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Online Cigarette Customers Get Bill from State 856

wakebrdr writes "The Michigan Treasury Department has sent bills to state residents who purchased cigarettes online to avoid Michigan's high taxes. One pack-a-day smoker received a bill for $2,500 in back taxes. If a simple subpoena of customer data allows them to easily go after lost cigarette taxes, how long until state treasuries across the country subpoena Amazon.com or other big online retailers to collect unpaid sales taxes?"
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Online Cigarette Customers Get Bill from State

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  • by Anonymous Coward on Friday February 18, 2005 @09:28AM (#11711174)
    if they decide to tax porn...
  • by BoomerSooner ( 308737 ) on Friday February 18, 2005 @09:29AM (#11711184) Homepage Journal
    Isn't it against federal law to tax interstate commerce? Plus if you bought them via the internet the fed's have specifically made it a "no tax zone".

    Love stupid the taxes
    • by RocketJeff ( 46275 ) on Friday February 18, 2005 @09:34AM (#11711238) Homepage
      It isn't a 'sales tax' it's a 'use tax'.

      The back of my Illinois tax form has had a 'Use Tax' form forever. You're supposed to pay it for all items purchased outside of the state.

      There is nothing new about this - it's been around as long as mail-order has. It only become a big deal since the Internet made it a lot easier to do it.

      I remember when I was a kid (1960's) that states were making a big deal about mail-order catalog companies not paying sales tax...
      • by MrLint ( 519792 ) on Friday February 18, 2005 @09:48AM (#11711425) Journal
        It seems to be a red herring on what they call it. It amounts the the same thing, they could call it a 3 headed chicken. However a court will have to decide if it is in fact a sales tax (aka purchase tax, a sales tax would have to be paid by the seller:P)
      • It isn't a 'sales tax' it's a 'use tax'.

        Actually, it's called the cigarette excise tax.

      • by jglen490 ( 718849 ) on Friday February 18, 2005 @10:01AM (#11711625)
        This is correct. It's not a tax made on the sale of the article, but rather on its use/consumption. Several years ago, I bought a car in Illinois, but paid no sales tax there because I was in the U.S. military and was on my way to my next duty station in Florida (yeah, I know, real rough duty!!). So when I went to get a Florida license plate, I was required to pay Florida's "use tax" in order to title the car and get the plate. The "use tax" was at the same percentage rate as the sales tax for Florida on a new car, but was not a tax on the sale of the item, only a tax on its use in the state of Florida. Anyhow, it worked out O.K. in this case personally as the tax amount turned out to be less than any sales tax that would have accrued in Illinois. The point is, that for better or worse, it's necessary to understand the sometimes subtle differences when discussing a subject.
        • by swv3752 ( 187722 ) <swv3752@NOsPAM.hotmail.com> on Friday February 18, 2005 @10:44AM (#11712206) Homepage Journal
          And that Florida USE tax got repealled because it is really a sales tax.
        • by WidescreenFreak ( 830043 ) on Friday February 18, 2005 @11:41AM (#11713006) Homepage Journal
          Regardless of how the states try to phrase it, it most certainly still *is* a sales tax. It is the state's way of collecting taxes that they did not get because you went outside of the borders. (Oh, you evil person!) You do not pay "use taxes" on items that you did *not* purchase outside of the state's borders because use taxes are based on the price that you paid to acquire the item; therefore, it is a sales tax. But because states cannot force other states' business entities to collect taxes, they have used this "use tax" as an excuse.

          It is, in effect, nothing more than punishing citizens of a state for daring to purchase items in places other than that particular state. This is offensive is way that cannot possibly be described in mere words.

          Taxes on interstate commerce are forbidden as per U.S. Constitution, Article 1, Section 8, Clause 10, which states...

          No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

          A "use tax" is nothing more than a euphemism importation duty. I don't know of any law that has ever gone through the U.S. Congress that allows duties of one state to another, thereby making "use taxes" in violation of the above clause at the current time.

          Granted, I'm not a lawyer, but this is one of those things that I've done a lot of research on. I want desperately to shove this in the Pennsylvania Department of Revenue's every time they ask about this during income tax time.
      • It isn't a 'sales tax' it's a 'use tax'

        You can try to call it a use tax but really it's a 'sin tax'. Sin taxes are the second dumbest tax method after corporate income tax and on the same tax-stupidity level with inheritance tax. All three ought to be abolished.
    • by DaHat ( 247651 ) on Friday February 18, 2005 @09:34AM (#11711240)
      From TFA:

      It is illegal to bring any cigarettes into Michigan from other states unless by licensed sellers who pay the appropriate tax. People who bring less than $50 in cigarettes don't face penalties. Michigan requires that cigarettes sold in the state have a stamp attached to the pack to signify the payment of taxes.

