2010-04-02 / Top Stories

Congress Cracks Down On Black Market Tobacco

The House today passed legislation that will give states and localities a major boost in cigarette tax revenue by giving law enforcement new tools to crack down on smugglers of tobacco and to curb illicit tobacco sales over the Internet. The State of New York could see a windfall of $500 million and New York City could collect $150 million more from cigarettes.

The Prevent All Cigarette Trafficking Act (PACT) of 2009, sponsored by Representative Anthony D. Weiner, a member of the House Judiciary Committee, cleared the Senate last week. Today the PACT Act passed the House by a vote of 387 to 25, sending the legislation to President Obama and finally ending Internet tobacco smuggling.

Weiner said, “This new law will give states and localities a major revenue boost by cracking down on the illegal sale of tobacco and close a major source of finances for international terrorists and criminals. Every day we delay is another day that New York loses significant amounts of tax revenue and kids have easy access to tobacco products sold over the Internet.”

The bill makes it a felony to sell tobacco in violation of any state tax law and effectively ends Internet tobacco smuggling by stopping shipments of cigarettes through the United States Postal Service. FedEx, UPS and DHL have already agreed not to mail tobacco.

Estimates based on reporting from the New York State Department of Tax and Finance found that New York State loses up to $500 million from untaxed Internet tobacco sales and that New York City may lose as much as $150 million. According to a recent Government Accountability Office (GAO) report, Hezbollah profited $1.5 million from the sale of illegal tobacco from 1996-2000.

The PACT Act cracks down on illegal tobacco sales in the following ways: 1. Ends Internet Sales of Tobacco

by Banning Mailing of Cigarettes: Makes cigarettes and smokeless tobacco products non-mailable matter through USPS, except in limited cases. While FedEx, UPS and DHL have agreed not to ship tobacco products, USPS has continued to deliver

tobacco products bought over

the Internet.

2. Strengthens the Jenkins Act: Increases

existing penalties from a misdemeanor to a felony, making it a federal offense for any seller making a sale via telephone, the mail, or the Internet to fail to comply with all state tax laws. The legislation also empowers each state to enforce the federal law against out-of-state sellers sending delivery sales into its state by giving state Attorneys General the authority to seek injunctive

relief and civil penalties against violators.

3. Empowers Law Enforcement:

Allows the Attorney General to compile a list of delivery sellers who fail

to comply with the PACT Act or

states’ tax laws.

4. Mandates Age Verification: Internet

and other remote sellers will be required to verify the purchaser’s age and identity through easily accessible databases. It also requires

the person accepting delivery to verify

their age. 5. Grants ATF Inspection Authority:

The Bureau of Alcohol, Tobacco, Firearms and Explosives inspection authority, including on reservations, for distributors of cigarettes and creates

a penalty for those who refuse

inspection.

Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, said, “We applaud Representative Weiner for working tirelessly to pass the Prevent All Cigarette Trafficking Act. When law, the PACT Act will help prevent and reduce smoking and other tobacco use by preventing the illegal sale of tax-evading, low-priced cigarettes and smokeless tobacco over the Internet and making sure that Internet and other mail-order sellers do not sell to minors. Indeed, the PACT Act offers Congress a unique opportunity to fight crime, protect federal and state tax revenues, and promote public health, all at the same time.”

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