Wall Street Journal Looks at Proliferation of Web Sites Selling Discount Cigarettes
The Wall Street Journal today examines the "proliferation" of Web sites that are selling discounted and "often untaxed" cigarettes. According to a recent Massachusetts Health Department survey, there are more than 200 Web sites, some sponsored by small retailers and distributors around the world, that offer discounted cigarettes. The Journal reports that the increase in discounted cigarette sites is the result of the 1998 national tobacco settlement, under which tobacco companies agreed to pay states $206 billion over 25 years to cover smoking-related health care costs. To raise the settlement money, tobacco companies are charging more for retail cigarettes, creating a demand for this discount market. Selling cigarettes online is legal, but anti-smoking advocates and some state officials are concerned that the sites will increase cigarette consumption, particularly among minors, and decrease state revenue from taxes levied on retail cigarettes.
Under the Jenkins Act, companies that ship tobacco products across state lines are required to report the names and addresses of individual buyers. However, many Web sites promise not to divulge the identity of customers, and many states have been lax in pursuing the issue, since the money involved is "relatively small," the Journal reports. Although California has taken steps to enforce the excise-tax payments by "pushing" out-of-state companies to provide names of California customers and then sending those customers tax bills, the state is still losing at minimum $15 million each year, according to Dennis Maciel, chief of the excise-tax division of the state's tax department. In addition to lost revenue, some anti-smoking activists fear that the Internet will provide companies with a way to "evade" advertising restrictions on tobacco products. Although some tobacco companies are using the Internet to provide information on the dangers of smoking, anti-tobacco advocates say that it is "only a matter of time" before companies start compiling information about smokers and potential customers for marketing purposes (Fairclough, Wall Street Journal, 9/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.