      This is not uncommon, most states claim the right to tax things purchased outside of the state and will be used primarily within their own.
      • Misnamed Tax (Score:5, Insightful)

        by Whispers_in_the_dark ( 560817 ) * <{rich.harkins} {at} {gmail.com}> on Friday February 18, 2005 @09:48AM (#11711427)
        This is not uncommon, most states claim the right to tax things purchased outside of the state and will be used primarily within their own.


        Quite true. I have to wonder though whether there would be more public pushback if it was given a more apt name like "buying tax". After all it isn't the sale that's being taxed (it isn't the seller's state that's important), it's the buyer.

        IMHO, if they want to continue calling it a sales tax, they should tax the seller and the price listed is the final price to the consumer. This would mean no more silliness about trying to figure out the over-the-top tax rates when one buys goods, no stupid use tax traps, and make interstate commerce a LOT easier (calculating tax often requires knowing the actual municipality based on zip code -- quite a pain the tuckus).

      • Line in the Sand (Score:5, Insightful)

        by buckhead_buddy ( 186384 ) on Friday February 18, 2005 @09:58AM (#11711584)

        This is not uncommon, most states claim the right to tax things purchased outside of the state and will be used primarily within their own.

        Just because the states claim the right doesn't mean that they will be allowed the right. Look at gay marriage and slavery.


        But beyond that, it seems that the easiest way to beat this wrap is to take a vacation elsewhere (especially a place that doesn't have high smoking tax or regulation such as D.C., Mexico, or Puerto Rico) and take legal evidence of smoking and consuming these products outside of Michigan. You may not be able to show that you consumed all of the cigarettes outside of the state, but it will add a significant burden to the prosecution's case to prove that you consumed the majority inside the state.


        Even so, I think the prosecution is going to have a hard time proving that the cigarettes were consumed at all. Some people collect cigarette packaging (or wine bottles or coke cans) and don't give a flip what happened to the content. Did the defendant smoke the cigarettes or did he simply throw them away? Prove it! Where were these sticks consumed


        I personally don't smoke anything legal or illegal. But I find government regulation of smoking to have gone to greedy excess. As soon as this revenue stream starts drying up, they'll all move on to other items to tax (or other internet revenue). This needs to be stopped right now.

        • by pla ( 258480 ) on Friday February 18, 2005 @10:59AM (#11712432) Journal
          Just because the states claim the right doesn't mean that they will be allowed the right.

          You make a HUGE mistake in trying to apply logic to tax laws...

          Yes, you could point to a million possible ways that the "use" taxes don't apply. But state taxation departments simply don't care - They can and will make your life hell, even if you "win" your argument.


          Case in point... My SO and I moved from state A to state B roughly four years ago. Last year, she received an excise tax bill from state A, plus tons in penalties, for those three years.

          After literally dozens of hours wasted on the phone (which at her salary, arguably cost quite a bit more than the tax bill itself), she finally convinced them she no longer lived in state A. She STILL had to pay the late penalty charges on the bill that everyone involved agreed she never actually owed (the "logic", if you can call it that, ran something like "You may not have owed us that money, but you did fail to pay it promptly, so the penalties still apply even though the original bill doesn't"... Whiskey Tango Foxtrot???). She paid it just to get the whole miserable mess over with. Okay, all seemed great.


          Guess where she got a new excise tax bill from this spring?
          • Get a Lawyer (Score:3, Interesting)

            by virg_mattes ( 230616 )
            Don't worry about the cost, since as you can see, not fixing the problem can lead to continuing problems that will be nothing but a legal hassle. Hire a Massachusetts attorney who specializes in tax law. What this will get you is a laywer who knows who to talk to on the phone at the Mass. Dept. of Taxation so that this problem goes away and your SO gets her money back (minus legal fees).

            Tax offices are used to dealing with deadbeats, and there's no law saying they can't drop the hammer on anyone they ch
  • How long? (Score:5, Funny)

    by Binestar ( 28861 ) on Friday February 18, 2005 @09:29AM (#11711185) Homepage
    how long until state treasuries across the country subpoena Amazon.com or other big online retailers to collect unpaid sales taxes?

    18 months. You heard it here.
    • because we have no sales tax.

      Woo-hoo!

    • Re:How long? (Score:3, Interesting)

      The exact time prediction is irrelevant, humor aside. The point is that the states WILL do it eventually since they are being squeezed by the federal government. As the fedgov turns into a military/crony zone, the flow of federal funds to the states will dry up (or have all manner of conditions attached). We are seeing this sort of reaction now. The states are turning around on their own taxpayers in order to make up for their mind-bogglingly overreaching spending. The 1990s never were an era of prospe
    • Re:How long? (Score:5, Insightful)

      by wondafucka ( 621502 ) on Friday February 18, 2005 @09:57AM (#11711560) Homepage Journal
      Naaaah. Smokes are just low hanging juicy fruit that people think is bad so it's okay to take said juicy, juicy fruit. Mmmmmmm....taxes.
    • Re:How long? (Score:3, Insightful)

      by ArsonSmith ( 13997 )
      Moores law of...well...Law. (specifically tax law)

      Law will double in size and complexity and have the efficiency cut in half every 18 months.
    • Re:How long? (Score:3, Informative)

      by adamfranco ( 600246 )
      how long until state treasuries across the country subpoena Amazon.com or other big online retailers to collect unpaid sales taxes?

