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Several states are cracking down on smokers who buy their cigarettes online, claiming they owe millions in unpaid state taxes. And they’re snuffing out the smokers by taking legal action against the Internet cigarette companies, which total more than 800, forcing them to hand over the names of their customers. In the last year, at least 10 states, including Michigan, New York, Virginia and Washington, have subpoenaed online cigarette vendors for lists of their clients, thousands of whom have received letters notifying them of unpaid taxes. New York City has gone a step further, suing under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) between 35 and 40 Web sites that sell cigarettes. “In my lawsuits, a lot of the defendants have settled with us and turned over their customer lists . . . but I had to sue them to get them,” said Eric Proshansky, a city government assistant corporation counsel. Settlement coming Proshansky said he is about to settle a suit with one of the largest online cigarette vendors, eSmokes.com, which will turn over its customer list and allows the city and state state to recoup $47 million in lost taxes as part of the settlement. Attorney Stephen Leslie of Stichter, Riedel, Blain & Prosser in Tampa, Fla., who is representing eSmokes.com in bankruptcy proceedings in Florida, declined to comment. An e-mail sent to the eSmokes.com customer service department came back as undeliverable. Efforts to contact other online cigarette companies for comment led to similar results. Attorney John Rogers, partner at Bryan Cave in St. Louis, is representing two defendants in the eSmokes.com litigation: a former and current officer of the Web site. He is also defending a Web site called DirtCheap.com in a similar cigarette lawsuit also filed by the city of New York. Rogers, who has filed motions to dismiss both cases, sees no merit to the city’s suits. “At the end of the day, their theory is that we have helped the taxpayer not pay their tax obligation,” he said. “These are novel claims to say the least.” Rogers said that since the litigation began three years ago, his clients have turned over to tax authorities their customer lists. He also defended the online cigarette industry: “They aren’t any different than the hundreds of companies over the Web. Whether they be computers or anything else . . . they just have some special rules that apply to their industry.” Meanwhile, Proshansky said that while litigation might help snare tax scofflaws, it won’t eliminate online cigarette vendors because they can just “change their operation overnight.” But he offered another solution. “The most pressing issue is that the post office continues to ship cigarettes,” said Proshansky, noting that the National Association of Attorneys General (NAAG) has lobbied Congress to pass a bill banning the shipment of cigarettes through the mail. “That would be a simple solution to the problem.” According to NAAG, virtually all Internet cigarette sales violate one or more state and federal laws, including state age-verification laws, state laws prohibiting the direct sale of cigarettes to consumers, federal mail fraud statutes and the federal RICO statute. Currently, four states outlaw the sale of cigarettes over the Internet: Arkansas, Connecticut, Maryland and New York. And roughly half the states have some type of law that regulates the sale of cigarettes over the Internet.

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