Key Researchers
 

 
  • Some states are beginning to take action. Several have passed laws regulating the collection and remittance of excise taxes, requiring customers to pay taxes from cigarettes purchased online. Others have altogether banned shipping/delivery of cigarettes to consumers, and state Attorneys General have worked to develop promising new strategies to address the threat of Internet cigarette sales.

    By the end of 2006, thirty-four states had enacted provisions aimed at preventing tax evasion from Internet cigarette sales, according to an analysis undertaken as part of the American Lung Association SLATI (State Legislated Actions On Tobacco Issues) program (Chriqui, in press). Thirty of the thirty-four states included provisions requiring vendor compliance with the Jenkins Act and/or state tax collection and reporting. Four states--New York, Arkansas, Maryland, and Connecticut--passed laws banning the shipping/delivery of cigarettes to consumers altogether. A handful of states (e.g., Michigan, Illinois, Connecticut, and Pennsylvania) are actively collecting unpaid taxes on Internet cigarette sales reported under the Jenkins Act (Hunter, 2005).

    In 2005, the Bureau of Alcohol, Firearms, Tobacco, and Explosives and several state Attorneys General worked together to alter the manner in which Internet cigarette vendors do business in a manner that previous regulatory approaches had been unable to accomplish. In March 2005, they reached a voluntary agreement with the major credit card companies and PayPal to cease processing transactions for Internet cigarette sales, effectively cutting vendors off from their primary form of processing payments, leaving them with few available payment options other than personal checks and money orders. In October 2005, they reached a voluntary agreement with UPS, which joined DHL and FedEx in refusing to ship cigarettes to retail consumers, leaving the U.S. Postal Service as the only viable shipping option for Internet cigarette vendors. The voluntary nature of these landmark agreements avoided the potential pitfalls of the legislative process that has prevented federal legislation from being enacted to date to serve the purposes of these two agreements. Furthermore, because these agreements are with the payment processors and shipping companies (not state and federal governments), they are not subject to the same jurisdiction issues experienced when attempting to enforce state and federal regulations with vendors located on Native American reservations and overseas.


 

 

 
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