April
1, 2003: Tobacco
E-Tailer Cyco.net Issues Challenge to States - Cyco.net Inc. President
Richard Urrea stated: In May 1992 the U.S. Supreme Court ruled that you
cannot place an undue burden on a company that does not have a physical
presence in that state. The Jenkins Act, which requires shipment of cigarettes
into states to report those shipments to that state's tax authority, was
imposed in 1955. We have operated knowing that a Supreme Court ruling negates
any former laws that go against the ruling -- case in point, Roe v. Wade.
Any future law that would circumvent such a ruling would require a constitutional
amendment, which requires two-thirds of Congress and each state's ratification.
Cyco.net Inc. challenges
the states that are depending on the Jenkins Act to use as grounds for
legislation and litigation to first get a Supreme Court ruling prior to
proceeding with such action. The company at no time wants to do anything
illegal and feels it is unjust to be accused of such without this ruling.
If the court rules that Jenkins is intact, the company will comply with
the regulation and all litigation will be unnecessary. Otherwise, any litigation
will be dragged out for years before resolution.
February
21, 2008: In Blow to
Spitzer, Court Strikes Down Tobacco Law - A ruling yesterday by the
United States Supreme Court will cast a shadow over one of the successes
Governor Spitzer claimed during his tenure as attorney general: his work
to curtail online purchases of cigarettes.
Online cigarette sales, Mr.
Spitzer and other state attorneys general found, were allowing smokers
to evade taxes and permit minors to get around age requirements. Some states,
such as New York, enacted criminal penalties for truck drivers who knowingly
delivered boxes of tobacco. Mr. Spitzer used an investigation to leverage
the United Parcel Service into giving up the transporting of tobacco to
smokers nationwide.
Yesterday the federal high
court unanimously struck down a Maine law that forbids deliveries of tobacco
to individual consumers and burdens truckers with enforcing the law. The
law is similar, though not identical, to New York's.
"The Supreme Court's ruling
has a breadth that suggests states will have to revisit laws that are akin
to this," the lawyer who successfully challenged the law on behalf of several
trucking associations, Beth Brinkmann of the firm Morrison Foerster, said
in an interview.
A spokesman for Attorney
General Cuomo, Mr. Spitzer's successor, said the office was reviewing the
Supreme Court decision.
So far, New York's law has
survived court challenge. A federal appeals court in Manhattan in 2003
upheld the law against claims that it violated the Constitution's commerce
clause by favoring instate tobacco retailers. But the challenge to the
Maine law the Supreme Court heard was brought under an entirely different
legal theory.
Trucking associations in
New Hampshire, Vermont, and Massachusetts said the Maine law was pre-empted
by a federal law that forbids a state from enacting a law "related to a
price, route, or service of any motor carrier."
The Supreme Court's main
concern was that Maine's law, coupled with other laws, undermined Congress's
effort to deregulate the trucking industry. "To interpret the federal law
to permit these, and similar, state requirements could easily lead to a
patchwork of state service-determining laws, rules, and regulations," Justice
Breyer wrote for the court. "That state regulatory patchwork is inconsistent
with Congress' major legislative effort to leave such decisions, where
federally unregulated, to the competitive marketplace."
The trucking industry has
criticized the state laws as being not only burdensome but also, ultimately,
ineffective. Online cigarette retailers, industry representatives say,
sidestep the laws by shipping through the federal United States Postal
Service, which is not subject to state laws.
"Why should the mailman be
able to deliver them to your door and the UPS driver has to go to jail?"
the president of the New York State Motor Truck Association, William Joyce,
said.
In 2004. Mr. Spitzer's office
opened an investigation into whether UPS had violated New York State law
by shipping cigarettes to individual smokers. In return for the shuttering
of the investigation, UPS signed an agreement with Mr. Spitzer that announced
the company had made "a business decision" to stop shipping cigarettes
to individual smokers anywhere in the country.
Under the agreement, UPS
can back out if New York's law is declared invalid or enjoined by a court.
UPS is not likely to use
the Supreme Court ruling as a hook to try to get out of that agreement
with New York.
"We have a policy that's
been in effect for almost three years now and has been effective, and we
see no reason to change it," a UPS spokesman, Norman Black, said.
[back
to index]
THE LAW
NYS PUBLIC HEALTH LAW
ARTICLE 13-F; SECTION 1399-LL
Unlawful shipment or
transport of cigarettes.
Effective June 2003
(Any
emphasis is added by C.L.A.S.H. for follow-up points)
* § 1399-ll. Unlawful
shipment or transport of cigarettes. 1. It shall
be unlawful for any
person engaged in the business of selling cigarettes
to ship
or cause to be shipped any cigarettes to any person in
this
state who
is not: (a) a person licensed as a cigarette
tax agent or
wholesale dealer
under article twenty of the tax law or registered
retail dealer under
section four hundred eighty-a of the tax law; (b) an
export warehouse
proprietor pursuant to chapter 52 of the
internal
revenue code
or an operator of a customs bonded warehouse pursuant to
section 1311 or 1555
of title 19 of the United States Code; or (c)
a
person who is an officer, employee
or agent of the United States
government [1], this state or
a department, agency, instrumentality or
political subdivision
of the United States or this state, when such
person is acting
in accordance with his or her official duties.
For
purposes of this
subdivision, a person is a licensed or registered agent
or dealer
described in paragraph (a) of this subdivision if his or her
name appears on a
list of licensed or registered agents or
dealers
published by
the department of taxation and finance, or if such person
is licensed or registered
as an agent or dealer under article twenty of
the tax law.
2.
It shall be unlawful for any common
or contract carrier to
knowingly transport
cigarettes to any person in this state reasonably
believed by
such carrier to be other than a
person described in
paragraph (a), (b)
or (c) of subdivision one of this section.
