Voice_of_Reason
11th March 2009, 22:38
Federal Excise Tax Increase and Related Provisions
Summary
The Children’s Health Insurance Program Reauthorization Act of 2009 (“Act,” Public Law 111-3), was signed into law on February 4, 2009. The Act increases the Federal excise taxes on tobacco products and sets forth new permit and enforcement provisions regarding tobacco products and processed tobacco.
In the coming weeks, TTB will be publishing detailed information to assist industry members in complying with the provisions of the Act. We will also be posting updated application forms and floor stocks tax return forms. In addition, we will publish in the Federal Register several rulemaking documents implementing the provisions of the Act.
In the interim, we are providing the general guidance below and ask that you please contact the National Revenue Center with any questions. Please email your questions to [email protected] or call the NRC at 1-877-TTB-FAQS (1-877-882-3277) toll free or at (513)-684-3334.
Federal Excise Tax Increase and Floor Stocks Tax
The Act increases the Federal excise tax on all tobacco products and cigarette papers and cigarette tubes, effective April 1, 2009. In addition, the Act imposes a floor stocks tax on all tobacco products (except large cigars), cigarette papers and cigarette tubes held for sale on April 1, 2009. A floor stocks tax is a one-time excise tax placed on a commodity undergoing a tax increase. The amount of the floor stocks tax is equal to the difference between the new tax rate and the one just previous to it. Any person who holds tobacco products (except large cigars), cigarette papers, or cigarette tubes is liable for the floor stocks tax on April 1, 2009. This includes, for example, wholesalers and retail dealers, as well as manufacturers and importers who are holding taxpaid or tax determined products. Each person is allowed a credit against the tax of $500. Liability for the floor stocks tax must be established by inventory and the tax must be paid on or before August 1, 2009. As noted above, more information related to the floor stocks tax will follow. The tax rates in effect on April 1, 2009, and just previous to the increase, as well as the floor stocks tax, are shown in the table below.
Product
Tax Rate effective March 31, 2009
Tax Rate effective
April 1, 2009
Floor Stocks Tax Rate
(difference between
the rates)
Small Cigarettes - Class A
(Weigh 3 lbs. or less per 1,000)
$19.50 per 1,000
equivalent to:
$3.90 per carton
$0.39 per pack
$50.33 per 1,000
equivalent to:
$10.066 per carton
$1.0066 per pack
$30.83 per 1,000
equivalent to:
$6.166 per carton $0.6166 per pack
Large Cigarettes - Class B*
(Weigh more than 3 lbs. per 1,000)
$40.95 per 1,000
$105.69 per 1,000
$64.74 per 1,000
Small Cigars
(Weigh 3 lbs. or less per 1,000)
$1.828 per 1,000
$50.33 per 1,000
$48.502 per 1,000
Large Cigars
(Weigh more than 3 lbs. per 1,000)
20.719% of sales price but not to exceed $48.75 per 1,000
52.75% of sales price but not to exceed $0.4026 per cigar (or $402.60 per 1,000)
NOT PART OF FLOOR STOCKS TAX
Chewing Tobacco**
$0.195 per pound
$0.5033 per pound
$0.3083 per pound
Snuff**
$0.585 per pound
$1.51 per pound
$0.925 per pound
Pipe tobacco**
$1.0969 per pound
$2.8311 per pound
$1.7342 per pound
Roll-your-own tobacco**
$1.0969 per pound
$24.78 per pound
$23.6831 per pound
Cigarette papers***
$0.0122 per 50
$0.0315 per 50
$0.0193 per 50
Cigarette tubes***
$0.0244 per 50
$0.0630 per 50
$0.0386 per 50
*If more than 6 ½ inches in length, the cigarettes are taxable at the rate prescribed for small cigarettes, counting each 2¾ inches, or fraction thereof, as one small cigarette.
**The tax rate is set forth per pound and a proportionate tax at the same rate applies to all fractional parts of a pound.
***The tax rate for less than 50 cigarette papers or cigarette tubes is not prorated. If more than 6 ½ inches in length, the cigarette papers or cigarette tubes shall be taxable at the rate prescribed for that product, counting each 2¾ inches, or fraction thereof, as one cigarette paper or cigarette tube, as appropriate.
