Online Cigarette Sales Laws in California

• A 2002 General Acounting Office report concluded California had lost about $15 million in cigarette taxes due to online sales since 1999, prompting legislative action.cigarettes image by bilderbox from Fotolia.com
  
  The rise of online tobacco retailers, offering products shipped directly to the customer from out-of-state, allows consumers to skirt state and local taxes and enjoy cheaper cigarettes. California's 87-cent-per-pack tobacco tax serves as both a public health initiative and an $839 million-a-year source of revenue, and the state of California has enacted several laws aimed at closing this loophole.
  
  

The Jenkins Act

• A federal law passed in 1949, the Jenkins Act requires any person or business shipping cigarettes to a state imposing a tobacco tax to disclose to local tax officials the name and address of the shipper and the person to whom the product is shipped, including brand names and quantity. At face value, this seems to resolve the issue, but the problem lies in enforceability. The state government lacks the authority to enforce a law on an individual or company outside its borders. Interstate commerce falls under federal jurisdiction, and neither the FBI nor the Justice Department have made enforcing the Jenkins Act a priority.
  
  

SB 1766

• Senate Bill 1766, passed in 2002 as an attempt by the state of California to give teeth to the Jenkins Act, requires retailers to collect applicable taxes and pay them to the state. Any retailer failing to collect state taxes must send a written disclosure informing the purchaser that "the seller has reported ... the sale of these cigarettes to your state tax collection agency, including your name and address. You are legally responsible for all unpaid state taxes on these cigarettes."
  
  

AB 1830

• The anonymous nature of Internet commerce lends itself readily to abuse by minors. Assembly Bill 1830 (2002) aims at curbing the online sale of cigarettes and tobacco products to those under 18 years old. The bill prohibits the use of cash or money order, as neither form of payment establishes the purchaser's identity. For credit card payments, the words "tobacco products" must be printed on the purchaser's credit card statement, and the distributor must make a telephone call after 5 p.m. confirming the order. Legislators' assumed the prospect that parents might be informed would deter at least some adolescents from making online cigarette purchases.
  
  

SB 1701

• Each pack of cigarettes sold in California must bear a stamp certifying that the state tax has been paid. Senate Bill 1701, also passed in 2002, requires cigarette tax stamps to be laser-readable and contain encrypted verification data, thus making it more difficult for a California vendor to purchase cigarettes from an online distributor and resell them with counterfeit stamps.