[Federal Register: March 31, 2009 (Volume 74, Number 60)]
[Rules and Regulations]
[Page 14479-14491]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31mr09-13]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 40, 41, 44, 46, and 71
[Docket No. TTB-2009-0001; T.D. TTB-75; Re: Notice No. 93]
RIN 1513-AB70
Increase in Tax Rates on Tobacco Products and Cigarette Papers
and Tubes; Floor Stocks Tax on Certain Tobacco Products, Cigarette
Papers, and Cigarette Tubes; and Changes to Basis for Denial,
Suspension, or Revocation of Permits (2009R-118P)
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Temporary Rule.
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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is amending its
regulations to implement certain provisions of the Children's Health
Insurance Program Reauthorization Act of 2009 (the Act). This final
rule amends existing regulations to reflect increases in the Federal
excise tax rates on tobacco products and cigarette papers and tubes,
revises existing floor stocks tax regulations to reflect the scope of
the floor stocks tax provisions of the Act, and revises existing
regulations to include the new statutory criteria for denial,
suspension, or revocation of tobacco permits. We also are soliciting
comments from all interested parties on these amendments through a
notice of proposed rulemaking published elsewhere in this issue of the
Federal Register.
DATES: Effective date: March 31, 2009. Applicability dates: The
amendments in 27 CFR 40.21, 40.23, 40.25, 40.25a, 40.351, 40.352, 41.30
through 41.35, 46.75, and 46.191 through 46.274, are applicable April
1, 2009. The amendments in 27 CFR 40.74, 40.332, 41.198, 44.92, 44.162,
71.46, and 71.46b were applicable on February 4, 2009.
FOR FURTHER INFORMATION CONTACT: For questions concerning floor stocks
tax, contact the National Revenue Center, Alcohol and Tobacco Tax and
Trade Bureau (FloorStocksTax@ttb.gov, 513-684-3334 or 1-877-TTB-FAQS
(1-877-882-3277)); for other questions concerning this document,
contact Amy Greenberg, Regulations and Rulings Division, Alcohol and
Tobacco Tax and Trade Bureau (202-927-8210).
SUPPLEMENTARY INFORMATION:
[[Page 14480]]
Impact of the Homeland Security Act on This Rulemaking
Effective January 24, 2003, the Homeland Security Act of 2002 (Pub.
L. 107-296, 116 Stat. 2135 (2002)) divided the Bureau of Alcohol,
Tobacco and Firearms (ATF) into two new agencies, the Alcohol and
Tobacco Tax and Trade Bureau (TTB) in the Department of the Treasury
and the Bureau of Alcohol, Tobacco, Firearms and Explosives in the
Department of Justice. The regulation and taxation of tobacco products
and cigarette papers and tubes remains a function of the Department of
the Treasury and is the responsibility of TTB. References to ATF in
this document reflect the time period prior to January 24, 2003, while
references to TTB are after that date.
TTB Authority
Chapter 52 of the Internal Revenue Code of 1986 (IRC) contains
permit, Federal excise tax payment, and related provisions regarding
tobacco products and cigarette papers and tubes. TTB has authority to
issue, deny, suspend, and revoke permits of manufacturers, importers,
and export warehouse proprietors pursuant to regulations contained in
parts 40, 41, 44, and 71 of title 27 of the Code of Federal Regulations
(CFR). TTB also collects Federal excise taxes on tobacco products and
cigarette papers and tubes from proprietors of domestic bonded
manufacturing premises pursuant to regulations contained in 27 CFR part
40; the Bureau of Customs and Border Protection (CBP) collects these
taxes from importers of these products pursuant to regulations
contained in title 19 of the CFR. TTB also has authority to regulate
the importation and exportation of tobacco products and cigarette
papers and tubes, and the removal of tobacco products and cigarette
papers and tubes for use of the United States under 27 CFR parts 41, 44
and 45, respectively. Under 27 CFR part 46, TTB has authority to
administer floor stocks taxes and other miscellaneous matters involving
these products.
Tax Increase
The Children's Health Insurance Program Reauthorization Act of 2009
(the Act), Public Law 111-3, was enacted on February 4, 2009. Section
701 of the Act increases the rate of Federal excise tax on tobacco
products and cigarette papers and tubes removed from the factory or
from internal revenue bond or from Customs custody on or after April 1,
2009.
This document amends the tobacco regulations in parts 40, 41, 44,
and 46 to reflect the new excise tax rates. These amendments include
additional examples of computations that show the new tax rates.
Floor Stocks Tax
Section 701 of the Act also imposes a floor stocks tax on taxpaid
or tax determined tobacco products (other than large cigars described
in 26 U.S.C. 5701(a)(2)), and on cigarette papers and tubes, held for
sale on April 1, 2009. The floor stocks tax rate is equal to the
difference between the new Federal excise tax rate and the immediately
prior rate. Persons likely to be holding articles for sale that are
subject to the floor stocks tax include manufacturers, importers, and
wholesale and retail dealers of these articles. The floor stocks tax
provisions of section 701 also permit a credit against the floor stocks
tax of $500 or the amount of tax due, whichever is less, and also
contain rules for handling articles in foreign trade zones and for
controlled groups.
