Tobacco Products Tax Frequently Asked Questions
The following FAQs are provided for general guidance on the Tobacco Products Tax. Taxpayers are encouraged to read the Tobacco Products Tax Guidelines for more detailed instructions on complying with this tax.
1: Who pays the Tobacco Products (OTP) Tax?
A: The Tobacco Products Tax is imposed on tobacco products a distributor 1) 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 actually sold to a retailer in the Commonwealth and not when the tobacco products are brought into the Commonwealth for sale. Retail dealers in possession of untaxed tobacco products are also liable for the Tobacco Products Tax.
2: Are cigarettes subject to the Tobacco Products (OTP) Tax?
A: No. Only tobacco products other than cigarettes, such as snuff, pipe tobacco, roll-your-own tobacco, cigars, and chewing tobacco are subject to the tax.
3: As a distributor of tobacco products, when is the tax imposed?
A: The Tobacco Products Tax is imposed on the distributor at the time the distributor sells the tobacco products to a retail dealer located in Virginia.
4: When is the tobacco products tax return due, and what form should I use?
A: Every distributor registered for the Tobacco Products Tax is required to file Form TT-8, Virginia Tobacco Products Tax Return, on or before the 20th day of the month following the reporting period. A return must be filed for each month even if no tax is due. At the time of filing Form TT-8, Virginia Tobacco Products Tax Return, the distributor must pay the amount of tax due. The return for each period becomes delinquent on the twenty-first day of the succeeding month if not paid.
5: Is the Tobacco Tax one flat rate similar to sales and use tax?
A: No. Tobacco products are taxed at different rates, depending on the product. Products such as cigars, pipe tobacco, dry snuff and roll-your-own tobacco are taxed at a rate of 10.0% of the manufacturer’s sales price or the distributors purchase price. Moist snuff and loose-leaf tobacco are taxed based on the weight of the product sold.
6: As a distributor of Tobacco Products, what amount do I use for the basis for calculating the tax on moist snuff and loose-leaf tobacco products?
A: The OTP tax on moist snuff is $0.18 per ounce based on the net weight of the package. The OTP tax on loose leaf tobacco is based on several rates based on the weight of each unit.
$.021 for each unit less than 4 ounces
$.040 for each unit that is at least 4 ounces but not more than 8 ounces
$.070 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
7: I am an owner of a retail store who sells Other Tobacco Products. I am exempt from Sales and Use Tax when I purchase my inventory. Am I also exempt from the OTP Tax when I make these purchases?
A: Maybe. If you purchase your inventory from a licensed Virginia OTP distributor who has paid the tax, you have no tax liability. If you purchase untaxed product from a non-licensed supplier, you are liable for the OTP tax on those purchases.
8: Do I calculate the tax on loose leaf tobacco using the total weight as packed by the manufacture, or by the individual weight as packaged for retail sale?
A: The tax should be calculated based on the weight for individual sale.
9: Is plug or twist tobacco taxed at the loose leaf tobacco rate?
A: No, plug and twist tobacco remain taxed at the 10 percent of the manufacture’s sales price or the distributor’s purchase price.
10: How are bonus packs handled? For example, we sell a buy one get one free pack made up of two 3 oz packages of loose leaf tobacco.
A: You must pay the tax on both 3 ounce packages. The tax is $0.21 for each unit that is less than 4 ounces. In this case, the tax due on the two packages would be $0.42.
11: How is the tax calculated if we sell three cigars with a manufacture’s selling price of $8.00, with a free .50 oz package of snus.
A: You must pay the tax on the three cigars based on a rate of 10% of the manufacturer’s selling price and the .50 oz package of snus based on weight. In this case, the tax due on the cigars and the snus would be $0.89.
12: Is dry snuff taxed at the 10% rate?
A: Yes, dry snuff is taxed at 10% of the manufacturer’s sales price or the distributor’s purchase price and reported on line 4 of From TT-8.
13: What should I do if a competitor is not complying with OTP requirements?
A: All licensed tobacco products distributors are listed on the department’s website. Please contact the Department of Taxation and provide us with any available information that may assist us in ensuring compliance with the tobacco tax statute. Also note that we cannot provide you with updates or otherwise disclose information relating to audits or investigations of specific businesses.
14: I am a Virginia wholesaler who sells tobacco products but I am not a licensed OTP distributor. Do I need to obtain a permit?
A: Yes. A wholesaler purchasing untaxed product for resale in the Commonwealth meets the definition of a distributor for the purposes of the Tobacco Products Tax. You must register with the Department of Taxation and pay the Tobacco Products Tax.
15: What is the penalty if I decide to sell tobacco products without obtaining a distributor’s license and paying the Tobacco Products Tax?
A: It is unlawful for any person who is not a licensed distributor to import, transport, or possess, for resale, any tobacco products in the Commonwealth or under circumstances and conditions that indicate that tobacco products are being imported, transported, or possessed in a manner as to knowingly and intentionally evade or attempt to evade the tobacco products tax. Such tobacco products are subject to seizure, forfeiture and destruction by TAX or any law-enforcement officer of the Commonwealth. All fixtures, equipment, materials and personal property used in substantial connection with the sale or possession of tobacco products involved in a knowing and intentional violation of the tobacco products tax are subject to seizure and forfeiture.
16: What other resources are available to assist me in complying with the requirements of the Tobacco Products Tax?
A: Tobacco Products Tax Guidelines and Rules as well as the Form TT-8 and Instructions are available on-line in the Tax Policy Library section of TAX's website, located at www.tax.virginia.gov.
17: Who should I contact regarding questions about the tobacco products tax, license applications and filing tobacco products tax returns?
If you have any further questions, please contact the Tobacco Tax Unit at (804) 371-0730.
Go to Tobacco Products Tax for more information.
Last Updated 9/30/2013 9:0