New Jersey tobacco tax collected via out-of-state cigar store

Only in New Jersey. Earlier this week I received an email from a good friend and avid cigar smoker who lives in New Jersey. The subject of his message was "NJ Taxman coming after you?" I actually got a little nervous. Was this a joke? Apparently, he was in the Club Stogie All Cigar Lounge forum, when he stumbled upon a June 18 posting titled, "NJ Residents please read..."

The posting by FlyerFanX (a/k/a "FFX") begins: So at the end of April, I buy a cigar sampler from our Retailer Forum. Was very pleased with what I got and the price. No problems.
Saturday the mail comes, and there's a letter from NJ Tax Department. In a nutshell it says: On XX/XX/XXXX you purchased $90 worth of untaxed cigars from XXXXXXXX. You owe us $90 X 30% tobacco tax = $27 X .07 sales tax = $ up sucker.
Anyone else ever get one of these lovely letters? And how the hell did they find out what I bought?

Later in the thread, a response comes from the proprietor of the cigar store, Blue Havana II, through which FFX purchased his cigars:

As FFX stated, I was the vendor. Tobacco taxes are not paid (or rebated) on out of state sales and I am required to file both a "Schedule C" in Georgia with the name of the purchaser and city, as well as the invoice, for all out of state sales. I have never heard of any states billing the consumer and wonder what it costs the state of NJ to go after this money (in this case, less than $30).
They also billed FFX for the sales tax. Has any else ever heard of a state go after intrastate sales tax on such a small amount?
In the future, I will make it clear that all taxes are the responsibility of the customer as all internet retailers do.

My friend was so intrigued by this, the next day he wrote to FFX for a copy of the letter, which in turn, he passed on to me.

Dear Taxpayer,

The Federal Government requires any entity or persons shipping cigarettes or tobacco products in interstate commerce to file a monthly report of all shipments to the receiving state's tax administrator. Information received by the State of New Jersey indicates that you are in receipt of untaxed cigars from Blue Havana II Cigars and Gifts.

New Jersey Statutes Annotated, N.J.S.A. 54:40B-1 et. seq. (Tobacco Product Tax) levies a 30% tax on every tobacco product and N.J.S.A 54:32B-1 et. seq. (Sales and Use Tax) levies a tax of 7% on the purchase price including the 30% tax.

The New Jersey Division of Taxation has determined that you are liable for the following tax amount based on the purchase listed below:

Date 4/30/2007
Description: Cigars $90.00
Tobacco product tax @ 30% $27.00
Amount subject to sales tax @ 7% $117.00

Tax Due $27.00
$ 8.19
Total Taxes to be remitted by the above named purchaser: $35.19

Please make your remittance payable to "State of New Jersey" and mail in the envelope provided along with a copy of this letter within (30) days of the date hereof. Failure to respond will result in the assessment of penalties and interest as provided by New Jersey statute.

Very truly yours,
Audit Services Branch
[Name], Technician, MIS
[Phone number]
Cigarette & Tobacco Products Tax

Since this person was just doing their job, I intentionally deleted their name and phone number from the letter.

Moreover, I don't know who to be upset with in this case; Georgia, who requires cigar stores to file the Schedule C, or New Jersey, who followed up on it. I suppose the best I can do is just pass it on as a warning to my fellow BOTLs. And so it goes.



Anonymous said…
One very interesting aspect of this is that the state of New Jersey seems to be referring to the Jenkins Act in their letter. This act, in the US Code as Title 15, Chapter 10A is specifically for cigarettes and defines cigarettes as:
"The term “cigarette” means any roll for smoking made wholly or in part of tobacco, irrespective of size or shape and whether or not such tobacco is flavored, adulterated, or mixed with any other ingredient, the wrapper or cover of which is made of paper or any other substance or material except tobacco."
Anonymous said…
I find all this very interesting, I just got a call from my mother in NJ this morning, in tears, she is 76 years old and is smoking the "Seneca" brands, vs. the Lucky Strikes she used to be able to afford...They went back to 2005 and sent her a bill for over $6,000. dollars! Since NJ has such high taxes, and she is determined not to sell the house she built, how does a Senior live there? and more important ...she said she has to come up with the money in 30 days? I obviously don't live in NJ and can not believe she wasn't warned. (or was she?) Is very one paying there share? I don't know what to tell her? Should she take a Home Line of Credit on her house for this?

Any help would be appreciate, since I can not find any information on this anywhere???

Anonymous said…
I too received a bill on August 23rd for $2,690. I emailed the governor, cnn, nbc, abc, njn, etc and even called the governor's office stipulating that the offer of a payment plan set people up for penalities and interest. Today, I finally received a letter from the state (responding to the 8/23 email) mentioning the NJ Cigarette Tax Act and mentioning who I might call to arrange a payment plan (I estimate it will take them two weeks to answer the phone). The cutoff for payment is 9/20 by the time they arrange a payment plan I'm in default.

I paid the bill in August because I could. My point to the state was their inability to respond in an appropriate time frame forces people to have additional charges placed on an already large bill. Note the date of the response letter received today, I rest my case. By the time the state gets everything arranged for timed payments additional penalities will have be added.

I told the state I thought their tatics were immoral. I wanted to know if everyone that has ever bought an online item and not paid tax, whether cigarettes or other, were being billed. I was told that wasn't information I was entitled to know. So I researched NJ Freedom of Information Act and found they're right. As citizens we can ask for information and get none.

The state doesn't wish for smokers to quit, just pay up. Today it might be the cigarette smokers that are targeted, tomorrow it may be the fast food crowd that will be penalized. As soon as they can figure out a way to tax what we eat and pass another tax act.

This is a slippery slope.
Anonymous said…
One item of interest...the state outsourced the payment by credit card option of the tax charges with a 2.5% handling fee. I believe they also outsourced the process of collecting the billing information. How much is this outsourcing costing the tax payers of NJ?
CigarAdvisor said…
I'm glad to see the responses to this posting, but in a bittersweet sort of way really, since I sympathize with all of you who've been subjected to this nonsense. Just makes me glad I don't live in New Jersey anymore.
JB said…
You might be able to argue a case against the cigarette tax by claiming it is "selective prosecution." If it could be proven in court that smokers buying cigarettes out-of-state are being singled out to pay taxes, and others purchasing non-tobacco items are not, and they're not, that's selective prosecution and could be grounds to the case tossed out of court.
Anonymous said…
I'm an artist, don't make money for the past two years. I received a bill for 2000 from NJ state for the cigarettes I bought cheap online back in 2002. How can I fight this? I obviously cannot pay...
Anonymous said…
I can tell you that Yes, NJ comes after its citizens for purchases other than cigarettes. I was billed the NJ tax for furniture I bought online from NC. The NC furniture company was obligated to report furniture purchases over a set limit. So, it is not just cigarettes they are watching.

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