The floor stocks tax regulations currently in 27 CFR part 46,
subpart I, were promulgated by ATF to administer the 2000 and 2002
cigarette floor stocks taxes imposed by section 9302(j) of Public Law
105-33. There is no need to retain those regulations (any collection or
other administrative action relating to those taxes would be conducted
under the provisions of the law and regulations in effect at the time).
Accordingly, in this document, TTB revises subpart I of part 46 to
implement the new floor stocks tax imposed by the Act, relying on and
replicating the prior provisions to the greatest extent possible.
However, TTB notes that there are some differences between the law that
imposed the earlier floor stocks tax and the 2009 floor stocks tax
imposed by the Act, which are addressed in the new regulations adopted
in this document as follows:
The 2009 floor stocks tax applies to more articles (that
is, not only to cigarettes), so the instructions for taking inventories
and computing appropriate tax are modified accordingly.
For purposes of the previous floor stocks tax regime, ATF
included instructions for keeping separate inventories of cigarettes
marked for export. Since holding products marked for export is
prohibited by 26 U.S.C. 5751, inventory instructions for such products
are not necessary.
The Act provides no exemption for products held in vending
machines, so no such exemption is provided in this circumstance.
Under the previous floor stocks tax, ATF regulations
provided that a person holding articles subject to floor stocks tax who
owed no tax after taking the allowed credit, would not have to file a
return. However, based on experience under that previous floor stocks
tax, TTB believes that it is necessary to require the filing of a
return even when no tax is due. If TTB were to provide an exemption
from filing a return when no tax is due, TTB would not be able to
determine if the failure to file a return is due to zero liability or
willful noncompliance with the requirements of the statute, so no
exemption is provided for in the regulatory texts adopted in this
document. Therefore, those whose tax owed is zero must file a return.
Section 702(d) of the Act expanded the definition of ``roll-your-
own'' tobacco to include tobacco for making cigars and tobacco for use
as wrappers for cigars, effective April 1, 2009. The floor stocks tax,
however, applies only to ``roll-your-own'' products covered by the old
definition (that is, ``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''). Therefore, in order to avoid confusion in the
implementation of the floor stocks tax, that definition change will be
reflected in a separate rulemaking.
Denial, Suspension and Revocation of Permits
Section 702(b) of the Act amended 26 U.S.C. 5712 and 5713 to expand
the basis for denial, suspension and revocation of tobacco permits with
effect from February 4, 2009. In this document, TTB includes the
amended statutory language in the pertinent sections of the TTB
regulations, that is, in Sec. Sec. 40.74, 40.332, 41.198, 44.92,
44.162, 71.46, and 71.49b.
Temporary Rule
Based on the February 4, 2009, enactment of the changes to the
criteria for denial, suspension, and revocation of permits and the
April 1, 2009, effective date of the tax increases and floor stocks
tax, TTB believes that proper administration and enforcement of those
requirements necessitates the immediate adoption of implementing
regulations as a temporary rule. TTB believes that such implementing
action ensures that affected industry members will have timely
knowledge of the regulatory requirements.
[[Page 14481]]
Public Participation
For submitting comments, please refer to the notice of proposed
rulemaking on this subject published in the Proposed Rules section of
this issue of the Federal Register.
Regulatory Flexibility Act
We certify that this temporary rule will not have a significant
economic impact on a substantial number of small entities. Accordingly,
a regulatory flexibility analysis is not required. The regulatory
obligations and relevant collections of information derive directly
from the Internal Revenue Code of 1986, as amended, and the regulations
in this rule concerning these obligations and collections merely
implement and provide necessary standards for complying with the
statutory requirements. Likewise, any secondary or incidental effects,
and any reporting, recordkeeping, or other compliance burdens flow
directly from the statute. Pursuant to 26 U.S.C. 7805(f), this
temporary regulation will be submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact
on small businesses.
Paperwork Reduction Act
TTB has provided estimates of the burden that the collection of
information contained in these regulations imposes, and the estimated
burden has been reviewed and approved by the Office of Management and
Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507) and assigned control numbers 1513-0129 and 1513-0030.
Under the Paperwork Reduction Act of 1995, an agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a valid OMB control
number.
Comments concerning suggestions for reducing the burden of the
collections of information in this document should be directed to Mary
A. Wood, Alcohol and Tobacco Tax and Trade Bureau, at any of these
addresses:
P.O. Box 14412, Washington, DC 20044-4412;
202-927-8525 (facsimile); or
formcomments@ttb.gov (e-mail).
Executive Order 12866
This is not a significant regulatory action as defined in E.O.
12866. Therefore, it requires no regulatory assessment.
Inapplicability of Prior Notice and Comment and Delayed Effective Date
Procedures
Because this document implements provisions of a law which are
effective on February 4 and on April 1, 2009, and because immediate
guidance is necessary to implement these provisions, it is found to be
impracticable to issue this Treasury decision with notice and public
procedure under 5 U.S.C. 553(b).
