Taxman may be a drag for online cigarettes buyers
NEWARK, N.J. - Thousands of New Jersey smokers who turned to the Internet as a source of cheaper cigarettes are finding that the cost may be more dear than they expected.
New Jersey authorities have expanded efforts to have smokers remit the taxes that the online prices don't include. That can be substantial, since New Jersey's cigarette tax, at $2.40 a pack, is among the highest in the nation.
The names and purchase information of smokers who bought cigarettes online are being relinquished by the Web-based purveyors, after prodding by the state Division of Taxation.
The Taxation Division cited a 1949 federal law, the Jenkins Act, to obtain lists of New Jersey buyers. The law requires remote sellers of cigarettes to provide names of buyers to state tax authorities, said Tom Vincz, a spokesman for the state Treasury Department.
In the past year, several other states, including New York, Michigan, Minnesota, Nebraska, Ohio, Oregon, Pennsylvania and Oregon, also have used the Jenkins Act to crack down on residents who buy cigarettes over the Internet but don't pay state taxes.
New York City announced in March that through a settlement with eSmokes.com, the company is surrendering 12,500 names of customers from 2000 to 2003, when a New York State ban on Internet cigarette sales took effect. It was the largest list of names obtained by the city.
New Jersey hit the jackpot in February, with one vendor providing 13,000 names and addresses, representing about $13 million in sales and cigarette taxes, Vincz said.
It was the largest cache uncovered by the state, which by April was only about halfway done with mailing notices seeking tax payments to smokers who made online purchases. None have been charged yet.
The bills ranged from less than $100 to over $45,000. The higher figures, suggesting people who are reselling cartons of cigarettes, are attracting extra scrutiny, Vincz said.
"A lot of folks are surprised to realize you can't purchase cigarettes tax-free over the Internet," Vincz said.
They would include smoker Joseph P. Gulbinsky of Hamilton, who paid the $1,300 he was assessed but questioned whether the Jenkins Act can be applied to Internet sellers. He said that law was originally aimed at cigarette smugglers, and that a new state law targeted at buyers does not apply to purchases he made before Nov. 1, 2005.
"To me, it would seem that they're not entitled to the records before November 1st. This law is not grandfathered back," said Gulbinsky, 61, a retired asphalt tester at the state Department of Transportation.
He said bought online from 2003 through 2005 from eSmokes.com, which has a Reston, Va., mailing address.
Telephone numbers listed for the company were disconnected, and e-mails to addresses on the site were not returned.
Gulbinsky also questioned the Treasury Department's view that New Jerseyans who hop over to Pennsylvania and bring back less costly smokes are breaking the law.
"It's about $20 a carton cheaper to buy cigarettes in Pennsylvania," Gulbinsky said. "If you buy them in person, you can buy a trunkload of them, pay federal and Pennsylvania taxes, and bring them back here, it's perfectly legal."
State tax authorities maintain it is illegal to possess a pack of cigarettes in New Jersey that lacks a New Jersey tax stamp, although it is generally only enforced against large-scale violators.
If collected, the $13 million in back cigarette taxes will not relieve the state's budget woes. And it represents just 1.6 percent of the $788.6 million New Jersey collected in cigarette taxes for the fiscal year that ended June 30. Of that, $155 million went to pay for charity care in the state's hospitals and for anti-smoking programs in the Department of Health, of which $11 million was for smoking prevention and cessation programs.
