Tax Free Cigarettes- the real ordeal
Tax free cigarettes can be purchased where customers with access from a sales taxed jurisdiction are enticed to make
tax free cigarettes purchases, notwithstanding the legal requirement to pay the equivalent use tax when they return home.
For example, merchants in tax-free New Hampshire regularly attempt to entice residents of adjacent Massachusetts, Vermont
and Maine to come purchase tax free cigarettes, but fail to point out that there is no exemption from the sales and use taxes
when the cigarettes are taken back home. Many purchasers conveniently forget to pay the tax, possibly because they feel it
is the duty of a merchant to collect the cigarette tax from them and pay it indirectly, rather than paying it directly to
the state themselves.
Similarly, any non-exempt resident of a US state with a sales tax is also liable for
payment of the equivalent use tax when purchasing tax free cigarettes from another state or country through mail-order,
by telephone or through the Internet. cigarettes that would be taxable at home are taxable at the same rate when taken
home or delivered, regardless of where they were purchased. Numerous local sales tax exemptions exist according to taxpayer
status, size of purchase and for specific types of goods.
Shoppers of
tax free cigarettes should also be aware of this phenomenon when purchasing in
adjacent states that have a slightly lower tax rate than at home, as they may be personally liable for paying the difference
when they return home with the goods, although it was already not tax free cigarettes, but rather tax discount.
Some countries charge a value added tax on purchases. When those customers that buy tax free
cigarettes are residents of a US state having sales taxes on cigarettes, those taxes paid can be used as a credit against
the amount of use tax otherwise owed. However, some travellers make the mistake of claiming a post-travel refund of the VAT
or GST, without consideration of the ongoing tax liability to his or her state.
While it is true that many residents of states with sales taxes are unaware of the equivalent
use taxes, there are potentially severe penalties for willful tax evasion when purchasing tax free cigarettes. Where an
online, mail-order, or travelling shopper intentionally makes tax free cigarettes purchases for the purpose of evading
state sales taxes, one could well argue that a crime has been committed. There may be fees, penalties and interest accrued
for failure to timely remit the necessary tax return and tax payments for the cigarettes. It should also be noted that the
statute of limitations on taxes due may not begin to run until and unless a required tax return is filed.
Under a streamlined interstate use tax agreement, many states have enacted statutory changes
that require residents to disclose, under penalty of perjury, their annual use tax liability for out-of-state purchases
specifically for tax free cigarettes purchases. Online retailes of tax free cigarettes have been forced to turn over customers
listings and billing information. One way to avoid this and buy real tax free cigarettes is to buy them from an international
online cigarettes store
There have been some national efforts to create obligations or incentives merchants to collect taxes from customers who are
residents of sales tax states, especially online sales of tax free cigarettes, in exchange for a percentage of the taxes that
would be otherwise unpaid. There is also a growing group of tax amnesty states, which may permit residents to settle unpaid use
taxes (and penalties) at a discount, but only before being caught.
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