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Did you guys hear?

bigmac

New Member
Joined
Jul 23, 2004
Messages
639
About how staytes like New York and others are in the process of sending out tax bills to people who purchase cig's over the internet? I wonder how long it will take them to come after some of us who order cigars over the internet?I have heard of some bills in the 8000 dollar range.What do you guys think? And what would be a good policy for future purchases? I would guess use of phone orders will increase dramatically.
 
States do not have the right to regulate or tax interstate commerce. Get a lawyer.
 
bigmac said:
About how staytes like New York and others are in the process of sending out tax bills to people who purchase cig's over the internet? I wonder how long it will take them to come after some of us who order cigars over the internet?I have heard of some bills in the 8000 dollar range.What do you guys think? And what would be a good policy for future purchases? I would guess use of phone orders will increase dramatically.
[snapback]170425[/snapback]​


Damnit. Any more information on this? I don't want to be hit with a huge tax bill for all the cigars some of us orders.
 
In this mornings paper.


Smokers feeling unexpected burn
States demand taxes on sales via Internet

By Tim Jones
Tribune national correspondent
Published March 7, 2005


The one-page greeting from the Michigan Department of Treasury came out of the mailbox, but to Julia Sidebottom it may as well have come from the moon. Tucked amid the legalese was the line that said her boyfriend owed the state $4,797.87 in unpaid cigarette taxes.

"I was totally flabbergasted," Sidebottom said. "At first you don't know what to think. . . . I thought it was some kind of a joke."

Michigan, Illinois and other states are giving smokers who buy cigarettes over the Internet a lot to think about, in the form of letters notifying them that they owe thousands of dollars in taxes on bargain-priced smokes. More than 530 Michigan residents received tax bills in the past two weeks, with the average individual liability being $3,200.

In Illinois, about 1,300 people who bought cigarettes over the Internet are about to be notified that they must pay the state's 98-cent-per-pack tax, an Illinois Department of Revenue spokeswoman said.

The collection effort is part of a stepped-up campaign by states, including New York, Pennsylvania, Ohio and Oregon, to capture millions of dollars of unpaid cigarette tax revenue--as much as $2 billion annually--from hundreds of thousands of people who buy the cheap smokes over the Internet and avoid dramatically higher cigarette taxes in their home states.

In January, New York City's Department of Finance notified about 3,700 people that they had skirted the city's $3-per-pack tax by purchasing over the Internet. Some owed as much as $10,000 in unpaid taxes. Ohio has targeted 1,000 people for non-payment of cigarette taxes.

In Michigan, where thousands more cigarette purchasers soon will be notified, treasury officials referred the names of 121 people to the state police for criminal investigation because they bought more than 300 cartons of cigarettes over the Net tax-free, presumably to resell them.

"We're learning more about this, and we're getting a little better sense of the operation," said state Treasury Department spokesman Terry Stanton, adding that investigators have targeted 13 Internet sites and are obtaining the sales records in pursuit of Michigan residents who avoided the state's $2-per-pack tax.

Tax collection a problem

The collection of taxes for goods sold over the Internet is increasingly problematic for state and local governments. Recent studies project that they are losing tens of billions of dollars annually because many sales evade taxation. Tobacco sales are only a small part of the picture, but they are important because states increasingly rely on cigarette taxes to mend budget holes.

In recent years some states, such as California, tried--to little effect--to recover cigarette tax revenue, shut down Internet operations or prevent the smokes from being delivered. Now, driven by huge state budget deficits, 44 state attorneys general will meet in Washington this month to discuss the problem of tobacco sales over the Net and what they can do about the hundreds of Internet operations with such names as cheapsmokesbymail.com, cigs4free.com and notaxsmokes.com.

By going after the buyers of cigarettes, said Jeff Cohen, assistant chief counsel for the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, the "word is getting out" about big tax liabilities.

"I think most people realize that something must be fishy if they buy something at a fraction of the cost," Cohen said.

Sidebottom, who lives with her boyfriend in the northern Detroit suburb of Waterford, disputes that claim, arguing that she thought the cigarettes were a low-priced deal, as are many items sold on the Internet.

That doesn't matter to Michigan treasury officials; the tax is owed, they say. And they're putting the muscle on cigarette buyers and using them as public examples in efforts to cripple the sale of tax-free cigarettes.

The aggressive enforcement comes as more state legislatures are pushing even higher cigarette taxes to plug budget holes and pay for state programs such as public education and Medicaid.

Illinois Gov. Rod Blagojevich has proposed boosting the state's 98-cent cigarette tax by 75 cents. Iowa lawmakers are weighing an 80-cent increase in the state tax, currently at 36 cents per pack. Indiana lawmakers are considering a boost of as much as 40 cents in the state's 55 1/2-cent tax. In Ohio, the 55-cent tax could rise to $1.

Thirty-four states have raised cigarette taxes since 2002--by as little as 8 cents to as much as 75 cents--and as those levies have jumped, tobacco sales over the Internet have exploded, as have the number of online cigarette sites, estimated to number 800 to 1,000. New York has estimated it loses $500 million to $600 million annually from cigarette sales through the Internet, toll-free phone operations and American Indian reservations.

"As taxes go up, Internet sales go up," said Dana Bolden, a spokesman for Philip Morris USA, the giant cigarette manufacturer. Indeed, online buyers can save 50 percent or more depending on the tax level where they live.

One private study projected that online cigarette sales could reach 14 percent, or more than $5 billion, of total U.S. sales by the end of this year.

