The Internet by nature provides bountiful and unprecedented opportunities to sidestep the law, while the limitations of law enforcement let the ethically challenged exploit these opportunities without losing sleep over getting caught.
Another outstanding example can be found in a report about cigarette sales over the Internet that was recently prepared by the U.S. General Accounting Office. The 55-page analysis examines how the 50 states are doing collecting excise taxes that are payable on cigarettes sold by the 147 online tobacco merchants the GAO could identify.
How are the states doing? Let's put it this way: Next time someone lights a cigarette near you, try grabbing a handful of the smoke. . . . That's how they're doing.
The report doesn't get at a precise dollar figure for the lost tax revenue but does cite a year-old Forrester Research estimate that U.S. online tobacco sales will reach $5 billion by 2005 and that the states will lose out on $1.4 billion as a result.
Here is what's happening . . . or, more precisely, not happening.
"Consumers who use the Internet to buy cigarettes from vendors in other states are liable for their own state's cigarette excise tax and, in some cases, sales and/or use taxes," the GAO report explains. "States can learn of such purchases and the taxes due when vendors comply with the Jenkins Act."
Ah, the Jenkins Act. There lies the rub between old law and new technology, as the lawmakers who passed the act - in 1949 - obviously knew not of the Internet. Nonetheless, the act requires vendors - including online merchants - who ship cigarettes into another state to anyone other than a licensed distributor to report the details of all such transactions to the tax authorities in those states.
In theory, the recipients of the cigarettes are supposed to pay the taxes or the states will come calling to collect.
In practice, precious few smokers pay up, and the governments are in poor position to collect because only a handful of merchants fulfill their responsibilities under the Jenkins Act.
Just how pervasive is the disdain for this law? Some of these online outfits carry revealing names such as Notaxsmokes.com and Dutyfreetaxfree.com, while others proudly proclaim on their home pages that they do not and will not comply with the Jenkins Act. Their excuses - including claims of exemption by American Indians - are all bogus, according to the GAO.
Which brings us to the question of what should be done about it.
(All of you who believe it's OK to avoid paying taxes of this kind because you judge them to be unfair can go get in line with the corporate bigwigs and bean counters who believe the rules are meant for others.)
The GAO report says that a violation of the Jenkins Act is only a misdemeanor that carries a maximum $1,000 fine and six months in the can. Near as the GAO can tell, no one has been fined or jailed.
State officials highly recommend making Jenkins violations a felony.
A good start, but that isn't likely to compel individual smokers to get square with the tax collector, or even deter the merchant violators without an accompanying aggressive enforcement campaign.
So why not make the merchants collect the tax payments up front?
You say that would be a logistical nightmare?
Call me unsympathetic.
You say some of these outfits might even be put out of business?
Call that an added bonus.