Hawaii Goes After Internet Tobacco Sale Taxes

State looks to capture up to $700,000 in uncollected funds; meanwhile New York considers enforcing a 2008 law that would require collecting taxes on the sale of cigarettes by Native Americans to non-Indians.

March 17, 2010

HONOLULU - Hawaii has begun to pursue uncollected taxes on cigarettes bought online with more vigor, the Honolulu Star Bulletin reports. The state wants to collect its tax of 13 cents per pack on each out-of-state sale.

Hawaii Attorney General Mark Bennett said the state likely could realize between $600,000 and $700,000 in uncollected tax funds. To try to recover that money, the state sent letters to close to 1,000 Hawaii residents who purchased cigarettes online but did not pay taxes on them.

"Wholesalers and retailers are paying the tax, so for them they are at a disadvantage," said Bennett. "The tax is passed on to the consumer."

In Hawaii, sellers of tobacco products must purchase a tax stamp for all cigarette packs. "But in addition, those who possess in Hawaii, whether they acquire them from sales outside Hawaii or not, cigarettes that do not have a tax stamp are liable for the payment of the tax," said Bennett.

Meanwhile, New York Gov. David Paterson wants to give collecting taxes on the sale of cigarettes by tribes to non-Indians another go, the Observer-Dispatch reports. A 2008 law gives the state the right to gather taxes on cigarettes sold by tribes to non-Indians.

"This is a different kind of enforcement. It??s enforcement on the wholesale level, not retail," said Morgan Hook, the governor??s spokesman. "The enforcement happens before the cigarettes get to the Indian nations."

But the Oneida Indian Nation does not like the idea at all. "None of New York??s previous efforts to impose taxes upon sovereign Indian nations have ever succeeded, and there??s no reason anyone should believe this latest effort will succeed either," Nation spokesman Mark Emery said in a statement.

"In reality, this is not a tax on any Indian nation, but a tax on their non-Indian customers," said James Calvin, president of the New York Association of Convenience Stores. "The U.S. Supreme Court ruled unanimously that states have a right to tax such transactions, and can do so without unreasonably infringing on Indian sovereignty."

Advertisement
Advertisement
Advertisement