Senate Judiciary Committee Cracks Down On Online Cigarette Vendors

by Glen Shapiro, LawAndTax-News.com, New York

07 August 2003

It has emerged that prior to recessing for the summer, the Senate Judiciary Committee approved new legislation granting state authorities more power to act against the owners of websites which sell cigarettes over the internet.

Currently, the Contraband Cigarette Trafficking Act (CCTA) makes it illegal for any person or organisation to buy, sell, distribute, or otherwise handle contraband cigarettes. For legal purposes, contraband is defined as more than 60,000 untaxed cigarettes.

However, the Prevent All Cigarette Trafficking (PACT) Act, sponsored by Senators Orrin Hatch (R-Utah) and Herb Kohl (D-Wisc), seeks to lower this threshhold to 10,000 cigarettes. It also strengthens the reporting requirements for vendors selling cigarettes across state borders, and substantially increases both criminal and civil penalties for violating reporting obligations.

'The internet is contributing to the smuggling problem because many internet cigarette retailers are not paying the required taxes when shipments are sent to buyers in various states,' Senator Kohl explained to the upper house in June, continuing:

'Several openly proclaim on their websites that they do not report internet tobacco sales to any state's tax administrator. This is a flagrant violation of the law in every state.'

He concluded by revealing that: 'A recent Government Accounting Office report advised that states will lose approximately $1.5 billion in tax revenues by the year 2005 if the current state of internet tobacco sales continues. More than ever, state governments need those tax dollars.'

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