CIGARETTE SHIPPING IN NEW YORK
 
 

 
 
Legal Challenges 
 
The Law 
 
Follow-Up Points 
 
Related News 
 
BOYCOTTING UPS, 
et al
LEGAL CHALLENGES 

June 2001: Court Strikes Down State Ban on Sale of Cigarettes Online - A federal judge struck down a New York State law banning Internet and mail-order sales of cigarettes yesterday, saying the state had unduly interfered with interstate commerce.

This was first brought to suit in November, 2000.  Judge Preska had issued a temporary restraining order on the ban then until the next hearing date which has now come to pass, remarking that it was likely to be unconstitutional.  We applaud Judge Preska on this ruling and for upholding constituional rights. 
 

February 2003: Ban on Internet Cigarette Sales Is Upheld - Reversing a lower court ruling, a federal appeals panel yesterday upheld a New York State ban on Internet and mail-order cigarette sales.  The United States Court of Appeals for the Second Circuit said the Federal District Court had erred in finding that the law violated the Commerce Clause of the Constitution. 
 

April 2003: New Yorkers’ Right to Buy Cigarettes Online May Not Go Up in Smoke - New Yorkers who purchase their cigarettes online may be saved from a New York statute which would end Internet tobacco sales to New York consumers.  OLTRA (the Online Tobacco Retailers Association), announced that OLTRA and three of its members, along with two New York consumers, filed a lawsuit in the United States District Court for the Western District of New York against Governor George Pataki, New York Attorney General Eliot Spitzer and Commissioner of Health Antonia Novello, seeking to have New York Public Health Law §1399-ll declared unconstitutional. 
Related
 
April 1, 2003: Tobacco E-Tailer Cyco.net Issues Challenge to States - Cyco.net Inc. President Richard Urrea stated: In May 1992 the U.S. Supreme Court ruled that you cannot place an undue burden on a company that does not have a physical presence in that state. The Jenkins Act, which requires shipment of cigarettes into states to report those shipments to that state's tax authority, was imposed in 1955. We have operated knowing that a Supreme Court ruling negates any former laws that go against the ruling -- case in point, Roe v. Wade. Any future law that would circumvent such a ruling would require a constitutional amendment, which requires two-thirds of Congress and each state's ratification.  

Cyco.net Inc. challenges the states that are depending on the Jenkins Act to use as grounds for legislation and litigation to first get a Supreme Court ruling prior to proceeding with such action. The company at no time wants to do anything illegal and feels it is unjust to be accused of such without this ruling. If the court rules that Jenkins is intact, the company will comply with the regulation and all litigation will be unnecessary. Otherwise, any litigation will be dragged out for years before resolution. 
  

February 21, 2008: In Blow to Spitzer, Court Strikes Down Tobacco Law - A ruling yesterday by the United States Supreme Court will cast a shadow over one of the successes Governor Spitzer claimed during his tenure as attorney general: his work to curtail online purchases of cigarettes. 

Online cigarette sales, Mr. Spitzer and other state attorneys general found, were allowing smokers to evade taxes and permit minors to get around age requirements. Some states, such as New York, enacted criminal penalties for truck drivers who knowingly delivered boxes of tobacco. Mr. Spitzer used an investigation to leverage the United Parcel Service into giving up the transporting of tobacco to smokers nationwide. 

Yesterday the federal high court unanimously struck down a Maine law that forbids deliveries of tobacco to individual consumers and burdens truckers with enforcing the law. The law is similar, though not identical, to New York's. 

"The Supreme Court's ruling has a breadth that suggests states will have to revisit laws that are akin to this," the lawyer who successfully challenged the law on behalf of several trucking associations, Beth Brinkmann of the firm Morrison Foerster, said in an interview. 

A spokesman for Attorney General Cuomo, Mr. Spitzer's successor, said the office was reviewing the Supreme Court decision. 

So far, New York's law has survived court challenge. A federal appeals court in Manhattan in 2003 upheld the law against claims that it violated the Constitution's commerce clause by favoring instate tobacco retailers. But the challenge to the Maine law the Supreme Court heard was brought under an entirely different legal theory. 

Trucking associations in New Hampshire, Vermont, and Massachusetts said the Maine law was pre-empted by a federal law that forbids a state from enacting a law "related to a price, route, or service of any motor carrier." 

The Supreme Court's main concern was that Maine's law, coupled with other laws, undermined Congress's effort to deregulate the trucking industry. "To interpret the federal law to permit these, and similar, state requirements could easily lead to a patchwork of state service-determining laws, rules, and regulations," Justice Breyer wrote for the court. "That state regulatory patchwork is inconsistent with Congress' major legislative effort to leave such decisions, where federally unregulated, to the competitive marketplace." 

The trucking industry has criticized the state laws as being not only burdensome but also, ultimately, ineffective. Online cigarette retailers, industry representatives say, sidestep the laws by shipping through the federal United States Postal Service, which is not subject to state laws. 

"Why should the mailman be able to deliver them to your door and the UPS driver has to go to jail?" the president of the New York State Motor Truck Association, William Joyce, said. 

In 2004. Mr. Spitzer's office opened an investigation into whether UPS had violated New York State law by shipping cigarettes to individual smokers. In return for the shuttering of the investigation, UPS signed an agreement with Mr. Spitzer that announced the company had made "a business decision" to stop shipping cigarettes to individual smokers anywhere in the country. 

Under the agreement, UPS can back out if New York's law is declared invalid or enjoined by a court. 

UPS is not likely to use the Supreme Court ruling as a hook to try to get out of that agreement with New York. 

"We have a policy that's been in effect for almost three years now and has been effective, and we see no reason to change it," a UPS spokesman, Norman Black, said. 

