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Once upon a time, several years ago, the Internet was like the wild, wild West — untamed and uncontrolled. But, as the Internet has become an increasingly essential element of everyday life, various laws have come into effect in an effort to shape, guide and regulate the Web. In the latest such twist, the New York Department of Taxation and Finance recently notified shippers and retailers of cigarettes of a state law that will be enforced starting on Wednesday. The law, which was enacted three years ago, bans Internet and mail-order sales of cigarettes. Violators face potential large civil fines and possible jail time. The law had not been enforced earlier based on the pendency of a tobacco industry lawsuit. However, several months ago, a federal appellate court agreed with New York that the law did not run afoul of interstate commerce protections. BACKLASH Notice of legal enforcement reportedly has raised the fury of the Seneca Nation of Native Americans, as dozens of Seneca business owners operate Internet and mail order cigarette operations. And this fury may be just the tip of the iceberg, as the U.S. General Accounting Office reportedly found last year that approximately half of the 150 cigarette related Web sites in the United States are based on Native American reservations in Western New York. Native American representatives have taken the position that the ban violates their sovereignty. THE BOTTOM LINE The apparent motivation behind the law is to ensure that sales taxes are collected on cigarettes sold by Native Americans to non-Native Americans. New York lawmakers have stated that if cigarettes are sold as taxed products, this could translate into millions of dollars of additional funds in state coffers. Indeed, one industry trade group calculated that New York was deprived of $900 million in cigarette sales taxes last year. CONCERN AND PRAISE Apart from the tax issue, there has been concern voiced by delivery companies, as they can face legal penalties for shipping cigarettes purchased over the Internet that are not taxed. The delivery companies are worried that they will have too difficult a task ascertaining whether their customers are complying with the law. On the other hand, cigarette retailers have praised New York’s stated intention of enforcing the law. They believe that such enforcement will allow them to be more competitive, as they no longer would have to compete with untaxed Internet or mail-order cigarette sales. Health groups also praise enforcement of the law, hoping that the ban could lead to less sales of cigarettes, especially to minors, and opining that the law could be a model for other states. ANON Undoubtedly, once enforcement of the law beings, there will be some creative efforts to get around the law. In fact, some Native American retailers have said that the law does not ban them from selling cigarettes via the U.S. Postal Service. Still, in the big picture, the writing is on the wall. The wild, wild West days of the Internet, slowly, but surely, are coming to an end. Eric Sinrod is a partner in the San Francisco office of Duane Morris ( www.duanemorris.com), where he focuses on litigation matters of various types, including information technology disputes. Sinrod’s Web site is www.sinrodlaw.com, and he can be reached at [email protected] . To receive a weekly e-mail link to Sinrod’s columns, please type Subscribe in the subject line of an e-mail to be sent to [email protected] .

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