Federal Judge Deals Blow to Efforts by Senecas to Continue Internet Tobacco Sales

Statement of Matthew L. Myers, President, Campaign for Tobacco-Free Kids

Jul. 30 2010

Washington, D.C. — U.S. District Court Judge Richard J. Arcara's ruling that blocks the section of the Prevent All Cigarette Trafficking Act (PACT) that requires Seneca tobacco sellers to collect and pay all applicable state taxes before shipping cigarettes outside the reservation is wrong legally. It ignores the Seneca's past illegal acts and will adversely impact efforts to protect kids from tobacco and crack down on tax evasion that is costing state governments billions every year. We are confident it will be reversed on appeal.

However, the Court upheld the provisions in the PACT Act that make it illegal to ship cigarettes for commercial purposes through the mails. Since the Senecas' major method of delivery has been the U.S. mails, the Court's decision upholding the provision making it illegal for the Senecas to use the mails to deliver cigarettes should, if obeyed, put an end to the widespread sale of cigarettes by the Senecas to customers throughout the US.

The Buffalo, New York federal judge granted a preliminary injunction that keeps the section of the Prevent All Cigarette Trafficking Act that requires the Senecas to collect state and local taxes from being implemented.

Congress enacted the PACT Act in March to curtail the growing sales of tax-evading, low-cost cigarettes and other tobacco products over the Internet and through the mail. Internet sales of tobacco products keep prices down and smoking levels up. These sales make it easier and cheaper for kids to buy cigarettes, facilitate tax evasion and cost federal and state governments billions in revenue. The PACT Act does not infringe on the Seneca's tribal rights. It simply prevents them from illegally selling cigarettes on which taxes have not been paid to individuals who live throughout the US who are not members of the Seneca tribe.

As the Justice Department's court filing in the case make clear, well before the PACT Act was signed into law, the federal Bureau of Alcohol, Tobacco and Firearms and the U.S. Attorney for the Western District of New York tried repeatedly to negotiate with the Senecas to end their illicit Internet and mail order cigarette sales, which deprive states of substantial amounts of tobacco tax revenue and fail to comply with tax reporting requirements under federal law. After those negotiations failed, federal authorities launched an undercover investigation of cigarette trafficking and tax evasion involving Seneca businesses. That probe ended with enactment of the PACT Act.

The law requires Internet tobacco sellers to pay all federal, state, local or Tribal tobacco taxes and affix tax stamps before delivery to any customer. It also mandates that the age and identification of purchasers be checked both at purchase and delivery. It bans delivery of tobacco products through the U.S. mail, with limited exceptions.

The PACT Act protects kids from tobacco and helps states collect billions in tax revenue that is rightfully theirs. It is good for public health and for law enforcement. That's why the National Association of Attorneys General strongly supported its passage.

We believe strongly that the Justice Department should appeal this faulty ruling. The PACT Act ultimately will be found to be both legitimate and necessary.

 

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