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Tobacco Products Tax

 

New:  Manufacturers Virginia Tobacco Shipments Report

During their 2010 session the Virginia General Assembly enacted HB 626 which made several changes to the Virginia Products Tax.

One of the enacted changes mandates each tobacco manufacturer that ships tobacco products to any person located in the Commonwealth of Virginia to file an annual report with the Department of Taxation.  The report must identify the names and addresses of persons in the Commonwealth to whom shipments of tobacco products (excluding cigarettes) were made during the previous year. 

The report is due on or before Febuary 20th of each year. The report must also include the type, brand and quantity of the products shipped to each recipient.  For tobacco products taxed based on weight, such as moist snuff and loose leaf tobacco, your report must include both the total units and weight of each tobacco product shipped to each recipient.

Manufacturers may use their own templates for the report provided all of the above data elements are presented in a reasonable format.  The Department prefers the information to be provided in an Excel worksheet or Access database format; however, hard copy paper reports will be accepted.  Reports should be mailed to:

Tobacco Unit
Virginia Department of Taxation
P.O. Box 715
Richmond, VA 23218-0715       

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Other Tobacco Products Tax Forms

TT-8 (PDF 25 Kb) Virginia Tobacco Products Tax Return and Instructions
TT-22 (PDF 197 Kb) Tobacco Products Tax Guidelines and Rules
Publication (PDF 576 Kb) Virginia Taxpayer Bill of Rights
AG-1 (PDF) Stamping Agent's Report to OAG of NPM Cigarettes (Go to: http://www.oag.state.va.us/)
AG-2 (PDF) Stamping Agent's Report to OAG of PM Cigarettes (Go to: http://www.oag.state.va.us/)

General Information

Virginia imposes a tax on tobacco products purchased for sale in the Commonwealth by any person engaged in the business of a tobacco product distributor (Code of Virginia §58.1-1021 et al).

The tobacco products tax is imposed on tobacco products a distributor brings or causes to be brought into the Commonwealth for sale in the Commonwealth; 2) makes, manufactures, or fabricates in the Commonwealth for sale in the Commonwealth; or 3) ships or transports to retailer dealers in the Commonwealth to be sold by those retail dealers in the Commonwealth. The tobacco products tax, however, is due when tobacco products are sold in the Commonwealth and not when the tobacco products are brought into the Commonwealth for sale. The tax is imposed once, and only once, on all tobacco products for sale in the Commonwealth.

Distributors may sell tobacco products without paying the OTP tax, with proper documentation, to other licensed distributors and affiliates. The purchasing distributor is liable for the tobacco products tax for such tobacco products when he sells to a retailer within the Commonwealth.

You must receive a license from the Department to legally conduct business as a tobacco product distributor. The tax must be paid by the distributor, and so noted on any invoice or receipt provided to the purchaser (see "Recordkeeping").

Effective January 1, 2011 the OTP tax on moist snuff will be $0.18 per ounce based on the net weight of the package.

Loose leaf tobacco products are taxed at different rates based on the weight of each unit:
$0.21 for each unit less than 4 ounces
$0.40 for each unit that is at least 4 ounces but not more than 8 ounces
$0.70 for each unit more than 8 ounces but not more than 24 ounces
Units that exceed 24 ounces are taxed at $0.21 per unit plus $0.21 for each 4 ounce increment that exceeds 16 ounces

A taxable unit is considered to be the unit manufactured for the intended sale at retail to an individual consumer.

All other tobacco products, such as cigars, pipe tobacco, dry snuff, plug, twist and roll-your-own tobaccos are taxed at 10% of the manufacturer’s sales price. 

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Other Tobacco Products (OTP) Defined

For purposes of this tax, other tobacco product means:

Cigars as defined in Section 5702 of the Internal Revenue Code
Pipe Tobacco as defined in Section 5702 of the Internal Revenue Code

Roll-your-own tobacco means 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

Moist snuff is defined as any finely cut, ground, or powdered tobacco that is not intended to be smoked but does not include any tobacco intended to be placed in the nasal cavity. Moist snuff includes items such as snus and dissolvable tobacco products.

Loose leaf tobacco means any leaf tobacco that is not intended to be smoked, but shall not include moist snuff
 

Note: Cigarettes are not subject to the Other Tobacco Products Tax.

Please see the Cigarette Tax chapter for more information on cigarette taxes.

Special treatment for RYO Tobacco/Cigarettes.

Roll-your-own (RYO) tobacco means any tobacco labeled for or suitable for use and purchase by consumers as tobacco for making cigarettes for personal consumption. Although RYO tobacco is subject to the cigarette tax, the tax on RYO is administered in the same manner as the Other Tobacco Products Tax (See OTP Tax Return -Form TT-8 PDF 25 Kb). RYO dealers must also report their RYO activity to the Office of the Attorney General.

OTP Distributor Defined.

For purposes of the OTP tax, distributor means:

  • Any person engaged in the business of selling tobacco products in the Commonwealth who brings or causes to be brought in to the Commonwealth from outside the Commonwealth any tobacco products for sale in the Commonwealth.
  • Any person, who makes, manufacturers, fabricates, or stores tobacco products in the Commonwealth for sale in the Commonwealth.
  • Any person engaged in the business of selling tobacco products outside the Commonwealth who ships or transports tobacco products to any person in the business of selling tobacco products in the Commonwealth.
  • Any retail dealer in Virginia in possession of untaxed tobacco products.