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THE LAW 

NYS PUBLIC HEALTH LAW ARTICLE 13-F; SECTION 1399-LL 
Unlawful shipment or transport of cigarettes. 
Effective June 2003 

(Any emphasis is added by C.L.A.S.H. for follow-up points) 

* § 1399-ll. Unlawful shipment or transport of cigarettes. 1. It shall 
  be unlawful for any person engaged in the business of selling cigarettes 
  to  ship  or  cause  to  be shipped any cigarettes to any person in this 
  state who is not: (a) a person licensed as  a  cigarette  tax  agent  or 
  wholesale  dealer  under  article  twenty  of  the tax law or registered 
  retail dealer under section four hundred eighty-a of the tax law; (b) an 
  export warehouse proprietor pursuant  to  chapter  52  of  the  internal 
  revenue  code  or  an operator of a customs bonded warehouse pursuant to 
  section 1311 or 1555 of title 19 of the United States  Code;  or  (c)  a 
  person  who  is  an  officer,  employee  or  agent  of the United States 
  government [1], this state  or  a  department,  agency,  instrumentality  or 
  political  subdivision  of  the  United  States or this state, when such 
  person is acting in accordance with his  or  her  official  duties.  For 
  purposes of this subdivision, a person is a licensed or registered agent 
  or  dealer  described in paragraph (a) of this subdivision if his or her 
  name appears on a list of  licensed  or  registered  agents  or  dealers 
  published  by  the department of taxation and finance, or if such person 
  is licensed or registered as an agent or dealer under article twenty  of 
  the tax law. 
    2.  It  shall  be  unlawful  for  any  common  or  contract carrier to 
  knowingly transport cigarettes to any person in  this  state reasonably 
  believed  by  such  carrier  to  be  other  than  a  person described in 
  paragraph (a), (b) or (c)  of  subdivision  one  of  this  section.  For 
  purposes  of  the preceding sentence, if cigarettes are transported to a 
  home or residence, it shall be presumed  that  the  common  or  contract 
  carrier  knew  that  such person was not a person described in paragraph 
  (a), (b) or (c) of subdivision one of this section. It shall be unlawful 
  for any other person to knowingly transport cigarettes to any person  in 
  this  state,  other  than to a person described in paragraph (a), (b) or 
  (c) of subdivision one of this  section.  Nothing  in  this  subdivision 
  shall  be construed to prohibit a person other than a common or contract 
  carrier from transporting not more than eight hundred cigarettes at  any 
  one time to any person in this state.[2] 
    3.  When  a person engaged in the business of selling cigarettes ships 
  or causes to be shipped any cigarettes to  any  person  in  this  state, 
  other  than  in  the  cigarette  manufacturer's  original  container  or 
  wrapping, the container or wrapping must be plainly and  visibly  marked 
  with the word "cigarettes". 
    4.  Whenever  a  police  officer  designated  in  section  1.20 of the 
  criminal procedure law or a peace officer designated in subdivision four 
  of section 2.10 of such law, acting  pursuant  to  his  or  her  special 
  duties, shall discover any cigarettes which have been or which are being 
  shipped  or  transported  in  violation  of this section, such person is 
  hereby empowered and authorized to seize and  take  possession  of  such 
  cigarettes,  and such cigarettes shall be subject to a forfeiture action 
  pursuant to the procedures provided for in  article  thirteen-A  of  the 
  civil  practice  law and rules, as if such article specifically provided 
  for forfeiture of cigarettes  seized  pursuant  to  this  section  as  a 
  pre-conviction forfeiture crime. 
    5. Any person who violates the provisions of subdivision one or two of 
  this  section  shall be guilty of a class A misdemeanor and for a second 
  or subsequent violation shall be guilty of a class E felony. In addition 
  to the criminal penalty, the commissioner may impose a civil fine not to 
  exceed five thousand dollars for each such violation on any  person  who 
  violates  subdivision  one  or two of this section. The commissioner may 
  impose a civil fine  not  to  exceed  five  thousand  dollars  for  each 
  violation  of subdivision three of this section on any person engaged in 
  the business of selling cigarettes who ships or causes to be shipped any 
  such cigarettes to any person in this state. 

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FOLLOW-UP POINTS 

[1] "It shall be unlawful for any person engaged in the business of selling cigarettes to ship or cause to be shipped any cigarettes to any person in this state who is not... (c) a person who is an officer, employee or agent of the United States government..." 

In other words, common carriers like UPS or FedEx can be and are prohibited from shipping cigarettes but the United States Postal Service (USPS) -- a government agency -- cannot be and is not prohibited from shipping cigarettes.  The states don't have that power over a federal agency. 

It helps to explain why the USPS has been adamant in their refusal to cease shipments.  They do not have to no matter how much they are harassed to do so by the state Attorneys General and the anti-smoking groups.  

However, a pending federal act might put an end to that as well. Rather than trying to enforce and recoup lost taxes on cigarettes sold via the Internet, special interests got together and crafted the PACT Act (Prevent All Cigarette Trafficking Act) -- a federal law that prevents shipping of tobacco products.  The U.S. Senate bill passed in January 2004.  Since then the House has not acted on their version of the bill.  If this were to pass the USPS would be affected as well. 

(visit our action alert page, use the suggested letter, and follow the directions on how to contact your representative.)  


NY Times - May 29, 2005  
Post Office Sidesteps Fray on Illicit Sales of Cigarettes  

ALBANY, May 26 - As they move to thwart the illegal trade of cigarettes over the Internet, state officials have joined colleagues from around the nation in persuading the major credit card companies to stop processing payments for online cigarette sales. Additionally, the state has enacted a law prohibiting the shipment of cigarettes to its residents and banned private carriers, like FedEx, from shipping cigarettes.  

But as state officials fight illegal online cigarette sales, one operation is not falling into line - the United States Postal Service, which officials say delivers the bulk of illegally purchased cigarettes to New Yorkers.  

The Postal Service, citing concerns about the privacy of the mail and wary of putting postal clerks in the position of deciding which packages to accept and which to reject, is resisting the growing calls that it stop shipping cigarettes.  

Its stance is exasperating law enforcement officials. "It is outrageous that the federal government - through the United States Postal Service - is knowingly acting as the delivery arm for these criminal enterprises," New York's attorney general, Eliot Spitzer, said in a statement.  