      > 18 months. You heard it here.


      Quoth TFA, "It is illegal to bring any cigarettes into Michigan from other states unless by licensed sellers who pay the appropriate tax. People who bring less than $50 in cigarettes don't face penalties."

      So don't worry about this action affecting future tax's on Amazon et al coming from the states as other products which are not as controll
  • by Anonymous Coward on Friday February 18, 2005 @09:30AM (#11711189)
    These styles of cases are going to have to be settled in the federal court system. The state, upon joining the union, gave up specific rights to regulate interstate commerce that is up to the Federal system. The Federal law currently doesn't allow states to tax imports from other states and has banned any Internet taxes. Thus, the only recourse is a federal ruling to set precedence - of course there is already precedence but may not be specific enough to thwart the state attempt of taxing.

    In Massachusetts, the state income tax fillers have to estimate the value of imports to the state thus taxing the citizens that way. This too will be settled from a federal case, as all these types should be. If the law says you can't tax interstate commerce then that is the way it is. If the law is twisted forcing imports to be taxed then that is fine too - we will just all know the law and not be hit with a $2500+ unexpected (or should I say unjustified at this point) tax bill.

    This case is where state law and federal law collide but it will have implication to all internet purchasers.

    'The collection of purchasers' names is allowed by a 1949 federal law called the Jenkins Act' - Sec. 376. Reports to State tobacco tax administrator
    (a) Contents
    Any person who sells or transfers for profit cigarettes in interstate commerce, whereby such cigarettes are shipped into a State taxing the sale or use of cigarettes, to other than a distributor licensed by or located in such State, or who advertises or offers cigarettes for such a sale or transfer and shipment...

    I don't see where this individual is required to pay state tax.
    • by blcknight ( 705826 ) on Friday February 18, 2005 @09:41AM (#11711339)
      Massachusetts has a state use tax. Anything bought and used in the state is taxed at 5% -- same as the sales tax, just with a different name.

      However, there's an alternative to paying it. There's a "safe harbor" provision that says if you pay a certain fixed amount based on your income, they won't come knocking on your door to check what you bought with one exception. The "safe harbor" only applies to items under $1,000. If you buy 150 widgets for $999 apeice at seperate times, you're fine, you can pay $15 "safe harbor" tax if you make under 40,000 (or $0 if you make under 25,000).

      Confused yet?

      http://www.massdor.com/help/guides/abate_amend/P er sonal/issues/Usetax.htm
    • by lukewarmfusion ( 726141 ) on Friday February 18, 2005 @09:43AM (#11711370) Homepage Journal
      I'm sure you're aware of this (your post seemed pretty well informed) but: Michigan Use Tax [michigan.gov]

      As far as I know, every state has something like this. Most folks don't pay tax for Internet purchases, but some companies (Best Buy, for one) already applies tax based on where you live. You are supposed to report and pay tax on all goods purchased from out of state.

      Given the costs of shipping (and the time it takes to deliver), I think Internet shopping can only survive if there is no sales/use tax. If I have to pay tax and shipping, I simply won't buy online.

      On the other hand, it's in the state's best interest to apply that tax - not only for the immediate tax revenue, but also creating incentive for people to shop in-state.
      • Given the costs of shipping (and the time it takes to deliver), I think Internet shopping can only survive if there is no sales/use tax. If I have to pay tax and shipping, I simply won't buy online.

        Ah, but then it's a form of corporate welfare by allowing "internet" transactions to be tax-free. Internet (and mail-order) companies are supposed to be able to offer wider selection and lower prices because of the way they operate (i.e., you don't have to hire X people per store to man the stores 12 hours a da
    • You're out in left field buddy. I live in Michigan and know what the law says.

      This is simple sales tax, these people do owe it, and it is not a federal issue. It has nothing to do with interstate lines.

      If you buy anything in MI (as the end users, which this case is) you owe sales tax to the state. It's that simple. If you go elsewhere any buy it, then this does not apply.

      These people were in Michigan when they bought the cigarettes, they owe sales tax. Michigan is not imposing a tax in goods brough into
  • by Torqued ( 91619 ) on Friday February 18, 2005 @09:31AM (#11711205) Journal
    And what if I buy something while on vacation in another state that has a different tax rate than my home state?

