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Michigan Sends Online Tobacco Up In Smoke
Michigan's attorney general filed a criminal and civil suit against certain online tobacco retailers last month, and last Saturday marked the end of their 10-day window to respond to charges that the companies illegally sold cigarettes to minors over the Internet.
Granholm on Sept. 20 filed 20 criminal complaints against eight individuals and three corporations. Additionally, each retailer received a Notice of Intended Action (NIA) alleging multiple violations of the Michigan Consumer Protection Act.
The criminal charges were filed in both the 54th District Court in East Lansing and Lansing. The filing was a result of an online sting operation aimed at cracking down on illegal online tobacco retailers. Minors made purchases from vendors based in Virginia, Kentucky, Missouri and Florida. Charges filed included selling tobacco to a minor, using a computer to commit a crime and failing to report the transfer of cigarettes into Michigan for sale to state authorities.
Michigan once had one of the highest taxes on cigarettes in the nation at 75 cents — on top of the nationwide tax of 24 cents per pack. In FY 1999, that tax reaped over $615 million, or 2.8 percent of total tax revenues, according to a study released in September by the Michigan Department of Treasury’s Office of Revenue and Tax Analysis.
State officials believe cigarette smuggling from other states with lower taxes into Michigan was what was causing Michigan cigarette sales to decrease while the number of Michigan smokers actually increased. The study cites mail order and Internet sales as the two main outlets for this activity, which circumvents Michigan tax law.
As of May 1, 1998, a cigarette wholesaler or other cigarette importer looking to sell cigarettes in Michigan had to purchase tax stamps from the state's Treasury Department, which signified they had paid the mandatory tax on the product. The cigarettes sold online during the sting operations allegedly did not carry these mandated stamps.
Granholm claims that the failure of the vendors’ Web sites to operate lawfully constitutes a violation of the state consumer protection act, which forbids companies from engaging in unfair or deceptive acts or practices in conducting business.
"Without clear verification of an Internet customer’s age and proper tax stamping, every online tobacco sale has the potential to be an illegal sale," Granholm said in a statement. "No tobacco retailer in Michigan is allowed to sell cigarettes or bidis to minors, period. Being an e-retailer doesn’t absolve you of your responsibility to follow the law."
The companies had a 10-day window from Sept. 20 to try to resolve the issue before the state could formally bring civil or criminal action against them. Granholm spokesman Chris DeWitt said that as of Tuesday, the office had heard from all of the companies mentioned in the lawsuit and that "there are ongoing discussions with them regarding a resolution."
"As long as those talks are moving forward, we would typically hold off filing a civil suit," he said.
Those named in the suit included: William Clyde Baker of Virginia, operator of www.aaasmokes.com; James Victor Punelli of Virginia, operator of www.cigarettecarton.com; Maher Haider of Kentucky, operator of www.cigarettevillage.com; Carl McAfee of Virginia and E-Commerce Today, operators of www.supercheapcigarettes.com; John Stebbins of Virginia and USAeast Investors, operators of www.youbuytobacco.com; Paul Taylor of Missouri and DC Inc., operators of www.dirtcheapcig.com; Dennis Peregory of Virginia, operator of www.cigsonline.com; and Joanne Fegen of Florida, operator of www.cigsmoke1.com.
TechNet, Republicans Talk High-Tech Politics
Massachusetts' Lt. Gov. Jane Swift, eight House Republicans and members of industry lobbyist group TechNet Massachusetts gathered in Boston Monday to discuss pending congressional legislation involving H-1B visas, online privacy and Internet taxation.
House Republicans in attendance included: National Republican Congressional Committee (NRCC) Chairman Tom Davis, VA; House Rules Committee Chairman David Dreier, CA; Pete Sessions, TX; Pete Hoekstra, MI; Nancy Johnson, CT; John Sununu, NH; Jack Quinn, NY; and John Sweeney, NY.
At the press conference, Swift cited political wrangling with the Massachusetts delegation’s congressional Democrats as an obstacle preventing the state from breaking into a higher competitive tech position.
