Posted on 05/05/2005 6:20:00 AM PDT by SheLion
Michigan resident Julia Sidebottom inhaled sharply when she opened her mailbox earlier this year and was greeted with an unexpected and unwelcome bill from the state for $4,753.89 in unpaid cigarette and sales taxes.
For several years, Sidebottom's boyfriend purchased cigarettes online at www.esmokes.com, one of 13 online cigarette retailers from which Michigan recently subpoenaed customer lists. She said the bill caught her completely off guard.
"It never even crossed our minds," said Sidebottom, whose 57-year-old boyfriend suffers from Alzheimer's and has granted her power of attorney. "I search the Web all the time for the best deals on everything. Never in a million years did I expect the state to come back and say we own them money."
Sidebottom is one of more than 1,500 Michigan residents who recently were mailed bills for the cigarette and sales taxes they had avoided by buying their smokes from online retailers. After 30 days, Sidebottom's letter informed her that a 100 percent penalty would be added to her existing debt.
Since February, the letters to online cigarette purchasers have garnered Michigan more than $2 million, said Terry Stanton, spokesman for the state treasury department.
Michigan is just one of the states looking to recoup revenue lost through sales of cigarettes on the Internet, where smokes often are cheaper precisely because the transactions almost never include cigarette and sales taxes owed to to the purchaser's state.
New York City, where smokers pay an extra $3 a pack, the highest cigarette tax in the country, recently billed 2,600 Big Apple residents. City officials say tax-free cigarettes purchased online contributed to an annual loss of $75 million in revenue for state and local governments.
Cigarette taxes aside, at least 10 states (Alaska, California, Connecticut, Illinois, Michigan, North Dakota, Oregon, Pennsylvania, Rhode Island and Washington) specifically outlaw online cigarette sales, and state law enforcement officials are cracking down on the virtual vendors.
The Virginia attorney general's office recently prosecuted two online cigarette companies (www.cigoutlet.com and www.affordablecigs.com) and discovered purchases from those two sites cost 46 states $2 million in revenue. Virginia investigators shared the names of those sites' customers with officials in other states, prompting many of the letters.
In Washington state, the Department of Revenue recently filed a federal lawsuit against www.valuecigs.com in an effort to compel the company to turn over the names of its Washington customers. A 1949 federal law requires vendors who ship cigarettes across state lines to provide states with the names and addresses of purchasing residents, but the law has been poorly enforced.
States' efforts to snuff out online cigarette retailers got a boost in March when the major credit card companies announced that they would no longer accept payments for tobacco products bought online. The action cut off the payment method relied on by the vast majority of online cigarette retailers.
The credit card industry also is collaborating with the federal Bureau of Alcohol, Tobacco and Firearms and with 10 state attorneys general who also announced their intention to crack down on the online cigarette market.
The issue has caught officials' attention because in a growing number of cases, states are relying on revenue generated by smokers to balance their budgets. Since November 2001, 44 states have increased their tobacco taxes, according to the Health Policy Tracking Service, which estimates that the taxes account for 1.5 percent of all states' revenue.
In Michigan, for example, lawmakers last year raised the tax on cigarettes by 75 cents a pack; smokers now pay $2 in cigarette taxes on every pack they purchase in the Wolverine State.
Grover Norquist, who heads the anti-tax group Americans for Tax Reform, issued a statement decrying Michigan's efforts to collect taxes on cigarettes purchased online, saying state officials had resorted to "police state tactics to get their money."
"The big spenders in Michigan are so desperate for more money and more spending that they are willing to pry into their residents' online activity, harass them and threaten them, just to get their excessive pound of flesh from smokers," Norquist said.
However, the state governments learning the names of residents who had purchased smokes online argue that it isn't really analogous to officials identifying or cracking down on residents who make other types of online purchases.
According to the National Association of Attorneys General, virtually all Internet cigarette sales violate one or more state and federal laws. They include state age verification laws, state laws prohibiting the direct sale of cigarettes to consumers, federal mail fraud statutes and the federal RICO statute, designed to combat racketeering and organized crime.
Anti-tax groups say states are hoping for a one-time jump in revenue from cracking down on smokers who have escaped cigarette taxes by purchasing them online. Instead, states should be looking for ways to cut spending, they say.
But state revenue officials defend the payment campaign.
"We're in a state that's not raising taxes, and we're working our way out of a large deficit," said Geraldine Conrad, spokeswoman for the Illinois Department of Revenue. "So any owed receipt is an important receipt to us."
Send your comments on this story to letters@stateline.org. Selected reader feedback will be posted in the Letters to the editor section.
Contact Kathleen Hunter at khunter@stateline.org.
What about the online auctions? And what about the sellers of any site not charging the state taxes?
When I purchase online, if the company doesn't charge for Maine State Taxes, I surely am not going to tack it on! In fact, when I order, and if the seller doesn't make provisions to charge me for Maine Tax, there is NO space for me to insert Maine tax.
So, these states are nailing the buyer! How unfair is that?!