    Also, if these web sites are owned/run by people in the USA, could the state that they live in or incorporate their business in go after the taxes as well?
  • RE: (Score:5, Interesting)

    by rdilallo ( 682529 ) on Friday February 18, 2005 @09:31AM (#11711213)
    This seems dangerous to consumers. States can, at any time, subpoena Amazon.com and other online suppliers to regard tax revenue? What's the statue of limitations on this? Most states are hard up for tax dollars right now, and this could be one very scary way for states to generate revenue. Just a thought...
    • eBay (Score:4, Insightful)

      by gandell ( 827178 ) on Friday February 18, 2005 @10:14AM (#11711813)
      What about eBay? The legitimate stores that have taxation in their store? I've been charged taxes from certain sellers on eBay...and not by others. I've been taxed from some online retailers (big names such as Dell or Apple), but not by others (smaller names such as online game stores).

      I think it IS just a matter of time before online retailers are required to tax based on state legislation.

  • by serith ( 658009 ) on Friday February 18, 2005 @09:32AM (#11711217) Homepage
    State - Did you make any online purchases this year? You - *fills in no whilst using your new uber computer you just dropped a few K on from newegg...*
  • by jridley ( 9305 ) on Friday February 18, 2005 @09:33AM (#11711229)
    The cigarette tax pursuit is aided by a 1947 FEDERAL law specifically geared towards tobacco that authorizes states to use these measures to subpoena records from other states. I don't think officials trying to collect state sales taxes would have that authority.

    NOTE: I'm going from memory from an NPR story I heard on the way in this morning. 1947 may not be accurate.
  • Not Long At All (Score:4, Interesting)

    by Kefaa ( 76147 ) on Friday February 18, 2005 @09:34AM (#11711241)
    While I do not want to pay sales tax on out of state items, each year on my state tax return there is the box to make my own claim. Each year I make my contribution so I can legally sign that I have represented all taxes owed.

    In a way, people have abused the ignorance of the system. If you live in a state, like mine, that requires you pay and you do not, don't complain when they catch you. You committed tax fraud. If you don't like it, have the law changed.

    People who complain about this amuse me. Would you complain if the police pulled you over for doing 70 mph through a school zone? But no one gets hurt when I don't pay you say. I disagree that money was planned for allocation somewhere and someone else will be making it up in raised taxes elsewhere.

    But please don't get me started about useless spending of our tax dollars. I could not agree more.
    • Re:Not Long At All (Score:3, Insightful)

      by Trifthen ( 40989 )
      So you're saying you look up address information for each company you buy from online, including all subsidiary offices, and actually manage to track, for an entire year, all such purchases for the sake of tax filing?

      Ok, now that we've determined you're an accountant, how about an option for the rest of us?
    • Re:Not Long At All (Score:3, Insightful)

      by plague3106 ( 71849 )
      But no one gets hurt when I don't pay you say. I disagree that money was planned for allocation somewhere and someone else will be making it up in raised taxes elsewhere.

      How can they account for and plan to spend money generated from the sale of an item that I might not even have decided to make yet?

      Oh, you mean they are guessing how much people will spend, and thus how much sales tax they will make? Sounds like they'd better figure out a new way to project budgets.
    • Re:Not Long At All (Score:4, Insightful)

      by cdipierr ( 4045 ) on Friday February 18, 2005 @10:09AM (#11711728) Homepage
      Presumably his state taxes works like North Carolina's does. If you do not keep all of your receipts, there's an option that allows you to use their estimate, which is something like 0.07% of your gross income.

      So for instance, if you make $50,000 a year, you pay $35 in out of state "use tax".

      You could argue that it's unfair for some, but for the majority of Slashdot readers, I suspect this is actually an underpayment. None the less, it's a perfectly legal way to fill out the tax forms.
    • Re:Not Long At All (Score:5, Insightful)

      by LaCosaNostradamus ( 630659 ) <LaCosaNostradamu ... m minus caffeine> on Friday February 18, 2005 @10:21AM (#11711910) Journal
      As a short rebuttal, legislatures should not pass laws they are hardly able to enforce. The "use tax" is so little enforced (from being inherently unenforceable) that it simply creates criminals, and from that, it also develops in the population a widespread disrespect or contempt for the law.

      Such taxes should be repealed, yes. But civil disobedience is a force to be reckoned with.
    • If you don't like it, have the law changed.

      That's such a trite, smug, holier-than-thou phrase it's beneath you. Your chances of getting any law changed without having millions to spend are exactly zero.

      If taxpayers are supposed to be paying out of state sales taxes the way to collect them is to go after the sellers and get changes in the federal laws, not beat up individual taxpayers.

      Some of my online purchases have sales tax added to them, some do not. How is the average Joe Sixpack reasonably expe

  • Ohio Use Tax (Score:3, Interesting)

    by stinerman ( 812158 ) on Friday February 18, 2005 @09:34AM (#11711242)
    The Ohio Use Tax is designed to tax out of state transactions if one did not pay sales tax in that state. As another poster has mentioned, this seems to violate the ban on the taxation of interstate commerce.