Pursuant to the provisions of 5 U.S.C. 553(d)(2), and (d)(3), we
are issuing these regulations without a delayed effective date. TTB has
determined that this regulation is an interpretative rule that
implements Public Law 111-3 as provided for in section 553(d)(2). TTB
also has determined that good cause exists to provide industry members
with immediate guidance on procedures to conduct an inventory and pay
the appropriate floor stocks tax in accordance with section 553(d)(3).
Drafting Information
Marjorie D. Ruhf of the Regulations and Rulings Division drafted
this document. Other employees of the Alcohol and Tobacco Tax and Trade
Bureau participated in its development.
List of Subjects
27 CFR Part 40
Cigars and cigarettes, Claims, Electronic funds transfers, Excise
taxes, Imports, Labeling, Packaging and containers, Reporting and
recordkeeping requirements, Surety bonds, Tobacco.
27 CFR Part 41
Cigars and cigarettes, Claims, Customs duties and inspection,
Electronic funds transfers, Excise taxes, Imports, Labeling, Packaging
and containers, Puerto Rico, Reporting and recordkeeping requirements,
Surety bonds, Tobacco, Virgin Islands, Warehouses.
27 CFR Part 44
Aircraft, Armed forces, Cigars and cigarettes, Claims, Customs
duties and inspection, Excise taxes, Exports, Foreign trade zones,
Labeling, Packaging and containers, Reporting and recordkeeping
requirements, Surety bonds, Tobacco, Vessels, Warehouses.
27 CFR Part 46
Administrative practice and procedure, Cigars and cigarettes,
Claims, Excise taxes, Packaging and containers, Penalties, Reporting
and recordkeeping requirements, Seizures and forfeitures, Surety bonds,
Tobacco.
27 CFR Part 71
Administrative practice and procedure, Alcohol and alcoholic
beverages, Tobacco.
Amendments to the Regulations
0
For the reasons set forth in the preamble, chapter I of title 27 of the
Code of Federal Regulations is amended as follows:
PART 40--MANUFACTURE OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND
TUBES
0
1. The authority citation for part 40 continues to read as follows:
Authority: 26 U.S.C. 5142, 5143, 5146, 5701, 5703-5705, 5711-
5713, 5721-5723, 5731, 5741, 5751, 5753, 5761-5763, 6061, 6065,
6109, 6151, 6301, 6302, 6311, 6313, 6402, 6404, 6423, 6676, 6806,
7011, 7212, 7325, 7342, 7502, 7503, 7606, 7805; 31 U.S.C. 9301,
9303, 9304, 9306.
0
2. Paragraph (a) of Sec. 40.21 is revised to read as follows:
Sec. 40.21 Cigar tax rates.
(a) Cigars are taxed at the following rates under 26 U.S.C.
5701(a):
----------------------------------------------------------------------------------------------------------------
Tax rate for removals during the following periods:
Type and amount ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Small cigars per thousand........ $1.828................................ $50.33
Large cigars*
percentage of sale 20.719%............................... 52.750%
price.
but not to exceed--. $48.75 per thousand................... $0.4026 per cigar.
----------------------------------------------------------------------------------------------------------------
* For large cigars: Until March 31, 2009, the percentage tax rate applies when the sale price is $235.294 per
thousand or less, and the flat tax rate applies when the sale price is more than $235.294 per thousand. On and
after April 1, 2009, the percentage tax rate applies when the sale price is $763.222 or less per thousand
cigars, and the flat tax rate applies when the sale price is more than $763.222 per thousand cigars.
[[Page 14482]]
* * * * *
0
3. Section 40.23 is revised to read as follows:
Sec. 40.23 Cigarette tax rates.
Cigarettes are taxed at the following rates under 26 U.S.C.
5701(b):
----------------------------------------------------------------------------------------------------------------
Tax rate per thousand for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Small cigarettes................. $19.50................................ $50.33
Large cigarettes up to 6\1/2\'' $40.95................................ $105.69
long.
Large cigarettes over 6\1/2\'' Taxed at the rate for small cigarettes, counting each 2\3/4\ or
long. fraction thereof of the length of each as one cigarette.
----------------------------------------------------------------------------------------------------------------
0
4. Section 40.25 is revised to read as follows:
Sec. 40.25 Smokeless tobacco tax rates.
Smokeless tobacco products are taxed at the following rates under
26 U.S.C. 5701(e):
----------------------------------------------------------------------------------------------------------------
Tax rate per pound* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Snuff............................ $ 0.585............................... $ 1.51
Chewing tobacco.................. $ 0.195............................... $ 0.5033
----------------------------------------------------------------------------------------------------------------
* Prorate tax for fractions of a pound.
0
5. Section 40.25a is revised to read as follows:
Sec. 40.25a Pipe tobacco and roll-your-own tobacco tax rates.
