fta tobacco tax conference internet enforcement update september 2005

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FTA Tobacco Tax FTA Tobacco Tax Conference Conference Internet Enforcement Internet Enforcement Update Update September 2005 September 2005

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Page 1: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

FTA Tobacco Tax FTA Tobacco Tax Conference Conference

Internet Enforcement Update Internet Enforcement Update

September 2005 September 2005

Page 2: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

Oregon’s Internet Oregon’s Internet Enforcement Tools Enforcement Tools

StatutesStatutes• Delivery SalesDelivery Sales• Racketeering Racketeering

ResourcesResources• DOR, DOJ, OSP personnel DOR, DOJ, OSP personnel

PlanPlan

Page 3: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

Internet Tobacco Retailer Attack Internet Tobacco Retailer Attack Plan (ITRAP)Plan (ITRAP)

Direct AttackDirect Attack•Retailer identification, notice, Retailer identification, notice,

buysbuys

Indirect AttackIndirect Attack•33rdrd party facilitators party facilitators

Page 4: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

ITRAP: Direct AttackITRAP: Direct Attack

Identify internet tobacco retailersIdentify internet tobacco retailers Send letter re Delivery Sales Send letter re Delivery Sales

lawslaws Follow-up letter plus contactFollow-up letter plus contact Undercover buysUndercover buys Next stepsNext steps

Page 5: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

ITRAP: Direct AttackITRAP: Direct Attack

Criminal Indictment broughtCriminal Indictment brought::• Inexpensivesmokes.comInexpensivesmokes.com• Otamedia S.A. Otamedia S.A.

Criminal Indictment draftedCriminal Indictment drafted::• House of Oxford House of Oxford • Little Brown Smoke ShackLittle Brown Smoke Shack

Civil suit broughtCivil suit brought::• Kycigarettes.comKycigarettes.com

Page 6: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

ITRAP: Indirect AttackITRAP: Indirect Attack

Identify 3Identify 3rdrd Party Facilitators Party Facilitators

•AdvertisersAdvertisers•Credit Card companiesCredit Card companies•Pay PalPay Pal•Carriers Carriers •Web hosts/web-based services Web hosts/web-based services

Page 7: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

ITRAP: Indirect AttackITRAP: Indirect Attack

1) 1) AdvertisersAdvertisers• Coupon inserts, Valpak, newspaperCoupon inserts, Valpak, newspaper• Calls plus return receipt lettersCalls plus return receipt letters

2) 2) Credit Card companiesCredit Card companies • AG sign-on letter and meetingAG sign-on letter and meeting

• Oregon-specific letterOregon-specific letter

Page 8: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

CREDIT CARD INTIATIVE CREDIT CARD INTIATIVE

The Perfect Storm The Perfect Storm NY AG: 8/20/04 letters to CCCsNY AG: 8/20/04 letters to CCCs

ATF:ATF: 12/7/04 letters to CCCs 12/7/04 letters to CCCs

NAAG: 1/7/05 letters to CCCsNAAG: 1/7/05 letters to CCCs Signed by 42 Attorneys General Signed by 42 Attorneys General

Page 9: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

CREDIT CARD INTIATIVECREDIT CARD INTIATIVE

Letters stated virtually all online Letters stated virtually all online tobacco retailers operate illegally tobacco retailers operate illegally because:because:• No age verificationNo age verification• No Jenkins reporting No Jenkins reporting • Violations of state laws Violations of state laws

prohibiting/regulating online tobacco prohibiting/regulating online tobacco sales sales

• Violations of state tax lawsViolations of state tax laws

Page 10: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

CREDIT CARD INTIATIVECREDIT CARD INTIATIVE

Similar letters sent to carriersSimilar letters sent to carriers

Meeting in DC on March 17Meeting in DC on March 17thth • NAAG – over 10 states represented NAAG – over 10 states represented • ATFATF• Five credit card companiesFive credit card companies• Four carriers Four carriers • Pay Pal Pay Pal

Page 11: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

CREDIT CARD INTIATIVECREDIT CARD INTIATIVE

Credit card companiesCredit card companies: : No illegal transactionsNo illegal transactions Internet tobacco sales presumed illegal Internet tobacco sales presumed illegal Due diligence Due diligence

CarriersCarriers: no definitive immediate action: no definitive immediate action• DHL: entered into later agreement with NYDHL: entered into later agreement with NY

Follow-upFollow-up: NAAG continuing enforcement : NAAG continuing enforcement

Page 12: FTA Tobacco Tax Conference Internet Enforcement Update September 2005

ITRAP: A New ParadigmITRAP: A New Paradigm

Changes in last 12 monthsChanges in last 12 months::

Number of internet tobacco retailers Number of internet tobacco retailers reducedreduced

Retailers left standing: Retailers left standing: • More difficult to continue to sellMore difficult to continue to sell• Some voluntary Jenkins compliance Some voluntary Jenkins compliance

OR DOR billing based on invoicesOR DOR billing based on invoices• Currently 10K invoices Currently 10K invoices