Tax evasion from Internet cigarette sales can deprive government and public health programs of much-needed revenue. Cigarette excise taxes are used to fund government programs, including vital public health programs (e.g., cancer screening and tobacco prevention and control programs).
There are no published, peer-reviewed estimates of the extent of tax revenue lost from Internet cigarette sales. Reports by industry analysts, which have not been subjected to scientific peer review, estimate that states could lose between $552.4 million and $4 billion in yearly state and local government tax revenue due to the sale of untaxed cigarettes on the Internet (U.S. GPO, 2003; Rubin, 2001). It is likely that the actual amount of lost revenue to states is lower than these industry estimates, but is still quite significant. This is lost revenue that could be used for funding state efforts to reduce cancer deaths in the 19 states that commit a portion of their excise tax revenues to cancer screening and tobacco prevention and control programs (NCI, 2004). Given the proven impact of cigarette excise taxes in generating revenue and reducing smoking, it is essential to keep the policies in place while finding ways to prevent tax evasion from Internet sales.