ALBANY, N.Y. (AP) – Philip Morris USA will stop supplying cigarettes to illegal Internet and mail-order dealers as part of an agreement with attorneys general for 37 states and territories, New York officials said Thursday.

The nation’s biggest tobacco company voluntarily agreed to end shipments of any of its products to customers, Indian tribes and enterprises that the states deem illegal, New York Attorney General Eliot Spitzer said.

The action is the third prong of the states’ efforts to curb the sale of cigarettes to minors over the Internet and by mail order, often to avoid substantial state sales taxes. In March, major credit card companies agreed to stop processing payments from Internet retailers. Months ago, shippers DHL and UPS Inc. agreed to stop shipping packages from the vendors.

“These illegal enterprises cannot remain in business without a steady supply of cigarettes, and thus restricting that supply can be very effective,” said Spitzer, who leads the group of attorneys from 33 states, three territories and the District of Columbia.

A spokeswoman for Philip Morris, part of Altria Group Inc., said the agreement builds on the company’s policies and programs to “preserve the integrity of our brands and the legitimate trade channels through which they are sold.

“Our voluntary agreement … sets a framework for continued information sharing with law enforcement and support of their efforts to eliminate illegal sales of Philip Morris USA products,” said the spokeswoman, Denise Keane.

Shares of Altria fell 10 cents to close at $73.75 on the New York Stock Exchange.

The company has agreed to change its practices nationwide, including:

• Ending shipments to any customers the attorneys general found engaged in illegal Internet and mail order sales.

• Reducing the amount of cigarettes sold to customers that state officials find resell the product to Internet retailers.

• Suspending the incentive programs of any retailer engaged in the illegal sales.

The attorneys general consider all Internet cigarette sales to be illegal because they violate one or more state or federal laws aimed at stopping sales to underage smokers and collecting sales taxes. They said many of the sales through foreign Web sites also violate federal smuggling, cigarette labeling, money laundering and contraband laws.

The attorneys general involved represent Alabama, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Mexico, New Jersey, Oklahoma, Oregon, Puerto Rico, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming. Also involved are American Samoa, and the Northern Marianas.

A New York Health Department study in November found that more than a third of New York smokers regularly avoid the state’s high cigarette taxes by buying from Indian reservations, the Internet or duty-free shops. Indian reservations, which as sovereign nations do not collect state tax, were the preferred source of cigarettes for 22 percent of smokers.

The Seneca Nation of Indians in western New York has several online smoke shops. The smoke shops said business had been hurt by an agreement by major credit card companies to refuse to handle online tobacco purchases.

A carton of cigarettes bought from a tribe can retail at $15 less than at off-reservation retailers.

A spokesman for the Seneca tribe did not immediately respond to a request for comment Thursday.

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AP-ES-01-26-06 1713EST

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