For
purposes of
the preceding sentence, if cigarettes are transported to a
home or residence,
it shall be presumed that the common or contract
carrier knew
that such person was not a person described in paragraph
(a), (b) or (c) of
subdivision one of this section. It shall be unlawful
for any other person
to knowingly transport cigarettes to any person in
this state,
other than to a person described in paragraph (a), (b) or
(c) of subdivision
one of this section. Nothing
in this subdivision
shall be construed to prohibit a person other than a common or
contract
carrier from transporting not more than eight hundred cigarettes
at any
one time to any person in this state.[2]
3.
When a person engaged in the business of selling cigarettes ships
or causes to be shipped
any cigarettes to any person in this state,
other than
in the cigarette manufacturer's original
container or
wrapping, the container
or wrapping must be plainly and visibly marked
with the word "cigarettes".
4.
Whenever a police officer designated in
section 1.20 of the
criminal procedure
law or a peace officer designated in subdivision four
of section 2.10 of
such law, acting pursuant to his or her
special
duties, shall discover
any cigarettes which have been or which are being
shipped or
transported in violation of this section, such person
is
hereby empowered
and authorized to seize and take possession of
such
cigarettes,
and such cigarettes shall be subject to a forfeiture action
pursuant to the procedures
provided for in article thirteen-A of the
civil practice
law and rules, as if such article specifically provided
for forfeiture of
cigarettes seized pursuant to this section
as a
pre-conviction forfeiture
crime.
5. Any
person who violates the provisions of subdivision one or two of
this section
shall be guilty of a class A misdemeanor and for a second
or subsequent violation
shall be guilty of a class E felony. In addition
to the criminal penalty,
the commissioner may impose a civil fine not to
exceed five thousand
dollars for each such violation on any person who
violates subdivision
one or two of this section. The commissioner may
impose a civil fine
not to exceed five thousand dollars
for each
violation of
subdivision three of this section on any person engaged in
the business of selling
cigarettes who ships or causes to be shipped any
such cigarettes to
any person in this state.
[back
to index]
FOLLOW-UP POINTS
[1] "It
shall be unlawful for any person engaged in the business of selling cigarettes
to ship or cause to be shipped any cigarettes to any person in this state
who is not... (c) a person who is an officer,
employee or agent of the United States government..."
In
other words, common carriers like UPS or FedEx can be and are prohibited
from shipping cigarettes but the United States Postal Service (USPS) --
a government agency -- cannot be and is not prohibited from shipping cigarettes.
The states don't have that power over a federal agency.
It
helps to explain why the USPS has been adamant in their
refusal to cease shipments. They do not have to no matter how
much they are harassed to do so by the state Attorneys General and the
anti-smoking groups.
However,
a pending federal act might put an end to that as well. Rather than trying
to enforce and recoup lost taxes on cigarettes sold via the Internet, special
interests got together and crafted the PACT Act (Prevent All Cigarette
Trafficking Act) -- a federal law that prevents shipping of tobacco products.
The U.S. Senate bill passed in January 2004. Since then the House
has not acted on their version of the bill. If this were to pass
the USPS would be affected as well.
(visit
our action alert
page, use the suggested letter, and follow the directions on how to
contact your representative.)
NY
Times - May 29, 2005
Post Office
Sidesteps Fray on Illicit Sales of Cigarettes
ALBANY,
May 26 - As they move to thwart the illegal trade of cigarettes over the
Internet, state officials have joined colleagues from around the nation
in persuading the major credit card companies to stop processing payments
for online cigarette sales. Additionally, the state has enacted a law prohibiting
the shipment of cigarettes to its residents and banned private carriers,
like FedEx, from shipping cigarettes.
But
as state officials fight illegal online cigarette sales, one operation
is not falling into line - the United States Postal Service, which officials
say delivers the bulk of illegally purchased cigarettes to New Yorkers.
The
Postal Service, citing concerns about the privacy of the mail and wary
of putting postal clerks in the position of deciding which packages to
accept and which to reject, is resisting the growing calls that it stop
shipping cigarettes.
Its
stance is exasperating law enforcement officials. "It is outrageous that
the federal government - through the United States Postal Service - is
knowingly acting as the delivery arm for these criminal enterprises," New
York's attorney general, Eliot Spitzer, said in a statement.
The
role of the post office in shipping illegally sold cigarettes is also attracting
attention across the nation. Last month the National Association of Attorneys
General asked the Postal Service to "adopt a firm policy prohibiting transportation
of packages that the carrier knows or reasonably should know contains cigarettes
sold illegally on the Internet." In Oregon, an online cigarette seller
was charged in January with unlawful distribution of cigarettes and racketeering;
the post office was not charged but was named in the indictment as part
of the racketeering enterprise. Congress has considered legislation that
would ban the mailing of cigarettes.
Postal
officials say that they are committed to fighting illegal activities conducted
through the mail, but complain that their hands are tied. They note that
Priority Mail, which officials say is most frequently used to ship cigarettes,
cannot be inspected without a search warrant or the consent of either the
sender or the recipient.
The
post office's investigative arm, the Postal Inspection Service, has worked
to stop illegal cigarette shipments in a number of cases, but has only
about 1,970 inspectors in the whole country, charged with investigating
everything from the anthrax mailings to all suspicious packages to the
distribution of child pornography. And postal officials say that postal
clerks cannot be expected to figure out what people are shipping, and whether
cigarette retailers are complying with obscure laws like the Jenkins Act,
which requires cigarette sellers to keep lists of customers for tax collection
purposes.
"Tobacco
is a legal, mailable product," Mary Anne Gibbons, the Postal Service's
general counsel, wrote last month in a response to the association of attorneys
general. "It would be impracticable for postal acceptance clerks to make
determinations on any given mailer's compliance with state excise or tax
law or Jenkins Act filings."
But
state officials reject this argument, pointing out that at least in New
York State, public health laws prohibit direct sales of cigarettes by mail.
