State taxes must be paid
on Net-bought cigarettes
Question: Is it legal to order cigarettes through the Internet? It costs only $17 per carton with no tax involved. I would like to know before I put my order in.
Answer: It is legal to order cigarettes through the Internet, but only if you have the proper state license and pay all the applicable excise and use taxes, according to the state Department of Taxation.
You can do the math and figure out if it's still cheaper to go through the Internet after you pay all the state-required taxes and fees.
Hawaii and other states are concerned that some online businesses are claiming their products may be purchased tax-free, acknowledged tax department spokeswoman Annette Yamanuha.
"The 'tax-free' come-on is misleading because, while the Hawaii purchaser does not have to pay the sales tax in the state where the goods originate from, the Hawaii purchaser is still responsible for paying the applicable taxes (cigarette, excise, use, etc.) due on the sale" in Hawaii, she said.
If you buy cigarettes either for sale or personal use through the Internet from a source that does not have a Hawaii Cigarette and Tobacco License, you will be considered a dealer. Under current law it is unlawful for a dealer to use or possess cigarettes or tobacco products without having a license, Yamanuha said.
There currently are five out-of-state companies licensed to sell cigarettes in Hawaii, but the department is "not aware if these companies are selling cigarettes over the Internet," she said.
The state imposes an excise tax on dealers equal to 5 cents per cigarette for each cigarette sold or used in the Hawaii. This tax will increase to 6 cents per cigarette on Oct. 1. The excise tax on cigarettes is collected through cigarette tax stamps, which can be purchased from the tax department, that must be affixed to any cigarette pack in the licensee's possession prior to use, Yamanuha said.
It costs $2.50 for a license, which must be obtained before any cigarettes are purchased through the Internet, she said.
Additionally, you have to submit Form M-100A (Application to Purchase Cigarette Stamps) and Form M-100B (Authorization to Order and Receive Tax Stamps) to the department for approval before you can purchase the cigarette tax stamps. You also have to file a Form M-19 (Cigarette and Tobacco Products Monthly Tax Return).
Forms can be downloaded from the department's Web site, www.state.hi.us/tax. In addition to filling out the forms, you have to obtain a tax clearance indicating you do not have any taxes outstanding. The whole process takes about two weeks, Yamanuha said.
On top of all this, Yamanuha points out that someone who buys cigarettes from an out-of-state seller who does not have a Hawaii general excise tax license also must pay a 4 percent use tax on the price of the imported cigarettes.
Asked how the state would know if someone is ordering cigarettes via the Internet, Yamanuha noted that the federal Jenkins Act requires companies selling cigarettes across state lines, including sales over the Internet, to submit monthly reports to each state affected showing the name, address, and the amount of cigarettes imported in the state. She said her department "is receiving reports."
But she added that the department "relies in large part on the honesty of taxpayers to pay all taxes imposed under state law." That includes the state use tax, which applies to Internet sales, the general excise tax and the cigarette tax on cigarettes purchased over the Internet.
"The department encourages voluntary compliance through education," Yamanuha said.
She also pointed to the Streamlined Sales Tax Project, an effort by the majority of states to make sales/use tax collection easier and more equitable by establishing a single sales/use tax rate, creating uniform definitions of terms, and creating a central electronic system to collect and remit sales/use taxes for all states.
MahaloOn Aug. 19, I had to go to the Alakea Court Building. Before I went in, I stopped outside to change my shoes, sitting down next to the statue of the bears. Just before going into the witness waiting room, I went to the restroom, where I discovered I had sat in an enormous amount of bird droppings! Without hesitation, a woman took control of the situation and within three minutes had fully cleaned my dress. She even gave me some kind words to help me bounce back from this devastation. Although I did thank her that morning, it wasn't enough for the kindness she bestowed upon a total stranger. Mahalo to that local woman -- you are truly a kind soul. -- The haole woman in distress. P.S. People, beware of the bird droppings around the statue!
AuweRecently, I observed a volunteer group picking up rubbish along the highway -- bags and bags of orange-colored trash bags filled with litter. How nice the highways looked. The same week I saw a group of political candidates and their supporters waving signs with no purpose except to show their candidate should win my vote. Suggestion: Candidates and supporters should walk the communities with trash bags and pick up litter. Their candidates' names can be on their T-shirts. That would show me they really do care! -- No Name
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