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State Collecting Taxes On Online Cigarette Sales

Massachusetts Residents Surprised With Hefty Bills

POSTED: 7:44 p.m. EST March 4, 2003

No one likes to get a tax bill, but hundreds of unsuspecting Massachusetts residents are receiving them from the state for money they didn't know they owed.

NewsCenter 5's Consumer Reporter Susan Wornick reported that residents are being surprised by bills for taxes on cigarettes purchased online. Bob, who asked not to reveal his identity, said that he has been buying cigarettes online for years.

"I didn't smoke," he said. "I'd save them for when the holidays would come. I'd give them to St. Francis, the veterans' shelters and the Pine Street Inn.

After buying about four cartons a month for the last two or three years, Bob recently got two bills from the state Department of Revenue and discovered that his generosity will cost him nearly $400 in the accumulated excise taxes.

A federal law called the Jenkins Act states that online cigarette distributors are supposed to voluntarily report their sales to the states where the purchase originates, but none do. So last July, the Legislature increased the excise tax to $1.51 a pack and gave state officials the authority to get tough.

"Since that time, we have put together a plan to track who is selling the cigarettes and to get information from them about people from Massachusetts that are not paying $1.51 per pack," Department of Revenue Commissioner Alan LeBovidge said.

The state sent letters to more than 300 online distributors demanding their records. Only two responded, but they offered the names of several hundred consumers, meaning big money for the state.

"We sent over 300 bills to people for $44,000 tax, and we've already collected $39,000," LeBovidge said.

Some cigarette Web sites tout tax-free cigarettes and promise, "We do not share our mailing lists or sales records with anyone." The state acknowledges it doesn't have the resources to go after the companies which refuse to cooperate, but those which do are reporting information quarterly, meaning consumers like Bob will be getting bills they probably hadn't planned for.

"I don't like bills," Bob said. "If I get a bill I pay it, but between the house tax, the car insurance -- I'm up over my head."

Bob has already paid one of the state bills, but he said he doesn't know what he will do about the others. State officials acknowledge a lot of people can't afford the added and unforeseen expense and said that while they will be aggressive, they will also be sensitive about collections.

The law only applies to cigarettes, not other tobacco products.

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