They acknowledge that the state cannot bar the post office, a federal entity,
from shipping cigarettes in New York, but say that since online merchants
often violate tax laws, shipping their cigarettes violates federal mail
fraud statutes and therefore should be stopped.
"Instead
of complying with federal law, the Postal Service is taking a head-in-the-sand
approach, by claiming that they have no idea what is in the packages being
delivered - even if they are being mailed by Internet operators that sell
nothing but cigarettes," Mr. Spitzer said in a statement. "That is an absurd
argument that we would never accept from a private defendant."
And
several law enforcement officials said that in small upstate communities
like Salamanca, N.Y., which are dotted with smoke shops advertising the
tax-free cigarettes sold from Indian reservations, the post office willingly
accepts delivery of truckloads of cartons of cigarettes for delivery.
But
Anthony Alverno, the post office's chief counsel for customer protection
and privacy, said in an interview that the post office's research indicated
that the smoke shops doing business in New York sold other items beside
cigarettes, including "novelty items," so some packages they ship might
not be cigarettes. "We would need to get a search warrant to make the determination,"
he said.
The
Postal Inspection Service joined other federal and local law enforcement
agencies to seize 300,000 cartons of illegal cigarettes last November at
Kennedy International Airport. Mr. Alverno said that blocking overseas
shipments was easier, because they must pass through customs. He added
that the Postal Service would continue to discuss civil or criminal actions
that could be taken with law enforcement agencies.
Not
just government officials, but also antismoking advocates are trying to
stop the mailing of cigarettes. And some see signs of progress.
John
F. Banzhaf III, the executive director of Action on Smoking and Health,
an antismoking organization that has warned the Postal Service that it
could face legal liability for shipping illegally purchased cigarettes,
said that the service was finding itself increasingly isolated, especially
since credit card companies stopped processing the payments for such sales
earlier this year.
"It
may be more trouble - both from a legal and public relations point of view
- than the benefits of the revenue that comes in," he said.
Several
online cigarette sellers shut down after the credit card companies stopped
processing their transactions; others are struggling. One Web site, tobaccobymail.com,
which says it is run from western New York, complains on its site that
it is "perpetually targeted by the state of New York," and says that it
is not bound by state or federal laws because it is owned and operated
by the Seneca Nation of Indians.
The
Web site says that it ships cigarettes by Priority Mail, that they are
tax-free, and that the company will not share its customer lists with the
government. But state officials say the company is flagrantly violating
tax laws.
Mr.
Spitzer said that the Postal Service should stop carrying illegally sold
cigarettes. "The entire law enforcement community - attorneys general,
the federal Bureau of Alcohol, Tobacco and Firearms, police officers, state
tax officials, and even the Postal Inspection Service - is united in trying
to stop these illegal sales," he said. "The postmaster general should be
instructing the 'delivery side' of his office to join us in this effort,
rather than facilitating illegal conduct."
[2] "Nothing
in this subdivision shall be construed to prohibit a person other than
a common or contract carrier from transporting not more than eight hundred
cigarettes at any one time to any person in this state."
It's
been reported that some retailers are now informing their customers that
they will only allow you to purchase a maximum of four cartons at
a time, per day, per household.
This
provision in the law explains why retailers have resorted to this tactic
("800 cigarettes" = 4 cartons). It's one more way to appear to be
within the law and especially reinforces the legitimate use of the USPS.
[back
to index]
RELATED NEWS
Associated Press - February 3, 2011
NY's
attorney general sues online tobacco sites
Six website operators are violating a state law
that bans the online sale of tobacco to customers in New York, Attorney
General Eric Schneiderman said Thursday.
Schneiderman said lawsuits were filed a day earlier in
state Supreme Court in Manhattan, seeking $5,000 in fines for each violation,
as well as an injunction barring the companies from future sales. The lawsuits
cite 11 violations, but the attorney general said his goal wasn't to collect
fines, but to stop the shipments.
New York is one of six states, according to Schneiderman,
that prohibits tobacco dealers from selling their products over the Internet;
Connecticut, Maryland, Ohio, Vermont, and Washington are the others. New
York's law requires anyone receiving cigarette shipments to be a licensed
cigarette tax agent or wholesale dealer.
"As one of my colleagues said recently, the Internet really
is the crime scene of the 21st century," Schneiderman said. He called Internet
cigarette sales "one of the primary methods of evasion of every effort
we're making in the state of New York and in the country to reduce the
national tragedy of tobacco addiction."
The lawsuits were filed the same day the New York City
Council banned smoking in city parks, beaches and even Times Square. The
village of Great Neck, on Long Island, also recently banned smoking on
public sidewalks.
Telephone messages and e-mail requests for comment from
the companies, some of which are based in Europe, were not immediately
returned Thursday.
Schneiderman and others contend that because the websites
have lax standards for age verification, the sale of cigarettes — usually
cheaper because no sales tax is collected — is attractive to underage smokers
who may be stymied in purchasing cigarettes at retail outlets. In New York,
the sales tax on a single pack of cigarettes is $4.35 — about half of the
total cost to customers.
He cited statistics from the Centers for Disease Control
and Prevention that 24,100 children under the age of 18 become new daily
smokers each year.
"When cheap untaxed cigarettes are made available, more
kids will try them and more will become addicted," said Michael Seilback,
a spokesman for the American Lung Association. "We know that a high cigarette
price is the single largest deterrent to kids starting to smoke and getting
adults to quit. The high price on cigarettes is a critical component of
a comprehensive tobacco control program."
Schneiderman also noted that most of the Internet tobacco
transactions do not include the collection of sales tax. The state Health
Department found in 2004, between $106 million and $122 million in sales
tax revenue from online cigarette sales went uncollected.
Los Angeles Times - November 29, 2007
Supreme
Court weighs Internet sales regulation
WASHINGTON — The Supreme Court took up a little-noted
case Wednesday that could prove a boon in the era of Internet commerce
-- and deal a setback to states' efforts to keep cigarettes, drugs and
other harmful products out of the hands of minors.
