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New York fumes over online loss of ciggy taxes

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The city of New York has concocted an unusual scheme for going after lost tax revenue. Officials this week decided to target smokers who have bought cheap cigarettes online by demanding payment for past purchases of smokes.

The city's Finance Department has sent out some 2,000 letters, insisting that smokers pay back taxes on their cigs. Should the smokers not pay within 30 days, the city has threatened to charge interest on the tax due and up to a $200 penalty per carton.

This situation is the result of a lawsuit against now defunct Cigs4Cheap.com in which the city was able to obtain the names of smokers who had purchased cigarettes online. New York forbids online sellers to ship cigarettes to its residents, avoiding a $3 per pack tax. New York, in October of 2003, sued 7 online cigarette sellers, including Cigs4Cheap.com.

The city reckons that it's missing out on $40m per year in taxes due to online ciggy sales. It hopes to collect close to $1m from the smokers identified in the Cigs4Cheap.com lawsuit and will apparently stop at nothing to get its cash. Along with sending out a flood of threatening letters, the Finance Department also plans to kick off an advertising campaign, warning smokers about their duties to pay the $3 per pack tax.

One local smoker interviewed by the New York Daily News didn't take news of her $900 in due taxes well.

"How dare they ask for $900 in 30 days," Sheila Hansen told the paper. "Do they think I'm [Mayor] Bloomberg? The tone of the letter is so threatening. I didn't even know I was doing anything wrong."

The city has vowed to go after more smokers as their names are revealed. One can't help but wonder if the city will actually bring in as much as it spends on this smoker hunt.

There's more on the situation here

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