The role of the post office in shipping illegally sold cigarettes is also attracting attention across the nation. Last month the National Association of Attorneys General asked the Postal Service to "adopt a firm policy prohibiting transportation of packages that the carrier knows or reasonably should know contains cigarettes sold illegally on the Internet." In Oregon, an online cigarette seller was charged in January with unlawful distribution of cigarettes and racketeering; the post office was not charged but was named in the indictment as part of the racketeering enterprise. Congress has considered legislation that would ban the mailing of cigarettes.  

Postal officials say that they are committed to fighting illegal activities conducted through the mail, but complain that their hands are tied. They note that Priority Mail, which officials say is most frequently used to ship cigarettes, cannot be inspected without a search warrant or the consent of either the sender or the recipient.  

The post office's investigative arm, the Postal Inspection Service, has worked to stop illegal cigarette shipments in a number of cases, but has only about 1,970 inspectors in the whole country, charged with investigating everything from the anthrax mailings to all suspicious packages to the distribution of child pornography. And postal officials say that postal clerks cannot be expected to figure out what people are shipping, and whether cigarette retailers are complying with obscure laws like the Jenkins Act, which requires cigarette sellers to keep lists of customers for tax collection purposes.  

"Tobacco is a legal, mailable product," Mary Anne Gibbons, the Postal Service's general counsel, wrote last month in a response to the association of attorneys general. "It would be impracticable for postal acceptance clerks to make determinations on any given mailer's compliance with state excise or tax law or Jenkins Act filings."  

But state officials reject this argument, pointing out that at least in New York State, public health laws prohibit direct sales of cigarettes by mail. They acknowledge that the state cannot bar the post office, a federal entity, from shipping cigarettes in New York, but say that since online merchants often violate tax laws, shipping their cigarettes violates federal mail fraud statutes and therefore should be stopped.  

"Instead of complying with federal law, the Postal Service is taking a head-in-the-sand approach, by claiming that they have no idea what is in the packages being delivered - even if they are being mailed by Internet operators that sell nothing but cigarettes," Mr. Spitzer said in a statement. "That is an absurd argument that we would never accept from a private defendant."  

And several law enforcement officials said that in small upstate communities like Salamanca, N.Y., which are dotted with smoke shops advertising the tax-free cigarettes sold from Indian reservations, the post office willingly accepts delivery of truckloads of cartons of cigarettes for delivery.  

But Anthony Alverno, the post office's chief counsel for customer protection and privacy, said in an interview that the post office's research indicated that the smoke shops doing business in New York sold other items beside cigarettes, including "novelty items," so some packages they ship might not be cigarettes. "We would need to get a search warrant to make the determination," he said.  

The Postal Inspection Service joined other federal and local law enforcement agencies to seize 300,000 cartons of illegal cigarettes last November at Kennedy International Airport. Mr. Alverno said that blocking overseas shipments was easier, because they must pass through customs. He added that the Postal Service would continue to discuss civil or criminal actions that could be taken with law enforcement agencies.  

Not just government officials, but also antismoking advocates are trying to stop the mailing of cigarettes. And some see signs of progress.  

John F. Banzhaf III, the executive director of Action on Smoking and Health, an antismoking organization that has warned the Postal Service that it could face legal liability for shipping illegally purchased cigarettes, said that the service was finding itself increasingly isolated, especially since credit card companies stopped processing the payments for such sales earlier this year.  

"It may be more trouble - both from a legal and public relations point of view - than the benefits of the revenue that comes in," he said.  

Several online cigarette sellers shut down after the credit card companies stopped processing their transactions; others are struggling. One Web site, tobaccobymail.com, which says it is run from western New York, complains on its site that it is "perpetually targeted by the state of New York," and says that it is not bound by state or federal laws because it is owned and operated by the Seneca Nation of Indians.  

The Web site says that it ships cigarettes by Priority Mail, that they are tax-free, and that the company will not share its customer lists with the government. But state officials say the company is flagrantly violating tax laws.  

Mr. Spitzer said that the Postal Service should stop carrying illegally sold cigarettes. "The entire law enforcement community - attorneys general, the federal Bureau of Alcohol, Tobacco and Firearms, police officers, state tax officials, and even the Postal Inspection Service - is united in trying to stop these illegal sales," he said. "The postmaster general should be instructing the 'delivery side' of his office to join us in this effort, rather than facilitating illegal conduct."  
 

[2] "Nothing in this subdivision shall be construed to prohibit a person other than a common or contract carrier from transporting not more than eight hundred cigarettes at any one time to any person in this state." 

It's been reported that some retailers are now informing their customers that they will only allow you to purchase a maximum of four cartons at a time, per day, per household. 

This provision in the law explains why retailers have resorted to this tactic ("800 cigarettes" = 4 cartons).  It's one more way to appear to be within the law and especially reinforces the legitimate use of the USPS. 

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RELATED NEWS 

Associated Press - February 3, 2011
NY's attorney general sues online tobacco sites

 Six website operators are violating a state law that bans the online sale of tobacco to customers in New York, Attorney General Eric Schneiderman said Thursday.

Schneiderman said lawsuits were filed a day earlier in state Supreme Court in Manhattan, seeking $5,000 in fines for each violation, as well as an injunction barring the companies from future sales. The lawsuits cite 11 violations, but the attorney general said his goal wasn't to collect fines, but to stop the shipments.

New York is one of six states, according to Schneiderman, that prohibits tobacco dealers from selling their products over the Internet; Connecticut, Maryland, Ohio, Vermont, and Washington are the others. New York's law requires anyone receiving cigarette shipments to be a licensed cigarette tax agent or wholesale dealer.

"As one of my colleagues said recently, the Internet really is the crime scene of the 21st century," Schneiderman said. He called Internet cigarette sales "one of the primary methods of evasion of every effort we're making in the state of New York and in the country to reduce the national tragedy of tobacco addiction."