Until the last decade, states restricted sales of certain
products by regulating the sellers. For example, retailers were banned
from selling cigarettes to those under age 18.
But cigarettes, like nearly every other product, now can
be bought over the Internet and sent directly to the consumer, which means
the seller cannot verify the age of the purchaser. The number of Web vendors
of cigarettes rose from 88 in 2000 to 772 early last year, according to
the California attorney general's office.
As a fallback, states increasingly have turned to shippers
and delivery services, such as UPS or FedEx, and said they must see to
it that certain products, including tobacco, are delivered only to adults,
not minors. Maine, for example, adopted a law requiring shippers who deliver
tobacco products to obtain a signature from an adult and see a government-issued
identification card.
But Bush administration lawyers joined the trucking industry
Wednesday in urging the high court to throw out Maine's law and to shield
shippers from all such state regulation of delivery services. This would
speed the flow of Internet sales and reduce costs, they said.
Forcing delivery services to check on who is receiving
a particular product disrupts "the timely and cost-effective flow of packages
to our businesses and homes," lawyers for the shippers said.
They referred to an industry-friendly measure passed by
Congress in 1994 that bars states from enforcing any law "related to the
price, route or service" of a trucker or a shipping firm. The administration's
lawyers say this broad deregulatory measure goes beyond economic regulation.
There is no "exception for state health and safety regulations," they argued.
Most of the justices signaled during the hourlong argument
that they favored freeing the shipping industry from state regulations.
"We are very worried," California Deputy Atty. Gen. Laura
Kaplan said after the argument. "We don't know how far the Supreme Court
will go, but there are a lot of other dangerous products besides cigarettes.
And this could leave a big void."
California does not regulate delivery services as strictly
as required Maine does. "We don't have anything exactly like" Maine's law,
Kaplan said.
Under California law, Internet vendors are required to
check whether purchasers are adults. However, as the Supreme Court was
told, a test of the state law had children try to buy a carton of cigarettes
from 234 websites, and they succeeded with 129. Most of the sites did nothing
more than ask purchasers to certify that they were 18 or older, the state's
lawyers said.
"The law has not been as effective as we'd like," Kaplan
said.
The California lawyers, joined by those from 37 other
states, filed a brief that warned against making the shipping industry's
"expansive view of [federal] preemption . . . the law of the land."
Doing so would threaten "state restrictions on the delivery
of a myriad of other dangerous products, including explosives, liquor,
drugs, poisonous reptiles and wild animals," they said.
Justice Antonin Scalia made clear that he did not share
the states' concern. "Maybe Congress wanted the regulatory void," he told
the Maine lawyer who was defending the state's efforts to regulate delivery
services.
Comments and questions by Chief Justice John G. Roberts
Jr. and Justices Stephen G. Breyer, David H. Souter and Samuel A. Alito
Jr. suggested similar views.
"Congress wanted to end a category of regulation," Souter
said.
Breyer said states were unlikely to set exactly the same
rules for delivery services. He added: "If every state does it differently,
it's going to be a nightmare."
With the steady growth of sales over the Internet, the
case has been seen as the key test of whether delivery services can be
required to enforce some of the state sales restrictions imposed on retailers.
The Maine law was struck down by two lower courts, but
the justices agreed to hear an appeal from the state's attorney general,
Steven Rowe.
ABC News - June 18, 2006
Post Office
Said to Abet Cigarette Sales to Kids
Web Sites
Offering Tax-Free Cigarette Sales Off Indian Reservations, Allegedly to
Minors, Called Illegal
New York Attorney General Eliot Spitzer says the U.S.
Postal Service has become "the delivery arm of a massive criminal enterprise."
Every day, Native American businesses ship millions of
cigarettes from reservations across the country.
While Native Americans on the reservation are entitled
to tax-free cigarettes, the Web sites that offer those tax-free cigarettes
for sale off the reservation are, officials say, illegal.
The public health community says Web sites that illegally
sell cheap smokes are a real concern — especially when it comes to young
smokers.
"The monetary incentive, from the state's perspective,
is not what drives us," Spitzer says. "What drives us is the concern that
kids will gain access to cigarettes online."
Studies confirm that children can easily buy cheap cigarettes
online.
"I got Virginia Slims Light cigarettes, and I'm 14," said
one teen who was working for law enforcement.
Spitzer, now running for governor of New York as a Democrat,
is on a mission to shut down the sites. He's convinced private delivery
services like FedEx, DHL and UPS to stop shipping cigarettes to individual
consumers. But he can't convince the U.S. Postal Service.
"Somebody at the Postal Service," says Spitzer, "should
be smart enough to say, 'Stop this. We don't need the money. It is illegal
to deliver these goods. We shouldn't do it.' "
But Tom Boyle of the U.S. Postal Inspection Service says,
"That's unfair to the Postal Service.
"We are not a private carrier," Boyle adds. "We are a
government entity. … By law, we cannot just open packages. We have to get
a federal search warrant."
Spitzer counters, "We're not saying to them they should
be opening packages randomly. We're saying when there is a company whose
sole line of business is to ship cigarettes, then you can say to the company,
'We don't think you should be delivering your product because we believe
it may be contraband.' "
But deciding what's contraband or not, says the post office,
is not their job.
"We're doing as much as we possibly can," Boyle says.
In the meantime, the two sides can't agree on how to solve
what they both say is a problem. And so a branch of the federal government
continues to deliver throughout the country what Spitzer says are millions
of illegal cigarettes.
Press
Release (Office of the NY Attorney General - March 10, 2006)
Schumer
and Spitzer Announce Legislation to Ban Shipment of Tobacco Through the
U.S. Mail
U.S.