Austan Goolsbee, an economist at the University of the Chicago who co-authored a study last fall on cigarette taxes and Internet sales, forecast that tobacco tax collections would be diluted by 25 percent to 40 percent as a result of online competition. Goolsbee said the "root of the problem for the states is that it is hard for them to enforce" a 1949 federal law that requires dealers who ship cigarettes across state lines to individuals to report the sale to the buyer's home state.

State enforcement is further complicated because most Internet cigarette operations are based on American Indian reservations, where state jurisdiction often is unclear.

Federal responsibility remains scattered, although the General Accounting Office recommended in a 2003 report that jurisdiction for handling Internet cigarette operations be given to the Bureau of Alcohol, Tobacco, Firearms and Explosives, an arm of the U.S. Justice Department.

States adopt strategy

For now, though, a growing number of states are attacking the problem by subpoenaing the sales lists of Internet operations. In that regard the effort resembles the moves of the recording industry's fight several years ago against Napster, the former pirate music downloading service.

Sidebottom, who said her boyfriend is in the early stages of Alzheimer's disease, complained that there was no warning from the state.

"When there was the big issue with Napster, at least there was some indication so you knew not to do it, so you stopped," she said.

Stanton, the Michigan treasury spokesman, said the state issued warnings after it raised the cigarette tax to $2 a pack in 2002.

Sidebottom argued that smokers are being persecuted while billions of dollars of retail sales over the Internet go untaxed.

"It's not politically correct for anyone to be a smoker right now, so they'll come after us," Sidebottom said.

"And this is just the tip of the iceberg. We're only in the first wave. I know any number of people who have purchased [cigarettes] online, and I tell them to be prepared because they're coming after you. They're scared to death, scared to death."

- - -

Tax collectors fired up

To boost tax revenues, some states have begun cracking down on cigarette sales over the Internet. Thirty-four states have increased their cigarette excise taxes since 2002

CIGARETTE TAX Per pack

Original tax, Increase since 2002, Current tax

(Includes map)

STATE: CURRENT TAX

- $2 or more

R.J.: $2.46

N.J.: $2.40

Mich.: $2.00

- $1.00-$1.99

Mont.: $1.70

Alaska: $1.60

Conn.: $1.51

Mass.: $1.51

N.Y.*: $1.50

Wash.: $1.43

Hawaii: $1.40

Pa.: $1.35

Vt.: $1.19

Ariz.: $1.18

Ore.: $1.18

Okla.: $1.03

D.C.: $1.00

Maine: $1.00

Md.: $1.00

* New York City adds an additional $1.50 excise tax

- Under $1.00

All other states

MOST CIGARETTE TAX REVENUES

For fiscal year 2003

Calif.: $1.03 billion

N.Y.: $993.1 million

Pa.: $827.8 million

Mich.: $816.5 million

Illinois: $642.8 million

Total for all states: $10.6 billion

Note: State average tax is 84 cents. There is also a federal excise tax of 39 cents per pack.

Sources: Campaign for Tobacco-Free Kids, American Lung Association, Philip Morris
 
Disclaimer, Not a lawyer.

Actually, if you do some research over the internet. There was a recent court case that upheld an old law called the Jenkins Act. States are gathering information from retailers based on this case. The act requries that purchase information be forwarded every thirty days to the state tobacco tax administrator where that product was sold to.

The good news is that the Jenkins Act is specifically directed at cigarettes or any tobacco rolled in paper for the purpose of smoking. I am quoting this from memory. Search the internet for better details.

As a side note, some states are gettting away with taxes on interstate commerce by wording the taxes as "use" or "consumption" of products in the state. Whether this holds water is beyond me.

It does not mean that Congress can not easily pass a rider amending the Jenkins Act. So taxes are still possible.
 
texasaero said:
Disclaimer, Not a lawyer.

Actually, if you do some research over the internet. There was a recent court case that upheld an old law called the Jenkins Act. States are gathering information from retailers based on this case. The act requries that purchase information be forwarded every thirty days to the state tobacco tax administrator where that product was sold to.

The good news is that the Jenkins Act is specifically directed at cigarettes or any tobacco rolled in paper for the purpose of smoking. I am quoting this from memory. Search the internet for better details.

As a side note, some states are gettting away with taxes on interstate commerce by wording the taxes as "use" or "consumption" of products in the state. Whether this holds water is beyond me.

It does not mean that Congress can not easily pass a rider amending the Jenkins Act. So taxes are still possible.
[snapback]170555[/snapback]​

Nice name for an act. :whistling: No way my lawyer would have a hayday with that hmmm come to think of it since i have residence in two states and have orders sent to both places it could get interesting. No way I would pay that. I dont see how it could be posssible to track correctly either.
 
There is currently ANOTHER case that has bearing. Wine.com is in court because several states have decided to try to regulate interstate commerce, MI included. I haven't heard anything in a while, I think it's in the appeal stages, but it sounded like the states were on the 'losing' side and the constitution is on the other.
 
rknicker said:
There is currently ANOTHER case that has bearing. Wine.com is in court because several states have decided to try to regulate interstate commerce, MI included. I haven't heard anything in a while, I think it's in the appeal stages, but it sounded like the states were on the 'losing' side and the constitution is on the other.
[snapback]170595[/snapback]​
sweet thats good the states have been getting away with alot of bs lately.
and there still broke :D Maybe if they cut a few peoples pay by a few hundred thousand each they would not care so much about the da^n taxes that slip through there fingers from the internet.
 
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