Attorney General Hardy Myers, Department of Revenue Director Elizabeth Harchenko, and Oregon State Police Superintendent Ron Ruecker today announced a major initiative to combat the growing problem of illegal cigarette sales into Oregon via the Internet.
Many Internet retailers that sell cigarettes to Oregon consumers do not currently have a system for verifying the age of the consumer and do not pay the required Oregon cigarette tax. This illegal conduct places Oregon youth at risk and places the state's honest tobacco retailers at a competitive disadvantage. Further, the failure to pay cigarette tax costs the state millions of dollars in lost tobacco tax revenue.
In 2003, the Oregon Legislature enacted new laws enhancing the protection of minors from illegal tobacco sales and requiring Internet tobacco sellers to pay their fair share of Oregon's tobacco tax (HB 2368). The laws have three key provisions: (1) Internet retailers selling cigarettes to Oregon residents are required to provide safeguards to ensure consumers are at least 18 years old; (2) the Internet retailer must be licensed as a distributor under Oregon law; and (3) the Internet retailer must affix a tax stamp to each cigarette pack, demonstrating that the Oregon tobacco tax is paid.
The Oregon Tobacco Tax Compliance Task Force (Task Force), a multi-agency workgroup that includes the Oregon Department of Revenue, the Oregon State Police, and the Oregon Department of Justice, has developed a comprehensive plan to educate Internet tobacco retailers on Oregon law and, if necessary, take appropriate enforcement action against non-compliant retailers.
The agencies of the Task Force have identified a large number of Internet retailers that sell cigarettes to Oregon consumers. In the coming months, the Department of Justice and the Oregon State Police will conduct undercover operations to purchase cigarettes via the Internet. If the Internet retailer sells tobacco products to underage consumers, is not licensed as a distributor, or has not affixed Oregon the legally required cigarette tax stamps to the cigarette packs, then the Department of Justice will pursue civil and criminal penalties.
Each violation is punishable by a $1,000 fine or five times the value of cigarettes purchased, whichever is greater. Subsequent violations are punishable by fines of $5,000 or five times the value of the cigarettes purchased, whichever is greater. Each violation also may be punished criminally by up to five years in prison.
Internet retailers are also required to notify the Oregon Department of Revenue of the name of each customer in Oregon who has purchased cigarettes. The Internet retailer must provide the customer's name and address, the brand of cigarette purchased, and the quantity purchased.
If the retailer does not pay the Oregon tax, the Oregon resident purchasing the cigarettes is required by law to file a return and pay the cigarette tax by the 20th of the month following the purchase. Failure to file and pay the tax may result in collection action by the Department of Revenue against the Oregon consumer, including imposition of applicable interest and penalties. Additional information and forms are available at http://www.dor.state.or.us/tobacco/tobform.html.
Questions regarding tax compliance can be directed to the Department of Revenue at (503) 945-8120 and more information can be found at www.dor.state.or.us. Enforcement questions can be answered by the Criminal Justice Division of the Department of Justice at (503) 378-6347.
Kevin Neely, Justice, (503) 378-6002
Deni Cooperrider, DOR, (503) 945-8565