Senator Charles E. Schumer and New York State Attorney General Eliot Spitzer
today announced that they have teamed up to support legislation to stop
the shipment of cigarettes and smokeless tobacco through the U.S. Mail.
At
a joint news conference with Spitzer, held at New York’s historic Farley
Post Office, Schumer announced his bill that would prohibit mailing cigarettes
through the United States Postal Service, impose fines of at least $1,000
per offense and jail time for repeat offenders. The bill would also give
state Attorneys General the ability to pursue those who ship tobacco in
violation of the law.
"Passing
this bill will be the final nail in the coffin for the sale of cigarettes
on the Internet," Schumer said. "The U.S. Mail has become the last refuge
for online cigarette merchants and it’s time that this loophole be closed."
"Working
together we are attacking the problem of illegal cigarette shipments on
both a state and national level," Spitzer said. "The Postal Service has
become the delivery arm of a massive criminal enterprise shipping contraband
cigarettes nationwide. The legislation that Senator Schumer is introducing
will ensure that the Postal Service gets out of the cigarette delivery
business."
Internet
and mail order cigarette retailers operate in violation of numerous federal,
state and local laws, including tax laws, age verification laws, delivery
restrictions, reporting requirements, and federal wire fraud and mail fraud
statutes. As a result, a coalition of federal, state and local law enforcement
agencies has been working on several initiatives to stop these illegal
sales, including federal and state criminal indictments of cigarette sellers,
seizures of contraband cigarettes, and efforts to strengthen cigarette
trafficking prohibitions.
Several
states, including the New York, have laws prohibiting or restricting the
shipment of cigarettes and smokeless tobacco directly to consumers. Senator
Schumer’s bill would make cigarettes and smokeless tobacco non-mailable
items, just as liquor, firearms, explosives and even automobile master
keys may not be shipped through the U.S. Mail. In addition the legislation
will allow the Postal Service to reject packages believed to contain tobacco
products.
In
the past year, DHL, FedEx and UPS have agreed to cease delivery of cigarettes
to consumers throughout the United States. In addition, in March 2005,
the major credit card companies all agreed to take steps to ensure that
their credit card systems are not used to process payments that enable
illegal cigarette sales. Finally, last month, Philip Morris USA (PM USA)
reached an agreement with a coalition of 37 Attorneys General to cut off
the supply of PM USA cigarettes to those engaged in such illegal sales.
NY
Post (Editorial) - October 30, 2005
Spitzer's
Cig Showdown
Attorney
General Eliot Spitzer has bullied another private company into doing his
bidding.
Last
week, UPS announced that it will no longer deliver cigarettes to individuals,
under an agreement reached with the aspiring — indeed, all-but-presumptive
— governor.
What
did he threaten to do to the company if it didn't knuckle under? Maybe
some press conferences denouncing it?
Maybe
a lawsuit, despite the fact that UPS has violated no law?
No
matter.
Whatever
the AG wants, the AG gets. No questions asked.
Ostensibly,
this agreement is supposed to make it harder for people — particularly
New Yorkers, but UPS' new policy applies nationwide — to buy tax-free cigarettes
online.
For
consumers in New York City, facing an extra $3 a pack in taxes (the state
and the city each impose a $1.50 levy), buying from Indian-reservation
outlets, which don't charge taxes, is quite a bargain.
Whether
Indian vendors who sell to non-Indians have to collect taxes is in dispute,
but that's something for New York state and the tribes to work out — not
for Spitzer to dictate.
Spitzer
and his ilk say they want to stem the tide of lost revenue.
The
price, however, is likely to be lost lives.
The
principle here is fairly simple.
Any
time you ban a product that people want — or make it prohibitively expensive,
as is the case here — you inevitably create a black market.
Alcohol
prohibition begat bootleggers, who eventually evolved into organized criminal
enterprises that plague the United States to this day.
Similarly,
"buttlegging" has become a problem in New York, with all kinds of unsavory
characters getting in on the action — Russian thugs, Chinatown gangs and
even rings of smugglers with ties to Hezbollah.
Cutting
off one avenue for cheap cigarettes is only going to push more traffic
to another: the streets.
New
York has already seen a rash of murders as buttleggers fight over turf
throughout the five boroughs.
The
problem here, of course, ultimately stems from this state's politicians
and their addiction to spending.
The
politicians had to get their money-fix somewhere, and hitting smokers with
a ridiculously heavy tax burden was the easy score.
The
question at this point shouldn't be how to push the gray market for cigarettes
on the Internet into blacker and blacker territory.
It
should be whether the costs of Bloomberg-Pataki neo-Prohibitionism are
really worth it.
And
just how bad things might get during a Spitzer administration.
Associated
Press - October 24, 2005
UPS
agrees to end cigarette deliveries to individuals
ALBANY,
N.Y. - The world's largest shipping carrier, UPS Inc., will stop delivering
cigarettes to individuals in the United States under an agreement announced
Monday with New York state Attorney General Eliot Spitzer.
The
agreement is the latest in federal and state efforts to combat the sale
of under-taxed cigarettes and to fight underage smoking. Most under-taxed
or untaxed cigarettes are sold by Indian tribes, where the taxation of
sales to non-Indians is disputed.
Monday's
agreement leaves only the U.S. Postal Service among major carriers to continue
to deliver cigarettes to individuals, Spitzer said. He called that practice
"an embarrassment." Spitzer continues to negotiate with Federal Express,
but they are thought to handle a small amount of the trade, said Spitzer
spokesman Marc Violette.
Despite
a new policy adopted by the Postal Service in September to refuse delivery
of illegal products, the federal service allows employees to accept packages
suspected of containing under-taxed cigarettes, Spitzer said.
"Internet
cigarette traffickers are increasingly using the federal mail system to
distribute their wares," Spitzer said. He said the Postal Service "clearly"
has the authority to refuse to deliver cigarettes to individual smokers.
