Tax Type
Tax on Tobacco
Description
Penalty assessed to unstamped cigarette packs for the period August 2006
Topic
Basis of Tax
Collection of Tax
Records/Returns/Payments
Date Issued
11-07-2007
November 7, 2007
Re: § 58.1-1821 Application: Virginia Cigarette Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you seek abatement of the penalty assessed to unstamped cigarette packs for the period August 2006.
FACTS
The Taxpayer operates a supermarket. As a result of the Department's inspection of the Taxpayer's cigarette inventory, the auditor found the Taxpayer to be in the possession of 117 packs of unstamped cigarettes and 7 stamped packs of contraband cigarettes. The Office of the Attorney General seized the 7 packs of contraband cigarettes. The auditor issued an assessment for penalty on the 117 unstamped cigarettes based on the maximum per pack penalty pursuant to Va. Code § 58.1-1017.
The Department issued Tax Bulletin 07-3 (3/15/07), which addresses the Department's compliance enforcement of the cigarette tax. The Tax Bulletin sets forth the provisions for the imposition of penalty to unstamped cigarette packs on first and subsequent violations. For first violations, the penalty imposed is $250.00 per pack of unstamped cigarettes in excess of 100 packs. In this case, the Department adjusted the initial assessment to reduce the penalty imposed on the untaxed cigarettes in accordance with the new compliance penalty guidelines set out in Tax Bulletin 07-3.
The Taxpayer contends that some, if not all, of the cigarette packs in question were properly stamped. The Taxpayer claims that such cigarettes are unpopular brands and remained on the store shelf for a long period of time causing the stamps to become unclear. In addition, the Taxpayer claims that it has sold thousands of packs of popular brands of cigarettes, all of which were properly stamped. It is the Taxpayer's contention that any violation that may have occurred was not for the purpose of evading the payment of the tax.
DETERMINATION
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- Virginia Code § 58.1-1017 A provides that:
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- It shall be unlawful for any person, except as otherwise provided by law, to sell, purchase, transport, receive or possess . . . packages of cigarettes unless the same have been stamped in the manner required by law, for the purpose of evading the payment of the taxes on such products. Any person violating the provisions of this subsection shall be guilty of a Class 2 misdemeanor. In addition, the Department may impose a penalty, to be assessed and collected by the Department as other taxes are collected, not to exceed $500 per pack on any person for violation of this subsection. Each pack of cigarettes sold, purchased, transported or possessed shall be considered a separate offense.
Virginia Code § 58.1-1017 C states, "If a person who (i) has not been issued a permit to affix revenue stamps by the Department, as provided in § 58.1-1011, or (ii) is not a retail dealer who has lawfully purchased cigarettes from such permit holder has in his possession within the Commonwealth more than 30 packages of unstamped cigarettes, such possession shall be presumed to be for the purpose of evading the payment of the taxes due thereon."
In this case, the Taxpayer has provided no evidence to support its claim that the cigarette packs were properly stamped. Instead, it is my understanding that the auditor found no physical evidence such as stamp imprints to indicate that the contested cigarette packs had ever been stamped.
Further, while the Taxpayer claims that any violation that may have occurred was not for the purpose of evading the payment of the tax, the Taxpayer's possession of 117 unstamped cigarette packs clearly exceeds the statutory threshold in Va. Code § 58.1-1017 C for the presumption of evading the tax. Based on the foregoing, I find no basis for waiving the penalty assessed in this case.
CONCLUSION
An updated bill, with interest accrued to date, will be sent to the Taxpayer. No additional interest will accrue provided the outstanding balance is paid within 30 days from the date of the bill. The Taxpayer should remit its payment to: Virginia Department of Taxation, Tobacco Unit, Post Office Box 715, Richmond, Virginia 23218. If you have any questions concerning payment of the assessment, you may contact the Tobacco Unit at *****.
The Code of Virginia sections and Tax Bulletin cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions regarding this response, please contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
Janie E. Bowen
Tax Commissioner
- Sincerely,
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AR/1-1436568673T
Rulings of the Tax Commissioner