The law also made it illegal for shipping companies to deliver online cigarettes to any non-licensed dealers.

Since cigarettes vendors who rely on over the counter sales are unlikely to allow themselves to serve as a conduit for tobacco products that undercut their prices, the law effectively ends Internet tobacco sales in New York, observers said dute free cigarettes.

New York's law, and the outcome of the court proceedings are being closely watched around the country because New York was the first state to totally ban Internet tobacco sales, said Christopher Banthin, an analyst with the Tobacco Products Liability Project in Boston.

Other states have tried to control the sales of tobacco to minors by requiring age verification procedures, but Internet merchants have often ignored them, he said.

The state law was challenged by Brown & Williamson Tobacco Corp. and other tobacco companies shortly after it was signed by Pataki.

The United States District Court of the Southern District of New York issued a restraining order against enforcement of the law in November 2000 and then declared the law a violation of the Commerce Clause on June 8, 2001 following a five-day trial.

The tobacco companies argued that the state was maintaining a double-standard because it did not seek to tax cigarette sales on Indian reservations, and violated federal law because it was seeking to tell the United States Postal service what it could and could not ship.

The Second Circuit Court decided that the state's law was a a "de minimis" burden on interstate commerce. It was not "clearly excessive in relation to the local putative benefits," the decision reads.