E-Commerce: Taxes up in smoke
The medical community cheered when Massachusetts imposed hefty taxes on cigarettes. But a battle looms over cheap smokes for sale on the Web.
Seeking to avoid costly in-state cigarettes, Massachusetts residents are starting to migrate to discount cigarette stores on the Internet.
The trend worries health officials, as well as states that have placed heavy taxes on cigarettes. California and Iowa are among several states that have ordered online tobacco sellers to name their customers. And with lists in hand, they're contacting residents and telling them to pay up. So far, Massachusetts has been sitting on the sidelines.
''At this point, we're not taking any action,'' said Patricia Campbell Malone, a spokeswoman for the state Department of Revenue. ''But it's definitely something we're watching.''
Right now, consumers pay few taxes for products purchased online because federal law does not give states the authority to collect taxes from Net firms.
In addition, many Net smoke shops are based on Indian reservations. Stores on reservations do not have to charge state excise taxes, though Malone says sales at Web shops owned by Native Americans aren't necessarily protected.
''As soon as you start selling outside the reservation, it is taxable,'' she said.
Several Native American tobacco retailers disagreed, adding they wouldn't collect state taxes on Internet sales.
''They can't tax us,'' said Trina Shongo, an employee of the Smoke Signals tobacco shop, which operates buycigarettes.com from the Seneca Reservation in New York. ''And we're not going to give names out.''