ANNAPOLIS Consumers may have a way out of paying increasing taxes on tobacco products the Internet.
As lawmakers attempt to prevent under-the-table cigarette transactions in the General Assembly this session and debate whether to impose a $1 a pack tax, buyers can get more than 1,000 cigarette and tobacco products at discount prices through the Internet. The electronic purchases skirt state laws prohibiting out-of-state vendors from selling products directly to consumers.
Bills sponsored by Delegate Van. T. Mitchell, D-Charles, and fueled by the alcohol and tobacco unit of the state comptroller’s office, would force cigarette vendors to comply with state and federal regulations and would prohibit unlicensed companies from selling cigarettes in Maryland. The bills also would make transporting untaxed cigarettes illegal.
“Companies offer cigarettes over the Internet and ship them directly to consumers to avoid the taxes,” said Charles Ehart, director of the comptroller’s tobacco division. “People under 18 can get them. These bills address (those) issues.”
Should the bills pass, buyers could really pay. The bills would make the possession, sale, or purchase of untaxed cigarettes a felony, increase penalties, and require those charged to appear in state courts for a hearing.
A variety of Internet sources will ship cigarettes directly to consumers. Websites including madamtobacco.com., agayo.com and cigaretteshop.com advertise cartons of cigarettes at steep discounts. Prices range from $10.50 for generics to $25 for premium brands.
The sites lure customers with claims of low or no taxes.
Tobacco Xpress, reached through the madamtobacco.com website, sells cartons for as little as $10.50 each and advertises, “Never worry about the Tax Man again!” Cigaretteshop.com, based in New Mexico, claims “All Sales are Tax Free!” on its web page.
These prices sharply undercut those at local grocery stores.
Marlboro cartons are $26.97 at Giant in Maryland and $26.74 in Virginia. GPCs are $23.61 a carton in Virginia. Taxes vary by state.
Marlboro cartons on the Internet can be $3 to $4 cheaper.
“When you look at the whole issue of reducing the use of tobacco, we know that smokers or consumers are price-sensitive,” said Llelwyn Grant of the Centers for Disease Control and Prevention. “When you have a situation where you now have a product that could be purchased at a lower value, then you are not getting the desired support you need to reduce the prevalence.”
Some sellers follow state laws exactly. For example, agayo.com will sell only to states such as California, Washington and Illinois, which issue licenses to direct sales companies. When buyers from Maryland enter their addresses, a message appears saying state law prohibits the company from selling there.
Tobacco Xpress, located in New York and Texas, ships to Maryland. An employee of the company said she was unaware of Maryland’s licensing laws.
Internet tobacco sales, with their low cost and mail distribution, could contribute to increased teen smoking rates, critics say.
“It’s scary – they’re selling everything on the Internet,” said Marion Schanze, executive director of the Maryland Association of Tobacco and Candy Distributors. “When you’re not dealing face to face, you don’t know who you’re dealing with. What’s to stop any teenager from getting a credit card number from their parent, and ordering them over the Internet?”
Some sites post warnings to underage buyers, but they have no way to prevent minors from purchasing cigarettes anyway.
“We could see where this could mushroom into a big problem,” Schanze said. “Kids are smarter than we are.”
Gov. Parris N. Glendening has proposed increasing cigarette taxes by $1 per pack, in part to discourage tobacco smoking by youth. Glendening also would tax cigars and smokeless tobacco products for the first time.
The Internet may contribute to a gray market springing up in the Maryland-D.C.-Virginia area. Some companies will ship cigarettes that were intended for distribution elsewhere say for sales overseas – directly to U.S. consumers. This practice resembles a gray market of alcohol that sprang up 20 years ago, which has become a nationwide problem.
The comptroller’s Ehart said the assembly bills are designed to prevent a similar situation with tobacco products.
A spokesman for tobacco giant Philip Morris said the company’s policy is to neither advertise nor support marketing its brands on the Internet.
“We strongly believe and have worked to support state and federal law that all transactions for our brands should take place in a retail (environment) where there’s a face-to-face transaction so that identification can be checked,” said company spokesman Brendan McCormick.