I talked to a girl again today in the NJ taxation dept. She said we might stand a chance if we had groups of 100's fighting this.

As a bit of background, the federal Internet Tax Freedom Act of 1998, among other things, declared a moratorium on the application of certain types of taxes to Internet ecommerce. The moratorium was scheduled to run for three years, until 2001. Prior to the moratium's expiration in 2001, the Internet Tax Nondiscrimination Act of 2001 extended the moratorium until November, 2003. Finally, the Internet Tax Nondiscrimination of 2004 was signed in December, 2004, extending the moratorium until 2007. This means the moratorium was in effect from 1998 until the current time, with the possible exception of a thirteen month window, from November, 2003 until December, 2004.

I just reread the posts in this thread, and noticed that I haven't really posted a clear, concise explanation of why I think the NJ tobacco excise tax can't be applied to Internet transations. So here goes ... please remember that I AM NOT A LAWYER NOR A TAX PROFESSIONAL, and what I'm going to write represents an uninformed layman's opinion of what he thinks This All Means. Consult a professional for advice in your particular circumstances, do not rely on what I say as anything more than an educated guess.


As a bit of background, the federal Internet Tax Freedom Act of 1998, among other things, declared a moratorium on the application of certain types of taxes to Internet ecommerce. The moratorium was scheduled to run for three years, until 2001. Prior to the moratium's expiration in 2001, the Internet Tax Nondiscrimination Act of 2001 extended the moratorium until November, 2003. Finally, the Internet Tax Nondiscrimination of 2004 was signed in December, 2004, extending the moratorium until 2007. This means the moratorium was in effect from 1998 until the current time, with the possible exception of a thirteen month window, from November, 2003 until December, 2004.

Under the terms of the moratorium, two types of taxes may not be imposed by any state or local government -- "discriminatory" taxes and "multiple" taxes -- and one type of tax -- a sales/use tax -- is expressly permitted. I won't try to explain "discriminatory" taxes, since they're not relevant to my argument.

Even though the federal statutes refer to "multiple" taxes, the easiest way to understand "multiple" taxes is to think in terms of double taxation. The idea is that you shouldn't be liable for the same tax in both states ... in my specific case, since Virginia (where cigoutlet.com was located) and New Jersey both have a tobacco excise tax, I shouldn't be required to pay tobacco excise taxes to BOTH states, because I purchased my cigarettes over the Internet. Since cigoutlet.com was legally liable to collect Virginia tobacco excise tax as part of the purchase price, as a tobacco retailer, my liability to pay New Jersey tobacco excise tax would constitute double (or "multiple") taxation.

However, there is a key element necessary to determining whether or not the New Jersey tobacco excise tax constitutes "multiple" taxation, under the ITFA -- that element is "reciprocity." If the New Jersey Cigarette Tax Act (which establishes the NJ tobacco excise tax) allows me to claim a credit for the amount of Virginia excise tax paid -- in effect, providing a "reciprocal" credit for the Virginia tax -- then I'm only paying the original tax due under New Jersey law, and I am NOT being doubly, or multiply, taxed.

As of this writing, I still haven't gotten my hands on the full text of the New Jersey Cigarette Tax Law, and so, can't state with certainty yet that it lacks reciprocity. If the New Jersey law (or any other state excise tax law), lacks reciprocity with the Virginia tobacco excise tax, then (by my reading of the statutes), then that law represents "multiple" taxation, which is forbidden by the ITFA, for any time period during which the moratorium was in effect.

I hope that this post will provide some insight into why I feel the New Jersey tobacco excise tax POSSIBLY may not be being legally applied to Internet purchases. Again, I wish to stress that I'm not competent to give anyone legal advice, nor am I trying to ... I'm only posting this in the hopes that others in my situation across the nation will get some insight into the issues and arguments involved.