ATF officials identified three investigations since 1997 of Internet vendors for cigarette smuggling in violation of the CCTA and violating the Jenkins Act. States’ Efforts Produced Limited Results

Starting in 1997, seven of the nine states had made some effort to promote Jenkins Act compliance by Internet cigarette vendors. These efforts involved contacting Internet vendors and U.S. Attorneys’ Offices. I), we identified 147 Web site addresses for Internet cigarette vendors based in the United States and reviewed each Web site linked to these addresses. Majority of Web sites Indicate that Vendors do Not Comply with the Jenkins Act

None of the 147 Web sites we reviewed stated that the vendor complies with the Jenkins Act and reports cigarette sales to state tobacco tax administrators. Conversely, as shown in table 2, information posted on 114 (78 percent) of the Web sites indicated the vendors’ noncompliance with the act through a variety of statements posted on the sites. Matters for Congressional Consideration

To improve the federal government’s efforts in enforcing the Jenkins Act and promoting compliance with the act by Internet cigarette vendors, which may lead to increased state tax revenues from cigarette sales, the Congress should consider providing ATF with primary jurisdiction to investigate violations of the Jenkins Act (15 U.S.C. Appendix I: Scope and Methodology

To determine actions taken by the Department of Justice (DOJ) and the Bureau of Alcohol, Tobacco and Firearms (ATF) to enforce the Jenkins Act with regard to Internet cigarette sales and factors that may have affected the level and extent of such actions, we provided written questions to DOJ and ATF headquarters requesting the needed information.
Why GAO Did This Study

State and federal officials are concerned that as Internet cigarette sales continue to grow and as states' cigarette taxes increase, so will the amount of lost state tax revenue due to noncompliance with the Jenkins Act. The act requires any person who sells and ships cigarettes across a state line to a buyer, other than a licensed distributor, to report the sale to the buyer's state tobacco tax administrator. The Department of Justice (DOJ) is responsible for enforcing the Jenkins Act, and the Federal Bureau of Investigation (FBI) is the primary investigative authority.

What GAO Found

However, GAO found that DOJ and FBI headquarters officials did not identify any actions taken to enforce the Jenkins Act with respect to Internet cigarette sales. Since 1997, the Bureau of Alcohol, Tobacco, and Firearms (ATF) has begun three investigations of Internet cigarette vendors for cigarette smuggling that included the investigation of potential Jenkins Act violations. Overall, seven of nine selected states have made some effort to promote Jenkins Act compliance by Internet cigarette vendors by contacting Internet vendors and U.S. Attorneys' Offices, but they produced few results. GAO's Internet search efforts identified 147 website addresses for Internet cigarette vendors based in the United States. None of the websites posted information indicating the vendors' compliance with the Jenkins Act. Conversely, information posted on 78 percent of the websites indicated the vendors do not comply with the act.