PACT Passes Senate

Passage of bill to rein in online cigarette sales a "major win" for retailers, says NACS

WASHINGTON -- Last Thursday, the U.S. Senate unanimously approved legislation to crack down on black market tobacco selling. The Prevent All Cigarette Trafficking (PACT) Act closes loopholes in current tobacco trafficking laws, enhances penalties for violations and provides law enforcement with new tools to combat the methods being used by traffickers to distribute their products. PACT, which addresseslongstanding convenience store industry concerns, is a "major win" for retailers, according to NACS senior vice president of government relations Lyle Beckwith.

Authored by [image-nocss] Senator Herb Kohl (D-Wis.) and co-sponsored by a bipartisan group of 20 senators, this legislation (S. 1147) would help combat online cigarette sales that have robbed states of badly needed tax revenues and that undermine state laws that prevent youth access to tobacco products.

"The PACT Act closes loopholes in current tobacco trafficking laws, enhances penalties for violations, and provides law enforcement with new tools to combat the innovative methods being used by cigarette traffickers to distribute their products," said Kohl. "With its passage, we cut off a source of funding for terrorists and criminals raise more money, enhance states' ability to collect significant amounts of tax revenue, and further limit kids from easy access to tobacco products sold over the internet."

He added, "By passing this bill, we are solving a serious problem that is growing every day.... Without innovative enforcement methods, law enforcement will not be able to effectively address the growing challenges facing them today." (Click here to read the full text of Kohl's remarks on the Senate passage of the legislation.)

The PACT Act would strengthen federal laws on cigarettes sold over the Internet. In addition to preventing the U.S. postal service from delivering cigarettes, it would allow states to recover lost excise tax revenue and allow legitimate retailers to recover lost business. Additionally, the PACT Act would prevent sellers from circumventing state laws preventing minors from purchasing cigarettes.

Native American lobbyists have been waging a furious battle to derail this legislation, NACS said.

The House version, authored by Representative Anthony Weiner (D-N.Y.) previously passed by a vote of 397 to 11. While passing the PACT Act in the Senate is a major hurdle cleared, because of slight differences in the Senate and House bills, the House will need to take a final vote to accept the Senate version of the bill. It would then go to President Obama's desk for his signature.

"Senate passage of the PACT Act is a huge victory for American taxpayers, American small business owners and America's youth," said Scott Ramminger, president and CEO of the American Wholesale Marketers Association (AWMA) and spokesperson for the Coalition to Stop Contraband Tobacco, of which the National Association of Convenience Stores is a leading member. "We applaud the Senate for its action today and thank Sen. Kohl for his leadership in ensuring that contraband tobacco sales are eliminated."

"NACS has been working for over 10 years to pass legislation to regulate Internet and mail-order tobacco sales," said Beckwith. "Last night's vote brings us closer to achieving our goal than we have ever been. We will continue to pressure the House to take the final step necessary for passage and enactment."

Kohl noted that cigarette trafficking, including the illegal sale of tobacco products over the Internet, costs states billions of dollars in lost tax revenue each year. It is estimated $5 billion of tax revenue is lost, at the federal and state level, each year.

In 1998, the Bureau of Alcohol, Tobacco, Firearms & Explosives (BATFE) had six active tobacco smuggling investigations. Today there are more than 400 open cases. The Internet represents a new obstacle to enforcement. Illegal tobacco vendors around the world evade detection by conducting transactions over the Internet, and then shipping their illegal products around the country to consumers. Just a few years ago, there were less than 100 vendors selling cigarettes online. Today, approximately 500 vendors sell illegal tobacco products over the Internet.