Pipe tobacco and roll-your-own tobacco are taxed at the following
rates under 26 U.S.C. 5701(f) and (g), respectively:
----------------------------------------------------------------------------------------------------------------
Tax rate per pound* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Pipe tobacco..................... $ 1.0969.............................. $ 2.8311
Roll-your-own tobacco............ $ 1.0969.............................. $ 24.78
----------------------------------------------------------------------------------------------------------------
* Prorate tax for fractions of a pound.
0
6. Section 40.74 is revised to read as follows:
Sec. 40.74 Investigation of applicant.
(a) Investigation. The appropriate TTB officer may cause inquiry or
investigation to be made to verify the information furnished in
connection with an application for permit and to ascertain whether the
applicant is eligible for a permit. Any of the following conditions may
be grounds for denial of a permit:
(1) The premises on which it is proposed to conduct the business
are not adequate to protect the revenue;
(2) The activity proposed to be carried out at such premises does
not meet the minimum manufacturing or activity requirements of Sec.
40.61(b); or
(3) The applicant (including, in the case of a corporation, any
officer, director, or principal stockholder and, in the case of a
partnership, a partner)--
(i) Is, by reason of his business experience, financial standing,
or trade connections or by reason of previous or current legal
proceedings involving a felony violation of any other provision of
Federal criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, not likely to maintain operations
in compliance with this chapter;
(ii) Has been convicted of a felony violation of any provision of
Federal or State criminal law relating to tobacco products, processed
tobacco, cigarette paper, or cigarette tubes; or
(iii) Has failed to disclose any material information required or
made any material false statement in the application therefor.
(b) TTB action. The appropriate TTB officer, if there is reason to
believe that the applicant is not entitled to a permit, shall promptly
give the applicant notice of the contemplated disapproval of the
application and opportunity for hearing thereon in accordance with part
71 of this chapter, which part (including the provisions relating to
the recommended decision and to appeals) is applicable to such
proceedings. If, after such notice and opportunity for hearing, the
appropriate TTB officer finds that the applicant is not entitled to a
permit, he shall, by order stating the findings on which his decision
is based, deny the permit.
(26 U.S.C. 5712)
0
7. Section 40.183 is amended by revising paragraph (e) to read as
follows:
Sec. 40.183 Record of tobacco products.
* * * * *
(e) Removed subject to tax (itemize large cigars by sale price in
accordance with Sec. 40.22, except that before April 1, 2009, cigars
that cost more than $235.294 may optionally be shown as if the price
were $236 per thousand, and on and after April 1, 2009, cigars that
cost more than $763.222 may optionally be shown as if the price were
$764 per thousand);
* * * * *
[[Page 14483]]
0
8. Section 40.184 is amended by revising paragraph (a)(4) to read as
follows:
Sec. 40.184 Record of removals subject to tax.
(a) * * *
(4) For large cigars, show the sale price (if the sale price is
more than $235.294 per thousand before April 1, 2009, or more than
$763.222 per thousand on and after April 1, 2009, you may place a note
to that effect in the record instead of the actual price).
* * * * *
0
9. Section 40.332 is revised to read as follows:
Sec. 40.332 Suspension and revocation of permit.
Where the appropriate TTB officer has reason to believe that a
manufacturer of tobacco products has not in good faith complied with
the provisions of 26 U.S.C. chapter 52, and regulations thereunder, or
with any other provision of 26 U.S.C. with intent to defraud, or has
violated any condition of his permit, or has failed to disclose any
material information required or made any material false statement in
the application for the permit, or has failed to maintain his premises
in such manner as to protect the revenue, or is, by reason of previous
or current legal proceedings involving a felony violation of any other
provision of Federal criminal law relating to tobacco products,
processed tobacco, cigarette paper, or cigarette tubes, not likely to
maintain operations in compliance with 26 U.S.C. chapter 52, or has
been convicted of a felony violation of any provision of Federal or
State criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, the appropriate TTB officer shall
issue an order, stating the facts charged, citing such person to show
cause why his permit should not be suspended or revoked. Such citation
shall be issued and opportunity for hearing afforded in accordance with
part 71 of this chapter, which part is applicable to such proceedings.
If, after hearing, the hearing examiner, or on appeal, the
Administrator, finds that such person has not shown cause why his
permit should not be suspended or revoked, such permit shall be
suspended for such period as the appropriate TTB officer deems proper
or shall be revoked.
(72 Stat 1421, as amended; 26 U.S.C. 5713)
0
10. Section 40.351 is revised to read as follows:
Sec. 40.351 Cigarette papers.
Cigarette papers are taxed at the following rates under 26 U.S.C.
5701(c):
----------------------------------------------------------------------------------------------------------------
Tax rate for each 50 papers* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Cigarette papers up to 6\1/2\ long.
Cigarette papers over 6\1/2\ long. length of each as one cigarette paper.
----------------------------------------------------------------------------------------------------------------
* Tax rate for less than 50 papers is the same. The tax is not prorated.
(72 Stat. 1414; 26 U.S.C. 5701)
0
11. Section 40.352 is revised to read as follows:
Sec. 40.352 Cigarette tubes.
Cigarette tubes are taxed at the following rates under 26 U.S.C.