The lawsuits were filed the same day the New York City Council banned smoking in city parks, beaches and even Times Square. The village of Great Neck, on Long Island, also recently banned smoking on public sidewalks.

Telephone messages and e-mail requests for comment from the companies, some of which are based in Europe, were not immediately returned Thursday.

Schneiderman and others contend that because the websites have lax standards for age verification, the sale of cigarettes — usually cheaper because no sales tax is collected — is attractive to underage smokers who may be stymied in purchasing cigarettes at retail outlets. In New York, the sales tax on a single pack of cigarettes is $4.35 — about half of the total cost to customers.

He cited statistics from the Centers for Disease Control and Prevention that 24,100 children under the age of 18 become new daily smokers each year.

"When cheap untaxed cigarettes are made available, more kids will try them and more will become addicted," said Michael Seilback, a spokesman for the American Lung Association. "We know that a high cigarette price is the single largest deterrent to kids starting to smoke and getting adults to quit. The high price on cigarettes is a critical component of a comprehensive tobacco control program."

Schneiderman also noted that most of the Internet tobacco transactions do not include the collection of sales tax. The state Health Department found in 2004, between $106 million and $122 million in sales tax revenue from online cigarette sales went uncollected.
 

Los Angeles Times - November 29, 2007 
Supreme Court weighs Internet sales regulation 

WASHINGTON — The Supreme Court took up a little-noted case Wednesday that could prove a boon in the era of Internet commerce -- and deal a setback to states' efforts to keep cigarettes, drugs and other harmful products out of the hands of minors. 

Until the last decade, states restricted sales of certain products by regulating the sellers. For example, retailers were banned from selling cigarettes to those under age 18. 

But cigarettes, like nearly every other product, now can be bought over the Internet and sent directly to the consumer, which means the seller cannot verify the age of the purchaser. The number of Web vendors of cigarettes rose from 88 in 2000 to 772 early last year, according to the California attorney general's office. 

As a fallback, states increasingly have turned to shippers and delivery services, such as UPS or FedEx, and said they must see to it that certain products, including tobacco, are delivered only to adults, not minors. Maine, for example, adopted a law requiring shippers who deliver tobacco products to obtain a signature from an adult and see a government-issued identification card. 

But Bush administration lawyers joined the trucking industry Wednesday in urging the high court to throw out Maine's law and to shield shippers from all such state regulation of delivery services. This would speed the flow of Internet sales and reduce costs, they said. 

Forcing delivery services to check on who is receiving a particular product disrupts "the timely and cost-effective flow of packages to our businesses and homes," lawyers for the shippers said. 

They referred to an industry-friendly measure passed by Congress in 1994 that bars states from enforcing any law "related to the price, route or service" of a trucker or a shipping firm. The administration's lawyers say this broad deregulatory measure goes beyond economic regulation. There is no "exception for state health and safety regulations," they argued. 

Most of the justices signaled during the hourlong argument that they favored freeing the shipping industry from state regulations. 

"We are very worried," California Deputy Atty. Gen. Laura Kaplan said after the argument. "We don't know how far the Supreme Court will go, but there are a lot of other dangerous products besides cigarettes. And this could leave a big void." 

California does not regulate delivery services as strictly as required Maine does. "We don't have anything exactly like" Maine's law, Kaplan said. 

Under California law, Internet vendors are required to check whether purchasers are adults. However, as the Supreme Court was told, a test of the state law had children try to buy a carton of cigarettes from 234 websites, and they succeeded with 129. Most of the sites did nothing more than ask purchasers to certify that they were 18 or older, the state's lawyers said. 

"The law has not been as effective as we'd like," Kaplan said. 

The California lawyers, joined by those from 37 other states, filed a brief that warned against making the shipping industry's "expansive view of [federal] preemption . . . the law of the land." 

Doing so would threaten "state restrictions on the delivery of a myriad of other dangerous products, including explosives, liquor, drugs, poisonous reptiles and wild animals," they said. 

Justice Antonin Scalia made clear that he did not share the states' concern. "Maybe Congress wanted the regulatory void," he told the Maine lawyer who was defending the state's efforts to regulate delivery services. 

Comments and questions by Chief Justice John G. Roberts Jr. and Justices Stephen G. Breyer, David H. Souter and Samuel A. Alito Jr. suggested similar views. 

"Congress wanted to end a category of regulation," Souter said. 

Breyer said states were unlikely to set exactly the same rules for delivery services. He added: "If every state does it differently, it's going to be a nightmare." 

With the steady growth of sales over the Internet, the case has been seen as the key test of whether delivery services can be required to enforce some of the state sales restrictions imposed on retailers. 

The Maine law was struck down by two lower courts, but the justices agreed to hear an appeal from the state's attorney general, Steven Rowe. 
 

ABC News - June 18, 2006 
Post Office Said to Abet Cigarette Sales to Kids 
Web Sites Offering Tax-Free Cigarette Sales Off Indian Reservations, Allegedly to Minors, Called Illegal 

New York Attorney General Eliot Spitzer says the U.S. Postal Service has become "the delivery arm of a massive criminal enterprise." 

Every day, Native American businesses ship millions of cigarettes from reservations across the country.  

While Native Americans on the reservation are entitled to tax-free cigarettes, the Web sites that offer those tax-free cigarettes for sale off the reservation are, officials say, illegal. 

The public health community says Web sites that illegally sell cheap smokes are a real concern — especially when it comes to young smokers. 

"The monetary incentive, from the state's perspective, is not what drives us," Spitzer says. "What drives us is the concern that kids will gain access to cigarettes online." 

Studies confirm that children can easily buy cheap cigarettes online. 

"I got Virginia Slims Light cigarettes, and I'm 14," said one teen who was working for law enforcement. 

Spitzer, now running for governor of New York as a Democrat, is on a mission to shut down the sites. He's convinced private delivery services like FedEx, DHL and UPS to stop shipping cigarettes to individual consumers. But he can't convince the U.S. Postal Service. 

