California Cracks Down on Tobacco Taxes

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California Cracks Down on Tobacco Taxes

SACRAMENTO -- As California State officials consider a hike in cigarette taxes to boost state revenues, a Senate committee yesterday approved a bill that could make it more difficult for smokers to dodge state taxes.

The bill, by Sen. Debra Bowen (D-Marina del Rey), would ban the sale of tobacco and cigarettes by Internet or mail-order companies that skirt federal and state tax laws. If passed, the bill would help state officials tap into the estimated $40 million to $50 million that the state loses annually by smokers who find ways to avoid the tax.

Under federal law, out-of-state tobacco sellers aren't required to collect sales taxes, but they're supposed to report the sale to state officials, allowing the California Board of Equalization to collect the tax -- about $9 for every carton of cigarettes -- from the buyer, the Associated Press reported.

The problem, Bowen said, is that many tobacco sellers aren't reporting their sales. Out of 167 major online tobacco companies selling to California last year, only 20 were regularly reporting their sales to state officials, according to a report by the federal General Accounting Office.

If approved by the California Legislature and signed by Gov. Gray Davis, the tobacco tax bill would allow state officials to ban online and mail-order companies that continually ignore state tax laws from selling cigarettes to California smokers.

It comes as state lawmakers consider a proposal by Davis to more than double California's cigarette tax from 87 cents per pack to $1.97 per pack, boosting revenues for the cash-strapped state by an estimated $1.17 billion next year.