Cigarette tax dodge needs fix

When the state of Michigan got aggressive about collecting taxes on Internet cigarette sales, anti-tax crusader Grover Norquist of Americans for Tax Reform accused officials there of using “police state tactics.”

The comment was meant as a put-down, no doubt, but when massive numbers of people are breaking the law, whom do you call? You call the police.

That, figuratively, is what Michigan and several other states, including Washington and Idaho, are doing as the amount of cigarette sales that take place over the Internet has grown by 25 percent a year. The practice deprives the state of Washington of about $1 billion in revenue over the course of a biennium, according to the Department of Revenue. Local governments around Washington lose another $300 million. In Idaho, the state loses about $3 million a year in cigarette taxes because of Internet purchasing.

Smokers fume, with some justification, that they are an easy target when lawmakers want to collect more taxes with minimal political backlash. A month ago, the tax on cigarettes sold in Washington state went up another $6 a carton.

But that political battle has been fought in a different arena and resolved. The cigarette taxes on the books are, like other taxes, part of the structure by which a representative government chooses to fund itself. Lingering resentment over the way that expense is apportioned doesn’t make paying taxes any less a duty.

Yet the Internet has given consumers and national enterprisers a way to team up and sneak around state tax laws. Numerous Web sites afford smokers in Washington and Idaho the opportunity to buy smokes on line, paying only the dirt-cheap taxes collected in tobacco-growing states like Kentucky. Legally, the tax is still owed at the purchaser’s end, but there’s little risk in not paying it if the government doesn’t know about the sale.

States have discovered an ally that preceded the Internet by more than half a century. The 1949 Jenkins Act gives states the ability to get the names of people who buy cigarettes shipped across state lines, but with little to gain, the responsible federal agencies have been lackadaisical about enforcing it. Washington state has had recent success in civil court, however, and a growing number of smokers are being contacted and reminded of their obligation. It’s an informational campaign for now, but buyers ultimately face a decision whether to cough up delinquent taxes – sometimes thousands of dollars – or deal with collection actions.

The situation is not unlike that involving mail-order and online retail purchases, which usually escape state and local sales taxes. That’s a different challenge, however, without a federal law to resolve it – so far, at least. States are making separate efforts to address the sales-tax problem, as they should, but that issue has no bearing on the justification for collecting cigarette taxes.

“Police state tactics” is a harsh term for what the states are doing to combat tax evasion. Honest taxpayers, including smokers who buy their cigarettes the conventional way, should applaud the states’ efforts.