StarBulletin.com

State pursues taxes on Net tobacco sales


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POSTED: Tuesday, March 16, 2010

If Hawaii smokers think they are getting a deal buying cigarettes on the Internet, the state attorney general has some advice: Forget it.

The state has recently stepped up its campaign to collect the tobacco tax of 13 cents per cigarette on all out-of-state sales.

Attorney General Mark Bennett says the state could be missing between $600,000 and $700,000 in uncollected tax money.

Hawaii has sent out more than 900 letters to Hawaii residents who bought cigarettes via the Internet but did not pay tax on them.

That 13 cents adds up: Bennett says it amounts to an extra $26 on a carton of cigarettes.

“;Wholesalers and retailers are paying the tax, so for them they are at a disadvantage,”; Bennett said. “;The tax is passed on to the consumer.”;

Hawaii's tobacco tax law has two parts. First, sellers must buy a tax stamp to be attached to all cigarette packs. The stamp is the tax.

“;But in addition, those who possess in Hawaii, whether they acquire them from sales outside Hawaii or not, cigarettes that do not have a tax stamp are liable for the payment of the tax,”; Bennett explains.

Not paying that tax is serious.

Anyone who purchases, uses, controls or possesses untaxed cigarettes must pay the tax. Having 3,000 untaxed cigarettes is a felony. More than 1,000 cigarettes is a misdemeanor, Bennett says.

“;People need to be aware that there are criminal penalties that can attach depending on the number of cigarettes possessed,”; Bennett warns.

Bennett said he does not think his office will file criminal charges against people who are buying a small amount for personal consumption, but he wants all Internet buyers to know what the law is and what taxes Hawaii is owed.

The reason Hawaii can go after local buyers is a federal law that requires Internet cigarette retailers to report the names of their customers to local tax officials.

A federal law, the Jenkins Act, requires enterprises that ship cigarettes to states that have a tobacco tax, such as Hawaii, to tell local tax officials the name and address of both the shipper and the person to whom the cigarettes are shipped.

Bennett says the federal law results in regular reports from mainland cigarette retailers, so his office knows who in Hawaii is buying cigarettes via the Internet.

The law is different from efforts to force Hawaii consumers to pay the 4 percent use tax liable for purchases made via the Internet. Some Internet firms charge the state tax; others do not.