Weekly column: The Massachusetts Internet tax mystery

[Declan McCullagh <declan () well com>]

http://news.com.com/2010-1028-5104537.html

The Massachusetts Internet tax mystery
November 10, 2003, 4:00 AM PT
By Declan McCullagh

A mystery is brewing in Massachusetts over how state tax collectors learned 
the identities of residents who bought cigarettes over the Internet.

Since early this year, the Massachusetts Department of Revenue has been 
busy firing off 3,264 letters to online shoppers, ordering them to submit a 
check for unpaid cigarette taxes, plus interest and penalties--or risk 
fines and imprisonment. Like its tax-happy neighbors of New York, Rhode 
Island and Connecticut, the Bay State ranks in the five most expensive 
places in the United States to buy cigarettes. Massachusetts levies $1.50 a 
pack in state excise taxes, not counting state sales taxes and local taxes.

The 7-Eleven store on Hanover Street in Boston's North End sells a carton 
of Marlboros for $55.75. Online retailer DirtCheapCig.com sells Marlboros 
for between $27.19 and $31.19 plus shipping. That's a huge competitive 
advantage for DirtCheap, explained in large part by its location in the 
verdant tobacco fields of Kentucky, which has the lowest tobacco excise 
taxes in the nation.

What's a great deal for Massachusetts smokers horrifies the state's tax 
collectors, who acknowledge that they've obtained the names and addresses 
of DirtCheap customers but refuse to divulge their source. What's a great 
deal for Massachusetts smokers horrifies the state's tax collectors. The 
two possible culprits: DirtCheap and the United Parcel Service, which the 
company uses to ship cigarettes.

[...remainder snipped...]
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