"It is an embarrassment that major private companies have stopped carrying
contraband cigarettes, but the federal government continues to accept them,"
said Spitzer, a Democrat running for governor. "Congress needs to step
in and stop this practice immediately."
The
Postal Service can't stop delivery even if it suspects a package clearly
marked as coming from a retailer contains untaxed cigarettes, said Postal
Service spokesman Gerry McKiernan.
"There
could be souvenirs in the package. We don't know because we can't see inside
the package," he said.
Instead,
the Postal Service will watch for packages if advised by law enforcement
agencies. They also will alert law enforcement agencies when the service
is shipping those packages, he said.
"It's
up to law enforcement agencies to enforce the law," McKiernan said.
He
said private companies have contracts with firms that regularly use their
services which identifies materials being shipped. The Postal Service doesn't.
"As
far as I'm concerned, it's illegal," said Audrey Silk of New York City
Citizens Lobbying Against Smoker Harassment and a Libertarian Party candidate
for New York City mayor. "They are exploiting children ... when you employ
`for the children' you can get the public to do anything."
Earlier
this year, DHL banned cigarette deliveries to individuals nationwide and
the nation's largest credit card companies stopped processing payments
for cigarette sales.
Spitzer
said Internet and mail-order cigarette retailers violate federal, state
and local laws governing taxes and underage smoking. Sales to minors also
violate federal wire fraud and mail fraud laws, he said.
The
agreement with Spitzer matches a nationwide policy at UPS aimed at avoiding
the difficulty of complying with a "patchwork" of different state laws
enacted in 28 states since 2003, said Steve Holmes, spokesman for the global
company based in Atlanta. He said he had no estimate of how much business
would be lost.
"Regardless
of that issue, we believe it's a prudent business decision and we want
to do what's right, of course, by the laws, but we want to do right by
our customers and we want to do right by our communities as well," he said.
Violations
of the UPS policy would eventually result in suspension of service, according
to the agreement.
States
lose more than $1 billion a year in tax revenue from Internet tobacco sales,
according to the U.S. Bureau of Alcohol, Tobacco and Firearms. Enforcement,
however, has been difficult, even though in many states, including New
York, the Internet sale of tobacco products is illegal.
Associated
Press - July 5, 2005
DHL
agrees to end cigarette deliveries to individuals
ALBANY,
N.Y. -- One of the world's largest package delivery companies will stop
delivering cigarettes to individual consumers nationwide under an agreement
with New York Attorney General Eliot Spitzer.
Spitzer
said DHL is the first major shipping company to agree to the ban and negotiations
continue with other companies and the U.S. Postal Service. The agreement
follows a March deal in which major credit card companies began refusing
to participate in Internet sale of cigarettes nationwide.
The
agreement in March involving Spitzer and the U.S. Bureau of Alcohol, Tobacco,
Firearms and Explosives was aimed at ending a common method for youths
to obtain cigarettes, which can't legally be sold to people under 18 years
old.
In
Tuesday's Spitzer agreement, DHL cuts off another route for the Internet
cigarette sales, a growing business, Spitzer said.
Audrey
Silk of New York City Citizens Lobbying Against Smoker Harassment said
the actions are simply boosting an illegal market for cigarettes in which
no one asks a consumers' age. The measures deny consumer choice, because
some brands are only sold out of state.
"When
the product is legal, who are you to say I can't order it?" said Silk,
who's also a Libertarian candidate for New York City mayor. "He's attacking
one consumer class trying to buy a legal product and strong-arming the
common carries into going along with his campaign to keep cigarettes out
of adult hands."
DHL
General Counsel Jon Olin said the agreement is in the best interest of
customers and the public. The company will still be able to deliver tobacco
products to licensed retailers and other authorized recipients.
"By
taking a proactive approach, DHL is pleased to be the leader in the prevention
of illegal cigarette sales in the United States," Olin said.
State
and federal law enforcement agencies have since 2004 sought to crack down
on Internet sales of cigarettes partly because they lack age verification
for the buyers and partly because it costs state and local governments
billions of dollars in sales tax.
States
lose more than $1 billion a year in tax revenue from Internet tobacco sales,
according to the ATF. Enforcement, however, has been difficult, even though
in many states, including New York, the Internet sale of tobacco products
is illegal.
NY
Times - May 29, 2005
Post Office
Sidesteps Fray on Illicit Sales of Cigarettes
ALBANY,
May 26 - As they move to thwart the illegal trade of cigarettes over the
Internet, state officials have joined colleagues from around the nation
in persuading the major credit card companies to stop processing payments
for online cigarette sales. Additionally, the state has enacted a law prohibiting
the shipment of cigarettes to its residents and banned private carriers,
like FedEx, from shipping cigarettes.
But
as state officials fight illegal online cigarette sales, one operation
is not falling into line - the United States Postal Service, which officials
say delivers the bulk of illegally purchased cigarettes to New Yorkers.
The
Postal Service, citing concerns about the privacy of the mail and wary
of putting postal clerks in the position of deciding which packages to
accept and which to reject, is resisting the growing calls that it stop
shipping cigarettes.
Its
stance is exasperating law enforcement officials. "It is outrageous that
the federal government - through the United States Postal Service - is
knowingly acting as the delivery arm for these criminal enterprises," New
York's attorney general, Eliot Spitzer, said in a statement.
The
role of the post office in shipping illegally sold cigarettes is also attracting
attention across the nation. Last month the National Association of Attorneys
General asked the Postal Service to "adopt a firm policy prohibiting transportation
of packages that the carrier knows or reasonably should know contains cigarettes
sold illegally on the Internet." In Oregon, an online cigarette seller
was charged in January with unlawful distribution of cigarettes and racketeering;
the post office was not charged but was named in the indictment as part
of the racketeering enterprise. Congress has considered legislation that
would ban the mailing of cigarettes.
