PACT Act Passage Could Lead to More Criminal Enforcement
Recently, the United States Senate unanimously approved legislation to stop certain controversial sales of tobacco via the internet and mail. The Prevent All Cigarette Trafficking (PACT) Act purports to (i) close loopholes in current trafficking laws, (ii) enhance penalties; and (iii) provide law enforcement with new tools to thwart illegal tobacco traffickers. In addition to preventing the U.S. postal service from delivering cigarettes, the PACT Act requires Internet and other mail order sellers to:
- Pay all applicable federal, state, local or Tribal tobacco taxes and affix any related tax stamps before delivering any cigarettes or smokeless tobacco products to any customer in a state;
- Comply with various state and local laws as if the Internet sellers were tobacco product retailers located in the same state as their customers;
- Register with the state and make periodic reports to state tax collection officials; and
- Check the age and ID of customers both at purchase and at delivery to stop Internet cigarette and smokeless tobacco sales to kids.
The PACT Act also subjects illegal Internet sellers to strong new penalties, allows for the enforcement of the new federal law by the Attorneys Generals of the States, localities and Indian Tribes where the tobacco products are delivered, and provides other enforcement tools to enable federal and state enforcement officials to stop the deliveries to consumers of illegally sold cigarettes and smokeless tobacco by non-complying Internet sellers.
According to government officials, cigarette trafficking, including the illegal sale of tobacco products over the Internet, costs states billions of dollars in lost tax revenue each year, with estimates placing the amount at $5 billion. Compared to 1998 when there were only 6 active tobacco smuggling investigations by the Bureau of Alcohol, Tobacco, Firearms & Explosives (BATF), today there are more than 400 open cases. Illegal tobacco vendors have been able to evade detection by conducting transactions over the Internet, and then shipping their illegal products around the country to consumers. Even manufacturers or distributors who are not the target or subject of the investigation may receive subpoenas for documents or testimony related to these investigations. If you are contacted by a representative of a law enforcement agency, whether it is for the purpose of serving a search warrant, serving a subpoena for documents, or requesting an interview, it is important that you contact legal counsel immediately for advice on how to respond.