34 Tex. Admin. Code § 3.121 - Definitions, Imposition of Tax, Permits, and Reports
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Bonded agent--A person in Texas who is a third-party agent of a manufacturer
located outside of Texas and who receives tobacco products in interstate
commerce and stores the tobacco products for distribution or delivery to
distributors under orders from the manufacturer.
(2) Cigar--A roll of fermented tobacco that
is wrapped in tobacco and that the main stream of smoke from which produces an
alkaline reaction to litmus paper.
(3) Commercial business location--The entire
premises occupied by a permit applicant or a person required to hold a permit
under Tax Code, Chapter 155 (Cigar and Tobacco Product Tax). A commercial
business location does not include a residence or a unit in a public storage
facility.
(4) Common carrier--A
motor carrier registered under Transportation Code, Chapter 643 (Motor Carrier
Registration), or a motor carrier operating under a certificate issued by the
Interstate Commerce Commission or its successor agency.
(5) Distributor--A person who:
(A) receives untaxed tobacco products from a
manufacturer for the purpose of making a first sale in Texas;
(B) brings or causes to be brought into Texas
untaxed tobacco products for sale, use, or consumption;
(C) manufacturers or produces tobacco
products; or
(D) is an
importer.
(6) Engage in
business--A person engaging either directly or through a representative, in any
of the following activities:
(A) selling
tobacco products in or into this state;
(B) using a warehouse or another location to
store tobacco products; or
(C)
otherwise conducting through a physical presence tobacco product-related
business in this state.
(7) Export warehouse--A person in this state
who receives untaxed tobacco products from manufacturers and stores the tobacco
products for the purpose of making sales to authorized persons for resale, use,
or consumption outside the United States.
(8) Factory list price--The published
manufacturer gross cost to the distributor. The term is synonymous with
manufacturer's list price.
(9)
First sale--Except as otherwise provided by this section, the term means the
first transfer of possession in connection with a purchase, sale, or any
exchange for value of tobacco products in or into this state, which includes:
(A) the sale of tobacco products by a
distributor in or outside this state to a distributor, wholesaler, or retailer
in this state; and a manufacturer in this state who transfers the tobacco
products in this state; and does not include:
(i) the sale of tobacco products by a
manufacturer outside this state to a distributor in this state; or
(ii) the transfer of tobacco products from a
manufacturer outside this state to a bonded agent in this state;
(B) the first use or consumption
of tobacco products in this state; or
(C) the loss of tobacco products in this
state whether through negligence, theft, or other loss.
(10) Importer--A person who ships,
transports, or imports into Texas tobacco products manufactured or produced
outside the United States for the purpose of making a first sale in this
state.
(11) Manufacturer--A person
who manufactures, fabricates, or assembles tobacco products, or causes or
arranges for the manufacture, fabrication, or assembly of tobacco products, for
sale or distribution.
(12)
Manufacturer's representative--A person who is employed by a manufacturer to
sell or distribute the manufacturer's tobacco products.
(13) Manufacturer's listed net weight--For
the purposes of calculating and reporting the state excise tax due on tobacco
products other than cigars, the taxable net weight for a tobacco product is the
weight of the finished product as shown or listed by the product manufacturer
on the product can, package, shipping container, or the report required by Tax
Code, §
155.103(b)
(Manufacturer's Records and Reports).
(14) Permit holder--A bonded agent,
distributor, importer, export warehouse, manufacturer, wholesaler, or retailer
who obtains a permit under Tax Code, §
155.041(Permits).
(15) Place of business--
(A) a commercial business location where
tobacco products are sold;
(B) a
commercial business location where tobacco products are kept for sale or
consumption or otherwise stored and may not be a residence or a unit in a
public storage facility;
(C) a
vehicle from which tobacco products are sold; or
(D) a vending machine from which tobacco
products are sold.
(16)
Raw tobacco--Any part of the tobacco plant, including the tobacco leaf or stem,
that is harvested from the ground and is not a tobacco product as the term is
defined in this section.
(17)
Retailer--A person who engages in the business vending machine.
