State And Local Tax

 Please note that I am expecting you to do outside research to complete this assignment. It is expected that you will use case law and/or other applicable authority in the completion of this assignment.

The state of York is concerned about the health of its citizens who are cigarette smokers and also has a projected budget deficit for 2013 of $6 billion. To help solve both problems at once, the state assessed a $2 per pack sales tax on all cigarette sales within the state. The state expects to raise over $1 billion per year with this tax. It also hopes to discourage cigarette usage to the extent possible.

Unfortunately, during 2013, many people seek to avoid this tax. One particularly worrisome practice that has become common among people seeking to make a quick dollar, is to take advantage of the tax arbitrage by buying large quantities of cigarettes in neighboring Jersey (which has no cigarette tax) and selling them to York residents for 50 cents less than a normal retailer. The merchant then earns $1.50 per pack because the merchant did not pay York cigarette tax.

Cigarettes Around The Country (CATC) is a cigarette merchant incorporated in Delaware with a principal place of business in Jersey. It maintains a website on which it advertises cigarettes for five dollars per pack. New York residents routinely order cigarettes from CATC. CATC routinely fills and ships these orders without assessing, collecting or paying Yorks cigarette tax.

York officials want to stop CATC activities. Please write an essay discussing the following two questions:

  1. Is CATC likely to be subject to York taxation or can they make any successful constitutional arguments to avoid being subject to York taxation? Discuss.
  2. Please discuss specific legal mechanisms by which New York may be able to successfully force CATC to collect and pay York cigarette tax. In other words, what types of courses of action may be likely to succeed in this regard?