N.D. to Collect Taxes From Web Cigarette Buyers

Will send notices to online purchasers

BISMARCK, N.D. - The North Dakota Tax Department is preparing to send notices to smokers who owe taxes for Internet cigarette purchases, said the Associated Press, although it does not expect a windfall from the effort.

State lawmakers earlier this year passed legislation requiring interstate sellers of cigarettes to provide sales information to state tax officials. The move followed action by Congress that carries the same requirement. But John Quinlan, a compliance officer with the North Dakota Tax Department, said enforcement was not a high [image-nocss] priority on the national level.

Some smokers buy cigarettes online to avoid paying state and local taxes, but Quinlan said there is not much savings involved. Right now you can go out to most large gas stations and buy cigarettes at comparable prices to the Internet, he said.

The state cigarette tax is 44 cents a pack plus the applicable sales tax, which varies depending on the area. The advent of Internet purchasing is tied to your tax rate, Quinlan said. North Dakota is ranked 36th or 38th [in the nation] in tax rate, so we don't see the Internet activity that some of the high-tax states do.

Quinlan said state officials are still deciding whether to impose penalties on people who avoid cigarette sales taxes. Initially we would allow them a time to pay and, if they don't respond, then penalties would apply, but that hasn't been finalized, he said.

In Michigan, online cigarette buyers who do not respond to a letter from the state treasury department within 30 days have to pay a 100% penalty. Minnesota, which taxes cigarettes at 48 cents a pack, also has a law that allows state officials to go after people who do not pay cigarette taxes, said Bruce Thomsen, a tax specialist for the Minnesota Department of Revenue. We've gotten some payments, and we are looking for some more, he said.