INTERNET SALES State looks to recover lost cigarette taxes

Ohio sent letters asking smokers to pay taxes on cigarettes they bought on the Internet.
TOLEDO (AP) -- The state is trying to recoup thousands of tax dollars lost on Internet sales of cigarettes.
The state has sent 25 letters to Ohioans asking for about $5,000 in taxes. An additional 1,000 letters will be sent.
"We are trying to collect tax due," said Gary Gudmundson, spokesman for the Ohio Department to Taxation. "Some of these figures represent years' worth of purchases."
Gudmundson said the state has compiled a list of people who bought cigarettes under the federal Jenkins Act of 1949, which requires companies to supply lists of customers for tobacco taxing purposes.
Businesses that sell cigarettes say more customers are turning to the Internet to avoid paying taxes.
Gov. Bob Taft wants to increase Ohio's cigarette tax from 55 cents to $1 per pack. The tax went up 24 cents in 2002.
At the Frenchtown Liquor Shoppe in Frenchtown Township, customers have been asking for the lowest-priced brands, some so obscure that clerk Mike Workes has never heard of them.
"I know business has gone down. And they're not even asking about the generics, they want something less than Basics," he said.
Recovering taxes
Collection of the tax points to the larger issue of how states and local governments can recover sales taxes increasingly lost to unregulated Internet sales.
Ohioans can declare unpaid sales taxes on their state income tax return, but it works on an honor system that some say needs to be changed.
Gudmundson put the loss for the state at $100 million for Internet sales where tax is not collected.
The National Association of Convenience States estimates that 350 companies sold 413.5 million packs of cigarettes online at the end of 2003, about 2 percent of all cigarettes sold in the country.
There is an effort to standardize sales tax collections across the country.
As of July 1, Ohio companies sending items across state lines will charge the sales tax of the county where the goods are headed, rather than count it as a local sale and keep the sales tax at home.