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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’s 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 York’s cigarette
tax.

York officials want to stop CATC’s 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’s cigarette tax. In other words, what types
of courses of action may be likely to succeed in this
regard?