"Somebody at the Postal Service," says Spitzer, "should be smart enough to say, 'Stop this. We don't need the money. It is illegal to deliver these goods. We shouldn't do it.' " 

But Tom Boyle of the U.S. Postal Inspection Service says, "That's unfair to the Postal Service. 

"We are not a private carrier," Boyle adds. "We are a government entity. … By law, we cannot just open packages. We have to get a federal search warrant." 

Spitzer counters, "We're not saying to them they should be opening packages randomly. We're saying when there is a company whose sole line of business is to ship cigarettes, then you can say to the company, 'We don't think you should be delivering your product because we believe it may be contraband.' " 

But deciding what's contraband or not, says the post office, is not their job.  

"We're doing as much as we possibly can," Boyle says.  

In the meantime, the two sides can't agree on how to solve what they both say is a problem. And so a branch of the federal government continues to deliver throughout the country what Spitzer says are millions of illegal cigarettes. 
 

Press Release (Office of the NY Attorney General - March 10, 2006)  
Schumer and Spitzer Announce Legislation to Ban Shipment of Tobacco Through the U.S. Mail 

U.S. Senator Charles E. Schumer and New York State Attorney General Eliot Spitzer today announced that they have teamed up to support legislation to stop the shipment of cigarettes and smokeless tobacco through the U.S. Mail. 

At a joint news conference with Spitzer, held at New York’s historic Farley Post Office, Schumer announced his bill that would prohibit mailing cigarettes through the United States Postal Service, impose fines of at least $1,000 per offense and jail time for repeat offenders. The bill would also give state Attorneys General the ability to pursue those who ship tobacco in violation of the law. 

"Passing this bill will be the final nail in the coffin for the sale of cigarettes on the Internet," Schumer said. "The U.S. Mail has become the last refuge for online cigarette merchants and it’s time that this loophole be closed."  

"Working together we are attacking the problem of illegal cigarette shipments on both a state and national level," Spitzer said. "The Postal Service has become the delivery arm of a massive criminal enterprise shipping contraband cigarettes nationwide. The legislation that Senator Schumer is introducing will ensure that the Postal Service gets out of the cigarette delivery business."  

Internet and mail order cigarette retailers operate in violation of numerous federal, state and local laws, including tax laws, age verification laws, delivery restrictions, reporting requirements, and federal wire fraud and mail fraud statutes. As a result, a coalition of federal, state and local law enforcement agencies has been working on several initiatives to stop these illegal sales, including federal and state criminal indictments of cigarette sellers, seizures of contraband cigarettes, and efforts to strengthen cigarette trafficking prohibitions. 

Several states, including the New York, have laws prohibiting or restricting the shipment of cigarettes and smokeless tobacco directly to consumers. Senator Schumer’s bill would make cigarettes and smokeless tobacco non-mailable items, just as liquor, firearms, explosives and even automobile master keys may not be shipped through the U.S. Mail. In addition the legislation will allow the Postal Service to reject packages believed to contain tobacco products. 

In the past year, DHL, FedEx and UPS have agreed to cease delivery of cigarettes to consumers throughout the United States. In addition, in March 2005, the major credit card companies all agreed to take steps to ensure that their credit card systems are not used to process payments that enable illegal cigarette sales. Finally, last month, Philip Morris USA (PM USA) reached an agreement with a coalition of 37 Attorneys General to cut off the supply of PM USA cigarettes to those engaged in such illegal sales. 
 

NY Post (Editorial) - October 30, 2005  
Spitzer's Cig Showdown 

Attorney General Eliot Spitzer has bullied another private company into doing his bidding.  
Last week, UPS announced that it will no longer deliver cigarettes to individuals, under an agreement reached with the aspiring — indeed, all-but-presumptive — governor.  

What did he threaten to do to the company if it didn't knuckle under? Maybe some press conferences denouncing it?  

Maybe a lawsuit, despite the fact that UPS has violated no law?  

No matter.  

Whatever the AG wants, the AG gets. No questions asked.  

Ostensibly, this agreement is supposed to make it harder for people — particularly New Yorkers, but UPS' new policy applies nationwide — to buy tax-free cigarettes online.  

For consumers in New York City, facing an extra $3 a pack in taxes (the state and the city each impose a $1.50 levy), buying from Indian-reservation outlets, which don't charge taxes, is quite a bargain.  

Whether Indian vendors who sell to non-Indians have to collect taxes is in dispute, but that's something for New York state and the tribes to work out — not for Spitzer to dictate.  

Spitzer and his ilk say they want to stem the tide of lost revenue.  

The price, however, is likely to be lost lives 

The principle here is fairly simple.  

Any time you ban a product that people want — or make it prohibitively expensive, as is the case here — you inevitably create a black market.  

Alcohol prohibition begat bootleggers, who eventually evolved into organized criminal enterprises that plague the United States to this day.  

Similarly, "buttlegging" has become a problem in New York, with all kinds of unsavory characters getting in on the action — Russian thugs, Chinatown gangs and even rings of smugglers with ties to Hezbollah.  

Cutting off one avenue for cheap cigarettes is only going to push more traffic to another: the streets.  

New York has already seen a rash of murders as buttleggers fight over turf throughout the five boroughs.  

The problem here, of course, ultimately stems from this state's politicians and their addiction to spending.  

The politicians had to get their money-fix somewhere, and hitting smokers with a ridiculously heavy tax burden was the easy score.  

The question at this point shouldn't be how to push the gray market for cigarettes on the Internet into blacker and blacker territory.  

It should be whether the costs of Bloomberg-Pataki neo-Prohibitionism are really worth it.  

And just how bad things might get during a Spitzer administration.  
 

Associated Press - October 24, 2005  
UPS agrees to end cigarette deliveries to individuals 

ALBANY, N.Y. - The world's largest shipping carrier, UPS Inc., will stop delivering cigarettes to individuals in the United States under an agreement announced Monday with New York state Attorney General Eliot Spitzer. 

