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Arizona smokers get tax bills for old online cigarette purchases

Smokers are an easy and popular target for state tax collectors. Whenever they want to raise some added revenue, they bump up the sales tax on cigarettes.

Stack of cigarette packsThat's why nicotine addicts are always looking for ways around their states' sin taxes.

Many thought they had found the perfect cigarette sales tax work-around: just buy the tax-free smokes from an Internet seller.

Well, that isn't working out so well for some Arizona smokers. They now are facing stiff tax bills on cigarettes they bought online, sales tax-free, almost a decade ago.

Old purchases, current tax bills: The Arizona Republic reports that around 30,000 Grand Canyon State smokers who bought cigarettes via the Internet as long ago as 2006 now are being hit with bills for thousands of dollars in unpaid state taxes.

Each purchaser of online smokes owes Arizona more than $20 for every carton obtained after 2006 and which didn't include the then applicable state sales and luxury taxes in the price.

For these buyers, the key issue now is Arizona's corresponding use tax.

You remember use taxes. Every state with a sales tax has a use tax that is the same rate as the sales tax. The use tax is imposed on goods bought elsewhere and then brought into (or delivered to) the buyer's home state to be used or consumed.

Costly cartons: That $20 per-carton outstanding cigarette levy is this week's By the Numbers figure.

And it has really added up for some Arizona smokers who thought they had saved more half off the retail price of cigarettes.

Take, for example, Annette Borden. The Chandler, Arizona, resident got a $4,299.20 tax bill last week for cigarettes she purchased online between 2007 and 2009, according to the newspaper.

So how do state tax officials know who to send letters demanding immediate payment for the unpaid cigarette taxes, along with years of penalty and interest charges?

When federal law enacted in 2012 made online cigarette sales illegal, it also required the selling companies provide their customer lists and purchase data to the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives. That federal agency then sahred the info with the states.

"Nothing you buy over the Internet is tax-free," said Sean Laux, an Arizona Department of Revenue spokesman, told the newspaper.

I suspect a lot of smokers in other other states also will soon be getting similar tax bills.

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