Ortiz bill targets Internet tobacco sales

The Senate Health Committee heard a bill Wednesday that would ban Internet
and mail-order tobacco sales in California. SB 1208 is part of a larger
campaign to curb youth smoking by taking on Web sites, many of them based on
Indian reservations, that don’t check the age of buyers or collect the
proper taxes. However, opponents claim that the bill casts an overly wide
net by targeting products that teens rarely consume, such as cigars and pipe tobacco.

The bill bans Internet and mail-order sales to anyone in California who is
not a tobacco seller licensed by the Board of Equalization. This would
eliminate a loophole under current law that allows vendors to sell tobacco
in non face-to-face interactions if they have paid all applicable taxes. SB
1208 also expands the definition of bidis, a type of unfiltered, hand-rolled
cigarettes that has become popular over the last few years.

The effort is supported by health and medical groups, as well as the
California Association of Retail Tobacconists (CART).

The bill was authored by Sen. Deborah Ortiz, D-Sacramento, but the effort
originated in the attorney general’s office. Part of the goal is to capture
an estimated $35 million or more in tobacco taxes that the state fails to
collect each year from illegal tobacco sales. But this is only a secondary
goal, according to Tom Dresslar, a spokesman for the attorney general’s
office

“From [Attorney General Bill] Lockyer’s perspective, it’s not so much the
money the state is losing, though that is obviously an issue,” Dresslar
said. “It’s the exposure it creates for increased youth access” to tobacco
products.

Deputy attorney general Laura Kaplan said her office first started taking on
the issue five years ago. In 2001, it set up a sting operation targeting
Internet tobacco vendors. Without giving them any guidance about where to
go, the attorney-general office hired 30 minors who managed to successfully
buy cigarettes online 129 times, Kaplan said.

While there was at least one California Indian tribe involved in illegal
tobacco sales, Kaplan said, most Web sites were based in other states.
Several were based on Indian reservations in other states. While government
scannot force tribes to pay taxes on transactions within a reservation,
Kaplan said, the same does not hold true for Internet or mail-order sales
made from tribal lands to outside customers.

The sting led to lawsuits against six vendors in San Diego Superior Court.
Not only were these sites selling to minors, Kaplan said, but they also were
based in states with low cigarette taxes. For example, two vendors based in
Virginia were paying that state’s 17-cents-per-pack tax, but avoiding
California’s 87-cent tax.

Over the next year, five of these vendors settled with the state and paid
total damages of just over $1 million.

Early last year, California joined an effort with attorneys general from
nearly two-dozen other states to try to limit online tobacco sales. The
group is working with credit-card companies and shipping companies such as
FedEx and UPS to prevent illegal tobacco sales.

Norman Sharp, president of the Washington, D.C.,-based Cigar Association of America, said that
lawmakers should take note that wine vendors generally are exempted from the
laws prohibiting mail-order alcohol sales on the grounds that teenagers
don’t generally get drunk by ordering expensive bottles of cabernet. He
argues that expensive cigars should similarly be exempt from Ortiz’s
proposed law.

“There is nothing to suggest that kids are ordering cigars and pipe tobacco
off the Internet,” Sharp said. “Kids don’t smoke premium handmade cigars.”