(18) Tobacco product--A tobacco product is:
(A) a cigar;
(B) smoking tobacco, including granulated,
plug-cut, crimp-cut, ready-rubbed, and any form of tobacco substitute for
smoking in a pipe or as a cigarette;
(C) chewing tobacco, including, Cavendish,
Twist, plug, scrap, and any kind of tobacco suitable for chewing;
(D) snuff or other preparations of pulverized
tobacco; or
(E) an article or
product that is made of tobacco or a tobacco substitute and that is not a
cigarette or an e-cigarette as defined by Health and Safety Code, §
161.081
(Definitions).
(19) Trade discount, special discount, or
deals--Includes promotional incentive discounts, quantity purchase incentive
discounts, and timely payment or prepayment discounts.
(20) Weight of a cigar--The combined weight
of tobacco and nontobacco ingredients that make up the total product in the
form available for sale to the consumer, excluding any carton, box, label, or
other packaging materials.
(21)
Wholesaler--A person, including a manufacturer's representative, who sells or
distributes tobacco products in this state for resale but who is not a
distributor.
(b)
Imposition of tax. A tax is imposed and becomes due and payable when a permit
holder receives cigars or tobacco products for the purpose of making a first
sale in this state.
(1) Tax Rates.
(A) the tax on cigars is calculated at:
(i) $.01 per 10 or fraction of 10 on cigars
that weigh three pounds or less per thousand;
(ii) $7.50 per thousand on cigars that weigh
more than three pounds per thousand and that are sold at factory list price,
exclusive of any trade discount, special discount, or deal, for 3.3 cents or
less each;
(iii) $11 per thousand
on cigars that weigh more than three pounds per thousand and that are sold at
factory list price, exclusive of any trade discount, special discount, or deal,
for more than 3.3 cents each, and that contain no substantial amount of
nontobacco ingredients; and
(iv)
$15 per thousand on cigars that weigh more than three pounds per thousand and
that are sold at factory list price, exclusive of any trade discount, special
discount, or deal, for more than 3.3 cents each, and that contain a substantial
amount of nontobacco ingredients.
(B) The tax for tobacco products, other than
cigars, is based on the manufacturer's listed net weight for an individual
product's can or package and a rate for each ounce and proportionate rate on
all fractional parts of an ounce of weight for that product. The tax imposed on
a can or package of a tobacco product that weighs less than 1.2 ounces is equal
to the amount of the tax imposed on a can or package that weighs 1.2 ounces.
The rates imposed for state fiscal years 2010, 2011, 2012, 2013, 2014, and
thereafter are set forth in this subparagraph. An expanded chart showing rates
for cans or packages greater than 1.2 ounces is available at
comptroller.texas.gov.
(i) The rate for the
state Fiscal Year 2010 (September 1, 2009 through August 31, 2010), is $1.10
per ounce plus the proportionate rate on all fractional parts of an
ounce.
(ii) The rate for the state
Fiscal Year 2011 (September 1, 2010 through August 31, 2011), is $1.13 per
ounce plus the proportionate rate on all fractional parts of an
ounce.
(iv) The rate for the state
Fiscal Year 2013 (September 1, 2012 through August 31, 2013), is $1.19 per
ounce plus the proportionate rate on all fractional parts of an
ounce.
(v) The rate for state
Fiscal Year 2014 (which begins September 1, 2013) and for each fiscal year
thereafter, is $1.22 per ounce plus the proportionate rate on all fractional
parts of an ounce.
(C)
The tax imposed on a unit that contains multiple individual cans or packages is
the sum of the taxes imposed under paragraph (1)(B) of this subsection, on each
individual can or package intended for sale or distribution at retail. For
example, on November 1, 2009 (Fiscal Year 2010) a distributor receives from a
manufacturer for the purpose of making a first sale in Texas a unit of snuff
that consists of 10 individual cans. Each can weighs 1.3 ounces. The effective
tax rate for each can is $1.43. The total tax due for the unit is calculated by
multiplying the effective tax rate on each individual can ($1.43) by the total
number of individual cans in the unit (10 cans), for a total tax due of
$14.30.
(2) Free goods
shall be taxed at the prevailing factory list price, except that each tobacco
product other than cigars shall be taxed according to the manufacturer's listed
net weight for the product and the applicable fiscal year rate for each ounce
and proportionate rate for all fractional parts of an ounce according to
paragraph (1)(B) of this subsection.
