Smokers, beware: City Hall is coming for your wallets.
The city has quietly launched a crackdown on New Yorkers who have bought tax-free cigarettes via the Internet, the Daily News has learned.
Some 2,300 city smokers were hit this week with warning letters from the city Finance Department, threatening severe penalties unless the back taxes are paid.
It’s the first big crackdown of its kind in the city, officials said, with the smokers’ names coming from a landmark Virginia court decision involving the now-defunct Cigs4Cheap.com Internet site.
“You owe $900 in New York City cigarette tax,” read the letter sent to Manhattan resident Sheila Hansen.
“If you fail to pay,” the note continued, “the Finance Department may also require you to pay interest on the tax due and penalties up to $200 per carton.”
In Hansen’s case, that would be a penalty tipping $12,000.
“How dare they ask for $900 in 30 days. Do they think I’m [Mayor] Bloomberg?” Hansen told The News. “The tone of the letter is so threatening. I didn’t even know I was doing anything wrong.”
The city and state boosted taxes on cigarettes to $3 a pack in July 2002, driving the cost of a pack of smokes to $7. That drove many smokers to tax-free cigs on the Internet, where 10-pack cartons can be had for less than $30.
City officials said sneaky smokers now cheat the city out of more than $40 million a year in unpaid cigarette taxes.
And they said the 2,300 smokers – representing nearly $1 million in lost tax revenue – are just a start.
They’re planning to send another 1,800 letters to parties who appear to have resold the cigarettes they purchased on Cigs4Cheap.com.
People who bought tax-free smokes from other Web sites still owe the city money, but they won’t be getting letters – not yet, anyway.
“This is the first time we’ve done this. It’s part of a new, long-term effort to ensure we’re enforcing the cigarette tax laws,” said Finance Commissioner Martha Stark.
And although the city’s efforts have been unpublicized, they won’t be for long: A newspaper ad campaign designed to educate smokers about their tax obligations will soon be unveiled.
Once the ad campaign starts, Stark said the city may decide to charge interest on any tax owed.
She said the enforcement is necessary to “level the playing field” for cigarette vendors in the city and safeguard the goal of the $3-per-pack cigarette tax.
“The tax was increased because we wanted to keep young people from starting to smoke,” Stark said. “Going on the Internet and purchasing packs without the tax evades the strategy around saving people’s lives.”
New York State tax officials also have the option of going after the puffers to collect the state’s portion of the unpaid taxes.
Hansen admitted she did buy some cartons off the Web several years ago, but said the Web site said the purchase was completely legal. She quit smoking in November 2003, she said.
“I’m losing sleep over this,” Hansen complained. “They could have at least offered a grace period, or maybe an amnesty.
“The whole thing is just such an outrage. How are they going to punish just 2,300 people when there are hundreds of thousands of others doing the same thing?”
Originally written By: NANCY DILLON DAILY NEWS STAFF WRITER