Postal
officials say that they are committed to fighting illegal activities conducted
through the mail, but complain that their hands are tied. They note that
Priority Mail, which officials say is most frequently used to ship cigarettes,
cannot be inspected without a search warrant or the consent of either the
sender or the recipient.
The
post office's investigative arm, the Postal Inspection Service, has worked
to stop illegal cigarette shipments in a number of cases, but has only
about 1,970 inspectors in the whole country, charged with investigating
everything from the anthrax mailings to all suspicious packages to the
distribution of child pornography. And postal officials say that postal
clerks cannot be expected to figure out what people are shipping, and whether
cigarette retailers are complying with obscure laws like the Jenkins Act,
which requires cigarette sellers to keep lists of customers for tax collection
purposes.
"Tobacco
is a legal, mailable product," Mary Anne Gibbons, the Postal Service's
general counsel, wrote last month in a response to the association of attorneys
general. "It would be impracticable for postal acceptance clerks to make
determinations on any given mailer's compliance with state excise or tax
law or Jenkins Act filings."
But
state officials reject this argument, pointing out that at least in New
York State, public health laws prohibit direct sales of cigarettes by mail.
They acknowledge that the state cannot bar the post office, a federal entity,
from shipping cigarettes in New York, but say that since online merchants
often violate tax laws, shipping their cigarettes violates federal mail
fraud statutes and therefore should be stopped.
"Instead
of complying with federal law, the Postal Service is taking a head-in-the-sand
approach, by claiming that they have no idea what is in the packages being
delivered - even if they are being mailed by Internet operators that sell
nothing but cigarettes," Mr. Spitzer said in a statement. "That is an absurd
argument that we would never accept from a private defendant."
And
several law enforcement officials said that in small upstate communities
like Salamanca, N.Y., which are dotted with smoke shops advertising the
tax-free cigarettes sold from Indian reservations, the post office willingly
accepts delivery of truckloads of cartons of cigarettes for delivery.
But
Anthony Alverno, the post office's chief counsel for customer protection
and privacy, said in an interview that the post office's research indicated
that the smoke shops doing business in New York sold other items beside
cigarettes, including "novelty items," so some packages they ship might
not be cigarettes. "We would need to get a search warrant to make the determination,"
he said.
The
Postal Inspection Service joined other federal and local law enforcement
agencies to seize 300,000 cartons of illegal cigarettes last November at
Kennedy International Airport. Mr. Alverno said that blocking overseas
shipments was easier, because they must pass through customs. He added
that the Postal Service would continue to discuss civil or criminal actions
that could be taken with law enforcement agencies.
Not
just government officials, but also antismoking advocates are trying to
stop the mailing of cigarettes. And some see signs of progress.
John
F. Banzhaf III, the executive director of Action on Smoking and Health,
an antismoking organization that has warned the Postal Service that it
could face legal liability for shipping illegally purchased cigarettes,
said that the service was finding itself increasingly isolated, especially
since credit card companies stopped processing the payments for such sales
earlier this year.
"It
may be more trouble - both from a legal and public relations point of view
- than the benefits of the revenue that comes in," he said.
Several
online cigarette sellers shut down after the credit card companies stopped
processing their transactions; others are struggling. One Web site, tobaccobymail.com,
which says it is run from western New York, complains on its site that
it is "perpetually targeted by the state of New York," and says that it
is not bound by state or federal laws because it is owned and operated
by the Seneca Nation of Indians.
The
Web site says that it ships cigarettes by Priority Mail, that they are
tax-free, and that the company will not share its customer lists with the
government. But state officials say the company is flagrantly violating
tax laws.
Mr.
Spitzer said that the Postal Service should stop carrying illegally sold
cigarettes. "The entire law enforcement community - attorneys general,
the federal Bureau of Alcohol, Tobacco and Firearms, police officers, state
tax officials, and even the Postal Inspection Service - is united in trying
to stop these illegal sales," he said. "The postmaster general should be
instructing the 'delivery side' of his office to join us in this effort,
rather than facilitating illegal conduct."
NY
Daily News Editorial - April 5, 2005
Don't
pay this tax
It's
tax season again, and millions of New Yorkers are preparing to be scofflaws.
They're going to fill in Line 56 on the state's long-form tax return or
Line 27 on the short form by reporting that they made no out-of-state purchases,
over the Internet, by catalog or in person, in 2004. Most will be lying.
And good for them, we say.
Over
Gov. Pataki's veto, the state Legislature added those lines to the tax
forms two years ago in a niggling grab at every last penny of sales tax
technically owed by New Yorkers. We urged everyone to simply report zero
out-of-state purchases and are happy to report that, quite on their own,
96% of taxpayers followed that course.
Among
the nearly 9 million filers who reported no out-of-state purchases were
Pataki, Lt. Gov. Mary Donohue, Attorney General Eliot Spitzer, Controller
Alan Hevesi, Assembly Speaker Sheldon Silver and Senate Majority Leader
Joe Bruno. Only 386,000 taxpayers coughed up money, a total of $21 million,
an average of just $54.03.
Call
those taxpayers scrupulously, admirably honest or call them suckers, but
the bottom line is the same: Only 4% are following the law. And that has
to be some kind of record for blatant noncompliance. The message to the
Legislature is clear: The tax is unequally applied and unenforceable. Repeal
it.
[back
to index]
BOYCOTTING UPS and other carriers
In
November 2005 we alerted our NYC C.L.A.S.H. members to the following:
UPS Agrees to Demand to
Stop Cigarette Deliveries
My sincerest apologies to
our members from outside of New York who are also the victims of our own
NY Attorney General, Eliot Spitzer, who is single-handedly trying to shut
down Internet cigarette purchases across the country.
First he bullied the credit
card companies, then DHL, and now UPS has crumbled and signed an agreement
("Assurance
of Discontinuance") that they will no longer ship/deliver cigarettes
from on-line vendors to the customers that order them. (FedEx quit
shipping on their own -- though I'd bet under pressure -- some time ago).
