Back to previous page
U.S. House of Representatives Passes Legislation Designed to End Illegal Cigarette Trafficking
Philip Morris USA Applauds Passage of PACT Act
RICHMOND, VA (May 21, 2009) - Today the United States House of Representatives passed, by a vote of 397-11, legislation aimed at stopping illegal cigarette sales. H.R. 1676, known as the Prevent All Cigarette Trafficking Act (the "PACT" Act), is intended to prevent the tax-evading sales of cigarettes and smokeless tobacco by remote sellers who operate via the Internet, mail or phone. The legislation, sponsored by Congressman Anthony Weiner (D-NY), also provides law enforcement with more resources to accomplish this goal and to stop other forms of illegal tobacco trafficking.
Recent increases in federal, state and local excise taxes have provided new incentives for illegal cigarette traffickers. Remote sellers can take advantage of such tax increases by operating from low excise tax states or untaxed areas, such as Native American reservations, and by luring consumers into making purchases on assurances that their transactions will not be reported to state tax authorities, despite federal requirements to do so.
"The sale of untaxed cigarettes and smokeless tobacco products harms legitimate wholesale and retail businesses, government budgets and ultimately consumers," said Joe Murillo, vice president and associate general counsel, Altria Client Services, speaking of behalf of Philip Morris USA. "The PACT Act is the result of years of bipartisan discussion, and we applaud the sponsors for their efforts to address this issue."
If enacted, the PACT Act would make it a felony if appropriate taxes on cigarettes and smokeless tobacco are not paid into the state in which the tax is owed. It would also limit youth access to cigarettes and smokeless tobacco products by requiring remote sellers to establish age verification processes; prohibiting remote sellers from shipping cigarettes and smokeless tobacco products through the U.S. Postal Service; and placing significant restrictions on other package delivery carriers.
Recent reports show that contraband cigarette trafficking is a growing problem. In April 2009, tax officials in Mississippi uncovered a warehouse containing approximately one million cartons of untaxed cigarettes having an estimated value of $20 million. Also in April, 18 people were charged as the result of two undercover investigations into the sale of untaxed cigarettes. The Nassau County, N.Y. District Attorney's office estimates lost state taxes from this trafficking scheme at more than $2.195 million.
To help the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives address this issue, the PACT Act also would create within three years six regional contraband cigarette trafficking teams in Detroit, Los Angeles, Miami, New York City, Seattle and Washington, D.C.; a new national Tobacco Intelligence Center to monitor and coordinate illegal cigarette trafficking investigations in the United States; and a computer database that would track and analyze information from remote sellers of tobacco products.
The PACT Act is co-sponsored by Judiciary Committee Ranking Member Congressman Lamar Smith (R-TX), Congressman Steve Cohen (D-TN), and Congressman Darrell Issa (R-CA). Similar legislation is expected to be introduced in the U.S. Senate in the very near future by Senator Herbert Kohl (D-WI), a long-time supporter of the PACT Act.
Philip Morris USA is an operating company of Altria Group, Inc. (NYSE: MO).
