Cheap cigarettes store
Since early this year, the Massachusetts Department of Revenue has been
busy firing off 3,264 letters to online shoppers, ordering them to submit
a check for unpaid cigarette taxes, plus interest and
penalties--or risk fines and imprisonment. Like its tax-happy neighbors
of New York, Rhode Island and Connecticut, the Bay State ranks in the
five most expensive places in the United States to buy cigarettes. Massachusetts
cheap cigarettes online levies $1.50 a pack in state excise taxes, not
counting state sales taxes and local taxes.The 7-Eleven store on Hanover
Street in Boston's North End sells a carton of Marlboros for $55.75.
Online retailer DirtCheapCig.com sells Marlboros for between $27.19
and $31.19 plus cheap cigarettes online shipping. That's a huge competitive
advantage for DirtCheap, explained in large part by its location in
the verdant tobacco fields of Kentucky, which has the lowest tobacco
excise taxes in the nation.What's a cheap cigarettes online
great deal for Massachusetts smokers horrifies the state's tax collectors,
who acknowledge that they've obtained the names and addresses of DirtCheap
customers but refuse to divulge their source. The two possible culprits:
DirtCheap and the United Parcel Service, which the company uses to ship
cigarettes. DirtCheap's lawyer told the Boston Globe that his client
did not turn over the cheap cigarettes online customer
lists but said thestate had obtained UPS spreadsheets that have delivery
information. (DirtCheap did not respond to CNET News.com inquiries Friday.)
UPS spokeswoman Susan Rosenberg confirmed that her employer has complied
with legal requests that relate to DirtCheap customers but won't say
whether they came from Massachusetts or another state. "I'm not
going to go investigate whether we did or we didn't in this particular
case," Rosenberg said. "We're not going to address individual
circumstances, where we might have received a legal request for information."
The company's privacy policy is somewhat ambiguous, saying "we
do provide personal data to government agencies as required by law or
regulation." Rosenberg said that cheap cigarettes online means
"a subpoena or part of the discovery process in a formal manner
to comply with the law--it's definitely more than a mere request."
Note that if a lawsuit cheap cigarettes online had been filed, UPS and
DirtCheap would be required to turn over their records. That's the normal
discovery process that takes place in lawsuits, and no firm could be
faulted for complying with a proper court order. But no lawsuits were
filed at the time the taxocrats began sending out the threatening cheap
cigarettes online letters. That means that if UPS did divulge customer
records, it may have done so voluntarily, a horrific privacy breach
if true.
The details of this case are important to Massachusetts residents, but
the implications are national. State and city governments are hungrily
trying to cover budget shortfalls by boosting cigarette taxes. The advocacy
group Campaign for Tobacco-Free Kids calculates that 31 states have
increased taxes since January 2002, with the average cheap cigarettes
online tax rate skyrocketing by 68 percent during that time. In New
York City, state and local taxes alone on a carton of cigarettes now
total $30, more than the entire cost of a carton of DirtCheap smokes.
When local tax rates ascend into the stratosphere, more smokers turn
to the Web, making online retailers a tempting target. At a hearing
in May in the U.S. House of Representatives, politicians warned that
Internet tobacco sales will exceed $5 billion in 2005 and cheap cigarettes
online states will lose $1.4 billion in tax revenues as a result. With
limited exceptions, Internet sellers do not have to collect sales taxes
on shipments made to other states. (The National Governors Association
is hoping to persuade Congress to change this.) Cigarettes are one of
those exceptions. A 1949 law called the Jenkins Act says anyone who
ships cigarettes cheap cigarettes online nationally
must file monthly reports with each state tax collector listing "the
name and address of the person to whom the shipment was made, the brand,
and the quantity thereof." Washington state attorney general Christine
Gregoire filed suit against DirtCheap in October 2002, alleging a violation
of the Jenkins Act. The case is still pending, with a federal court
in Washington in May denying the company's motion to dismiss the lawsuit.
Established businesses tend to follow the Jenkins Act, but small Internet
retailers don't have as strong an incentive. Scores of online retailers
sell cigarettes, but spokesman Timothy Connolly said the Massachusetts
Department of Revenue has obtained customer lists from only 10 retailers
after the state sent out Jenkins Act notifications.
Connolly said one shipping company, which he would not name, has turned
over its shipping records to Massachusetts. If the state knows the exact
amount of the purchase, it sends a bill for that sum; otherwise, "there's
a form to fill out. Tell us how much you bought, and write us a check
for that amount." Or, the letter adds, go to prison. It's obvious
that as taxes rise and tax avoidance follows, government agencies typically
respond by taking intrusive steps to monitor citizens and snoop cheap
cigarettes online on how they spend their money. But there are other
side effects, such as high taxes, creating massive black markets that
divert billions of dollars to criminals and spawn crime.
A Cato Institute study recounts New York City's horrific experience
after it hiked its taxes in the 1970s: "In the aftermath of the
act's passage tax officials reported an increase in robberies and thefts
from retailers and wholesalers as well as hijackings of cheap cigarettes
online trucks carrying cigarettes." Meanwhile, cigarette sales
in jurisdictions where New York bootleggers purchased cigarettes rose
sharply. In New York City today, a truck that's filled with 200 cases
of cigarettes has a retail value of about $1 million--a tempting target
for thieves.
Massachusetts may have the law on its side in tracking down its taxpayers,
but it doesn't mean that the law is right or that the taxes are wise.
Attempts to collect revenue should be cheap cigarettes online
weighed against the privacy of taxpayers. Turning UPS or other shipping
companies into government informants that report on Internet shoppers
is not an acceptable price to pay.