    In Ohio, your Use Tax liability is left up to you to calculate (that is, it is hardly subject to audit). In my experiences, nearly everyone cheats by putting $0 down for out of state purchases.
  • Pointless Article (Score:5, Informative)

    by United544 ( 851579 ) on Friday February 18, 2005 @09:34AM (#11711246)
    These people were breaking Michigan law by buying the cigerattes from out-of-state and bringing them into the state. If the poster had read the article before submitting it...

    "It is illegal to bring any cigarettes into Michigan from other states unless by licensed sellers who pay the appropriate tax."

    This has nothing to do with taxes on purchases from Amazon or similar online retailers.

    • by FreeUser ( 11483 ) on Friday February 18, 2005 @09:55AM (#11711524)
      "It is illegal to bring any cigarettes into Michigan from other states unless by licensed sellers who pay the appropriate tax."

      That state law is a violation of federal law and of the constitution. States may not regulate interstate commerce. Cigarettes can only be illegal to import into Michigan if they are illegal to possess in Michigan (like, for example, marijuana). They obviously are not illegal to possess, so the Michigan law is unconstitutional and won't hold up to a legal challenge. Which, if someone sent me a bill for $2500, would be exactly what I would do: join with everyone else who also received these rediculous bills and sue the state in federal court, getting the law overturned and maybe a little pocket money in punitive damages as well.
      • Re:Pointless Article (Score:3, Interesting)

        by interiot ( 50685 )
        There IS a constitutional basis for shifting power towards states (away from federal) with regards to alcohol. See the 21st amendment [wikipedia.org]:
        • Section 2.

        • The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

        I understand that courts have interpretted this more generally (eg. also giving states more power in cases that are less than outright prohbition). My gues

      • Re:Pointless Article (Score:3, Informative)

        by Anonymous Coward
        You're a moron.
        Ever heard the saying - "knows just enough to be dangerous" ? That's you. You are wrong wrong wrong.

        True - the constitution grants the right to regulate interstate commerce - IN GENERAL - to the Federal Government, and takes that right from the states. However, the Federal Government can re-grant that authority to the states, and the states may act in areas where the Feds have chosen not to act - so long as the effect is non-discriminatory and applies to activities in that state. (This i
  • The law is actually be broken buy the consumers is it not? I don't see that states are doing anything illegal. As long as they get the prope warrents for search and have probable cause.

    We should pay are taxes you know.
  • by Anonymous Coward
    In Vermont it is already included. We have a new tax this year called a use tax which is a function of income. IT is said to cover internet purchases which did not charge state sales tax.

    Not a huge amount, (I paid $15, on the $45,000 I earned) but still how do they know how much I purchased online and what about people like my father who have never used a computer, they are being unfairly taxed.

    It is bullshit. They need to crack down on retailers for the money. Tell Amazon that it owes the state X amount
  • by Antony-Kyre ( 807195 ) on Friday February 18, 2005 @09:35AM (#11711253)
    In my "opinion", sales tax should work by the seller charging for sales tax based on the physical location of that business. So if someon from like Oregon buys cigarettes from like Florida, the Oregonian would be paying Floridian sales tax.

    My logic is that if someone travels from one state to another, in person, you end up paying the sales tax at the location of the business. That is, a Californian travels to Texas for vacation, wouldn't he or she be paying Texan sales tax at the place he or she is staying?

    If we have it the other way around, where the buyer pays the sales tax where he or she is located, and not the business, it complicates things a whole lot more.

    Here's a thought. What if someone travels in-state to a Native American Reservation and pays no tax?
    • Sounds like the indians should get into e-comm. :-)
    • Several states have formed a consortium [streamlinedsalestax.org] to simplify sales tax collection. The scheme they have come up with is "destination based" sales tax.

      The idea is that if you buy something in one location to be delivered to your home, the seller would have to collect sales tax for your location.

      For my state, Kansas, it would work like this - I buy a chair in Wichita to be delivered to my house (3 counties away). The furniture store would have to collect my county's sales tax, not the Wichita tax.

      It's a controve

  • by Jack Taylor ( 829836 ) on Friday February 18, 2005 @09:36AM (#11711261)
    Thank goodness all you have to do in the U.K. to avoid paying tax on something is to buy it abroad and hide it under your hat while going through customs...
  • I don't smoke but if I received a bill for back sales tax on online purchases from out of state I would refuse to pay.

    Most tax as far as I know is levied against items sold in the state. Is the online service is located in your state you will pay tax otherwise you are not required to do so. Unless the state is taxing not on the purchase but on the shipment into the state of specific items. They should check their tax laws to see how it is written.