(3) A person who receives or possesses
tobacco products on which a tax of more than $50 would be due is presumed to
receive or possess the tobacco products for the purpose of making a first sale
in this state. This presumption does not apply to common carriers or to
manufacturers.
(4) A tax is imposed
on manufacturers, who manufacture tobacco products in this state, at the time
the tobacco products are first transferred in connection with a purchase, sale,
or any exchange for value in intrastate commerce.
(5) The delivery of tobacco products by a
principal to its bonded agent in this state is not a first sale.
(6) If a manufacturer sells tobacco products
to a purchaser in Texas and ships the products at the purchaser's request to a
third party distributor in Texas, then the purchaser has received the tobacco
products for first sale in Texas.
(7) The person in possession of cigars or
tobacco products has the burden to prove payment of the tax.
(c) Sales and purchase
requirements for permit holders. Except for retail sales to consumers,
cigarettes may only be sold or distributed by and between permit holders as
provided by this section. A permit holder may engage in the following business
activities:
(1) A manufacturer outside this
state who is not a permitted distributor may sell tobacco products only to a
permitted distributor.
(2) A
permitted distributor may sell tobacco products only to a permitted
distributor, wholesaler, or retailer.
(3) A permitted importer may sell tobacco
products only to a permitted distributor, wholesaler, or retailer.
(4) A permitted wholesaler may sell tobacco
products only to a permitted distributor, wholesaler, or retailer.
(5) A permitted retailer may sell tobacco
products only to the consumer and may purchase tobacco products only from a
permitted distributor or wholesaler.
(6) A permitted export warehouse may sell
tobacco products only to persons authorized to sell or consume untaxed tobacco
products outside the United States.
(7) A manufacturer's representative may sell
tobacco products only to a permitted distributor, wholesaler, or
retailer.
(d) Liability
of a permitted distributor. A permitted distributor who makes a first sale to a
permitted distributor in this state is liable for and shall pay the
tax.
(e) Permits required. To
engage in business as a distributor, importer, manufacturer, export warehouse,
wholesaler, bonded agent, or retailer a person must apply for and receive the
applicable permit from the comptroller. The permits are not transferable.
(1) A person who engages in the business of a
bonded agent, distributor, importer, manufacturer, export warehouse,
wholesaler, or retailer without a valid permit is subject to a penalty of not
more than $2,000 for each violation. Each day on which a violation occurs is a
separate offense. A new application is required if a change in ownership occurs
(sole ownership to partnership, sole ownership to corporation, partnership to
limited liability company, etc.). Each legal entity must apply for its own
permit(s). All permits issued to a legal entity will have the same taxpayer
number.
(2) Each distributor,
importer, manufacturer, wholesaler, bonded agent, export warehouse, or retailer
shall obtain a permit for each place of business owned or operated by the
distributor, importer, manufacturer, wholesaler, bonded agent, or retailer. A
new permit shall be required for each physical change in the location of the
place of business. Correction or change of street listing by a city, state, or
U.S. Post Office shall not require a new permit so long as the physical
location remains unchanged.
(3)
Permits are valid for one place of business at the location shown on the
permit. If the location houses more than one place of business under common
ownership, an additional permit is required for each separate place of
business. For example, a retailer must have a separate permit for each vending
machine including several machines at one location.
(4) A vehicle from which cigars and tobacco
products are sold is a place of business and requires a permit. A motor vehicle
permit is issued to a bonded agent, retailer, distributor, or wholesaler
holding a current permit. Vehicle permits are issued bearing a specific motor
vehicle identification number and are valid only when physically carried in the
vehicle having the corresponding motor vehicle identification number. Vehicle
permits may not be moved from one vehicle to another. Each cigar or tobacco
product manufacturer's sales representative is required to purchase a wholesale
dealer's permit for each manufacturer's vehicle operated. No cigar and tobacco
product permit is required for a vehicle used only to deliver invoiced tobacco
products.
