New York City can’t use a federal racketeering law to accuse discount cigarette retailers of evading hundreds of millions of dollars in taxes on Internet sales, the US Supreme Court ruled.

The nation’s highest court, voting 5-3, today threw out the city’s claims under the US Racketeer Influenced and Corrupt Organizations Act (RICO) in lawsuits filed in 2003 and 2004.
More than 400 Web sites sell cigarettes over the Internet with many falsely advertising their sales as “tax free,” according to one of the complaints. The city accuses the retailers of not complying with a federal law requiring them to turn over information about their customers to state officials for tax-collection purposes.
Writing the court’s lead opinion, Chief Justice John Roberts said there wasn’t a close enough connection between the alleged failure to supply that information and the city’s inability to collect the taxes. The city contended it could have used the state information to pursue unpaid taxes.
“We have never before stretched the causal chain of a RICO violation so far and we decline to do so today,” Roberts wrote. The decision reversed a 2008 ruling by a federal appeals court. (pi)