  • by vortex2.71 ( 802986 ) on Friday February 18, 2005 @09:36AM (#11711265)
    At $2500 per year for a pack a day habit a P.O. box at a private place (like the UPS store) and a preloaded Visa grift card would present a viable altenative. Wow thats something like $6.80 a pack and P.O. boxes only run about $10 a month. Its the same old story whether their talking about movies, songs or cigarettes... People have always pirated the stuff, but "the internet has maid it so easy to do" so the powers that be are freaking out with reactive litigation instead of responding with new law that incorporates new technology.
  • by jdreed1024 ( 443938 ) on Friday February 18, 2005 @09:37AM (#11711269)
    If a simple subpoena of customer data allows them to easily go after lost cigarette taxes, how long until state treasuries across the country subpoena Amazon.com or other big online retailers to collect unpaid sales taxes?"

    I'd like to say that this is a little different, but I'm not fully confident that's true. From what I can tell, there was an explicit law preventing sale in the state of cigarette packs that did not contains a stamp proving the taxes were paid.

    But now I'm not so sure. Several states (including good old Taxachusetts) get very grumpy about "use tax" (what you're supposed to pay if you purchased something in another state and didn't pay sales tax), and occasionally go after people. Usually, however, they don't do that unless it's a big ticket item (car, boat, etc). The state was losing a lot of money on cigarette tax (much, much more than sales tax on the same amount), which is what motivated them in this case.

    If the state was to go after everyone who purchased a few books from Amazon, they'd be so overwhelmed with paperwork, it wouldn't be worth their while. Then again, Amazon keeps selling more and more expensive things tax-free (I got a $1900 radial arm saw in my Gold Box a while back), so maybe it'll happen.

    • Several states (including good old Taxachusetts)

      There was a study during the election last year that showed that Mass. actually has some of the lowest taxes/fees in the nation (expressed as dollars taxed/dollars earned). I think it came up after Zell Miller made a taxachusetts reference in his keynote speech. IIRC, Georgians pay more per dollar earned in taxes/fees than Mass'ians.

      "Taxachusetts" is a right wing myth, in the vein of 'welfare queens', the social security 'crisis', and Iraqi WMDs.
  • maybe (Score:3, Interesting)

    by WormholeFiend ( 674934 ) on Friday February 18, 2005 @09:37AM (#11711278)
    Maybe smokers who want to avoid taxes should grow their own tobacco?

    I'm not a smoker, but I'm a coffee addict... so to save money and get the freshest coffee possible, I buy green coffee beans and roast them myself, which saves me a lot of cash.

    Sure, I'd save more money if I quit drinking coffee, and believe me, I can quit whenever I want, I just choose to keep on drinking it because I love the taste of fresh home-roasted coffee...
  • by prakslash ( 681585 ) on Friday February 18, 2005 @09:38AM (#11711287)

    The Jenkins Act [senecasmokes.com] requires anyone who sells cigarettes into any state, to report those sales to each state monthly. This would include your name and order information. Native Americans are exempt from the Jenkins Act because they are independent nations under their federal treaties.
  • Technically, you are supposed to already pay sales taxes on mail order, magazine subscriptions and internet orders. Tobacco and alcohol are regulated differently, with extra "sin taxes" on them.

    Most states prohibit bringing tobacco and alcohol products into their state without an extra tax on them. Take a look at a pack of cigarettes, there is usually some "stamp" on them showing that the taxes were paid for in their state. Bootleggers make a mark up shipping alcohol or tobacco from states with low taxes to

  • Tax is not right. It is a tool. It's there to make sure that money is available for the needs of that state.
  • Let's say this. I drive to delaware and buy some fancy electronics. I pay no sales tax because the store is in Delaware. See, its not really me who pays the sales tax. It's the store that pays the sales tax. The store just charges me extra so they have the money to pay that tax, and so they can account for it.

    Now, even though I live in a state with a lot of sales tax, they don't charge me if I buy stuff from a store in Delaware. So lets say we have an online store in a state with 6% sales tax. That stor
  • by HotNeedleOfInquiry ( 598897 ) on Friday February 18, 2005 @09:39AM (#11711315)
    In California, we have to declare all of our out-of-state purchases that we didn't pay sales tax on and would have, had the purchases been made in-state. It's called Use Tax and we have to pay the standard sales tax on them. Since we are a business, we have to keep records and submit to audits. I've been told that the state office that handles use tax compliance audits rakes in over $4000 per hour of audit time.
  • It's my understanding that state sales taxes are explicitly exempt (in most states) from mail-order. The same is true for most provinces in Canada.
  • Article 9, Section. 9. Clause 5: "No Tax or Duty shall be laid on Articles exported from any State."

    Can someone please explain to me why extra-state USE taxes are legal but extra-state SALES taxes are not?! Changing the name doesn't fool me. Why are they fooling everyone else?!

  • Michigan law, as stated in the FA, prohibits importing tobacco from out of state to circumvent the tax.

