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Internet cigarette retailers targeted Bay State seeks to sue Net cigarette retailers Globe Newspaper Company By Bruce Mohl, Globe Staff, 2/17/2004 The Massachusetts Revenue Department says it plans to start suing Internet cigarette retailers in a bid to track down customers in the state who are not paying the $1.51-a-pack state excise tax. In a report sent last week to the Legislature, the agency said it would ask Attorney General Thomas F. Reilly to sue one or more Internet retailers to force them to turn over the names of their customers in Massachusetts. The Revenue Department also said it has asked three shipping companies for the names of Massachusetts residents who had received deliveries of cigarettes from out-of-state Internet vendors. One of the shipping companies has already turned over records to the state and the other two are expected to do so shortly, the agency's report said. Agency officials declined to identify the shipping companies. In October, the Globe reported that United Parcel Service had agreed to turn over a list of Massachusetts customers who had received cigarette shipments. The customers were sent letters demanding they remit unpaid cigarette excise taxes plus interest and penalties or face civil fines and possible imprisonment. That effort has yielded more than $162,000 in tax payments so far. State officials and tobacco industry analysts suspect that more and more smokers are turning to the Internet to buy cigarettes as states hike their excise taxes. By some estimates, states are losing more than $1.5 billion annually through evaded cigarette taxes. Here in Massachusetts, the current minimum price for a carton of Marlboros is $45.86. By contrast, Dirtcheapcigs.com, a leading Internet retailer based in Kentucky, is selling the same carton for $31.19. Shipping charges are extra, but customers can have up to 10 cartons delivered for $7. Dirtcheapcigs collects only the 30-cents-a-pack Kentucky cigarette excise tax. It advises customers to check with their own state to determine whether they owe more taxes, but it has refused to turn over the names of its customers to states seeking that information. The state of Washington sued Dirtcheapcigs last year, arguing that the federal Jenkins Act of 1949 requires the Internet retailer to turn over the names and addresses of customers to whom it ships cigarettes. The case is still pending, although an attempt by Dirtcheapcigs to dismiss the lawsuit failed. In its report to the Legislature, the Massachusetts Revenue Department said it plans to file similar lawsuits against Internet cigarette retailers. Its efforts to persuade Internet retailers to voluntarily comply with the Jenkins Act have been largely unsuccessful so far. The state has had more success in persuading shipping companies to turn over the records of customers to whom they deliver cigarettes. UPS and other companies say they are required to comply with requests from law enforcement agencies, but many consumers have seen the release of information on their purchases as a violation of their privacy. Efforts to identify which three shipping companies have agreed to turn over information to the state were unsuccessful. A spokesman for Federal Express said he did not believe his company had been asked for customer data. The spokesman said Federal Express accepts only dealer-to-dealer shipments of cigarettes and does not deliver cigarettes directly to consumers. A spokesman for the US Postal Service said his agency would be unlikely to turn over shipping data to Massachusetts unless an actual law enforcement agency became involved. Even then, the spokesman said, it was unlikely the information would be released.---

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