"While the Congressional Democrats, including some from the Massachusetts delegation, continue to make decisions that will thwart progress and potentially hurt our country and state’s competitive position, Gov. (Paul) Cellucci and I and other Republicans have shown leadership on policies that make a difference to families across a nation," Swift said, according to prepared remarks.
"These issues are not about big business," she said. "They are about creating jobs, they are about keeping American competitive." Swift cited measures such as PNTR, research and development tax credits, H-1B visas and preventing Internet taxation as key legislation necessary to spur job growth in Massachusetts and the rest of the country.
"These are national issues that have implications right here in the dot.commonwealth, since we are a national and global leader in high technology," she said. "From the Berkshires to Cape Cod, high-tech start-ups are driving out economy in every region of the 'dot-commonwealth.'"
Connecticut AG Attacks Priceline
Connecticut Attorney General Richard Blumenthal is investigating the online company that seems to be in a midst of legal trouble of late. After receiving more than 100 complaints, mainly about name-your-own-price company Priceline.com's airline ticket and gasoline services, Blumenthal said he would open a consumer protection investigation into the company. Although it’s not a criminal investigation, Priceline.com could face fines and penalties, and a court order to stop any violations of the law.
Blumenthal's investigation comes on the heels of negative publicity surrounding the company after its membership was revoked from the Better Business Bureau. A "48 Hours" special featuring Priceline shareholder and actor William Shatner" that aired at the end of September reported that more than 300 complaints have been filed against the company. Additionally, the company's stock recently has plunged. Rep. Weller Makes Push For High-Tech Growth
Rep. Jerry Weller, R-IL, hosted the State of Southland Technology Summit last week at Governor State University that brought together local educators, small business owners, telecommunications industry representatives, local officials and community leaders for an in-depth discussion of high technology in the south suburbs of Illinois. Weller, a member of the House Ways and Means Committee and the Congressional Internet Caucus, hopes to develop a team approach to promote growth of the new economy in the area. "I want to bring together all of the sides that have interest in high technology and economic growth in the south suburbs, so we can work together in charting a course of action and to get a clear assessment of where we are and where we need to go in promoting the new economy here," Weller said in a statement. Weller is the author of the Digital Divide Access to Technology Act (DATA), which encourages companies to follow business models of companies like Ford and Intel to help bridge the digital divide by offering computers to employees. He is also sponsoring legislation that creates a $1,500 tax credit for high-tech education and training.
States Get Grades For Digital Services
The Center for Digital Government and the Progress & Freedom Foundation released its "2000 Digital State Survey" last week which studied state governments’ progress in eight areas of digital technologies: e-commerce, taxation/revenue, social services, law enforcement and the courts, digital democracy, management/administration, higher education and K-12 education. For the third year in a row, Washington earned top rank, while other states in the top 10 included: Kansas, Alaska, Illinois, Utah, New Jersey, Georgia, Wisconsin, Maryland and Texas. Sponsored by Compaq, the study shows that all 50 states have now integrated digital technologies into their operations in significant ways and have mapped out long-term IT infrastructure strategies.
Streamlining Net Taxes
Officials from 27 states gathered in Chicago Friday as part of the Streamlined Sales Tax Project (SSTP) to discuss an issue that could potentially widen the rift between federal and state governments. While legislation on whether to tax online sales and/or extend the current moratorium Net taxes, states have attempted to come up with a streamlined system of taxing goods sold over the Internet. The SSTP was organized six months after the congressional Advisory Commission on Electronic Commerce failed to develop a consensus on how to handle sales taxes on the Internet. SSTP is the first concerted effort by states in more than 40 years to simplify their complicated sales tax structure.
The Commerce Department estimates that consumers are spent as much as $5.3 billion in the fourth quarter of 1999 alone on online purchases. A study conducted by the Center for Business and Economic Research at the University of Tennessee found that by 2003, e-commerce nationwide could mean $10.8 billion in tax revenue losses.
Kansas, Wisconsin, North Carolina and Michigan will run an experiment with software providers and national retailers to see if existing software could handle the task of sorting through and applying hundreds of different state and local sales taxes.
The group will meet again in Chicago on Oct. 26 and a teleconference will be held on Oct. 13 to discuss the next meeting topics.
- by Liza Porteus
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