    Does it set an ugly precidence? Not likely. I would doubt very much that their laws prohibit the importation of books. It is true that most states have moved to requiring that the consumer report and pay a 'Use Tax' for Mail-order/Internet goods; but, the reporting responsibility is purely on the consumer, and the state gains little from pursuing individual residence for what will likely be tiny amounts -
  • by lokedhs ( 672255 ) on Friday February 18, 2005 @09:45AM (#11711395)
    I'm not trying to troll or anything, I honestly want to know how inter-state trade regulations work in the US.

    As a EU citizen I'm allowed to buy anything from any EU country paying sales tax in the country from which I purchase the goods. It's a key part of the "free movement of goods and services" idea upon which the EU is founded.

    To me, it seems as though trade between US states are more restricted than between EU countries. Is this correct?

    • by Peyna ( 14792 ) on Friday February 18, 2005 @10:04AM (#11711657) Homepage
      One of the reasons for ditching the Articles of Confederation was that it didn't give the federal government any power to regulate interstate commerce, so you had serious issues with states in that respect.

      The federal government (through Congress) now has the power to "To regulate commerce with foreign nations, and among the several states, and with the Indian tribes." U.S. Const. Art. 1 Sec. 8.

      As far as the instance at hand here, most states have had use taxes on out of state purchases for quite some time. I would be surprised if it had not already been challenged and upheld.

      I located this page [myflorida.com] which provides some good information on the details of Florida's use tax on out-of-state purchases.

      Most states don't bother to pursue collecting these taxes because the cost to collect is much greater than the benefit of the tax they receive.

    • As a EU citizen I'm allowed to buy anything from any EU country paying sales tax in the country from which I purchase the goods. It's a key part of the "free movement of goods and services" idea upon which the EU is founded.

      Actually, this isn't quite true. It is true for most items, however tobacco and alcohol have a "personal use" restriction - ie: you can transport only as much as is reasonable for personal use.

      There are other restrictions on items such as cars, whereby local taxes come into effect b

    • Yes.
      The US does not have a federal sales tax, and with each state being its own entity they can tax as they like.
      Most of the use taxes allow you deduct the the taxes from the other state so generally you only have to pay any additional taxes. It would be like going to Germany 16%VAT from France 19% and then France collecting the additional 3% as you come in. Other have aggrements with bordering states where people do not have to pay thoses taxes but only the one of thier residence, provided you fill out
      • by phuturephunk ( 617641 ) on Friday February 18, 2005 @11:06AM (#11712541)
        I've lived in New York for most of my life and I've NEVER heard of that happening. I'd like some supporting proof of that.

        Actually, I call bullshit on that completely. The only ways to get to NY from Jersey (which has a controllable border and has tax amnesty on various goods you'd want to buy like clothes..CT doesn't count because you can get through to Westchester 100 different ways) are from the Tappan Zee (by way of the GSP or 287), GWB, Lincoln Tun, Holland Tun, the Goethalls Bridge via 278 to the verrazano or the Outerbridge crossing down at the south end of SI. All of those routes are major interstate routes and it'd be nigh impossible to mess with already painfull holiday traffic to shake down people for their Christmas presents.

        If the cops did that, you'd see Blue and whites being thrown of the George Washington Bridge by angry commuters.
    • Yes it is. I think however that the authors of the constitution had intended it to be illegal for states to regulate trade with eachother or impose duties/tariffs on imported goods except to cover the costs of inspection.

      No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of

  • by RadioactivePorpoise ( 602206 ) on Friday February 18, 2005 @09:50AM (#11711449)
    It seems that States want it both ways - they like to get nicotine addiction classified as a handicap (MN) in order to pursue tobacco companies to get huge settlements, then they turn around and enact outrageous, disporportionate taxes on this same addiction. Is it morally right to collect $1.7 million based on people being addicted to a substance? Are Michigan smokers really just a big nicotine fueled cash cow? If the state is able to tax that much based on something a person is addicted to, what motivation does the state really have to help get that person off nicotine? It seems as though all of these lawsuits against the tobacco companies were just a way to give the state a cut from our addictions - more like the Gambinis muscling in on the Gottis than any sort of public representation.
  • by EmagGeek ( 574360 ) on Friday February 18, 2005 @10:10AM (#11711737) Journal
    1) The taxes here are not sales taxes, they are CIGARETTE taxes, which are excise taxes. Excise taxes are not exempted by interstate commerce

    2) Sales taxes are only exempt if the vendor of the purcased item does NOT have a business entity in the state where the purchaser lives.

