The Internet in the Cigarette Taxation and Sale to Minors in New York State
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The Internet in the Cigarette taxation and sale to minors in New York State
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Cigarette vendors are taking advantage of the resources of the Internet. They are offering website ordering where you can order cigarettes and have them directly shipped a consumer home resident. Being that there is limited shelf space in stores they are trying to establish a market through the Internet that can provide all types cigarette brands to consumers with the convenience of home shopping. The state of New York has statues in place that ban the selling of cigarettes via direct shipping to New York consumers. A lawsuit was filed in the district court of New York stating that it is unconstitutional to ban out of state vendors from selling and direct shipping cigarettes to New York consumers. The New York statue is forbidding the out of state sale of cigarettes based on protection of public health of consumers and state tax that will be lost from sale revenue.
The federal Commerce clause will play a major role in evaluating the New York statue being that it is an interstate commerce issue and cigarettes are being sold across states. The main issue is the taxation of cigarettes that are sold over the Internet. The state of New York will lose a substantial amount of state tax revenue from the sale and direct shipping of cigarettes via the Internet.
In evaluating the legal issues of taxation of cigarettes sold over the Internet and sale to minors, the case of Brown & Williamson Tobacco Corp v State of New York will be analyzed.
In the Brown & Williamson Tobacco Corp v State of New York, the state of New York is stating that it is unlawful to ship or transport cigarettes to consumers that reside in New York State based on New York statute section 1399-II of New York Public Health Law. The parts that are specific to this case read as follows:
It shall be unlawful for any person engaged in the business of selling cigarettes to ship or cause to be shipped any cigarettes to any person in this state who is not: (a) a person licensed as a cigarette tax agent or wholesale dealer . . . ; (b) an export warehouse proprietor . . . or an operator of a customs bonded warehouse . . . ; or (c) a person who is an officer, employee or agent of the United States government, this state or a department, agency, instrumentality or political subdivision of the United States or this state, when such person is acting in accordance with his or her official duties. . . . (N.Y. Pub. Health Law §§ 1399-ll(1).
It shall be unlawful for any common or contract carrier to knowingly transport cigarettes to any person in this state reasonably believed by such carrier to be other than a person described in paragraph (a), (b) or (c) of subdivision one of this section. For purposes of the preceding sentence, if cigarettes are transported to a home or residence, it shall be presumed that the common or contract carrier knew that such person was not a person described in paragraph (a), (b) or (c) of subdivision one of this section. It shall be unlawful for any other person to knowingly transport cigarettes to any person in this state, other than to a person described in paragraph (a), (b) or (c) of subdivision one of this section. Nothing in this subdivision shall be construed to prohibit a person other than a common or contract carrier from transporting not more than eight hundred cigarettes at any one time to any person in this state ( N.Y. Pub. Health Law §§ 1399-ll(2).
The New York statute is stating that cigarette vendors that directly ship cigarettes to New York consumers will be charged with violation of this statute and can face civil as well as criminal penalties. This also applies to vendors or carriers that transport cigarettes to New York consumers. The statute is declaring that cigarettes sold through the Internet, by telephone, or mail order is a threat to public health and affects the economy of the state. The age of cigarette purchasers that receive direct shipment of cigarettes can not be verified, which will open up the possibility of cigarettes being sold to minors.
The New York statute is being evaluated on strict scrutiny based on discrimination against the Commerce clause as it pertains to Internet sales of cigarettes. The Commerce clause allows congress to regulate interstate commerce. In the case Katzenbach v. McClung, “Ollies Barbeque” the Commerce clause was used to regulate Civil Rights of 1964.
. . . . in Birmingham, Alabama, caters to local white customers with take-out service for Negroes, serving food a substantial portion of which has moved in interstate commerce, sued to enjoin appellants from enforcing against their restaurant and others Title II of the Civil Rights Act of 1964, which they claimed was unconstitutional. A three-judge District Court granted an injunction, holding that there was no demonstrable connection between food purchased in interstate commerce and sold in a restaurant and Congress conclusion that discrimination in the restaurant would affect commerce so as to warrant regulation of local activities to protect interstate commerce (Katzenbach v. McClung).
This case is famous for setting precedence for the commerce clause as it indirectly affected interstate commerce and aides in the definition of the commerce clause.
Applying strict scrutiny analysis it was found that New York was mandating the retail sales of cigarettes in state only. Thus preventing the retail cigarette sales of out of state vendors and transportation of cigarettes by interstate direct shippers. One of the purposes for the statue was to require purchasers to buy cigarettes in person to ensure the state excise and local tax of $3.00 per pack is collected. Claiming that increase in the price of cigarettes will cause a decrease in purchasing of cigarettes for the betterment of public health is false.
New York Department of Taxation and Finance showed no effort to collect taxes on cigarettes sold by out of state vendors to New York consumers via telephone, mail, or Internet. Based on CAL. BD. OF EQUALIZATION v. CHEMEHUEVI TRIBE, 474 U.S. 9 (1985) 474 U.S. 9, New York had alternative ways to implement an excise tax on cigarettes outside of banning out of state vendors. It has been demonstrated that increasing cigarette excise tax has only increased cigarette