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Online tobacco subject to taxes

BISMARCK - North Dakota smokers, already feeling the chill of indoor smoking bans enacted this year, have taken another hit - this time from the tax man.

BISMARCK - North Dakota smokers, already feeling the chill of indoor smoking bans enacted this year, have taken another hit - this time from the tax man.

A state law now requires Internet purchasers of cigarettes and tobacco to pay the North Dakota 44-cents-per pack tax, the 5 percent state use tax and any local sales taxes, Tax Commissioner Cory Fong said Monday.

"Some people are buying tobacco products online because prices are cheaper, and historically they have not had to pay cigarette and tobacco taxes on their Internet purchases," Fong said.

Those days are over.

A state law that took effect in April requires Internet tobacco retailers selling to North Dakotans to register with the Tax Department. Some 260 merchants have done so.


And, the Internet tobacco company must report monthly the names of their North Dakota customers and what was purchased. Some already have turned in North Dakota buyers, Fong said.

The state treasury has taken in nearly $5,000 from the first batch of smokers it notified. The Tax Department began enforcement Aug. 1.

"In our initial mailing, we sent assessments to 50 residents who bought their cigarettes over the Internet or by mail," he said. "The Tax Department sent the purchasers a notice to inform them they need to pay the cigarette and tobacco tax on their purchases."

Fong said most buyers quickly complied and paid the taxes on their purchases. Forty-five individuals have paid the tax department more than $4,600. Collection efforts are continuing for those who haven't responded to the initial mailing, he said.

Those who continue to avoid paying could face penalties and interest.

The bill's prime sponsor, Rep. Al Carlson, R-Fargo, said the section on taxing consumers for Internet tobacco buying was "almost an afterthought."

Carlson introduced the bill to revive the placing of stamps on cigarette packages, saying he was trying to get at untaxed cigarette packages that change hands in the state. Merchants opposed returning to state cigarette stamps, he said, so that provision was taken out.

Carlson said the bill was passed to squelch the sales of untaxed cigarettes, stem minors' access to cigarettes and to prevent people from buying bogus products.


"They (online buyers) are not really sure what they're getting. We looked at some that were from Russia," he said.

Data from online sellers confirmed there is not a large number of North Dakotans ordering tobacco online or through the mail, Fong said.

"Still, smokers need to know that they have an obligation to pay taxes on all tobacco purchased over the Internet and by mail, just as if they are buying it locally."

The Tax Department says buyers can avoid getting assessment notices by voluntarily paying cigarette taxes due.

Its cigarette and tobacco use tax form (Form 44-UT) and use tax return are available on the department's Web site at www.nd.gov/tax or by calling the Tax Department at 701-328-3470.

Readers can reach Forum reporter Janell Cole at (701) 224-0830

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