    3) Sales taxes can be levied by your home state, regardless of whether the transaction is interstate, if the state of purchase does not levy its own sales tax. (Example is PA-DE - no sales tax in DE, so PA can tax things you drive to DE to buy to avoid sales tax)

  • spooky actually... (Score:3, Interesting)

    by webgodjj ( 779462 ) on Friday February 18, 2005 @10:13AM (#11711804) Homepage
    Ok.. So this really isn't about cigarettes.. and it isn't about how the consumers got cigarettes. Read inbetween the lines here.. All States are suffering because the feds have cut their funds. They are trying ANY way to make more money. This is just a test case for this State. Like it or not, if this goes smoothly without opposition, the WILL start taxing every internet purchase. Don't think this taxing everything under the sun is getting out of control? Take California as a good example. For years they have been pushing their citizens to drive less, drive fuel efficent cars, and or use fuel alternatives. This actually SAVED them money becuase their is less pollutin = less sickness. Now they want to tax cars by the mile using GPS because "hey, we are loosing SALES TAX on gas! Forget the fact that these smaller cars probably rip up the road much less than a large gas guggling truck. Forget the idea that it was their idea that consumers should drive smaller and more efficient cars. And dear god, forget that this will also save in health bills throughout the state. Then again.. I ramble... :)
  • by phorm ( 591458 ) on Friday February 18, 2005 @10:37AM (#11712118) Journal
    I'm wondering if this had added fines, compounded interest, or something else funky. As per the headline "One pack-a-day smoker received a bill for $2,500 in back taxes."
    If you look at the cost, assuming a 5% tax:

    $2500 / 0.05 = $50000

    So effectively, this person bought $50,000 in cigs? That's more than a lot of people make in a year. Yes, I have friend that smoke a lot, but I have a hard time imaging any regular person being able to afford smoking that much in a year's period, or possibly even 2-3 years. So how long do these "back-taxes" actually go?
  • by Nom du Keyboard ( 633989 ) on Friday February 18, 2005 @11:00AM (#11712434)
    Do Internet retailers need to keep records? Records specific enough to identify particular consumers? If they must keep them, can they keep in a Data Haven beyond a state's subpoena reach?

    While I don't smoke and hate being around those who do, what can be done to smokers can be done to the rest of us on everything else too. I'd be more willing to patronise retailers who promise that the records of the sale are destroyed as soon as the order is received. This isn't the first time that an on-line retailer has been forced into revealing records that have then been used even by private companies to extort legal purchasers.

    Now how long before some 89-year-old grandmother who never smoked in her life is sued because her grandkids used her name to buy a pack?

  • by Mr. Cancelled ( 572486 ) on Friday February 18, 2005 @11:41AM (#11713009)
    "Granholm sucks!". Worst governer ever!

    She gained a lot of publicity just recently by saying that the state will no longer provide free coffee for prisoners, which I highly support, but it's really just the latest in a long string decisions she's made that allow her to scrape a little bit more money away from the average working class person.

    In case you weren't aware, this is the same lovely person who's been sending letters to online retailers around the country, trying to persuade them (it's not quite threatening them, but it's pretty darn close from what I've seen) into tracking all customers from Michigan, and then forcing those customers to pay taxes on out-of-state purchases.

    My opinion is obviously that she's a real bitch to deal with, and that she treats the average citizen like crap, all the while avoiding any changes to the upper class, higher income bracket. As much as I like the aforemention coffee idea, it doesn't make up for the fact that she's screwing over her constituents in the name of a quick buck. It's doubly annoying when you contrast it with Michgan having one of the highest unemployment rates in the country currently, much less one of the higher crime rates (Look no further than Flint or Detroit for evidence of this...).

    When Granholm starts looking into providing some services for her constituents, then I'll accept some of the increases, and penaltys that she's proposing.

    I ran into another bill passed recently under her admnistration... My car got hit by another driver a couple of weeks ago... When we contacted the insurance companies, they said that under new Michigan laws, you are only able to get up to $500 from the guilty partys insurance company... So even though this guy was at fault, and he was very open about this fact, his insurance companies only obligated for up to half a grand, no matter the extent of the damage, and/or guilt of the insured. The excuse was given that this was a way lawmakers thought they could avoid frivilous lawsuits from happening, but instead it's prevent legitimate lawsuits, which would be up-holdable in other states, from ever happening here.

    And do you know why this was done? Because too many people only have the bare minimum insurance coverage for their vehicles in this state, so owners of nice cars, who had full coverage but were driving poorly and hit a beater car, were upset about having to pay money out to repair what they considered to be a throw-away car... Any guess why so many of Michigans drivers only have the bare minimum of coverage? Look no further than our unemployment rate, and our average incomes... Again, one more example of Michigans laws protecting those with money, while screwing the working class over.

    I know I sound bitter in this posting, but I seriously think that the state's in much worse shape now then when Engler was running the state (which is really saying something, asn he wasn't too impressive either!). The reason why all these laws are going into place is because the state has elected a former prosecutor for governor. Hire a money grubbing, self-centered lawyer for your governor and see what happens in your state!

    I personally can't wait for the state elections to come up so that we can get back on track here... The goals of our governor is SO far off the goals of the people living in this state, who she's supposed to be working for!

    Sorry for any mispellings... I just got up on my day off, but when I checked the headlines and saw this, I just had to reply. 8)=

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