N.Y. smokers go online to avoid tax
NEW YORK - In New York, smokers face one of the highest cigarette costs in the country and are apparently turning to the Internet to escape the city's new taxes.
The cost of a pack of cigarettes has skyrocketed because of a July 1 city tax increase, from 8 cents to $1.50. The state also collects $1.50, raised last year from 39 cents.
Most national brands, which had been selling for $5.50 or less, now cost about $7 in the city. The state's smoker's hotline reports a sharp jump in callers who want to quit.
New York City Mayor Michael Bloomberg backed the tax as a way of discouraging smoking while raising $220 million annually.
Retailers and others say that the primary result has been to drive addicts to cheaper sources. While smuggling has been widely anticipated, no cases have surfaced so far.
Instead, tax-free cigarette shops on the Internet, mostly run by American Indian tribes and offering cartons for about half the going city price, appear to be getting an increased share of New Yorkers' business.
"I've got some customers who used to buy a carton a week," said Ahmed "Alex" el Nesaffi, who runs a cramped newsstand, candy store and smoke shop in Brooklyn Heights. "Now, they call the [Internet] company and they send the cigarettes by mail."
El Nesaffi said his sales of one popular brand, Marlboro Lights, had gone from five cartons a week to one since the new tax was applied.
"The few retailers I've spoken to have had drops of 25 to 50 percent," said James Calvin, executive director of the New York Association of Convenience Stores. "There was an immediate drop-off, but it gets worse every day."
Calvin estimated that "as much as half" of the vanished buyers have turned to the Internet.
Sites are not hard to find, by typing in search terms such as "cheap smokes."
One such site, based on the Seneca Indian reservation in western New York state, boasts that "we are exempt from all State Taxes, Sales taxes, Sin taxes, Local taxes, etc... due to our Federal Treaty Rights."
The site offers a carton - 10 packs - of Marlboros for $36.85, sent by mail, with a minimum of two cartons. For those unable to use the Internet, there is also a toll-free phone number for placing orders.
"We are 100 percent confidential," the site says. "We are not required to turn over our records to anyone and we will not do so."
New York tax officials have said that state residents buying more than two cartons at such sites are supposed to pay a "use tax." They have not, however, revealed how the tax should be paid, or any method of enforcing it.
New Yorkers had already been turning to such sources at rates far higher than elsewhere, said Michael Cummings, director of cancer prevention for the Roswell Park Cancer Institute in Buffalo.
Just after the state more than tripled its tax last year, Cummings said, a survey he conducted for the National Cancer Institute found that 5 percent of the state's smokers said they had recently bought cigarettes over the Internet.
Cummings' institution also operates the state's Quit Line, a toll-free number for smokers, and he said that there had been a 12 percent increase in the calls from New York City since the new city tax took effect.
He said the tax increase was welcome if it caused some to quit.
"They should bump it up even higher, in my view."