A San Francisco ordinance prohibiting tobacco sales in drugstores could violate the equal protection clauses of the state and federal constitutions, a state appeal court ruled Tuesday.
The unanimous decision by San Francisco’s 1st District Court of Appeal reverses a demurrer in the city’s favor and lets Walgreen Co. go ahead with a suit challenging the controversial ordinance
“Should Walgreens ultimately prevail on its equal protection causes of action,” Administrative Presiding Justice William McGuiness wrote in the 33-page ruling, “the court will be required to determine whether the appropriate remedy is to preclude enforcement of the entire ordinance or to invalidate only the exceptions contained in” San Francisco’s health codes.

The San Francisco law outlaws the sale of tobacco products in drugstores, but exempts supermarkets, such as Safeway, and big-box stores, such as Costco, that contain pharmacies.

The appeal court said the disparate treatment of various types of stores might not be “rationally related” to a legitimate legislative end. The justices rejected the city’s arguments that tobacco sales by pharmacies send a stronger message of acceptance than by other stores.

“There is no plausible reason to believe,” McGuiness wrote, “that members of the public place any greater reliance on implicit advice regarding the healthfulness of tobacco products conveyed by counter clerks, the corporate structure or the product mix of a Walgreens than of a Safeway or Costco.”

Justices Stuart Pollak and Martin Jenkins concurred.

By Mike McKee, law.com, June 10, 2010

Riding a wave created by a youth movement against smoking, the city will start imposing its own fines on businesses that sell tobacco to minors.
Azusa Youth Against Smoking campaigned for a new ordinance to keep tobacco sellers in check following unscientific studies done by the organization.

“We are pleased they took a step forward by introducing an ordinance,” said project coordinator Edgar Ontiveros, who helped students coordinate the event. “When we first started, we started small … it is very rewarding.”

The Azusa Youth Against Smoking conducted a study in December that found 41 percent of retailers in Azusa sold tobacco to minors.

Teens attempted to purchase cigarettes, and if the clerk offered to make the sale without checking ID, the teens would make an excuse and leave the store, Ontiveros said.

The group presented the study to the council earlier this year.

The city crafted ordinance will place a $250 to $500 fine for those businesses caught selling tobacco to minors.

“If we have it on our books, it will be easier for us to collect the fine,” Public Works Director Tito Haes said.

While the youth organization is happy with the ordinance, they felt it would have been stronger if the city charged a fee to sell tobacco.

“We are happy with the ordinance that staff recommended, however, we feel it is missing teeth,” Ontiveros said. “A stronger ordinance will decrease the number of illegal sales to youth.”

The City Council, directed staff to come back later with information about a sellers license, Haes said.

“It was really to avoid imposing another fee to businesses in town,” Haes said about not including the license in the ordinance. “It is a down economy and we felt it was not the time to add another fee to businesses in town.”

Despite not having the license, the ordinance demonstrates the city’s desire to work with the organization and Haes said he believes the fine will do enough to deter illegal sales.

“I think it still serves the purpose,” Haes said. “I understand where the Azusa Youth Against Smoking is coming from, but I kind of disagree. If you impose a licensing fee across the board, you are kind of penalizing businesses that do obey the rules. If you have the fine you only penalize businesses breaking the rules.”

By Daniel Tedford, Staff Writer

A tobacco shop that opened late last year in Cloverdale alongside Highway 101 is selling contraband cigarettes and making dubious claims that it is operated by an Indian tribe, according to state authorities.

The state attorney general’s office has notified Native Tobacco 101 that most of the brands it sells are untaxed, not approved for sale in California, and do not meet fire safety standards.
“These cigarettes they are selling don’t have a tax stamp on them,” Senior Assistant Attorney General Dennis Eckhart said.

While the business claims it is exempt from state taxes because it only sells cigarettes manufactured on Indian land, Eckhart said, “We don’t agree.”
In a letter dated March 18, he asked the store to stop selling the cigarette brands and to confirm the “illegal conduct” has ceased.
The manager of the store on Friday said he was not aware of the letter, but requested a copy.
“We are on native land. We are a tribally operated, sovereign nation,” said Tony Speer, manager of Native Tobacco 101.
“One side believes we should pay state taxes, the other that we should not – only federal (taxes). It’s been going back and forth,” he said.
There are complicated issues of Indian law and restrictions on state enforcement procedures involving tribes and Indian lands. But legal experts said the U.S. Supreme Court made it clear tribes have an obligation to collect and remit state tax on the sale of cigarettes to non-tribal members.
When the Cloverdale store opened in December, it drew immediate complaints from other tobacco retailers in Cloverdale who said its American Indian owners enjoyed an unfair advantage by not charging sales tax.
It also touched on a controversy that has played out in other states involving American Indian smoke shops and the taxes they sometimes avoid.