Permits, reports, and recordkeeping requirements for manufacturers and importers of processed tobacco
As a result of the Act, any person who manufactures or imports processed tobacco will now be required to qualify for and obtain a permit from TTB, and take inventories, submit reports, and keep records as required by regulation. There is no tax liability on processed tobacco and no bond requirement. Under the Act, the processing of tobacco does not include the farming or growing of tobacco or the handling of tobacco solely for sale, shipment, or delivery to a manufacturer of tobacco products or processed tobacco. The Act includes a transitional rule whereby any person engaged in the business as a manufacturer or importer of processed tobacco on April 1, 2009, who submits an application to TTB within 90 days after April 1, 2009 (that is, on or before June 30, 2009) may continue to engage in that business pending final action by TTB on the permit application.
Expansion of the definition of roll-your-own tobacco
The definition of roll-your-own tobacco at 26 U.S.C. 5702(o), as amended by the Act, reads “any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or for use as wrappers thereof.” Specifically, the Act added the words, “or cigars, or for use as wrappers thereof” to the end of the definition. As a result, existing permit requirements applicable to manufacturers and importers of roll-your-own tobacco will now extend to manufacturers and importers of tobacco for making cigars and tobacco for use as wrappers of cigarettes and cigars. There is no transitional rule for these new industry members. The effective date for this provision is also April 1, 2009.
Basis for denial, suspension, or revocation of permits
As a result of the Act, the basis for denial, suspension, or revocation of permits has been broadened. That is, a permit may now be denied for an applicant who has been convicted of a felony violation of a Federal or State criminal law relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, or if, by reason of previous or current legal proceedings involving a violation of Federal criminal felony laws relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, the applicant is not likely to maintain operations in compliance with the applicable provisions of the IRC. Similarly, a permit may be revoked or suspended for a person convicted of a felony violation of a Federal or State criminal law relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, or if, by reason of previous or current legal proceedings involving a violation of Federal criminal felony laws relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, the person is not likely to maintain operations in compliance with chapter 52 of the IRC. This provision was effective on the date of enactment, that is, February 4, 2009.
Other provisions
As noted above, the general guidance provided here is merely to alert industry members and other interested parties of certain provisions in the Act that have immediate and broad importance. More detailed information, guidance, and regulatory text, will be forthcoming. For reference, the text of the Act follows.
<link>www.ttb.gov</link>
Does this not make anyone else outraged?
Before this is all over cigarettes are going to be $10 a pack even for Camel and cheap brands.
The taxes go to Children’s Health Insurance, what exactly does that have to do with smoking?
Summary
The Children’s Health Insurance Program Reauthorization Act of 2009 (“Act,” Public Law 111-3), was signed into law on February 4, 2009. The Act increases the Federal excise taxes on tobacco products and sets forth new permit and enforcement provisions regarding tobacco products and processed tobacco.
In the coming weeks, TTB will be publishing detailed information to assist industry members in complying with the provisions of the Act. We will also be posting updated application forms and floor stocks tax return forms. In addition, we will publish in the Federal Register several rulemaking documents implementing the provisions of the Act.
In the interim, we are providing the general guidance below and ask that you please contact the National Revenue Center with any questions. Please email your questions to [email protected] or call the NRC at 1-877-TTB-FAQS (1-877-882-3277) toll free or at (513)-684-3334.
Federal Excise Tax Increase and Floor Stocks Tax
The Act increases the Federal excise tax on all tobacco products and cigarette papers and cigarette tubes, effective April 1, 2009. In addition, the Act imposes a floor stocks tax on all tobacco products (except large cigars), cigarette papers and cigarette tubes held for sale on April 1, 2009. A floor stocks tax is a one-time excise tax placed on a commodity undergoing a tax increase. The amount of the floor stocks tax is equal to the difference between the new tax rate and the one just previous to it. Any person who holds tobacco products (except large cigars), cigarette papers, or cigarette tubes is liable for the floor stocks tax on April 1, 2009. This includes, for example, wholesalers and retail dealers, as well as manufacturers and importers who are holding taxpaid or tax determined products. Each person is allowed a credit against the tax of $500. Liability for the floor stocks tax must be established by inventory and the tax must be paid on or before August 1, 2009. As noted above, more information related to the floor stocks tax will follow. The tax rates in effect on April 1, 2009, and just previous to the increase, as well as the floor stocks tax, are shown in the table below.
