Congress moves to kill the internet cigarette trade

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I wrote recently about the growing black market in tobacco smuggling. Another tax-avoidance approach some cigarette smokers have embraced is buying tobacco over the internet. Now Congress is considering a bill that would put probably fatal restrictions on this trade.

One of the sponsors of the bill, Anthony Weiner (D, NY), estimates that New York City alone is losing up to $150 million in tax revenue annually from internet sales. With taxes, a pack of butts in the city runs around $9, or $90 a carton. The same carton of Marlboros would cost $44.00 plus shipping over the internet from CigarettesAmerica.com, a company based in "sovereign native American territory." I think we can all see the problem, even through the cloud of smoke.

House bill 1676, The Prevent All Cigarette Trafficking (PACT) Act of 2009 was just approved by the House Judiciary Committee and will now be considered by the House at large. The law, which would pertain to sellers from tribal lands as well as all states, would create the following rules:
  • Vendors may not make any sales in excess of 10 pounds.
  • Vendors may not sell cigarettes to minors.
  • Vendors must, at the time of accepting an order, obtain the full name, birth date, and address of the person ordering, and verify the information, especially age, via a commercially available database "that is regularly used by government and businesses for this purpose."
  • Records of all orders, including the above details, must be kept for four years and made available to state tobacco administrators and other law enforcement.
  • Vendors may not ship any cigarettes to a resident of a state that do not carry that state's tax stamp and the federal excise tax stamp.
  • Vendors must collect all local, state and federal taxes and send the money to those governments.
  • Vendors can't pawn off the age verification onto the company handling delivery of the goods.
  • Violations are considered felonies carrying prison time of up to three years, as well as fines as high as two percent of the previous 12 month's gross sales.
If passed and strictly enforced, this bill would signal the end of legal internet smokes. The same bill was proposed in the previous Congress, but never made it out of the house. Like any bill dealing with lost tax revenue that comes up for a vote this year, I expect it to pass.
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