Oregon Tackles Internet Tobacco Retailers

PORTLAND, Ore. -- Oregon is chasing buyers and sellers of untaxed cigarettes traded on the Internet, hoping to plug a hole that is costing the state up to $20 million a year, according to the Associated Press. Oregon collects $1.18 per pack in taxes, the tenth-highest such tax in the nation.

Last summer, state prosecutors closed Inexpensivesmokes.com, a Web site run by Eric Guthrie out of Aloha, Ore., and filed racketeering charges against Guthrie. Furthermore, the state is beginning to send bills to buyers for cigarette taxes they never paid.

So far, 15 people have been billed, with 60 more to follow. Billed amounts are trifling for the state -- from $11.80 to $2,000 for each smoker. If all the customers pay, the state would recover $15,000 of the $15 million to $20 million it is estimated to lose each year to untaxed Internet tobacco sales, said Randy Evers, administrator for the Oregon Department of Revenue's business tax division.

But there is more to come, Evers promised. "This is the tip of the iceberg," he said. "We're just getting started."

While some argue that higher taxes discourage smoking, others counter that it is not so simple because tobacco is habit-forming. They say boosting the tax merely encourages people to find cheaper cigarettes.

"The driving force is the tax rates,'' said Lyle Beckwith, senior vice president of the National Association of Convenience Stores in Alexandria, Va. "They create lawbreakers.''

Kevin Neely, spokesman for the Oregon attorney general's office, agrees. "The American Cancer Society is going to tell you that if taxes are raised high enough, people will quit smoking. What I'm going to tell you is that I don't care,'' Neely said. "These Internet companies are stealing money from the state, and our job is to stop them. This is a criminal issue for us.''