In New York, for example, state officials claim bootleg sales of tobacco products on reservations or through the Internet have resulted in hundreds of millions of dollars in lost state revenues.
When Native Tobacco 101 opened, the then-store manager confirmed he charged no state taxes on his products. But he said the tobacco products were mostly manufactured by Indians on Native American lands and had been subjected to federal taxes.
Eckhart on Friday said the shop is unlawfully avoiding an estimated $1.50 per cigarette pack in state excise and sales taxes, and other levies.
Some of the revenue from the state taxes on cigarettes goes to children health care services, tobacco control and cessation efforts, he said.

Local officials have also expressed consternation that Native Tobacco 101 has put other retailers at a disadvantage.
“They are not paying taxes and I’m not sure that’s appropriate,” Cloverdale Mayor Carol Russell said Friday. “I’m a firm believer in one set of rules for everybody.”
Russell said she also was “shocked” to learn the brands sold at Native Tobacco 101 allegedly do not comply with cigarette safety provisions, which are designed to ensure they don’t keep burning when not being puffed.

Many tribes in California sell cigarettes that are authorized on a state directory and also pay state taxes.
But the attorney general’s office has recently gone after some shops in Southern California that were alleged to have sold illegal tobacco products on reservations, or failed to collect state taxes.
Earlier this month, four of the retail tobacco stores on Indian lands in Riverside County voluntarily closed after the state filed an injunction seeking compliance.
The Agua Caliente Band of Cahuilla Indians agreed that the tobacco products on the reservation were being sold illegally and they were not in partnership with the retailers.

Native Tobacco 101, located on a frontage road next to the freeway, is on a remnant of the former Cloverdale Rancheria, owned by survivors of John Santana, a Pomo elder and postmaster who was allotted the land more than 40 years after the rancheria was dissolved.
When it opened several months ago, the then-manager of the shop said the owners are working with a Native American company licensed to use the land and operate the tobacco business. But he declined to provide more detail.

Speer, the current manager, referred questions about the attorney general’s allegations to the owners, who could not be reached for comment.
The restored Cloverdale Rancheria Band of Pomo Indians, who are proposing a casino on adjacent lands, have said they have no connection to the tobacco business, and it is not on land belonging to the tribe.
In his letter, Eckhart said a sign posted in the shop is misleading.

It states that the store is located on Indian land and operated by a federally recognized Indian tribe.
“We believe that the posted sign may falsely represent to your customers a fact about the shop’s ownership and/or management,” he said.

By CLARK MASON, Yourtown.pressdemocrat

Further flexing its newly-gained muscles to regulate tobacco, the Food and Drug Administration (FDA) has announced new federal regulations further restricting the marketing of cigarettes and smokeless tobacco products to persons under 18.

The new regulations, authorized under the Family Smoking Prevention and Tobacco Control Act, go into effect on June 22, 2010, and will:

* Prohibit the sale of cigarettes or smokeless tobacco to people younger than 18.

* Prohibit the sale of cigarette packages with fewer than 20 cigarettes.

* Prohibit the sale of cigarettes and smokeless tobacco in vending machines, self-service displays, or other impersonal modes of sales, except in very limited situations.

* Prohibit free samples of cigarettes and limits distribution of smokeless tobacco products.

* Prohibit tobacco brand name sponsorship of any athletic, musical, or other social or cultural event, or any team or entry in those events.

* Prohibit gifts or other items in exchange for buying cigarettes or smokeless tobacco products.

* Require that audio ads for cigarettes and smokeless tobacco products use only words with no music or sound effects.

* Prohibit the sale or distribution of items, such as hats and tee shirts, with tobacco brands or logos.

“This ruling is a critical piece of a coordinated effort to save lives, lower costs, and reduce suffering from heart disease, cancer and other tobacco-related illness,” said Health and Human Services Secretary Kathleen Sebelius in a press release. “Today, we’re addressing a larger public health effort to prevent our children from becoming the next generation of Americans to die early from tobacco-related disease. This is a great step toward a healthier America.”

By Robert Longley, Usgovinfo

If Hawaii smokers think they are getting a deal buying cigarettes on the Internet, the state attorney general has some advice: Forget it.