(5) The comptroller may
issue a combination permit for cigarettes, tobacco products, or cigarettes and
tobacco products to a person who is a distributor, importer, manufacturer,
wholesaler, bonded agent, or retailer as defined by Tax Code, Chapter 154
(Cigarette Tax) and Chapter 155 (Cigars and Tobacco Products Tax). A person who
receives a combination permit pays only the higher of the two permit
fees.
(6) The comptroller will not
issue permits for a residence or a unit in a public storage facility because
tobacco products cannot be stored at such places.
(f) Permit Period.
(1) Bonded agent, distributor, export
warehouse, importer, manufacturer, wholesaler, and motor vehicle permits expire
on the last day of February of each year.
(2) Retailer permits expire on the last day
of May of each even-numbered year.
(g) Permit Fees. An application for a bonded
agent, distributor, manufacturer, wholesaler, motor vehicle, or retailer permit
must be accompanied by the required fee.
(1)
The permit fee for a bonded agent is $300.
(2) The permit fee for a distributor is
$300.
(3) The permit fee for a
manufacturer with representation in Texas is $300.
(4) The permit fee for a wholesaler is
$200.
(5) The permit fee for a
motor vehicle is $15.
(6) The
permit fee for a retailer permit issued or renewed is $180. Retailers who fail
to obtain or renew a retailer permit in a timely manner are liable for the fee
in effect for the applicable permit period, in addition to the fee described in
paragraph (8) of this subsection.
(7) No permit fee is required to obtain an
importer permit, export warehouse, or to register a manufacturer when the
manufacturer is located out of state with no representation in Texas.
(8) A $50 fee is assessed for failure to
obtain or renew a permit in a timely manner.
(9) The comptroller prorates the permit fee
for new permits according to the number of months remaining in the permit
period. If a permit will expire within three months of the date of issuance,
the comptroller may collect the prorated permit fee for the current permit
period and the total permit fee for the next permit period.
(10) A person issued a permit for a place of
business that permanently closes before the permit expiration date is not
entitled to a refund of the permit fee.
(h) Permit issuance, denial, suspension, or
revocation.
(1) The comptroller shall issue a
permit to a distributor, importer, manufacturer, export warehouse, wholesaler,
bonded agent, or retailer if the comptroller has received an application and
any applicable fee, the applicant has complied with Tax Code, §
155.041, and the comptroller
determines that the issuance of such permit will not jeopardize the
administration and enforcement of Tax Code, Chapter 155.
(2) If the comptroller determines that an
existing permit should be suspended or revoked or a permit should be denied,
after notice and opportunity for hearing, because the applicant has failed to
disclose any information required by Tax Code, §
155.041(d),
(e), and (f), including the applicant's prior
conviction of a crime and the relationship of the crime to the license, the
comptroller will notify the applicant or permittee in writing by personal
service or by mail of the reasons for the denial, suspension, revocation, or
disqualification, the review procedure provided by Occupations Code, §
53.052 (Judicial
Review), and the earliest date that the permit holder or applicant may appeal
the denial, suspension, revocation, or disqualification.
(i) Sale and delivery of tax-free cigars and
tobacco products to the United States government.
(1) Distributors may use their own vehicles
to deliver previously invoiced quantities of tax-free cigars and tobacco
products to instrumentalities of the United States government. These tax-free
products must be packaged in a manner in which they will not commingle with any
other cigars or tobacco products.
(2) Each sale of tax-free cigars and tobacco
products by a distributor to an instrumentality of the United States government
shall be supported by a separate sales invoice and a properly completed Texas
Certificate of Tax Exempt Sale, Form 69-302. Sales invoices must be numbered
and dated and must show the name of the seller, name of the purchaser, and the
destination.
(j) Reports.
(1) Manufacturer reports must be filed on or
before the 25th day of each month for transactions that occurred during the
preceding month.
(2) All tobacco
distributor and wholesaler reports and payments must be filed on or before the
25th day of each month for transactions that occurred during the preceding
month.
(3) All wholesaler and
distributor reports of sales to retailers required by the comptroller under Tax
Code, §
155.105 (Reports by
Wholesalers and Distributors of Cigars and Tobacco Products), shall be filed in
accordance with §
3.9 of this title (relating to
Electronic Filing of Returns and Reports; Electronic Transfer of Certain
Payments by Certain Taxpayers).
Notes
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