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March 17, 2004

Online Tobacco Company Barrred from Sales in Iowa

A.G. alleged company failed to prevent sales to minors, and failed to disclose that consumers must pay taxes for online cigarette purchases.

DES MOINES.   A Polk County District Court judge today ordered an online cigarette company not to do business in Iowa, and to pay $20,948.40 restitution to the State of Iowa - the amount Iowa customers should have paid in taxes for tobacco purchases from the company from 2000 to 2003.

Attorney General Tom Miller had alleged consumer fraud violations, that the Kentucky-based company,, Inc., failed to prevent cigarette sales to minors, and failed to inform Iowa purchasers that Iowa excise taxes are required on Internet purchase of tobacco products.

In a consent judgment filed today, Judge Robert J. Blink prohibited, Inc., from shipping cigarettes into Iowa, and the company's web site must clearly and conspicuously disclose that it does not make sales into Iowa.

Iowa and other states have conducted "stings" of Internet tobacco sales to minors. A 14-year-old Iowa girl purchased cigarettes from the dirtcheap web site, under supervision of a Consumer Protection Division investigator, using her own name and a credit card in her mother's name. The minor was not required to submit proof of age, and a carton of cigarettes was delivered to her home.

Cigarettes sold through the dirtcheap web site were "unstamped" -- they didn't bear the revenue stamp indicating payment of Iowa's excise tax. Customers who buy unstamped cigarettes over the Internet must pay taxes, and online retailers must not mislead customers that they don't have to pay them. Dirtcheap's $20,948 restitution payment will go to the Iowa Dept. of Revenue.

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