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Law enforcement officers were on alert for potential protests on the Seneca Indian Nation's two western New York reservations, the site of past, sometimes violent, clashes over taxation issues.More than half of the approximately 200 New York-based Web sites offering cut-rate cigarettes for sale are run by Indian businessmen.In April 1997, demonstrators burned tires to close roads and skirmished with state troopers to protest the state's attempt to collect taxes on reservation tobacco and gasoline sales. The Pataki administration later quietly abandoned the tax collection attempt."We would far rather have this settled in the courts," said Seneca Larry Ballagh, owner of Traveling Smoke. But he and others did not rule out other means of expressing their opposition."We are a nation being attacked by another nation," he said, "and like all nations being attacked, we will respond accordingly."Indian tribes argue they are sovereign nations and immune from state tax laws.

State Police Lt. Glenn Miner said there had been no incidents on the reservations as of Wednesday afternoon.The 2000 legislation _ which has never been enforced because of legal challenges _ prohibits private trucking companies from delivering Internet and mail-order shipments of cigarettes to consumers. The law does not prevent vendors from using the U.S. Postal Service for cigarette deliveries, a loophole some businesses were taking advantage of, Davoudi said.Tom Bergin, spokesman for the state Taxation and Finance Department, said the first day of enforcement was uneventful."Reasonable people will comply with the law," he said.
A New York state law that bans direct sales of cigarettes...

In a 79-page ruling, U.S. District Court Judge Loretta Preska wrote that the law violates the commerce clause of the U.S. Constitution, which limits the powers of states to restrict interstate trade. While the state''s interest in protecting the health of residents is "indeed commendable," Preska said, that can''t be done in violation of constitutional guarantees to companies.
The law, signed last August by New York Gov. George Pataki, banned direct sales of cigarettes over the Internet and the two other mediums in an attempt to prevent minors from making illegal purchases. The measure also sought to halt untaxed sales of cigarettes in the state via mail order and other means. But Louisville, Ky.-based cigarette maker Brown & Williamson Tobacco filed a lawsuit challenging the direct-sales ban last October, arguing that it unfairly limited the ways companies could do business in New York. A month later, Preska issued a temporary restraining order against the law just before it was due to take effect.
Brown & Williamson spokesman Mark Smith on Friday called the ruling "a caution to the states" in how they try to legislate online sales and business. Preska "made clear that states have many tools at their disposal to protect their interests without banning direct sales," Smith said, adding that state officials "ought not use a meat ax when a scalpel will do." A New York state law that sought to prohibit the direct sale of cigarettes through the Internet, as well as by mail order and via telephones, was declared unconstitutional by a federal judge in Manhattan.
Marc Violette, a spokesman for the New York state attorney general''s office, which defended the law, said that it''s disappointed by Preska''s ruling and is considering options for an appeal. "We view the issue of Internet sales of tobacco as being an important health issue in New York, particularly when it allows [minors] access when using the Internet," Violette said. Brown & Williamson, the third-largest cigarette maker in the U.S., set up a new division called BWT Direct last year to sell some of its harder-to-find cigarette brands directly to smokers. The direct-marketing strategy is aimed at making the brands more visible at a time when retailers have finite amounts of shelf space for products such as cigarettes.
The hard-to-find brands currently account for about 3.5 percent of the company''s annual sales. Brown & Williamson has said BWT Direct will collect all taxes on direct sales of the cigarettes and forward the money to the federal government and to state revenue departments, as required by existing laws.

 

But he did have one big question about selling cigarettes over the Internet.
"My first thought is, is that legal?" said Gentry, 32, who over the years has held several marketing and advertising jobs in the Triad and New York.
Gentry, a Burlington native, discovered that it was legal to sell cigarettes online, and over the phone, and by fax, so at the beginning of March, he started his Web site, CutRateSmokes.com. Customers can also place orders toll-free by phone, fax or by mail.
Gentry's business, which he operates by himself out of his home in Greensboro, generated about $4,000 in revenue in its first month. He incorporated Cut Rate Inc. in late January, according to state records.
The market for selling cigarettes over the Internet has increased sharply in recent years as the price of cigarettes has gone up because of price increases by cigarette companies and excise-tax increases by many states.
North Carolina has the third-lowest excise tax on cigarettes in the country at 5 cents a pack. Because the tax is so low, Gentry can sell a carton of Marlboros for $26.50, or a carton of Camel filters for $28.50 - not including the $6 flat-fee for shipping - to customers in states with higher excise taxes, saving them a lot of money.Chris Gentry got the idea to start selling cigarettes over the Internet last fall from a friend of his when they went to a Goodwill store in Greensboro to donate some clothes.Gentry had been out of work for about a year. He had been laid off from his last two jobs in New York - because of a merger at one company and cost-cutting moves at another.
"If you're paying $70 a carton in New York City, and I can sell them for $29, that's a pretty good deal," he said.

But selling cigarettes over the Internet has drawn fire from such anti-tobacco groups as the Campaign for Tobacco-Free Kids. They charge that online sellers threaten public health because they don't do an adequate job of age-verification.
Gentry said that his age-verification features are "robust." Customers must be 18. If they pay by credit card, the address where the package is shipped must be the same as the credit-card billing address. Customers must also sign for their packages on delivery. His Web site has also registered with the company that makes the parental-control software program, Net Nanny.
The Campaign for Tobacco-Free Kids also says that online sales rob states of excise-tax revenue.
A federal law, the Jenkins Act, requires that anyone who sells and ships cigarettes across state lines to someone other than a licensed distributor must report the sale to the buyer's state tobacco-tax administrator once a month.
Violating the law is a misdemeanor and carries a maximum penalty of $1,000.
The law is rarely enforced, however. Gentry said he has shipped cigarettes to a number of states around the country. There is a 10-carton limit on orders.
"There are really about 16 states that it would make sense pricewise for someone to order from," he said.
"A violation of the Jenkins Act is a misdemeanor and consequently isn't a high priority for federal law enforcement agencies," wrote Rob Campagnino, an analyst at Prudential Securities in New York, in a report published in September.
Buyers of online cigarettes are supposed to report their purchases to state tax authorities and pay their home-state's tax on the cigarettes.
"However, in practice, few consumers make the required tax payments - surprise!" Campagnino wrote.
Gentry, who earned a master's of business administration degree from Wake Forest University's Babcock Graduate School of Management, said he is aware of the Jenkins Act and is keeping records in case authorities make an inquiry into his business.
"Until compliance is required, I'll continue to conduct things as they are," he said.
A report in August by the General Accounting Office, the investigative arm of Congress, said that in a review of 147 Web sites based in the United States that sell cigarettes online, 16 percent cited American Indian status, the Internet Tax Freedom Act and other laws for not complying with the Jenkins Act.
The GAO report said that "our review of the laws cited, as well as the Jenkins Act and its legislative history, indicates that neither Native American status nor any of the laws cited relieve Internet vendors of their Jenkins Act responsibilities."

Even though he has learned a lot, the online cigarette-selling business is probably not going to be his line of work forever.
"This is just a business for a couple years," he said. "This is good for now, and it's interesting."Gentry owns 90 percent of his company. The other10 percent is owned by a Raleigh investor who put up some capital. Gentry said that the business cost about $3,000 to get up and running."On the cheap is the name of the game," he said.He said that his business is breaking even, but it isn't generating personal income for him yet.