Casual Web-Based Smuggling in Michigan

According to a spokesman for the Michigan Department of Treasury, more than 23,000 Michigan residents are known to have bought cigarettes online between February 2005 and August 2008. Their total tax liability to the state is computed at more than $36 million.[17] In a November 2010 e-mail, the Treasury spokesman claims that Michigan residents’ Internet purchases of cigarettes have dropped precipitously in recent years:

The contact and revenue data/information I had sent previously was accurate. As noted in a recent e-mail, … the department experienced a nearly 70% drop-off in sales data between 2007 and 2008. We have experienced another 25% drop-off in sales data since.

Treasury has sent out approximately 200 subpoenas (citing the Jenkins Act) over the last year or so, however there has been very little compliance. Vendors are often located out of state, in foreign countries, or on Native American lands, which makes enforcement difficult.

It appears that some of the sellers that had been cooperating (per the Jenkins Act) likely had customers turn elsewhere, as some sellers have advertised that they would not share customer lists with taxing authorities.[18]

[17] LaFaive, Fleenor and Nesbit, “Cigarette Taxes and Smuggling” (Mackinac Center for Public Policy, 2008), 49, http://www (accessed Dec. 10, 2010).

[18] Terry Stanton, e-mail correspondence with Michael LaFaive, Nov. 3, 2010.