The agreement is the latest in federal and state efforts to combat the sale of under-taxed cigarettes and to fight underage smoking. Most under-taxed or untaxed cigarettes are sold by Indian tribes, where the taxation of sales to non-Indians is disputed. 

Monday's agreement leaves only the U.S. Postal Service among major carriers to continue to deliver cigarettes to individuals, Spitzer said. He called that practice "an embarrassment." Spitzer continues to negotiate with Federal Express, but they are thought to handle a small amount of the trade, said Spitzer spokesman Marc Violette. 

Despite a new policy adopted by the Postal Service in September to refuse delivery of illegal products, the federal service allows employees to accept packages suspected of containing under-taxed cigarettes, Spitzer said. 

"Internet cigarette traffickers are increasingly using the federal mail system to distribute their wares," Spitzer said. He said the Postal Service "clearly" has the authority to refuse to deliver cigarettes to individual smokers. "It is an embarrassment that major private companies have stopped carrying contraband cigarettes, but the federal government continues to accept them," said Spitzer, a Democrat running for governor. "Congress needs to step in and stop this practice immediately." 

The Postal Service can't stop delivery even if it suspects a package clearly marked as coming from a retailer contains untaxed cigarettes, said Postal Service spokesman Gerry McKiernan. 

"There could be souvenirs in the package. We don't know because we can't see inside the package," he said. 

Instead, the Postal Service will watch for packages if advised by law enforcement agencies. They also will alert law enforcement agencies when the service is shipping those packages, he said. 

"It's up to law enforcement agencies to enforce the law," McKiernan said. 

He said private companies have contracts with firms that regularly use their services which identifies materials being shipped. The Postal Service doesn't. 

"As far as I'm concerned, it's illegal," said Audrey Silk of New York City Citizens Lobbying Against Smoker Harassment and a Libertarian Party candidate for New York City mayor. "They are exploiting children ... when you employ `for the children' you can get the public to do anything." 

Earlier this year, DHL banned cigarette deliveries to individuals nationwide and the nation's largest credit card companies stopped processing payments for cigarette sales. 

Spitzer said Internet and mail-order cigarette retailers violate federal, state and local laws governing taxes and underage smoking. Sales to minors also violate federal wire fraud and mail fraud laws, he said. 

The agreement with Spitzer matches a nationwide policy at UPS aimed at avoiding the difficulty of complying with a "patchwork" of different state laws enacted in 28 states since 2003, said Steve Holmes, spokesman for the global company based in Atlanta. He said he had no estimate of how much business would be lost. 

"Regardless of that issue, we believe it's a prudent business decision and we want to do what's right, of course, by the laws, but we want to do right by our customers and we want to do right by our communities as well," he said. 

Violations of the UPS policy would eventually result in suspension of service, according to the agreement. 

States lose more than $1 billion a year in tax revenue from Internet tobacco sales, according to the U.S. Bureau of Alcohol, Tobacco and Firearms. Enforcement, however, has been difficult, even though in many states, including New York, the Internet sale of tobacco products is illegal. 
 

Associated Press - July 5, 2005  
DHL agrees to end cigarette deliveries to individuals 

ALBANY, N.Y. -- One of the world's largest package delivery companies will stop delivering cigarettes to individual consumers nationwide under an agreement with New York Attorney General Eliot Spitzer.  

Spitzer said DHL is the first major shipping company to agree to the ban and negotiations continue with other companies and the U.S. Postal Service. The agreement follows a March deal in which major credit card companies began refusing to participate in Internet sale of cigarettes nationwide.  

The agreement in March involving Spitzer and the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives was aimed at ending a common method for youths to obtain cigarettes, which can't legally be sold to people under 18 years old.  

In Tuesday's Spitzer agreement, DHL cuts off another route for the Internet cigarette sales, a growing business, Spitzer said.  

Audrey Silk of New York City Citizens Lobbying Against Smoker Harassment said the actions are simply boosting an illegal market for cigarettes in which no one asks a consumers' age. The measures deny consumer choice, because some brands are only sold out of state.  

"When the product is legal, who are you to say I can't order it?" said Silk, who's also a Libertarian candidate for New York City mayor. "He's attacking one consumer class trying to buy a legal product and strong-arming the common carries into going along with his campaign to keep cigarettes out of adult hands."  

DHL General Counsel Jon Olin said the agreement is in the best interest of customers and the public. The company will still be able to deliver tobacco products to licensed retailers and other authorized recipients.  

"By taking a proactive approach, DHL is pleased to be the leader in the prevention of illegal cigarette sales in the United States," Olin said.  

State and federal law enforcement agencies have since 2004 sought to crack down on Internet sales of cigarettes partly because they lack age verification for the buyers and partly because it costs state and local governments billions of dollars in sales tax.  

States lose more than $1 billion a year in tax revenue from Internet tobacco sales, according to the ATF. Enforcement, however, has been difficult, even though in many states, including New York, the Internet sale of tobacco products is illegal.  
 
 

NY Times - May 29, 2005  
Post Office Sidesteps Fray on Illicit Sales of Cigarettes  

ALBANY, May 26 - As they move to thwart the illegal trade of cigarettes over the Internet, state officials have joined colleagues from around the nation in persuading the major credit card companies to stop processing payments for online cigarette sales. Additionally, the state has enacted a law prohibiting the shipment of cigarettes to its residents and banned private carriers, like FedEx, from shipping cigarettes.  

But as state officials fight illegal online cigarette sales, one operation is not falling into line - the United States Postal Service, which officials say delivers the bulk of illegally purchased cigarettes to New Yorkers.  

The Postal Service, citing concerns about the privacy of the mail and wary of putting postal clerks in the position of deciding which packages to accept and which to reject, is resisting the growing calls that it stop shipping cigarettes.  

Its stance is exasperating law enforcement officials. "It is outrageous that the federal government - through the United States Postal Service - is knowingly acting as the delivery arm for these criminal enterprises," New York's attorney general, Eliot Spitzer, said in a statement.  

