforts identified 147 Web site addresses for Internet
cigarette vendors based in the United States,” the report said, adding that
none of the Web
sites posted information that indicated the vendors complied with the Jenkins
Act.
“Conversely, information posted on 78 percent of the Web sites indicated the
vendors do not comply with the act. For example, 31 percent of the Web sites
stated the vendors either do not report cigarette sales or do not comply with
the Jenkins Act. Sixteen percent of the Web sites and four vendor
representatives cited their Native American status, the Internet Tax Freedom
Act, and other laws as reasons for not complying with the act,” the report
stated. None of those reasons are valid, says the GAO.
U.S. Rep. Marty Meehan, a Massachusetts Democrat who commissioned the report,
plans to introduce legislation on the issue when Congress returns from recess
in September, according to a Reuters report.
The bill would require Internet cigarette vendors to become licensed tobacco
sellers in each state in which they do business.
