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Smokers must cough up Utah’s Net taxes

SHARE Smokers must cough up Utah’s Net taxes

Anyone who's bought cigarettes over the Internet thinking they'd avoided paying taxes had better watch out: The Utah State Tax Commission has tracked down smokers who owe the state more than $130,000.

Next week, notices of taxes due will be mailed to 250 Utahns identified by the companies that they've purchased cigarettes from, according to Rod Marrelli, the tax commission's executive director.

"If you're buying over the Internet, we are going to be assessing you," Marrelli said. "You're being reported — now pay up the tax. It's only fair to the other people who are buying them at the grocery store and paying the tax."

The taxes owed to the state amount to 69 1/2 cents per pack of cigarettes, plus a 10 percent "failure to file" penalty that can be waived for first-time offenders. That's not including, of course, the federal taxes on cigarette purchases.

A 56-year-old federal law requires companies that ship cigarettes across state lines to release the names and addresses of their customers to taxing authorities in the purchasers' home states.

That law has been increasingly used by states across the country to collect taxes on Internet sales, Marrelli said. Thanks to legal action taken by other states, Utah started receiving information on such sales in 2003.

Back then, though, just one company sent information on three customers with total sales of $800. In March, two more companies reported selling $2,000 worth of smokes to four customers.

Now, two additional companies have come forward with the names of 250 Utah customers who owe $130,000. Marrelli said the earlier mailings have resulted in some taxpayers settling their bills while one has challenged the assessment.

"You can see that it's growing," Marrelli said, adding that the state expects to hear from other companies soon. "We suspect from our contacts throughout the country that this is a major problem."

Utah, where smoking isn't very prevalent, is depending on other states to root out companies that haven't been reporting sales here, he said. "We're relying on the enforcement activities of other states, with larger populations, to carry that weight," Marrelli said.

He said he was surprised at the size of the latest sales — an average of more than 673 packs a person. The amount being spent suggests the purchases may not be for personal use. "It's a lot of money. That's what's amazing," Marrelli said.

Utahns who buy cigarettes online owe the state's share of taxes at the time they make their purchases. They can download the necessary form, a TC-720, from the Tax Commission's Web site at www.tax.utah.gov.


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