I have run across some sites that tack on the individual's state tax, but not many. And if they don't charge me, I don't pay it. So why should I, as the buyer, be responsible for this?
J.C.Penny's is one online company that does charge for state taxes. I can't think of any others.
State Government Glutton ping.
I believe Target does, too.
And citizens worry about the Patriot Act. This has a more far-reaching effect on average citizens than the Patriot Act ever will!
Amen!
Nice to see the Government has so much time on their hands to investigate citizens and bill them for on-line smokes, yet there's not enough time to seal the borders and enforce existing immigration laws.
These kind of taxes are reminiscent of a government-run protection racket...
Don't worry. They'll get around to those soon.
I guess the other states are waiting for New Jersey to take the lead in this.
Depending on the brand of cigarettes, that is about a 100% tax.
And they wonder why folks buy cigarettes elsewhere. . .
Stevie Ray Vaughns song the taxman is so true. Find it listen to it. Its good.
Laws do vary anymore, but in the pre-Internet mail-order days, a company could only charge state taxes if they had an outlet in that state.
For example, mail order JCPenny could charge taxes on an order if they had at least one JCPenny retail store in that state. Otherwise, they (and the purchaser) could avoid paying state tax where the purchaser lived if JCPenny had no retail outlet in the purchaser's state.
This was a great incentive for mail order companies and their out of state customers.
Ebay purchases will be next.
Amen!...............Amen and Halleluiah…try doing this with beer tax, then we’ll see the fur fly!
With no sales tax in Delaware, many people cross the state line from Pennsylvania to buy there...but you are required to report all purchases to Pennsylvania and pay "use tax" on them. Many states chase this down for big-ticket items like automobiles, but Internet commerce has broadened the problem and the enforcement.
I'm not a smoker, but I recall noting years ago that few people would break the tax seal on cigarette packs (just opening the corner). Federal offense there.
Disclaimer: IANAL
WHAAAAAAAAAAAAAAAT??????????
Nice to see the Government has so much time on their hands to investigate citizens and bill them for on-line smokes, yet there's not enough time to seal the borders and enforce existing immigration laws.
Yea, you got THAT right!
And the postal service and UPS and Fed X is reported to go along with it?
It just goes to show that the anti smoking movement is NOT about people quitting smoking. It's about the revenue smoker's provide to the state. And the state's can't stand it that smoker's are now finding cheaper ways to spend their money.
If the state's weren't such gluttons by continually raising taxes on cigarettes, then the smoker's would have continued to support their state. But when taxes went so high, the smoker's threw their hands in the air and said 'enough is enough.'
When the lawmakers are too gutless to cut spending, stick it to the smokers and tell them it's for their own good.
First I've heard about it, but if they violate existing laws...
Or California!
The State Legislature in TX is apparently voting to start charging $6.00 more a carton in Taxes on Cigarettes. Also, they are voting on raising Taxes on alcohol.
When everyone is forced to quit drinking, and smoking, I'm not sure how they plan to get money from Texans..oh, yes, toll roads.
Texas is starting to resemble an East Coast State these days.
I am uncomfortable with the idea that the VA Attorney General's office is acting as a snitch to assist other states confiscatory tax policies...........and I would feel the same way if it were done on any product.
I notice thta the map does note that VA will change from green to yellow when our tax goes to 30 cents July 1.
Cigarette taxes were not the only taxes to be increased needlessly last year in VA....but they are the ONLY one where there is no discussion of a cut.
The same is true in Delaware and they are talking about raising the tax again.
Oh! Ok. We do have several in this state. Thanks for clarifying that for me Tom!
It's only good (to the state) because they have a demonized segment of society to pick on.
If they do this on cigarettes they should be made to do it on ALL online purchases.
They are!
Maine :Tax panel awash in plans
The proposal also would boost levies on beer, wine, cigarettes, bar drinks, prepared meals and lodging.
Other lawmakers have also put forth proposals focusing on the sales tax and on so-called sin taxes.
I don't buy any cigarettes in the US anymore because of this problem. Just use the internet and buy from another country where these tax hogs are not privey to your personal information. They will ship right to your door. Cheaper too!!!!
Thank you! TomGuy clarified this as well in his above post. Thanks so much!
So is Maine. Makes you wonder what the hell they are doing with the billions being fed into the states by the smoker's already, eh?
This is ridiculous.
Find out what the smoker's contribute already in your state. And the lawmakers want MORE? Can we say GLUTTONS?
Your State Information: (up to date)
View your tobacco taxes, a comparison of state excise taxes on cigarettes to state excise taxes on beer and wine, MSA payments to date, State laws, and links to other state-specific information.