The role of the post office in shipping illegally sold cigarettes is also attracting attention across the nation. Last month the National Association of Attorneys General asked the Postal Service to "adopt a firm policy prohibiting transportation of packages that the carrier knows or reasonably should know contains cigarettes sold illegally on the Internet." In Oregon, an online cigarette seller was charged in January with unlawful distribution of cigarettes and racketeering; the post office was not charged but was named in the indictment as part of the racketeering enterprise. Congress has considered legislation that would ban the mailing of cigarettes.  

Postal officials say that they are committed to fighting illegal activities conducted through the mail, but complain that their hands are tied. They note that Priority Mail, which officials say is most frequently used to ship cigarettes, cannot be inspected without a search warrant or the consent of either the sender or the recipient.  

The post office's investigative arm, the Postal Inspection Service, has worked to stop illegal cigarette shipments in a number of cases, but has only about 1,970 inspectors in the whole country, charged with investigating everything from the anthrax mailings to all suspicious packages to the distribution of child pornography. And postal officials say that postal clerks cannot be expected to figure out what people are shipping, and whether cigarette retailers are complying with obscure laws like the Jenkins Act, which requires cigarette sellers to keep lists of customers for tax collection purposes.  

"Tobacco is a legal, mailable product," Mary Anne Gibbons, the Postal Service's general counsel, wrote last month in a response to the association of attorneys general. "It would be impracticable for postal acceptance clerks to make determinations on any given mailer's compliance with state excise or tax law or Jenkins Act filings."  

But state officials reject this argument, pointing out that at least in New York State, public health laws prohibit direct sales of cigarettes by mail. They acknowledge that the state cannot bar the post office, a federal entity, from shipping cigarettes in New York, but say that since online merchants often violate tax laws, shipping their cigarettes violates federal mail fraud statutes and therefore should be stopped.  

"Instead of complying with federal law, the Postal Service is taking a head-in-the-sand approach, by claiming that they have no idea what is in the packages being delivered - even if they are being mailed by Internet operators that sell nothing but cigarettes," Mr. Spitzer said in a statement. "That is an absurd argument that we would never accept from a private defendant."  

And several law enforcement officials said that in small upstate communities like Salamanca, N.Y., which are dotted with smoke shops advertising the tax-free cigarettes sold from Indian reservations, the post office willingly accepts delivery of truckloads of cartons of cigarettes for delivery.  

But Anthony Alverno, the post office's chief counsel for customer protection and privacy, said in an interview that the post office's research indicated that the smoke shops doing business in New York sold other items beside cigarettes, including "novelty items," so some packages they ship might not be cigarettes. "We would need to get a search warrant to make the determination," he said.  

The Postal Inspection Service joined other federal and local law enforcement agencies to seize 300,000 cartons of illegal cigarettes last November at Kennedy International Airport. Mr. Alverno said that blocking overseas shipments was easier, because they must pass through customs. He added that the Postal Service would continue to discuss civil or criminal actions that could be taken with law enforcement agencies.  

Not just government officials, but also antismoking advocates are trying to stop the mailing of cigarettes. And some see signs of progress.  

John F. Banzhaf III, the executive director of Action on Smoking and Health, an antismoking organization that has warned the Postal Service that it could face legal liability for shipping illegally purchased cigarettes, said that the service was finding itself increasingly isolated, especially since credit card companies stopped processing the payments for such sales earlier this year.  

"It may be more trouble - both from a legal and public relations point of view - than the benefits of the revenue that comes in," he said.  

Several online cigarette sellers shut down after the credit card companies stopped processing their transactions; others are struggling. One Web site, tobaccobymail.com, which says it is run from western New York, complains on its site that it is "perpetually targeted by the state of New York," and says that it is not bound by state or federal laws because it is owned and operated by the Seneca Nation of Indians.  

The Web site says that it ships cigarettes by Priority Mail, that they are tax-free, and that the company will not share its customer lists with the government. But state officials say the company is flagrantly violating tax laws.  

Mr. Spitzer said that the Postal Service should stop carrying illegally sold cigarettes. "The entire law enforcement community - attorneys general, the federal Bureau of Alcohol, Tobacco and Firearms, police officers, state tax officials, and even the Postal Inspection Service - is united in trying to stop these illegal sales," he said. "The postmaster general should be instructing the 'delivery side' of his office to join us in this effort, rather than facilitating illegal conduct."  
 
 

NY Daily News Editorial - April  5, 2005  
Don't pay this tax 

It's tax season again, and millions of New Yorkers are preparing to be scofflaws. They're going to fill in Line 56 on the state's long-form tax return or Line 27 on the short form by reporting that they made no out-of-state purchases, over the Internet, by catalog or in person, in 2004. Most will be lying. And good for them, we say.  

Over Gov. Pataki's veto, the state Legislature added those lines to the tax forms two years ago in a niggling grab at every last penny of sales tax technically owed by New Yorkers. We urged everyone to simply report zero out-of-state purchases and are happy to report that, quite on their own, 96% of taxpayers followed that course.  

Among the nearly 9 million filers who reported no out-of-state purchases were Pataki, Lt. Gov. Mary Donohue, Attorney General Eliot Spitzer, Controller Alan Hevesi, Assembly Speaker Sheldon Silver and Senate Majority Leader Joe Bruno. Only 386,000 taxpayers coughed up money, a total of $21 million, an average of just $54.03.  

Call those taxpayers scrupulously, admirably honest or call them suckers, but the bottom line is the same: Only 4% are following the law. And that has to be some kind of record for blatant noncompliance. The message to the Legislature is clear: The tax is unequally applied and unenforceable. Repeal it. 

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BOYCOTTING UPS and other carriers 

In November 2005 we alerted our NYC C.L.A.S.H. members to the following: 

UPS Agrees to Demand to Stop Cigarette Deliveries 

My sincerest apologies to our members from outside of New York who are also the victims of our own NY Attorney General, Eliot Spitzer, who is single-handedly trying to shut down Internet cigarette purchases across the country. 

