Michigan targets online tobacco taxes.

• Position: TRENDS & TRANSITIONS

The Michigan Department of Treasury is demanding that 500 Michigan residents who have purchased untaxed cigarettes from Internet-based companies pay up. Under Michigan's Tobacco Product Tax Act, it is illegal to purchase cigarettes over the Internet or through any other source outside Michigan, unless the buyer is registered by the state or the seller collects cigarette and use taxes. Michigan lost an estimated $1.7 million in taxes from just one of 13 online cigarette retailers.

"At its most fundamental level, this is an issue of tax fairness," says State Treasurer Jay B. Rising. "It is only right that out-of-state vendors, who conduct business only online and at arms length, follow the letter of the law. These taxes are collected by brick and mortar businesses in Michigan and Internet vendors should not be allowed to skirt their responsibility."

State officials are requesting that online cigarette purchasers send them any applicable cigarette tax, use tax, and interest associated with their purchases or they may face significant penalties. Under federal law, Internet cigarette vendors are required to provide the state treasury with names and addresses of all Michigan residents who purchase their...