Product
Tax Rate effective March 31, 2009
Tax Rate effective
April 1, 2009
Floor Stocks Tax Rate
(difference between
the rates)
Small Cigarettes - Class A
(Weigh 3 lbs. or less per 1,000)
$19.50 per 1,000
equivalent to:
$3.90 per carton
$0.39 per pack
$50.33 per 1,000
equivalent to:
$10.066 per carton
$1.0066 per pack
$30.83 per 1,000
equivalent to:
$6.166 per carton $0.6166 per pack
Large Cigarettes - Class B*
(Weigh more than 3 lbs. per 1,000)
$40.95 per 1,000
$105.69 per 1,000
$64.74 per 1,000
Small Cigars
(Weigh 3 lbs. or less per 1,000)
$1.828 per 1,000
$50.33 per 1,000
$48.502 per 1,000
Large Cigars
(Weigh more than 3 lbs. per 1,000)
20.719% of sales price but not to exceed $48.75 per 1,000
52.75% of sales price but not to exceed $0.4026 per cigar (or $402.60 per 1,000)
NOT PART OF FLOOR STOCKS TAX
Chewing Tobacco**
$0.195 per pound
$0.5033 per pound
$0.3083 per pound
Snuff**
$0.585 per pound
$1.51 per pound
$0.925 per pound
Pipe tobacco**
$1.0969 per pound
$2.8311 per pound
$1.7342 per pound
Roll-your-own tobacco**
$1.0969 per pound
$24.78 per pound
$23.6831 per pound
Cigarette papers***
$0.0122 per 50
$0.0315 per 50
$0.0193 per 50
Cigarette tubes***
$0.0244 per 50
$0.0630 per 50
$0.0386 per 50
*If more than 6 ½ inches in length, the cigarettes are taxable at the rate prescribed for small cigarettes, counting each 2¾ inches, or fraction thereof, as one small cigarette.
**The tax rate is set forth per pound and a proportionate tax at the same rate applies to all fractional parts of a pound.
***The tax rate for less than 50 cigarette papers or cigarette tubes is not prorated. If more than 6 ½ inches in length, the cigarette papers or cigarette tubes shall be taxable at the rate prescribed for that product, counting each 2¾ inches, or fraction thereof, as one cigarette paper or cigarette tube, as appropriate.
Permits, reports, and recordkeeping requirements for manufacturers and importers of processed tobacco
As a result of the Act, any person who manufactures or imports processed tobacco will now be required to qualify for and obtain a permit from TTB, and take inventories, submit reports, and keep records as required by regulation. There is no tax liability on processed tobacco and no bond requirement. Under the Act, the processing of tobacco does not include the farming or growing of tobacco or the handling of tobacco solely for sale, shipment, or delivery to a manufacturer of tobacco products or processed tobacco. The Act includes a transitional rule whereby any person engaged in the business as a manufacturer or importer of processed tobacco on April 1, 2009, who submits an application to TTB within 90 days after April 1, 2009 (that is, on or before June 30, 2009) may continue to engage in that business pending final action by TTB on the permit application.
Expansion of the definition of roll-your-own tobacco
The definition of roll-your-own tobacco at 26 U.S.C. 5702(o), as amended by the Act, reads “any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or for use as wrappers thereof.” Specifically, the Act added the words, “or cigars, or for use as wrappers thereof” to the end of the definition. As a result, existing permit requirements applicable to manufacturers and importers of roll-your-own tobacco will now extend to manufacturers and importers of tobacco for making cigars and tobacco for use as wrappers of cigarettes and cigars. There is no transitional rule for these new industry members. The effective date for this provision is also April 1, 2009.
Basis for denial, suspension, or revocation of permits
As a result of the Act, the basis for denial, suspension, or revocation of permits has been broadened. That is, a permit may now be denied for an applicant who has been convicted of a felony violation of a Federal or State criminal law relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, or if, by reason of previous or current legal proceedings involving a violation of Federal criminal felony laws relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, the applicant is not likely to maintain operations in compliance with the applicable provisions of the IRC. Similarly, a permit may be revoked or suspended for a person convicted of a felony violation of a Federal or State criminal law relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, or if, by reason of previous or current legal proceedings involving a violation of Federal criminal felony laws relating to tobacco products, processed tobacco, cigarette papers, or cigarette tubes, the person is not likely to maintain operations in compliance with chapter 52 of the IRC. This provision was effective on the date of enactment, that is, February 4, 2009.
Other provisions
As noted above, the general guidance provided here is merely to alert industry members and other interested parties of certain provisions in the Act that have immediate and broad importance. More detailed information, guidance, and regulatory text, will be forthcoming. For reference, the text of the Act follows.
<link>www.ttb.gov</link>
Does this not make anyone else outraged?
Before this is all over cigarettes are going to be $10 a pack even for Camel and cheap brands.
The taxes go to Children’s Health Insurance, what exactly does that have to do with smoking?