5701(d):
----------------------------------------------------------------------------------------------------------------
Tax rate for each 50 tubes* for removals during the years:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Cigarette tubes up to 6\1/2\'' $ 0.0244.............................. $ 0.0630
long.
Cigarette tubes over 6\1/2\'' Use rates above, but count each 2\3/4\ inches, or fraction thereof, of the
long. length of each as one cigarette tube.
----------------------------------------------------------------------------------------------------------------
* Tax rate for less than 50 tubes is the same. The tax is not prorated.
(72 Stat. 1414; 26 U.S.C. 5701)
PART 41--IMPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND
TUBES
0
12. The authority citation for part 41 continues to read as follows:
Authority: 18 U.S.C. 2342; 26 U.S.C. 5701, 5703, 5704, 5705,
5708, 5712, 5713, 5721-5723, 5741, 5754, 5761-5763, 6301, 6302,
6313, 6404, 7101, 7212, 7342, 7606, 7651, 7652, 7805; 31 U.S.C.
9301, 9303, 9304, 9306.
0
13. Section 41.30 is revised to read as follows:
Sec. 41.30 Pipe tobacco and roll-your-own tobacco tax rates.
Pipe tobacco and roll-your-own tobacco are taxed at the following
rates under 26 U.S.C. 5701(f) and (g), respectively:
----------------------------------------------------------------------------------------------------------------
Tax rate per pound* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Pipe tobacco..................... $ 1.0969.............................. $ 2.8311
Roll-your-own tobacco............ $ 1.0969.............................. $ 24.78
----------------------------------------------------------------------------------------------------------------
* Prorate tax for fractions of a pound.
[[Page 14484]]
0
14. Paragraph (a) of Sec. 41.31 is revised to read as follows:
Sec. 41.31 Cigar tax rates.
(a) Cigars are taxed at the following rates under 26 U.S.C.
5701(a):
----------------------------------------------------------------------------------------------------------------
Tax rate for removals during the following periods:
Type and amount ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Small cigars per thousand........ $1.828................................ $50.33
Large cigars*
percentage of sale price 20.719%............................... 52.750%
but not to exceed--..... $48.75 per thousand................... $0.4026 per cigar.
----------------------------------------------------------------------------------------------------------------
* For large cigars: Until March 31, 2009, the percentage tax rate applies when the sale price is $235.294 per
thousand or less, and the flat tax rate applies when the sale price is more than $235.294 per thousand. On and
after April 1, 2009, the percentage tax rate applies when the sale price is $763.222 or less per thousand
cigars, and the flat tax rate applies when the sale price is more than $763.222 per thousand cigars.
* * * * *
0
15. Section 41.32 is revised to read as follows:
Sec. 41.32 Cigarette tax rates.
Cigarettes are taxed at the following rates under 26 U.S.C.
5701(b):
----------------------------------------------------------------------------------------------------------------
Tax rate per thousand for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Small cigarettes................. $19.50................................ $50.33
Large cigarettes up to 6\1/2\'' $40.95................................ $105.69
long.
Large cigarettes over 6\1/2\'' Taxed at the rate for small cigarettes, counting each 2\3/4\ or fraction
long. thereof of the length of each as one cigarette.
----------------------------------------------------------------------------------------------------------------
0
16. Section 41.33 is revised to read as follows:
Sec. 41.33 Smokeless tobacco tax rates.
Smokeless tobacco products are taxed at the following rates under
26 U.S.C. 5701(e):
----------------------------------------------------------------------------------------------------------------
Tax rate per pound* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Snuff............................ $0.585................................ $1.51
Chewing tobacco.................. $0.195................................ $0.5033
----------------------------------------------------------------------------------------------------------------
* Prorate tax for fractions of a pound.
0
17. Section 41.34 is revised to read as follows:
Sec. 41.34 Cigarette papers.
Cigarette papers are taxed at the following rates under 26 U.S.C.
5701(c):
----------------------------------------------------------------------------------------------------------------
Tax rate for each 50 papers* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Cigarette papers up to 6\1/2\ $0.0122............................... $0.0315
long.
Cigarette papers over 6\1/2\'' Use rates above, but count each 2\3/4\'' or fraction thereof of the length of
long. each as one cigarette paper.
----------------------------------------------------------------------------------------------------------------
* Tax rate for less than 50 papers is the same. The tax is not prorated.
0
18. Section 41.35 is revised to read as follows:
Sec. 41.35 Cigarette tubes.
Cigarette tubes are taxed at the following rates under 26 U.S.C.
5701(d):
----------------------------------------------------------------------------------------------------------------
Tax rate for each 50 tubes* for removals during the following periods:
Product ------------------------------------------------------------------------------
2002 to March 31, 2009 April 1, 2009 and after
----------------------------------------------------------------------------------------------------------------
Cigarette papers up to 6\1/2\ $0.0244............................... $ 0.0630
long.
[[Page 14485]]
Cigarette papers over 6\1/2\ long Use rates above, but count each 2\3/4\ or fraction thereof of the length of
each as one cigarette tube.
