Marylanders. Did you get a nasty letter from the compliance division of the Maryland State Comptroller (William Donald Schaefer) notifying you that you owed a pile of taxes from "illegal" purchases of cigarettes over the Internet?

Were you threatened by penalties and interest and withholding of your state income tax refund (if you were getting one)? Did the letter claim to have gotten your customer information from the out-of-state company selling you the cigarettes? Do you think that was an invasion of what was supposed to be private information?

"No", says the revenuer, "we got the information legally from a [unnamed] Federal agency." The Federal Government has ratted us out? Shame, shame. Probably some loophole in the Patriot Act as an excuse. But actually it is a provision in the Federal tax code for "contraband tobacco products". The Federal Government can provide out-of-state sales information to a state tax collector. However, the law states that only an individual sale of 600,000 cigarettes or more at one time can be reported. The Federal Government turned over the entire accounts of several internet cigarette companies without sorting out those accounts which the law did not allow to be snitched on. Shame, shame on the sloppy Federal bureaucracy. Shame, shame on the Maryland Comptroller (William Donald Shaefer, connoiseur of women's rear ends) for attempting to bully Maryland citizens into such extortion.

Cigarette sales over the Internet has become a real problem for states with high sales and stamp taxes. Maryland has one of the highest cigarette tax stamp rates in the country. ($1.00 per pack for that little stamp on the bottom of a pack and they're introducing legislation to add another $1.00 on top of that.) What do they think was going to happen? Smokers aren't stupid. They shop for cheaper prices like anyone else. And, contrary to what the Maryland Comptroller thinks, Internet sales are not illegal.

Maryland is attempting to retroactively collect not only sales tax (actually use tax), but also the $1.00 stamp tax. (Wasn't a stamp tax one of the issues in the American Revolution?)

Are you going to cave to this persecution? Or wait for the next shoe to drop? The $1.00 Maryland cigarette stamp tax can be paid only by a tobacco dealer licensed in Maryland. There's no line on the use tax reporting form for the cigarette tax stamp if an consumer were inclined to report and pay it.

It will be interesting to see how the revenuers will proceed. Watch this space. Assuming they allow jailbirds access to the Internet.

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