State tells smokers to cough up taxes

 Carton Pack "You have been reported to DOR as a person who recently purchased cigarettes where the cigarette use taxes and sales taxes . . . due may not have been paid," the warning letter says.It lays the groundwork for those smokers to be billed if their names show up as repeat buyers from Internet vendors.State officials got the names from Internet cigarette vendors after notifying 75 of those companies that a federal law makes it their responsibility to ensure that taxes owed Wisconsin get paid. Officials won't identify the 75 companies that got those notices, citing laws protecting the privacy of tax information.Internet cigarette buyers who get caught can be billed the $1.77 per pack tax, sales taxes, interest and a $25-per-carton fine, the letter adds. Officials also refused to say how many smokers got the letters, first mailed in February, or how much in taxes smokers who got the letters have paid as a result of threats.If too much information is released about how state officials got the names of Internet cigarette customers, state Revenue Secretary Roger Ervin said, it may jeopardize relationships with those vendors."We've gotten some very good two-way dialogue going with them, and we don't want to have them pull back and not give us those names," he said.Internet vendors remain eager to sell to Wisconsin smokers and, in some cases, appear willing to sidestep the state's cigarette tax.For example, some Wisconsin residents got an ad in the mail last week from an online vendor associated with the Seneca Indian Nation, offering a 10-pack carton of Skydancer cigarettes over the Internet for $12.99 - about $5 less than the Wisconsin taxes owed on it.Another Internet cigarette vendor, smokin4free.com, tells potential customers it won't cooperate with federal or state tax collectors under any circumstances: "IMPORTANT: We have never and do not report any information about our customers to any authorities. We guarantee your safety while shopping with us and will uphold our promise in keeping your information 100% confidential."Asked about such ads, Ervin said his agency is quietly doing all it can to work with Internet vendors, retailers and Indian tribes that sell cigarettes, and Wisconsin smokers who are avoiding the $1.77-per-pack tax."We are continually building and enhancing our education program with taxpayers," Ervin said. "If someone decides they want to purchase from this (Internet) company, we are going to continue to let them know they have a tax obligation on those packs of cigarettes."To help persuade smokers to quit and teens to never start smoking, and to help pay for general programs, Wisconsin raised its cigarette tax by $1 per pack.Wisconsin has the second-highest tax in the region, behind Michigan's $2 per pack. The state tax in Iowa is $1.36; in Illinois, local governments can add to the state tax of 98 cents per pack.Revenue producerWisconsin's $1.77-per-pack tax is expected to raise $523 million next year, or 76% more than what was raised before the tax increase. Because the tax increase took effect on Jan. 1, it is too soon to tell whether it will bring in as much as projected, budget analysts say.It's also too soon to say whether the number of smokers buying cigarettes from the Internet, or in states with lower taxes, has gone up significantly, Ervin said."From January to May is just too short of a time horizon to know what the impact is" on smokers who try to avoid the state tax, Ervin said.Similar warning letters sent in 2005 caused an uproar, and Gov. Jim Doyle told the same agency to stop sending them. But that was before the $1 per pack tax increase and before the state faced a $652 million shortfall in tax collections that Doyle and legislators are trying make up.One legislator and smoker, state Sen. Jon Erpenbach (D-Middleton), said more Wisconsin smokers may be trying to avoid the $1.77 levy as they try to cope with sharply higher gas and food prices."You're going to try and save whatever (money) you possibly can," said Erpenbach, who added that the $1.77 tax is one reason he now usually smokes less than a pack a day. That's fewer cigarettes than he smoked before the tax increase.Erpenbach said he now pays between $5.70 and $6.28 per pack."It really is very much of an honor system," Erpenbach said about the $1.77 tax. "Someone is always going to find a way around it."At www.NoCigTax.com, a site belonging to the R.J. Reynolds Tobacco Co., toll-free phone numbers appear with urgings to call lawmakers to speak out against rising cigarette taxes.A supervisor reached by phone who identified himself as Hyson Blitz said callers to NoCigTax.com are asked their ZIP codes so they can be given the names and contact information for their local legislators.Taxes on cigarettes "are already high enough," Blitz said, adding that his group does not encourage smokers to buy cigarettes from Internet vendors to avoid taxes.