----------------------------------------------------------------------------------------------------------------
* Tax rate for less than 50 tubes is the same. The tax is not prorated.
0
19. Section 41.81 is amended by revising paragraphs (c)(4)(ii) and
(c)(4)(iii) to read as follows:
Sec. 41.81 Taxpayment.
* * * * *
(c) * * *
(4) * * *
(ii) For large cigars with a sale price of not more than $235.294
per thousand before April 1, 2009, or a sale price of not more than
$763.222 per thousand on and after April 1, 2009, the number and total
sale price of such cigars;
(iii) For large cigars with a sale price of more than $235.294 per
thousand before April 1, 2009, or a sale price equal to or more than
$763.222 per thousand on and after April 1, 2009, the number of cigars;
* * * * *
0
20. Section 41.106 is amended by revising paragraphs (a)(5) and (a)(6)
to read as follows:
Sec. 41.106 Record of shipment by taxpayer.
(a) * * *
(5) The number and total sale price of large cigars having a sale
price of not more than $235.294 per thousand before April 1, 2009, or a
sale price of not more than $763.222 per thousand on and after April 1,
2009, to be shipped;
(6) The number of large cigars having a sale price equal to or more
than $235.294 per thousand before April 1, 2009, or a sale price equal
to or more than $763.222 per thousand on and after April 1, 2009, to be
shipped;
* * * * *
0
21. Section 41.110 is amended by revising paragraphs (e) and (f) to
read as follows:
Sec. 41.110 Record of tax computation and shipment by bonded
manufacturer under deferred taxpayment.
* * * * *
(e) The number and total sale price of large cigars having a sale
price of not more than $235.294 per thousand before April 1, 2009, or a
sale price of not more than $763.222 per thousand on and after April 1,
2009, to be shipped;
(f) The number of large cigars having a sale price equal to or more
than $235.294 per thousand before April 1, 2009, or a sale price equal
to or more than $763.222 per thousand on and after April 1, 2009, to be
shipped;
* * * * *
0
22. Section 41.198 is revised to read as follows:
Sec. 41.198 Investigation of applicant.
Appropriate TTB officers may inquire or investigate to verify the
information in connection with an application for a permit. The
investigation will ascertain whether the applicant is eligible for a
permit. A permit may be denied if the applicant (including, in the case
of a corporation, any officer, director, or principal stockholder and,
in the case of a partnership, a partner)--
(a) Is, by reason of his business experience, financial standing,
or trade connections or by reason of previous or current legal
proceedings involving a felony violation of any other provision of
Federal criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, not likely to maintain operations
in compliance with this chapter;
(b) Has been convicted of a felony violation of any provision of
Federal or State criminal law relating to tobacco products, processed
tobacco, cigarette paper, or cigarette tubes; or
(c) Has failed to disclose any material information required or
made any material false statement in the application therefor.
PART 44--EXPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND
TUBES, WITHOUT PAYMENT OF TAX, OR WITH DRAWBACK OF TAX
0
23. The authority citation for part 44 continues to read as follows:
Authority: 26 U.S.C. 5142, 5143, 5146, 5701, 5703, 5704, 5708,
5711-13, 5721-5723, 5731, 5741, 5751, 5754, 6066, 6065, 6151, 6402,
6404, 6806, 7011, 7212, 7342, 7606, 7805; 31 U.S.C. 9301, 9303,
9304, 9306.
0
24. Section 44.92 is revised to read as follows:
Sec. 44.92 Investigation of applicant.
(a) Investigation. The appropriate TTB officer shall promptly cause
such inquiry or investigation to be made, as may be necessary, to
verify the information furnished in connection with an application for
permit and to ascertain whether the applicant is eligible for a permit.
Any of the following conditions may be grounds for denial of a permit:
(1) The premises on which it is proposed to conduct the business
are not adequate to protect the revenue; or
(2) The applicant (including, in the case of a corporation, any
officer, director, or principal stockholder and, in the case of a
partnership, a partner)--
(A) Is, by reason of his business experience, financial standing,
or trade connections or by reason of previous or current legal
proceedings involving a felony violation of any other provision of
Federal criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, not likely to maintain operations
in compliance with this chapter;
(B) Has been convicted of a felony violation of any provision of
Federal or State criminal law relating to tobacco products, processed
tobacco, cigarette paper, or cigarette tubes; or
(C) Has failed to disclose any material information required or
made any material false statement in the application therefor.
(b) TTB action. An appropriate TTB officer who has reason to
believe that the applicant is not entitled to a permit shall promptly
give the applicant notice of the contemplated disapproval of his
application and opportunity for hearing thereon in accordance with part
71 of this chapter, which part (including the provisions relating to
the recommended decision and to appeals) is made applicable to such
proceedings. If, after such notice and opportunity for hearing, the
appropriate TTB officer finds that the applicant is not entitled to a
permit, he shall, by order stating the findings on which his decision
is based, deny the permit.