First he bullied the credit card companies, then DHL, and now UPS has crumbled and signed an agreement ("Assurance of Discontinuance") that they will no longer ship/deliver cigarettes from on-line vendors to the customers that order them.  (FedEx quit shipping on their own -- though I'd bet under pressure -- some time ago). 

That leaves the United States Postal Service who has responded once again that they do not agree that they have the power to inspect personal packages to determine what they contain.  And NYS Public Health Law 1399-ll that was effective June 2003 was only able to impose a NYS restriction on shipping cigarettes on private carriers such as UPS (which is what Spitzer was able to hold over their head) but had no jurisdiction to legislate the business of the federal carrier. 

It's an odd day indeed when an agency of the federal government holds fast in respecting consumer rights but a private company won't protect their own interests or those of their customers.  However, be cognizant of the fact that a bill remains pending in Congress that would regulate this on a federal level (see Action Alert) 

The NY Post ran a wonderful editorial, "Spitzer's Cig Showdown," denouncing him for this act. 

We strongly encourage all to no longer use UPS for any other business.  Kudos to one member who wrote and said she immediately cancelled her business transactions with UPS the minute she read about this on her own. 
 

The following is the letter sent by NYC C.L.A.S.H. to UPS: 

Dear Mr. Black, 

I am the founder of a NYC-based smokers' rights group.  We have members from all over the country.  Our organization does not encourage people to smoke, we defend the rights of adults who have already chosen to do so.  

Two months ago we alerted our members to the agreement you entered into with NYS Attorney General Eliot Spitzer to end the shipment of cigarettes between vendors and their customers. Our members were similarly alerted when other private carriers caved to the same pressure by this man we have no qualms in labeling a bully with a badge.  Like the other carriers, a boycott of UPS was called for all business transactions. 

Helpful to my correspondence with you is a copy of a reply (Nov. 15) you sent to one of our members who wrote to you (Nov. 14) about his support for the boycott.  You wrote: 

You probably should know that DHL, FedEx and UPS have the same policy. 

Meantime, no one would dispute that cigarettes are a legal product.  What's illegal is buying them on the Web and not paying taxes.  UPS acted because it has no intention of becoming a policeman to enforce such laws.

Pointing to other carriers and saying "they did it too" is not an excuse or explanation that we accept as valid and hold UPS up to the same shame value. 

While we all agree that it's indisputable that cigarettes are legal, it is the grossly selective and unequal treatment it receives as a product that is at the heart of the matter. It is "illegal" to purchase ANY product through the Web and not pay taxes.  Of course you know that. So for you to extend that as an explanation over cigarettes is insulting to us and should be an embarrassing defense for you to offer.  

The obvious first question is when will you stop delivering products purchased from places like Amazon.com?  Like cigarettes, no one pays taxes on those purchases at point of purchase.  

Also, with AG Spitzer, you have agreed to deny customers the ability to purchase legal products that they cannot otherwise buy locally.  There are brands of cigarettes that are not available in local stores or even in the same state.  For example, Bronco brand cigarettes are not sold in many places.  How legal is it to deny citizens their ability to obtain their legal product of preference?  

Overseeing collection of taxes is not your responsibility.  The alleged law breaking begins at the back end when customers are supposed to report ALL such purchases on their annual tax report.  Enforcement of the tax law is the business of the state's tax department and AG's office.  But, like Amazon.com purchases, how many people report them?  Has that non-reporting resulted in demands on you to stop shipments as a way to head the problem off at the pass and make it your problem and not their job?  

The NY Daily News editorial of April 5, 2005 not only supports my contention but actually encourages people to ignore that tax line on the NYS form.  It also includes an eye-opening fact: 

NY Daily News Editorial - April 5, 2005 
Don't pay this tax 

It's tax season again, and millions of New Yorkers are preparing to be scofflaws. They're going to fill in Line 56 on the state's long-form tax return or Line 27 on the short form by reporting that they made no out-of-state purchases, over the Internet, by catalog or in person, in 2004. Most will be lying. And good for them, we say.  

Over Gov. Pataki's veto, the state Legislature added those lines to the tax forms two years ago in a niggling grab at every last penny of sales tax technically owed by New Yorkers. We urged everyone to simply report zero out-of-state purchases and are happy to report that, quite on their own, 96% of taxpayers followed that course.  

Among the nearly 9 million filers who reported no out-of-state purchases were Pataki, Lt. Gov. Mary Donohue, Attorney General Eliot Spitzer, Controller Alan Hevesi, Assembly Speaker Sheldon Silver and Senate Majority Leader Joe Bruno. Only 386,000 taxpayers coughed up money, a total of $21 million, an average of just $54.03.  

Call those taxpayers scrupulously, admirably honest or call them suckers, but the bottom line is the same: Only 4% are following the law. And that has to be some kind of record for blatant noncompliance. The message to the Legislature is clear: The tax is unequally applied and unenforceable. Repeal it.

So, Mr. Black, will you agree to stop delivering to 96% of your customers -- including Mr. Spitzer -- who are not reporting they made out of state purchases that you helped deliver?  It'd be silly to believe that the majority of them, Spitzer included, didn't make any purchases over the internet. 

One thing you are right about is that you shouldn't be the "policemen" enforcing such laws.  And as I explained above, that job falls on men like Spitzer who, in their laziness, have illegally (in our opinion) pushed it on you.  But unless it's applied equally to all products then you have no defense in agreeing to this selective enforcement.  

Funny, of all carriers, you should take a clue from our own government's US Postal Service that had the backbone, in a retort to the same demands, to state the true and legally defensible:  " We don't have the power to inspect personal packages to determine what they contain." 

In light of all of the above, UPS has rightly been added to our list of carriers to boycott.  Though we'd prefer that you would grow the same spine as the USPS and void the agreement you made with Eliot Spitzer. 

Sincerely, 
Audrey Silk 
Founder, NYC Citizens Lobbying Against Smoker Harassment 
(NYC C.L.A.S.H.) 
 
 

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