01:39 PM PST on Friday, March 18, 2005

By MICHAEL GORMLEY, Associated Press Writer

ALBANY, N.Y. -- Major credit card companies will no longer handle Internet sales of cigarettes under a nationwide agreement announced Thursday.

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The negotiations were led by the attorneys general from New York, California and Oregon, and joined by those from Colorado, Idaho, Louisiana, Maryland, Pennsylvania, Vermont and Wisconsin.

The move is aimed at illegal dealers that are trying to avoid sales taxes or sell to underage customers.

The thriving trade of Internet tobacco undercuts local businesses that sell cigarettes and often avoids sales tax for states and cities, allowing smokers to buy cigarettes considerably cheaper online.

The agreement among virtually all credit card companies, state officials from around the country, and the Bureau of Alcohol, Tobacco, Firearms and Explosives is effective immediately.

"The way the system works now, tobacco can get into the hands of minors," said Bob Cooper, spokesman for the Idaho attorney general's office. "And these sales are depriving the states of revenue."

Smokers would still be able to buy cigarettes over the Internet, but they would not be allowed to use their credit cards, including Visa, MasterCard, American Express and Discover. Instead, they would have to use checks, money orders or some other payment system that would probably hold up delivery.

The long-unchecked practice of buying cigarettes and chewing tobacco over the Internet across state lines is illegal in New York and many other states, but enforcement has been difficult.

The ATF estimated that millions of dollars from illegal cigarette sales are diverted each year to terrorists and criminal organizations. And states lose more than $1 billion a year in tax revenue from Internet tobacco sales, said Sheree Mixell, ATF spokeswoman.

"We welcome the help," said Michael Bouchard, the bureau's assistant director for field operations.