Jersey Lawmakers Seek Tax on Internet Cigarettes

TRENTON, N.J. -- Heading into their fourth consecutive year of grappling with multi-billion-dollar budget deficits, state lawmakers are looking for a way to tax Internet cigarette sales, according to the Trenton Bureau.

Currently, smokers are forced to ante up a $2.05 excise tax on each pack of cigarettes sold in New Jersey. But with that levy raised in each of the last two years, Internet sales have cropped up as a way to avoid government collectors.

Excise taxes on cigarettes alone are expected to reach $790 million this year, the state Treasury Department said.

"We're trying to do two things here. We're making sure underage kids are not buying cigarettes and also to protect legitimate cigarette sellers in New Jersey," said Assemblywoman Loretta Weinberg (D-Bergen), who is spearheading the effort. "I think there is a growing problem."

The Assembly Appropriations Committee on Monday is expected to start deliberations on the measure, which is similar to legislation pending or enacted in 13 states around the nation.

Sen. Leonard Lance (R-Hunterdon/Warren) told the Trenton Bureau he has not seen the bill but is anxious to have it appear before the Senate Budget Committee.

At an estimated 500 sites, a 10-pack carton of cigarettes will sell for just $30 per carton online, while the same brand can cost upwards of $55 in stores, according to the news source.

State officials have no estimate of how much tax money is lost. But sponsors maintain Internet tobacco sales will cost the 50 states a collective $1.4 billion in 2005, a year in which New Jersey is projected to face a $4-billion shortfall.

"It's substantial," Treasury Department spokesman Tom Vincz said of the money, adding his agency has yet to rule on the bill. "We are generally supportive of any initiative that will help us enforce an excise tax."

The Jenkins Act also places the onus on buyers to pay appropriate taxes, not sellers.

This loophole allows re-importers, offshore firms buying American cigarettes tax-free, to ship them back into the country without reflecting the excise taxes in the price charged to consumers. Weinberg's legislation would order the online brokers to furnish the state with lists of those to whom they sell, reported the news source.

Left unclear is the legislation's effect on sales originating in American Indian reservations.

"It's only going to continue to grow. And the only way we're going to start to really address any illegal actions is by passing comprehensive legislation," said Jamie Drogin, a spokeswoman for tobacco giant Philip Morris U.S.A. "Online cigarette sales have grown as the prices have risen. What the adult smokers have done is that they've sought out lower prices in illegal venues."