Deal Aims to Prevent Web Cigarette Sales
ALBANY, N.Y. (March 18) - Major credit card
companies will refuse to participate in Internet sales of cigarettes nationwide under a
government agreement made Thursday.
The U.S. Bureau of Alcohol, Tobacco, Firearms
and Explosives, the companies and state attorneys general agreed to work together to
prevent the long unchecked use of credit cards to buy cigarettes over the Internet across
state lines. The agreement is effective immediately.
The result is that virtually all credit cards
will no longer participate with Web sites based in the United States and abroad that sell
cigarettes and tobacco products in every state, said New York Attorney General Eliot
Spitzer. The card companies also agreed to take action against Internet sellers that
authorities identify as violating state and federal laws regulating cigarette sales.
States lose more than $1 billion a year in tax
revenue from Internet tobacco sales, said Sheree Mixell, ATF spokeswoman.
The effort is important because enforcement
has been difficult, even though in many states, including New York, the Internet sale of
tobacco products is illegal. The trade undercuts traditional business operators, often
avoids sales tax for states and localities, and can be a way for underage consumers to buy
cigarettes and chewing tobacco before they turn 18.
"By working with all the major card
companies, we will severely restrict the availability of the Internet retailers to make
these illegal sales,'' said Spitzer, one of the lead attorneys general in the partnership
sealed Thursday.
The negotiations were also led by California
Attorney General Bill Lockyer and Oregon Attorney General Hardy Myers. Attorneys general
from Colorado, Idaho, Louisiana, Maryland, Pennsylvania, Vermont and Wisconsin also
participated.
"ATF investigations show that millions of
dollars each year in illegal sales of cigarettes are diverted to fund terrorists and
criminal organizations,'' said Michael Bouchard, ATF assistant director for field
operations. "Through today's initiative, we are addressing the problem of illegal
sales across multiple jurisdictions with tremendous support from the country's largest
credit card companies. We welcome the help.''
Earlier this month MasterCard International
issued a bulletin to its member banks on "the need to comply with rules governing the
Internet sale and shipment of tobacco.''
"MasterCard does not tolerate illegal
activities of any kind,'' the statement said.
The agreement announced Thursday also includes
American Express, Visa, Discover, Diners Club and the Internet financial transaction
service PayPal, which is owned by eBay Inc.
Joshua Peirez, senior vice president at
MasterCard, told The Associated Press the policy basically meant the card couldn't be used
for Internet purchases of tobacco "because at this point, no merchants are complying
with all of these laws.''
Smokers can still buy cigarettes over the
Internet, but they would have to use checks, money orders or some other payment system
that would likely delay receipt in the Internet business built on speed. Operators of
cigarette Web sites didn't immediately respond to requests for comment.
New York's ban on Internet cigarette sales was
the first in the nation. But opponents argued the law wasn't about minors smoking, but
about state tax revenue. The state's tax on a pack of cigarettes is $1.50, pushing the
total price to around $5. Lower prices are offered on the Internet and in mail-order
catalogs by tax-exempt Indian merchants and retailers in states with lower taxes.
In January, a federal judge tossed out
racketeering charges against a group of online cigarette sellers. New York City had
sued 16 cigarette Web sites to require taxes be paid on Internet sales. The city, which
estimates it loses as much as $100 million a year because of the unpaid cigarette sales
taxes, continues to seek to recover $15 million.
AP Business Reporter Eileen Alt Powell
contributed to this report from New York.
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