Alabama Information / Alaska Information / Arizona Information / Arkansas Information / California Information / Colorado Information / Connecticut Information / Delaware Information / DC Information / Florida Information / Georgia Information / Hawaii Information / Idaho Information / Illinois Information / Indiana Information / Iowa Information / Kansas Information / Kentucky Information / Louisiana Information / Maine Information / Maryland Information / Massachusetts Information / Michigan Information / Minnesota Information / Mississippi Information / Missouri Information / Montana Information / Nebraska Information / Nevada Information / New Hampshire Information / New Jersey Information / New Mexico Information / New York Information / North Carolina Information / North Dakota Information / Ohio Information / Oklahoma Information / Oregon Information / Pennsylvania Information / Rhode Island Information / South Carolina Information / South Dakota Information / Tennessee Information / Texas Information / United States Information / Utah Information / Vermont Information / Virginia Information / Washington Information / West Virginia Information / Wisconsin Information / Wyoming Information
Exactly Joe.
And what about all the basing and trashing and control, restrictions and bans the state is putting on smokers, telling us that we have to quit.
But! They can't balance their budgets without our tax dollars. Does anyone see the irony in this? What is it? Ban smokers or spend our tax dollars? They can't have both!
As Michigan racks up award after award as the worst state in the union to live and work, leave it to the nanny state clods to charge into a breach and throw a bomb to make the state more miserable.
The anti-smoking nazis infesting Lansing want to charge people with crimes for puffing in bars, restaurants and workplaces.
We should not be surprised that these Marxist thieves are breaking and entering into private property called bars, restaurants and businesses to impose fascist state control. After all, a diversion is needed to take attention away from the highest unemployment rate in the nation and businesses running as fast as they can away from Michigan’s high taxes and onerous regulations.
Fixing these problems would require skill, courage and acumen on the part of the clucking political class. Instead we get balloon popping clowns playing political skullduggery.
As a state sinks down into incompetence and impotency to properly manage a society of free individuals, we get a diversionary circus of punishing property owners for legally using their property.
We still wait for the anti-smoking nazis to produce a death certificate that states: “Died from second-hand smoke.”
In the meantime, enjoy your burgers and beer. They’re next.
Fact of the matter our country and Govt is broke and will confiscate money any way they while proclaiming it is for the good of the people. First they target a minority user group. Get their product labeled a syn product and then they can levy excess syn taxes without too much protest. Soon they will come up with the idea that we should be taxed 100% since its the states money and you will be returned enough to live on according to your contribution to society.
I have no idea. The Reservations haven't been mentioned too much yet.
New York: Indians' cigarette, gas sales targeted, Pataki tax proposal would be 'about-face'
And what about all the illegal drugs one can purchase online? I get countless emails from drug company's selling Valium, Zanex, etc. You mean to tell me that THEY can continue selling their drugs online? What about the kiddies with THIS?
If this is about the KIDS, and if they truly believe that KIDS can order tobacco products off of the Net, what about these prescription drugs? I guess they don't care about that, do they!
Maine is the very same way.
In the meantime, enjoy your burgers and beer. They’re next.
They are next! Maine wants to raise taxes on beer and liquor as well.
Only because they're not familiar with the financial provisions of the PA and it requires the fedz to cooperate. They'll get to it and it's much more convenient to use the provisions of the PA than issue subpeonas for customer records.
They better do it in a way that they don't get caught. I don't care if I have to deal with Osama himself, if the govt is going to be this fubar about it I'll go on the black market.
I don't know if it applies to reservation purchases but the state AG's got the credit card companies to cut off processing for them. Now you have to send a money order.
The mail-order taxation regulations you referred to also apply to internet transactions. As a Florida based business, with no physical presence in other states, I am liable for sales taxes only on sales within FL. Supreme Court ruling supports this; (Quill Corp v North dakota).
You've got that right and we have Wal-Mart to prove it.
Now comes a question to mind as to what Michigan crazies might intend on doing. Will the state seize or gain access to Wal-Mart records and obtain their customer identities so they can be sent an invoice for sales tax on the difference between Wal-Mart's low price and a higher price of same merchandise at J. C. Penney?
After all, isn't the act of buying the same merchandise at a lower price, avoidance of paying sales tax on a higher price?
I am glad sales tax laws only effect Businesses. Tax agencies would never bother individuals if we only had a 30% sales tax, or so I have been told.
This is the kind of tax freedom individuals will enjoy under a sales tax scheme.
Ah, no. This is what happens from having a billion and one tax laws and over reaching governments. Having ONE sales tax would eliminate this kind of crap.
It occurs to me, based on an earlier article, that if Maine would can the smoking ban, tax revenues would rise because folks wouldn't be avoiding the state so much..instead of raising taxes again that primarily hit the tourist industry.
Just this morning a friend told me that he and his wife will NOT be vacationing in Maine this year as they have for the past 10 years because it has just become far too expensive - and neither of them are smokers.
They have also scrapped their plans for buying property they had been talking about for a couple of years.
You guys need to get off the weed. A sales tax is nothing more than a shell game. Just a different method of sucking out $2 Trillion from the economy. It is not freedom from anything. The way the sales tax is being sold make snake oil salesmen look honest.
Of course not.
Pharmaceutical companies ......GOOD
Tobacco companies.....BAD
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