The state has recently stepped up its campaign to collect the tobacco tax of 13 cents per cigarette on all out-of-state sales.

Attorney General Mark Bennett says the state could be missing between $600,000 and $700,000 in uncollected tax money.

Hawaii has sent out more than 900 letters to Hawaii residents who bought cigarettes via the Internet but did not pay tax on them.

That 13 cents adds up: Bennett says it amounts to an extra $26 on a carton of cigarettes.

“Wholesalers and retailers are paying the tax, so for them they are at a disadvantage,” Bennett said. “The tax is passed on to the consumer.”

Hawaii’s tobacco tax law has two parts. First, sellers must buy a tax stamp to be attached to all cigarette packs. The stamp is the tax.

“But in addition, those who possess in Hawaii, whether they acquire them from sales outside Hawaii or not, cigarettes that do not have a tax stamp are liable for the payment of the tax,” Bennett explains.

Not paying that tax is serious.

Anyone who purchases, uses, controls or possesses untaxed cigarettes must pay the tax. Having 3,000 untaxed cigarettes is a felony. More than 1,000 cigarettes is a misdemeanor, Bennett says.

“People need to be aware that there are criminal penalties that can attach depending on the number of cigarettes possessed,” Bennett warns.

Bennett said he does not think his office will file criminal charges against people who are buying a small amount for personal consumption, but he wants all Internet buyers to know what the law is and what taxes Hawaii is owed.

The reason Hawaii can go after local buyers is a federal law that requires Internet cigarette retailers to report the names of their customers to local tax officials.

A federal law, the Jenkins Act, requires enterprises that ship cigarettes to states that have a tobacco tax, such as Hawaii, to tell local tax officials the name and address of both the shipper and the person to whom the cigarettes are shipped.

Bennett says the federal law results in regular reports from mainland cigarette retailers, so his office knows who in Hawaii is buying cigarettes via the Internet.

The law is different from efforts to force Hawaii consumers to pay the 4 percent use tax liable for purchases made via the Internet. Some Internet firms charge the state tax; others do not.

By Richard Borreca, Starbulletin

Last Thursday, the U.S. Senate unanimously approved legislation to crack down on black market tobacco selling. The Prevent All Cigarette Trafficking (PACT) Act closes loopholes in current tobacco trafficking laws, enhances penalties for violations and provides law enforcement with new tools to combat the methods being used by traffickers to distribute their products. PACT, which addresses longstanding convenience store industry concerns, is a “major win” for retailers, according to NACS senior vice president of government relations Lyle Beckwith.

Authored by Senator Herb Kohl (D-Wis.) and co-sponsored by a bipartisan group of 20 senators, this legislation (S. 1147) would help combat online cigarette sales that have robbed states of badly needed tax revenues and that undermine state laws that prevent youth access to tobacco products.

“The PACT Act closes loopholes in current tobacco trafficking laws, enhances penalties for violations, and provides law enforcement with new tools to combat the innovative methods being used by cigarette traffickers to distribute their products,” said Kohl. “With its passage, we cut off a source of funding for terrorists and criminals raise more money, enhance states’ ability to collect significant amounts of tax revenue, and further limit kids from easy access to tobacco products sold over the internet.”

He added, “By passing this bill, we are solving a serious problem that is growing every day…. Without innovative enforcement methods, law enforcement will not be able to effectively address the growing challenges facing them today.”
The PACT Act would strengthen federal laws on cigarettes sold over the Internet. In addition to preventing the U.S. postal service from delivering cigarettes, it would allow states to recover lost excise tax revenue and allow legitimate retailers to recover lost business. Additionally, the PACT Act would prevent sellers from circumventing state laws preventing minors from purchasing cigarettes.

Native American lobbyists have been waging a furious battle to derail this legislation, NACS said.

The House version, authored by Representative Anthony Weiner (D-N.Y.) previously passed by a vote of 397 to 11. While passing the PACT Act in the Senate is a major hurdle cleared, because of slight differences in the Senate and House bills, the House will need to take a final vote to accept the Senate version of the bill. It would then go to President Obama’s desk for his signature.

“Senate passage of the PACT Act is a huge victory for American taxpayers, American small business owners and America’s youth,” said Scott Ramminger, president and CEO of the American Wholesale Marketers Association (AWMA) and spokesperson for the Coalition to Stop Contraband Tobacco, of which the National Association of Convenience Stores is a leading member. “We applaud the Senate for its action today and thank Sen. Kohl for his leadership in ensuring that contraband tobacco sales are eliminated.”

