Customers owe tax for online cigarette buys

SEATTLE – Washington state patrons of an American Indian-owned online tobacco store are being asked to pay uncollected taxes on their cheap cigarettes, and the state is threatening them with fines if they return to the Internet for tax-free smokes.

The enforcement efforts follow a state lawsuit against a business based in New York’s Seneca Nation of Indians, whose reservations are home to some of the country’s largest online tobacco retailers.

“The breakthrough here, in our mind, is successfully suing a tribal vendor because in the past, the tribes have contended that they’re not subject to these federal laws, and we’ve demonstrated that they are,” said Mike Gowrylow, a state Revenue Department spokesman.

In a U.S. District Court lawsuit settlement announced Thursday, Web site operator Scott Maybee agreed to provide state officials with lists of Washington residents who have purchased cigarettes through his Web site, www.smartsmoker.com. The state already has received lists with about 1,100 entries, which it is using to identify consumers.

Those shoppers are getting letters from the Revenue Department that ask for full payment of the uncollected cigarette taxes. The payments are voluntary, but the letters warn of stiffer penalties if consumers keep buying tax-free tobacco online.

“We’re not going to turn it over to collections, so it’s somewhat of an honor system,” Gowrylow said.

Those who continue buying tax-free cigarettes will face a penalty of $250, or $10 per pack, whichever is greater. State officials also may impose delinquency charges of as much as 45 percent.

“And not just from this vendor, but any vendor, because there are many vendors out there and we haven’t sued them all yet,” Gowrylow said.