Internet sales result in loss of tax revenue to states
As cigarette taxes increase across the nation, Internet sale of tobacco products has increased, resulting in a loss of revenue for states. Internet sites are not mandated to collect state taxes from other states, but are responsible for reporting names of purchasers so that the state of residence can apply the taxes. The U.S. General Accounting Office estimated that states will lose more than $1 billion in taxes to Internet sales. The states’ best means for obtaining unpaid tax money is to request the names of addresses of purchasers from the Internet companies, who are required to oblige the request in accordance with the Jenkins Act of 1950. States must then contact the buyers and bill them for the taxes.
 
Some states have passed their own laws to initiate tax collection from Internet sales.

• In Michigan, buyers must be registered with the state in order to purchase cigarettes on the Internet or from out of state sources. An unregistered buyer may purchase cigarettes from an entity that collects tax and forwards tax money to the state.
• Utah has collected over $130,000 in taxes from Internet tobacco sales. The state intends to notify 250,000 more people with letters later in August of the tax revenue they owe the state.
• Nebraska has sent out letters to collect taxes from customers who have purchased tobacco products online.
• In Wisconsin, the Department of Revenue received tips from Internet vendors of over 2,000 people who had purchased tobacco online and owed the state tobacco tax money. After sending letters to those who owed back taxes, the governor decided the Department should not move forward in enforcing or collecting the tax.
• In accordance with the Jenkins Act, the Minnesota Revenue Department has been able to acquire names and addresses of Internet cigarette buyers and notify them of the taxes they owe the state. The state has been able to collect about $46,000 by sending tax letters to over 1,100 people. Minnesota law requires the U.S. Postal Service and private package-delivery services to use photo identification to verify that recipients of tobacco products are of legal age. UPS and other delivery companies have stopped the shipment of tobacco products to non-retail or wholesale entities.

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July 1st - Tax increases took effect in four states (NH, OH, VA, WA)
July 1st marked the initiation day of increased taxes in four states, while many others have tax increases slated for later in the year. New Hampshire raised its tax by $0.28 to $0.80; Ohio raised its tax from $0.55 to $1.25; Virginia raised its tax by $0.10 to bring its tax to $0.30; and Washington increased its tax by $0.60 cents to $2.025 total. Across the country, 39 states and territories have increased their cigarette taxes since 2002, with the average tax doubling to almost $0.90 per pack. Click for more information.

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Maine:
 
Maine doubles cigarettes tax
A $1 tax increase per pack of cigarettes goes into effect in Maine on September 19th and is expected to increase state revenue by $46.8 million over the next year. The tax increase will double the tax from $1 to $2 per pack. In addition to the increase on cigarettes, smokeless tobacco taxes are going up 16% and loose tobacco 4%. Click for more information.

Maine Attorney General appealing preemption ruling on tobacco delivery
In 2003, a Federal District Court ruled that the 2003 law requiring delivery companies to verify that recipients of delivered cigarettes were of legal purchasing age violates federal interstate commerce laws by interfering with timeliness and cost of delivery. The Attorney General of Maine, Steven Rowe, has filed an appeal to this ruling, claiming that the state has an obligation to reduce underage smoking and collect appropriate state taxes. Click for more information.

Michigan:
 
Michigan: After a year with highest tax, sales area down
Michigan has one of the highest cigarette taxes in the country at $2 per pack. The new tax, which began in July 2004, was expected to increase state revenue by up to $1 billion for 2005. The tax has cut back on purchasing dramatically, by about 20%, leaving the state with an increase of only $237 million. The state has also seen a decrease in smoking and related health care costs. Click for additional information.

Minnesota:
 
Minnesota passes highest cigarette tax in Midwest
Officials approved a $0.75 increase in the state’s tax on cigarettes, increasing it to $1.23 per pack. This is the highest cigarette tax in the Midwest. The increase took effect on August 1st. Some in the state, including Governor Pawlenty, have referred to the tax as a “cigarette fee,” as it is directed at businesses rather than a tax to the consumer. The assumption by many is that it will be rolled over to the consumer and resemble a tax on cigarettes. Click here for more information.

North Carolina:
 
North Carolina passes tax increase
On August 4th, after much debate, the North Carolina legislature agreed to increase the tax on cigarettes from $0.05 cents per pack to $0.35 cents per pack by next July. The tax will increase to $0.30 cents per pack on September 1st, then to $0.35 per pack on July 1, 2006. Taxes on other tobacco products would also increase from 2% to 3%. , North Carolina currenly has the lowest tobacco tax in the nation. This increase is expected to produce $118.8 million to help cover the $1.3 billion budget shortfall. Click for more information.

Phillip Morris campaigns to maintain low cigarette tax in North Carolina
The Phillip Morris Company sent over 5,000 postcards to convenience stores and retailers in an effort to curb the proposal to increase the cigarette tax in North Carolina. The postcards included toll free numbers to reach legislatures and a request to use the lines to voice opposition to the increase. Click for more information on the campaign and N.C. Alliance for Health’s grassroots counter-actions.

South Dakota:
 
South Dakota trying to get tax increase on ballot
A coalition of four nonprofit organizations is petitioning to have a $1 tax increase on the ballot for South Dakota voters in 2006. To reach the ballot, the petition needs 16,000 signatures. The tax increase would raise $40 million; groups propose that $5 million be used for tobacco prevention work and the remaining income be used for education, Medicaid and a reduction in property taxes. They also predict it could dissuade 11,000 young people from starting to smoke. Click for more details on the potential ban.

Tennessee:
 
Proposed tax hike in Tennessee vetoed
A proposed tax increase on smaller cigarette companies was vetoed by Tennessee Governor Phil Bredesen in late June. The Governor and Attorney General stated that the tax could have interfered with their Master Settlement Agreement and the $153 million they are to receive this year. Lawmakers were hoping to increase the cost of generic cigarettes in order to reduce youth smoking. Click for more information.

Wisconsin:
 
Governor of Wisconsin signs “no tax increase” budget
The budget Wisconsin Governor Doyle signed did not include the proposed $1 per pack tax increase legislators had hoped for. More likely, property taxes will increase at local levels, with the cigarette tax in remaining at $0.77. Click for additional information.

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