3OYS UPDATE: Taxman coming after smokers

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by LiAna Gonzales

Video report by Gary Harper

Posted on February 20, 2014 at 11:05 PM

Updated Wednesday, Oct 1 at 9:28 AM

PHOENIX -- Some Arizona smokers are getting a tax bill and they don't know if it's legitimate or if it's a scam.  Well, as it turns out it's real and it's a situation 3 On Your Side is very familiar with. 

3 On Your Side warned smokers about this situation earlier this year when the Arizona Department of Revenue started mailing out its first phase of bills to Arizona smokers who purchased cigarettes online and did not pay a state tax.

Now, the agency is sending out it's second round of bills and once again the bills are getting smokers' attention.

To help you understand why smokers are up in arms, let's re-visit Michael Sadowski who was profiled in 3 On Your Side's first report.

Sadowski says he isn't exactly proud that he smokes, calling it an expensive and nasty habit.

"Both of my parents were smokers and, back then, everybody was," he said.

After several failed attempts to quit, Sadowski started looking for a less expensive way to smoke. He found he could buy cigarettes cheaper online than in stores.

"I did that back in 2007, 2008 and then, in 2009, they started the PACT Act, which made it illegal to sell cigarettes across state lines," he explained.

So Sadowski returned to purchasing cigarettes in stores and didn't think more about it until a couple weeks ago, when he got a package from the Arizona Department of Revenue.

"I was sick to my stomach; highly stressed," he recalled. "They said I owed $4,417 in back taxes, and that includes penalties and interest."

The cigarettes Sadowski purhcased online more than five years ago apparently never included taxes.

"Most notices of assessment or tax due from the department generally catch people by surprise," said Sean Laux, of the Arizona Department of Revenue.

Laux said just because consumers buy products online, that doesn't mean they can skip out on the taxes owed to the state.

"For these individuals who are making purchases over the Internet, the law required you to fill out a form to report those so that the luxury tax was paid," he explained.

The Arizona Department of Revenue was able to obtain records from online tobacco retailers.

"Obviously, in this case, it does catch up with people," Laux said. "It's based on information that we receive and that we find, and then we try to collect the tax that's due."

Sadowski said he wasn't trying to cheat the system. He just thought he was getting a smoking deal.

"There's thousands of people just around the Phoenix area who buy stuff online every day, and I feel every person who bought anything online is in jeopardy if they did not pay state sales tax," he said.

The Department of Revenue says there is no way around the tax and apparently the program is working.

In fact, Laux tells 3 On Your Side that this year alone the agency has collected more than $2.5 million in these back taxes.

If you ever purchases cigarettes online and didn't pay taxes, expect to receive this letter at some point as well.

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