Cigarettes and Tobacco News

May 02, 2007 -- NEW YORK—A historic agreement, the first of its kind in the country, between the state Attorney General’s office and Creative Cash Flow Solutions, Inc. will help end the flow of cheap cigarettes to young people.

CCFS will stop providing electronic payment processing services to online tobacco retailers, which illegally sell cigarettes over the internet. When the unlawful nature of online tobacco sales was brought to their attention, Long Island-based CCFS immediately agreed to cease providing their services.

“Stopping the flow of cheap cigarettes is a significant advance for public health”, attorney general Andrew Cuomo said. “These online tobacco retailers can also serve as major providers of cigarettes to young people, since the companies cannot guarantee that a purchaser is at least 18 years old. We are heartened by CCFS’s cooperation in this effort and hope that other companies will similarly cease dealing with online tobacco retailers.”

As a result of CCFS’s services, online tobacco retailers were able to process their illegal tobacco sales without credit cards. CCFS’s assistance allowed the retailers to receive customer check information via the internet, telephone, or facsimile to enable a sales transaction. An investigation by the Attorney General determined that CCFS serviced at least 10 online tobacco retailers. Several were located in New York State, and two were among the 10 largest online tobacco retailers used by consumers throughout the United States.

This agreement is the first of its kind in the country. It furthers the successful efforts of New York and the other states that are part of the tobacco Master Settlement Agreement, a public health agreement which, among other goals, aims to stop the flow of cheap cigarettes to young people. Through the states’ efforts, leading credit card companies have already agreed to cease allowing their cards to be used to facilitate these unlawful sales, and several major shippers have refused to deliver cigarettes purchased online. Cutting down on electronic funds transfers, such as those facilitated by CCFS, will make it more difficult for these retailers to continue selling.

Online tobacco retailers operate illegally in a number of ways, including failing to file required monthly sales reports with the tax administrator of the states into which they are shipping cigarettes; using interstate wire and mail systems to defraud state governments of excise tax revenues; and shipping over 10,000 cigarettes per month without any state tax excise stamp. These same practices also violate New York State tax laws, which prohibit attempts to “evade or defeat a tax,” and New York State public health laws, which prohibit direct shipment of cigarettes to individual consumers in New York State, as well as similar laws of the states into which they sell.