(72 Stat. 1421; 26 U.S.C. 5712)
0
25. Section 44.162 is revised to read as follows:
Sec. 44.162 Suspension and revocation of permit.
Where the appropriate TTB officer has reason to believe that an
export warehouse proprietor has not in good faith complied with the
provisions of 26 U.S.C. chapter 52, and regulations
[[Page 14486]]
thereunder, or with any other provision of 26 U.S.C. with intent to
defraud, or has violated any condition of his permit, or has failed to
disclose any material information required or made any material false
statement in the application for permit, or has failed to maintain his
premises in such manner as to protect the revenue, or is, by reason of
previous or current legal proceedings involving a felony violation of
any other provision of Federal criminal law relating to tobacco
products, processed tobacco, cigarette paper, or cigarette tubes, not
likely to maintain operations in compliance with 26 U.S.C. chapter 52,
or has been convicted of a felony violation of any provision of Federal
or State criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, the appropriate TTB officer shall
issue an order, stating the facts charged, citing such export warehouse
proprietor to show cause why the permit should not be suspended or
revoked after hearing thereon in accordance with part 71 of this
chapter, which part (including the provisions relating to appeals) is
made applicable to such proceedings. If, after hearing, the hearing
examiner, or on appeal, the Administrator, finds that such person has
not shown cause why the permit should not be suspended or revoked, such
permit shall be suspended for such period as the appropriate TTB
officer deems proper or shall be revoked.
(72 Stat. 1421; 26 U.S.C. 5713)
PART 46--MISCELLANEOUS REGULATIONS RELATING TO TOBACCO PRODUCTS AND
CIGARETTE PAPERS AND TUBES
0
26. The authority citation for Part 46 continues to read as follows:
Authority: 18 U.S.C. 2341-2346, 26 U.S.C. 5704, 5708, 5751,
5754, 5761-5763, 6001, 6601, 6621, 6622, 7212, 7342, 7602, 7606,
7805; 44 U.S.C. 3504(h), 49 U.S.C. 782, unless otherwise noted.
0
27. Section 46.75 is amended by removing the tables titled ``Example
using 1993-1999 Rates'' and ``Example using 2000-2001 Rates'' and by
adding a new example at the end:
Sec. 46.75 Required information for claims.
* * * * *
Example Using Rates for April 1, 2009 and After
----------------------------------------------------------------------------------------------------------------
Quantity Article Rate of tax Amount
----------------------------------------------------------------------------------------------------------------
20,000.................................. Small cigars.............. $50.33 per thousand....... $1,006.60
1,000................................... Large cigars--sale price 52.75% of sale price...... 52.75
$100/thousand.
500..................................... Large cigars--sale price $0.4026 per cigar......... 201.30
$0.77 per cigar.
10,000.................................. Small cigarettes.......... $50.33 per thousand....... 503.30
5,000................................... Large cigarettes.......... $105.69 per thousand...... 528.45
199,975................................. Cigarette papers.......... $0.0315 per 50 papers..... 126.00
1,000................................... Cigarette tubes........... $0.0630 per 50 tubes...... 1.26
100 lbs................................. Chewing tobacco........... $0.5033 per pound......... 50.33
200 lbs................................. Snuff..................... $1.51 per pound........... 302.00
100 lbs................................. Pipe tobacco.............. $2.8311 per pound......... 283.11
300 lbs................................. Roll-your-own tobacco..... $24.78 per pound.......... 7,434.00
-----------------------------------------------------------------------
Total claimed....................... .......................... .......................... 10,489.10
----------------------------------------------------------------------------------------------------------------
0
28. Subpart I is revised to read as follows:
Subpart I--Floor Stocks Tax on Certain Tobacco Products, Cigarette
Papers, and Cigarette Tubes Held for Sale on April 1, 2009
General
Sec.
46.191 Purpose of this subpart.
46.192 Definitions used in this subpart.
46.193 Persons liable for floor stocks tax.
46.194 Persons not liable for floor stocks tax.
46.195 Floor stocks requirements.
Inventories
46.201 General.
46.202 Physical inventory requirements.
46.203 Record (book) inventory requirements.
46.204 Articles in transit.
46.205 Guidelines to determine title to articles in transit.
46.206 Articles in a foreign trade zone.
46.207 Articles held in bond.
46.208 Unmerchantable articles.
46.209 Articles in vending machines.
46.210 Articles marked ``not for sale'' or ``complimentary.''
Tax Liability Calculation
46.221 Floor stocks tax rates.
46.222 Determination of amount of tax due.
46.223 Tax credit.
Filing Requirements
46.231 Floor stocks tax return.
46.232 Preparation of floor stocks tax return.
46.233 Payment of floor stocks tax.
46.234 Tax payment deadline.
46.235 Filing requirements for multiple locations.
46.236 Articles in a warehouse.
46.237 Controlled group member.
Records
46.241 Required records.
46.242 Period for maintaining records.
46.243 Articles at multiple locations.
46.244 Location of records.
46.245 Errors in records.
Claims
46.251 Payment of tax required.
46.252 Claim based on error on return.
46.253 Destruction of articles by a Presidentially-declared major
disaster.