That leaves the United States
Postal Service who has responded once again that they do not agree that
they have the power to inspect personal packages to determine what they
contain. And NYS Public Health Law 1399-ll that
was effective June 2003 was only able to impose a NYS restriction on shipping
cigarettes on private carriers such as UPS (which is what Spitzer was able
to hold over their head) but had no jurisdiction to legislate the business
of the federal carrier.
It's an odd day indeed when
an agency of the federal government holds fast in respecting consumer rights
but a private company won't protect their own interests or those of their
customers. However, be cognizant of the fact that a bill remains
pending in Congress that would regulate this on a federal level (see Action
Alert)
The NY Post ran a wonderful
editorial, "Spitzer's
Cig Showdown," denouncing him for this act.
We strongly encourage all
to no longer use UPS for any other business. Kudos to one member
who wrote and said she immediately cancelled her business transactions
with UPS the minute she read about this on her own.
The
following is the letter sent by NYC C.L.A.S.H. to UPS:
Dear Mr.
Black,
I am the founder of a NYC-based
smokers' rights group. We have members from all over the country.
Our organization does not encourage people to smoke, we defend the rights
of adults who have already chosen to do so.
Two months ago we alerted
our members to the agreement you entered into with NYS Attorney General
Eliot Spitzer to end the shipment of cigarettes between vendors and their
customers. Our members were similarly alerted when other private carriers
caved to the same pressure by this man we have no qualms in labeling a
bully with a badge. Like the other carriers, a boycott of UPS was
called for all business transactions.
Helpful to my correspondence
with you is a copy of a reply (Nov. 15) you sent to one of our members
who wrote to you (Nov. 14) about his support for the boycott. You
wrote:
You probably
should know that DHL, FedEx and UPS have the same policy.
Meantime, no one would
dispute that cigarettes are a legal product. What's illegal is buying
them on the Web and not paying taxes. UPS acted because it has no
intention of becoming a policeman to enforce such laws.
Pointing to other carriers
and saying "they did it too" is not an excuse or explanation that we accept
as valid and hold UPS up to the same shame value.
While we all agree that it's
indisputable that cigarettes are legal, it is the grossly selective and
unequal treatment it receives as a product that is at the heart of the
matter. It is "illegal" to purchase ANY product through the Web and not
pay taxes. Of course you know that. So for you to extend that as
an explanation over cigarettes is insulting to us and should be an embarrassing
defense for you to offer.
The obvious first question
is when will you stop delivering products purchased from places like Amazon.com?
Like cigarettes, no one pays taxes on those purchases at point of purchase.
Also, with AG Spitzer, you
have agreed to deny customers the ability to purchase legal products that
they cannot otherwise buy locally. There are brands of cigarettes
that are not available in local stores or even in the same state.
For example, Bronco brand cigarettes are not sold in many places.
How legal is it to deny citizens their ability to obtain their legal product
of preference?
Overseeing collection of
taxes is not your responsibility. The alleged law breaking begins
at the back end when customers are supposed to report ALL such purchases
on their annual tax report. Enforcement of the tax law is the business
of the state's tax department and AG's office. But, like Amazon.com
purchases, how many people report them? Has that non-reporting resulted
in demands on you to stop shipments as a way to head the problem off at
the pass and make it your problem and not their job?
The NY Daily News editorial
of April 5, 2005 not only supports my contention but actually encourages
people to ignore that tax line on the NYS form. It also includes
an eye-opening fact:
NY Daily News Editorial
- April 5, 2005
Don't
pay this tax
It's tax season again, and millions of New Yorkers are
preparing to be scofflaws. They're going to fill in Line 56 on the state's
long-form tax return or Line 27 on the short form by reporting that they
made no out-of-state purchases, over the Internet, by catalog or in person,
in 2004. Most will be lying. And good for them, we say.
Over Gov. Pataki's veto, the state Legislature added those
lines to the tax forms two years ago in a niggling grab at every last penny
of sales tax technically owed by New Yorkers. We urged everyone to simply
report zero out-of-state purchases and are happy to report that, quite
on their own, 96% of taxpayers followed that course.
Among the nearly 9 million filers who reported no out-of-state
purchases were Pataki, Lt. Gov. Mary Donohue, Attorney General Eliot Spitzer,
Controller Alan Hevesi, Assembly Speaker Sheldon Silver and Senate Majority
Leader Joe Bruno. Only 386,000 taxpayers coughed up money, a total of $21
million, an average of just $54.03.
Call those taxpayers scrupulously, admirably honest or
call them suckers, but the bottom line is the same: Only 4% are following
the law. And that has to be some kind of record for blatant noncompliance.
The message to the Legislature is clear: The tax is unequally applied and
unenforceable. Repeal it.
So, Mr. Black, will you agree
to stop delivering to 96% of your customers -- including Mr. Spitzer --
who are not reporting they made out of state purchases that you helped
deliver? It'd be silly to believe that the majority of them, Spitzer
included, didn't make any purchases over the internet.
One thing you are right about
is that you shouldn't be the "policemen" enforcing such laws. And
as I explained above, that job falls on men like Spitzer who, in their
laziness, have illegally (in our opinion) pushed it on you. But unless
it's applied equally to all products then you have no defense in agreeing
to this selective enforcement.
Funny, of all carriers, you
should take a clue from our own government's US Postal Service that had
the backbone, in a retort to the same demands, to state the true and legally
defensible: " We don't have the power to inspect personal packages
to determine what they contain."
In light of all of the above,
UPS has rightly been added to our list of carriers to boycott. Though
we'd prefer that you would grow the same spine as the USPS and void the
agreement you made with Eliot Spitzer.
Sincerely,
Audrey Silk
Founder, NYC Citizens Lobbying
Against Smoker Harassment
(NYC C.L.A.S.H.)
[back
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