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Other Tobacco Products Tax Return (TT-8 PDF 25 Kb)

Mail completed return and payment to the following address:

Department of Taxation
P.O. Box 26627
Richmond, Virginia 23261-6627

The due date for this return is before the 20th day of the following month after the close of a reporting period. A return must be filed for each reporting period even if no tax is due.

For more information about this tax or help filing the returns, please call (804) 371-0730.

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Permits

Any person engaged in the business of selling OTP in Virginia who imports OTP from outside the Commonwealth, or manufacturers or stores OTP in Virginia, or any Virginia retail dealer in possession of untaxed OTP, must apply for and receive a permit to legally conduct an OTP business in Virginia.

It is unlawful to import, transport, or possess for resale any tobacco products in the Commonwealth without a permit. There is a presumption that dealing in OTP without a license is for the purpose of evading the tax. As such, all OTP inventories, fixtures, equipment, materials and personal property used in connection with the unlicensed possession and sale of OTP are subject to seizure and forfeiture.

To become a licensed OTP distributor, you must file an application for and receive a permit from the Department. The application forms are: Form TT-1 (PDF 30 Kb - Application for Cigarette Stamping Permit and Tobacco Products Tax Distributor's License) and Schedule A (PDF 27 Kb - Personal Data Form). There is a $600 application fee due with the application and a criminal background check will be conducted on the principal operatives of the company. Applicants should allow at least 90 days for processing of their applications and the issuance of their permits. Permits are valid for a period of three years from the date of issue.

Principal operatives requiring a criminal background check includes anyone who meets any of the following criteria: any officer, director, manager, sole proprietor, partner, member, stockholder, or any other person possessing an ownership interest of 10% or greater in the applicant entity. Background checks will also be required for anyone who exercises authority or control over the purchase, storage, sale or distribution of cigarettes or OTP, or over the compliance with any cigarette or tobacco products tax laws.

Any person who assumes any of the roles mentioned above after the initial application is filed must apply to the Department for a background check within 90 days of assuming that role. OTP distributors with multiple locations pay only one fee. There is an additional $100 fee for each background check submitted subsequent to the initial application.

A retail dealer may not purchase tobacco products for resale to consumers from any person (distributor) unless the Department licenses that distributor, or the retail dealer applies for and is granted it's own OTP license.

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Licensed OTP Distributors

Retail dealer's purchasing OTP from a distributor not on the current licensed distributors list (PDF 33Kb) must apply for it's own license.

Filing Requirements: OTP Tax Return (TT-8)

OTP distributors liable for the OTP tax must file a Form TT-8 (Tobacco Products Tax Return) each month to report OTP and RYO purchases made the previous month. Form TT-8 and the OTP tax payment is due by the 20th of the month.

RYO Activity to be Reported to Attorney General.

In addition to filing Form TT-8 and remitting the tax due, Other Tobacco Products distributors selling Roll-Your-Own Tobacco are also required to file a monthly report, Form AG-1 or AG-2, with the Office of the Attorney General. Forms and additional information can be found on the Office of the Attorney General website.

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Penalties and Interest

A Form TT-8 must be filed for each month even if there is no tax due. If a distributor fails to file or pay the full amount of the tax when due, a penalty is assessed on the late payment. The penalty is five (5) percent of the tax due for one month, or fraction of a month, with an additional penalty of 2 percent for each additional month or fraction of a month.

The maximum penalty that can be assessed is 20 percent of the tax due. The minimum penalty that will be assessed is $10 and will apply whether or not any tax is due for the period.

In the case of a false or fraudulent return where willful intent exist to defraud the Commonwealth of any tax due, or of a failure to file a return with the intent to defraud the Commonwealth of any tax, a penalty of 50 percent of the amount of the OTP tax will be assessed. Intent to defraud is assumed if any taxpayer reports sales or purchases at 50 percent or less than the actual amount.

Interest on late returns and unpaid balances will be applied at the underpayment rate established by Section 6621 of the Internal Revenue Code, plus 2 percent.

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Recordkeeping

Each distributor must keep in each licensed place of business complete and accurate records for that place of business. Records must include itemized invoices of tobacco products purchased and imported into Virginia, records of all sales of other tobacco products, records of OTP transfers to other retail outlets owned by the licensee and any other records required by the the Department.

Records must be retained for at least three years, and must be available for inspection by the Department's agents or employees at any time during normal business hours.

Each invoice for the sale of OTP to persons other than the ultimate consumer must clearly state the distributor's name and address, the purchaser's name and address, the date of sale, all prices and the wording "Virginia Tobacco Products Tax Paid." If the invoice includes items not subject to the OTP tax, the invoice must show separate subtotals for taxable and nontaxable items. Otherwise, separate invoices must be issued for taxable and non-taxable items.

Failure to make OTP records available for inspection is a Class 2 misdemeanor under the Code of Virginia §58.1-103.

Appeals

Taxpayers may appeal tobacco products tax issues or assessments to the Virginia Department of Taxation using the administrative appeals process as established in Code of Virginia §58.1-1820. Please see the Virginia Taxpayer Bill of Rights (PDF 576 Kb), available at the department's website, for additional information.

Disposition

Revenue generated from the Tobacco Products Tax is deposited into the Virginia Health Care Fund.

Additional Information

For additional information on the Tobacco Products Tax, download Form TT-22 (PDF 197 Kb - Tobacco Products Tax Guidelines and Rules)

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For Assistance Contact:

Tobacco Unit
Virginia Department of Taxation
P.O. Box 715
Richmond, VA 23218-0715
804-371-0730

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Last Updated 7/31/2014 11:46

 

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