AWMA and a coalition of nearly 70 law enforcement groups, public health organizations, and trade associations urged the U.S. Senate Tuesday to pass legislation that will combat online cigarette sales that rob the states and federal government of billions of dollars in tax revenue annually and undermine state laws that prevent youth access to tobacco products.
 

AWMA's Scott Ramminger and Sen. Herb Kohl (D-WI)

At a news conference on Capitol Hill, members of the Coalition to Stop Contraband Tobacco as well as the Coalition for Tobacco Free Kids called for approval of S. 1147, the Prevent All Cigarette Trafficking Act of 2009 (PACT Act), sponsored by Sen. Herb Kohl (D-WI). A similar bill, introduced by Rep. Anthony Weiner (D-NY), was overwhelmingly approved by the U.S. House of Representatives in May. Weiner also attended the conference and called on the Senate to pass the bill.

“Each day that we delay its passage, terrorists and criminals raise more money, states lose significant amounts of tax revenue, and kids have easy access to tobacco products sold over the Internet,” Sen. Kohl said at the news conference. He said an estimated $5 billion per year in tobacco tax revenue goes uncollected due to illegal Internet sales, with their proceeds often helping to finance such terrorist groups as Hezbollah, Al Qaeda, and Hamas.
 

Sen. Kohl

“The PACT Act will strengthen our tobacco laws to ensure that law enforcement has the tools they need to investigate and prosecute cigarette traffickers,” said Sen. Kohl. The bill requires payment of state and local excise taxes on remote sales; regulates delivery methods, including age-verification and shipping requirements; makes cigarettes and smokeless tobacco nonmailable to consumers through the U.S. Postal Service; and gives the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATFE) authority to inspect records and inventories of remote sellers.

AWMA released a new study it conducted that demonstrated how easy it is to purchase untaxed cigarettes online without age verification. Of 27 sites selected randomly using the Internet search engine Google, 74% allowed the use of a credit card, none of the cigarettes purchased carried U.S. state tax stamps, and no taxes were collected at the time of purchase. Only two sites required age verification.

“The results of this study stunned us because it demonstrated that the problem of illegal sales of cigarettes has gotten worse,” said Scott Ramminger, AWMA president and CEO. “This study is a clear indication that the PACT Act must be passed immediately so we can effectively combat illegal Internet sales of cigarettes and other tobacco products.”

Scott Ramminger

AWMA incoming Chairman Jon Burklund said that in addition to costing the states and federal government billions of dollars in tax revenue and increasing tobacco use by underage youth, illegal Internet sales result in unfair competition for distributors and retailers who pay the required taxes and, as a result, must sell the product at a higher price.

“From the distributor perspective, every illegal tobacco sale made on the Internet translates into a loss of a legal sale by a law-abiding distributor and retailer via a face-to-face transaction,” said Burklund, president and chief operating officer of Burklund Distributors, East Peoria, IL. Face-to-face transactions, he said, are the best way to keep tobacco products out of the hands of minors.
 

Jon Burklund

“We urge the Senate to follow the House example and pass this legislation quickly,” said Anne Holloway, AWMA vice president of government affairs. “The time to act is now. The problem is not going to go away. It is growing and is having a devastating impact on state budgets, law enforcement, minors and law-abiding businessmen and women across the country”

Joining AWMA at the news conference were representatives of the National Association of Convenience Stores (NACS), the New York Association of Convenience Stores, National Black Police Association, American Legislative Exchange Council, and Campaign for Tobacco Free Kids.
 

Rep. Anthony Weiner (D-NY)