Sunday, July 14, 2002

Smoke Signals
More on cigarette smuggling from the Washington Times. What's new here is more info on the role of the Internet and Indian tribes:
The Internet thus far accounts for only a small fraction of cigarette sales, but it may pose a bigger long-term threat to tax collectors than smuggling. The hefty tax increases may prompt more smokers to order in bulk from online merchants, who in turn may resist state efforts to collect taxes.

Under federal law, online cigarette vendors are required to report the names and addresses of out-of-state customers, but the law is widely flouted.

"Most vendors aren't turning over their customer list, so the Internet is becoming a hotbed of tax evasion," said Kurt Ribisl, a professor at the University of North Carolina School of Public Health.

Mr. Ribisl oversaw a study this year that identified 195 Internet cigarette vendors, up from 88 a year earlier. He said most advertise low-tax cigarettes and indicate they won't report to any authorities.

"We're definitely unprepared right now. We don't have the tools to get the states their proper revenue," he said. "You need federal legislation, because a patchwork approach from individual states is going to bog down."

In Congress, Rep. Martin T. Meehan, Massachusetts Democrat, is leading an effort to tighten regulation of Internet cigarette sales. Mr. Meehan's chief of staff, Bill McCann, predicted bipartisan legislation would be drafted this year aimed at enforcing existing requirements that Internet merchants block sales to minors and report out-of-state buyers.

Some states already are sending tax bills to smokers who patronized the Internet.

"They've thumbed their noses at us," said Gene Gavin, Connecticut's tax commissioner, "and they're right, because we don't do anything."

One legal complication is that many of the Internet sites are run by American Indians. Sales of cigarettes on Indian reservations are exempt from state and local taxes, and some Indian merchants contend their Internet sales also should be tax-exempt.
It should be fun to watch the PC types sort out the rights of Indians versus the evil weed. Or how about a new religion where tobacco is a sacrament?