May. 1 2003
Washington, D.C. — A subcommittee of the U.S. House of Representatives Judiciary Committee today addressed an important issue - the growing problem of internet sales of tobacco products to children and the evasion of state taxes on tobacco-related products sold over the internet. While we support the stated goal of the legislation brought before the committee by Representative Mark Green (R-WI), we oppose the bill because it does not deal with the problem of sales to children at all, and its limited proposal to address the problem of the evasion of state sales and tobacco-related excise taxes would be ineffective. We are particularly concerned because if the enactment of the bill prevents or forestalls the passage of legislation that effectively addresses these problems, it will do more harm than good.
There are currently about 200 U.S. websites that sell cigarettes to U.S. smokers and another 200 foreign-based websites that do so. Effective safeguards against kids being able to purchase cigarettes via the Internet are almost non-existent. While many Internet websites post notices that sales to persons under 18 are illegal or not allowed, very few do anything at all to make sure such sales do not occur.
Tax evasion via Internet sales of tobacco products is rampant. Internet tobacco prices are much lower than those in regular bricks-and-mortar retail outlets because Internet prices almost never include the taxes charged by retail stores. These low prices make Internet tobacco products attractive to both adult and underage smokers, and help to boost overall smoking levels. In addition, states lose millions of dollars each year in uncollected tax revenues. All of these problems have been compounded by the inadequacy of the enforcement tools available, the most serious of which is caused by the fact that under current law responsibility for paying the state taxes is normally the responsibility of the purchaser rather than the Internet seller.
In the last Congress, we supported H.R. 5724, legislation introduced by Representative Martin Meehan (D-MA) and former Representative James Hansen (R-UT). This bill offered a comprehensive solution to the problems arising from Internet sales of tobacco products by addressing both parts of the problem: youth access and tax evasion. To protect against Internet sales to youth, this bill would have required the verification of age and identity both at the time of sale and the time and place of delivery. The bill also provides state governments with an effective tool for collecting state taxes on Internet tobacco product sales to their residents. This legislation required Internet vendors of tobacco products to register with the states where they sell their products and comply with all related state laws regarding state tobacco tax collection and reporting. It also gave state officials the right to seek injunctive and equitable relief in federal courts to enforce Internet sellers' compliance with both the tax collection and youth access provisions of the bill. If the Green bill were enacted, it would undermine the longstanding, bipartisan efforts of Congressman Meehan, former Congressman Hansen and others to enact a comprehensive solution by giving the false impression that the problems had been effectively addressed.
Every day in this country, more than 4,000 kids try cigarettes for the first time. More than 2,000 become regular smokers, one-third of whom will die prematurely as a result. Restricting cigarette sales over the Internet is a critical part of protecting our kids.
Testimony of Matthew Myers, Campaign for Tobacco-Free Kids
Summary of Testimony