“NACS has been working for over 10 years to pass legislation to regulate Internet and mail-order tobacco sales,” said Beckwith. “Last night’s vote brings us closer to achieving our goal than we have ever been. We will continue to pressure the House to take the final step necessary for passage and enactment.”

Kohl noted that cigarette trafficking, including the illegal sale of tobacco products over the Internet, costs states billions of dollars in lost tax revenue each year. It is estimated $5 billion of tax revenue is lost, at the federal and state level, each year.

In 1998, the Bureau of Alcohol, Tobacco, Firearms & Explosives (BATFE) had six active tobacco smuggling investigations. Today there are more than 400 open cases. The Internet represents a new obstacle to enforcement. Illegal tobacco vendors around the world evade detection by conducting transactions over the Internet, and then shipping their illegal products around the country to consumers. Just a few years ago, there were less than 100 vendors selling cigarettes online. Today, approximately 500 vendors sell illegal tobacco products over the Internet.

CSP Daily News

While a Senate committee began hearings on bills to increase sales taxes and tobacco taxes, another bill has been advanced that would increase the cost of a 12-ounce can of soda.

The Senate Assessment and Taxation Committee began hearings over raising tobacco taxes by 55 cents and will continue hearings regarding Kansas Gov. Mark Parkinson’s plan to increase the state sales tax by 1 percent from 5.3 percent to 6.3 percent for three years.

The soda tax, which was advanced by Sen. John Vratil, R-Leawood, increases the tax on soda by one penny for every teaspoon of sugar — or an estimated 10 cents — and would raise an estimated $90 million during the next fiscal year, which begins on July 1.

“It is amazing just to see how much can be generated,” said Sen. Les Donovan, R-Wichita, chair of the Assessment and Taxation Committee. “There is a lot more consumed than I could have ever dreamed.”

Both the tobacco and sales tax increases would constitute an overall increase of just over $377 million in the state general fund receipts in the next fiscal year. Currently, the state is facing a projected $467 million shortfall for FY 2011.

“We’re hoping that the gap is not that broad,” Donovan said. “If it is we have bigger problems than we thought.”

Vratil proposed his soda tax during a meeting of the Senate Ways and Means Committee, which agreed to sponsor it. The committee also agreed to sponsor a bill that doubles the per-gallon taxes paid by distributors of beer, wine and liquor and the tax that retail stores pay on their gross receipts. That measure would raise an additional $50 million.

As for the tax increases that the Assessment and Taxation Committee started hearings for Tuesday — in favor of the Governor’s increases — Donovan said that state agencies are warming up to the proposal.

“There are a lot of people that get the funding that are excited about us discussing these tax increases,” Donovan said. “They get the money … that is a pretty good connection and without the tax increases, they are not going to get the funding they need.”

The testimony came on the same day that advocates for the disabled staged several small protests at the Statehouse.

The tobacco tax proposal would increase the cigarette tax by 55 cents, to $1.34 a pack, and to quadruple the tax on other tobacco products to 40 percent.

Hearings on tax increases will continue today with cigarette tax opponents and Donovan said hearings are scheduled to continue into next week.

“When we start hearing the other parts of the bill — soft drink tax bill and liquor bill — there will be hearings on each one of those,” Donovan said. “We want to give everyone a fair hearing and exhaust all possibilities to help those that get the funding while trying not to destroy those that are being taxed.”

By Matthew Clark, Eldoradotimes

U.S. health officials say they are concerned about candy-like smokeless tobacco products that are brightly packaged and flavored and, they fear, enticing to youngsters.

The tablets, strips and sticks are flavored like coffee or mint. The companies that make the products say they are marketed to adults who smoke but may be trying to quit or are looking for a nicotine fix while they are at a place that does not allow them to smoke.

The companies also point out that it’s illegal for anyone under 18 to purchase tobacco products, but the FDA is still concerned and has asked the makers of these products for information about their research and marketing for these items.

We share that concern. Cigarettes and smokeless tobacco have always been illegal to sell to people under the age of 18, yet studies have shown most people addicted to cigarettes and tobacco started using when they were teens, many under the age of 18.

We’re concerned young people who might be turned off to actually smoking may see these candy-like products as more acceptable, cool or trendy. The packaging is appealing and small, so they can easily be concealed. We’re also concerned that if so many people have been able to get cigarettes under the age of 18 it’s likely these products will be as easy to get as well.

We support the efforts of the FDA to get more information and we urge parents and others to educate youngsters about these products and their addictive nature.