Chain Smoking

He's done Amway. He's sold cable TV. But this cyber-cig deal, says Kevin Kintzi, is the real McCoy.

A pack-a-day smoker, Kevin Kintzi is never heard promising to quit next month, or making any of the other abashed declarations that accompany the ritual of lighting up these days. What he does say, frequently and happily, is that eight years ago he nearly died of a brain aneurysm. He was taking a drag on a filtered cigarette when a vein in his head popped; he says doctors later told him that the nicotine he was inhaling had narrowed his blood vessels and possibly saved his life. Kintzi, now 47 and living on disability payments, took the incident as divine permission to keep puffing.

And so it was that a month ago, when he received a heap of junk e-mail after visiting an America Online chat room, he opened one message because it came from an online tobacco sales concern. That e-mail, he says now, just may have been his ticket to turning his jones into a gold mine. "I tell you the truth. This is such a no-brainer, if somebody doesn't get involved in this"--he pauses, inhales--"I don't know what."

Here's how the former creamery worker and cable-TV sales rep anticipates subsidizing his habit and getting rich besides: Several weeks ago he paid $9.95 to join Stone Tobacco (www.stonetobacco.com), a wholesale cigarette-buying club. Stone offers four different kinds of cigarettes, all manufactured by the Omaha Nation Tobacco Company, located on a reservation in northeastern Nebraska about 25 miles west of Sioux City, Iowa.

As a member, Kintzi can purchase a minimum of two cartons of additive-free Omaha Nation smokes per month at the bargain rate of just $11.95 per carton, delivered to his home near Mankato. The price is so low because it doesn't include either state tobacco or sales taxes, which add about 75 cents to the cost of a pack of cigarettes sold in a store. A carton of Marlboros, for instance, sells in Twin Cities discount stores for upwards of $25.

But cheap cigarettes are just the beginning. As long as Kintzi buys four cartons a month--"Oh yeah, I'll smoke 'em," he half chuckles, half coughs--he is entitled to earn compensation for introducing new members to the club. Under Stone Tobacco's rules, every time one of his recruits buys a carton, Kintzi is supposed to receive a quarter. If the smokers he sponsors in turn become recruiters, Kintzi is to get 25 percent of their compensation. Kintzi says his "downline" has already grown to nearly 50 people, so he expects his first month's share to come close to $50--enough, right there, to underwrite his own habit. Given the expected growth in cigarette prices, stemming, in part, from tobacco lawsuits like the one Minnesota settled last year, Kintzi figures Stone Tobacco can't help but catch on like wildfire. And unlike multilevel marketing organizations he has been involved with in the past, he says this one is hassle-free: "I did Amway and I had to collect and go out and deliver and sell." With Stone Tobacco, all the work takes place through his PC--and he can smoke on the job.

Right now, Omaha Nation smokes are for sale only on the Internet. Kintzi's sponsor is Stan Haley, a cybergeek in Kansas with a background in multilevel marketing who offers his recruits free home pages
through his Web site. (Kintzi's URL is www.smokes4cash.com/cgi/members/kk117.html) Haley says the club has been marketing online since early December, already boasts more than 5,200 members, and is signing up about 400 new tokers a day. He says he has been told that compensation checks totaling more than $96,000 will be cut next month.

Officials of the Omaha Nation Tobacco Company could not be reached for comment. But Haley says the tribe owns the cigarette factory, pays the required federal manufacturing taxes, and sells its entire production to a tribal member who is legally entitled to resell the tobacco. The member in turn contracts with a Phoenix, Ariz.-based company called New Marketing Concepts to run the Stone Tobacco club. New Marketing officials did not return phone calls for this story.

States and tribes throughout the country have long wrestled with the question of whether tribes can legally sell products such as cigarettes and gasoline to nontribal members tax-free. Stone Tobacco's Web site acknowledges that "All state revenue departments may not be aware of the issues of tribal sovereignty and may have questions regarding this issue. We plan on working with and educating those that may have questions." Stone Tobacco's bylaws appear designed to avoid some legal pitfalls: The club requires members to vouch that they will not resell their smokes, and it prohibits purchases of more than 20 cartons per month. New members must supply a copy of their birth certificate or driver's license proving that they are of age, agree not to advertise without prior approval from Stone Tobacco, and release the club from any legal liability.

Stone Tobacco is not the first venture to take the reservation smoke-shop concept online. New York legislators started an investigation into sales of brand-name cigarettes by Salamanca-based Iroquois Tobacco Direct last year, after an underage legislative intern bought five cartons of Marlboro using a Capitol computer. California officials estimate they are losing some $50 million in unpaid cigarette taxes a year to a combination of Internet sales and smuggling.

George Hoyum, director of the state Department of Revenue special taxes division, concedes that Minnesota probably has no jurisdiction over sales made by the Omaha Nation. He says state laws allow for the import of one carton of cigarettes tax-free, but that consumers who buy more might become liable for the state's "compensating use tax": They could be forced to pay the tobacco tax a Minnesota retailer would have paid to bring cigarettes into the state, currently $4.80 for every carton. A buyer's failure to report purchases could spark a fine, he adds.

If Kintzi's fantasies of signing up thousands of smokers materialize, Hoyum speculates, the taxes owed by consumers of Stone Tobacco "could add up to enough to be economically worthwhile to collect." First, however, the state would have to become aware of the buyers. And when they get that kind of information, Hoyum says, it's usually as a result of investigations by other government agencies, such as the state attorney general's office or the federal Bureau of Alcohol, Tobacco, and Firearms. Officials at both agencies failed to return City Pages' phone calls for this story.

For his part, Kintzi, who has taken to signing his e-mails with the moniker "Cheap Smokes," says he isn't worried about regulators or tax collectors. And neither the Omaha Nation nor the state need worry he'll resell his $1.20-a-pack cigs at a profit, he adds: "One local guy I know said, 'Why not just slip me a carton here or there?' I said, 'I can make up to $700,000 a year from this. Why am I going to jeopardize that?'"

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