This article was in the Tacoma News Tribune. It makes you wonder how long it will be before they do it to cigar sellers. HOW MUCH WILL YOU OWE?



WASHINGTON - Up to 40,000 Washington residents should soon be receiving letters from the state asking them to pay back taxes on millions of dollars worth of cigarettes they bought through a Web site.

A settlement of a lawsuit filed by Washington state against online cigarette seller www.Dirtcheapcig. com Inc. of Missouri paved the way for the letters, which will be sent by the state Department of Revenue.


The settlement, signed Dec. 1 by U.S. District Judge Robert Lasnick in Tacoma, was little-noticed outside legal circles. But it's drawn quite a bit of attention from other cash-strapped states, which see it as helping to clear the way for them to start collecting more than $1 billion annually in taxes from Internet cigarette sales.


Lasnick's order asserted, for the first time, that Internet tobacco sales are taxable because they're covered by a federal law known as the Jenkins Act. It requires companies that engage in interstate cigarette sales to provide information on their customers to state tax administrators.

The settlement approved by Lasnick required Dirtcheapcig.com to provide information on its sales to customers in Washington dating back to Jan. 1, 2001, and on future sales to state residents. And it reinforced the rights of the states to pursue civil lawsuits against Web sites that violate the Jenkins Act.


So far, Dirtcheapcig.com has supplied Washington state with the names and addresses of between 35,000 and 40,000 residents who bought cigarettes over the past three years, as well as details on how many packs and what brands were purchased.

Those who purchased cigarettes from the Web site will be asked to voluntarily pay back taxes, Thronson said. Those who don't will face a 5 percent penalty, assessed interest on the outstanding balance and a penalty of $10 for each pack with a $200 minimum.

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You don't know who I am and you never saw me.

Hmmm..I wonder if this did happen to cigar sales would they tax you on the retail prices or on your bid prices?

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Tax is based on actual price paid.

In most states there's a place on your income tax forms to include any out of state purchases for which you owe unpaid sales tax. Make sure you cover your butt and include a FAIR estimate of your online purchases. That way, should you ever be audited, that's one less place for them to dig. After all, who spends NO money online?

Could states subpoena Cbid's records?

According to the article it says internet tobacco sales. Now granted this one is about (GASP)cigerettes but it does say tobacco and except for "Bad Frogs" I believe that our cigars are made from tobacco.

"that Internet tobacco sales are taxable because they're covered by a federal law known as the Jenkins Act. It requires companies that engage in interstate cigarette sales to provide information on their customers to state tax administrators."

But here is an excerpt from the "Jenkins Act".

(2) The term ''cigarette'' means any roll for smoking made wholly or in part of tobacco, irrespective of size or shape and whether or not such tobacco is flavored, adulterated, or mixed with any other ingredient, the wrapper or cover of which is made
of paper or any other substance or material except tobacco.

The key being the last part "the wrapper or cover of which is made of paper or any other substance or material except tobacco."

Hhhmmmm...69

If you are audited the state has access to all your records. Therefore, any credit card payments, checks, or debit transactions to any online or out-of-state merchant would be available to them.

It's not likely to happen, but as states become more strapped for cash they're becoming more agressive in collecting taxes due. Typically tax returns are randomly selected for audit. Once selected they're given an overview to make sure everything appears to be in order. If they see a red flag, then a full fledged audit may follow. The best policy is to avoid anything to create a red flag or a reason for a second look.