46.254 Additional reasons for filing a claim.
Alternate Methods or Procedures
46.261 Purpose of an alternate method or procedure.
46.262 Application.
46.263 Conditions for approval.
46.264 Withdrawal of an approval.
TTB Authorities
46.270 [Reserved]
46.271 Entry, examination and testimony.
46.272 Issuance of summons.
46.273 Refusing entry or examination.
46.274 Penalties for failure to comply.
Subpart I--Floor Stocks Tax on Certain Tobacco Products, Cigarette
Papers, and Cigarette Tubes Held for Sale on April 1, 2009
Authority: Section 701, Pub. L. 111-3, unless otherwise noted.
General
Sec. 46.191 Purpose of this subpart.
The regulations in this subpart implement the floor stocks tax on
certain tobacco products, cigarette papers, and cigarette tubes held
for sale on April 1, 2009.
Sec. 46.192 Definitions used in this subpart.
As used in this subpart, the following terms have the meanings
indicated unless the context in which they are used requires a
different meaning or a different definition is prescribed for a
[[Page 14487]]
particular section or portion of this subpart.
(a) Appropriate TTB officer. An officer or employee of the Alcohol
and Tobacco Tax and Trade Bureau (TTB) authorized to perform any
functions relating to the administration or enforcement of this part by
TTB Order 1135.46, Delegation of the Administrator's Authorities in 27
CFR 46, Miscellaneous Regulations Relating to Tobacco Products and
Cigarette Papers and Tubes.
(b) Articles subject to floor stocks tax. All Federally taxpaid or
tax determined tobacco products (other than large cigars described in
26 U.S.C. 5701(a)(2)), cigarette papers, and cigarette tubes that are
held for sale on April 1, 2009.
(c) Cigarette paper. Paper, or any other material except tobacco,
prepared for use as a cigarette wrapper.
(d) Cigarette tube. Cigarette paper made into a hollow cylinder for
use in making cigarettes.
(e) Controlled group. A related group of dealers under common
control. Controlled groups include:
(1) Controlled group of corporations. The term ``controlled group
of corporations'' has the meaning given to that term by 26 U.S.C.
1563(a) and the implementing regulations in 26 CFR 1.1563-1 through
1.1563-4, except that the phrase ``more than 50 percent'' shall be
substituted for the phrase ``at least 80 percent'' each time it
appears. Controlled groups of corporations include, but are not limited
to:
(i) Parent-subsidiary controlled groups as defined in 26 CFR
1.1563-1T(a)(2).
(ii) Brother-sister controlled groups as defined in 26 CFR 1.1563-
1T(a)(3).
(iii) Combined groups as defined in 26 CFR 1.1563-1T(a)(4).
(2) Nonincorporated dealers under common control. A group of
dealers is considered to be a controlled group when the group would
qualify as a controlled group of corporations, except for the fact that
one or more of the dealers is not incorporated.
(f) Dealer. A person or other entity holding articles subject to
floor stocks tax for sale on April 1, 2009, including manufacturers,
importers, wholesalers, and retailers.
(g) Floor stocks tax. A tax imposed on all Federally taxpaid or tax
determined tobacco products (other than large cigars described in 26
U.S.C. 5701(a)(2)), cigarette papers, and cigarette tubes held for sale
on April 1, 2009. The floor stocks tax is the difference between the
previous excise tax rate and the new excise tax rate.
(h) Foreign trade zone. A foreign trade zone established and
operated pursuant to the Act of June 18, 1934, as amended, 19 U.S.C.
81a.
(i) Person. An individual, trust, estate, partnership, association,
company, or corporation, any State, including the District of Columbia,
or political subdivision thereof, or any agency or instrumentality of a
State or political subdivision thereof.
(j) Tobacco products. Cigars, cigarettes, snuff, chewing tobacco,
pipe tobacco, and roll-your-own tobacco as described in 26 U.S.C.
5702(a), (b), (m)(2), (m)(3), (n) and (o), respectively.
Sec. 46.193 Persons liable for floor stocks tax.
A dealer who holds for sale any articles subject to floor stocks
tax on April 1, 2009, is liable for floor stocks tax. See Sec. Sec.
46.204 and 46.205 regarding articles subject to floor stocks tax that
are in transit on April 1, 2009 and Sec. 46.206 regarding articles
subject to floor stocks tax that are held in a foreign trade zone on
April 1, 2009.
Sec. 46.194 Persons not liable for floor stocks tax.
A person who does not meet the definition of a dealer is not liable
for the floor stocks tax under this subpart.
Sec. 46.195 Floor stocks requirements.
(a) Take inventory. The dealer must establish the quantity of
articles subject to the floor stocks tax held for sale on April 1,
2009. The dealer may take a physical inventory or may use a record
(book) inventory, as specified in Sec. 46.202 or Sec. 46.203.
(b) Compute tax. The dealer must compute the amount of tax for the
articles held for sale on April 1, 2009. Refer to the table in Sec.
46.222. The dealer may apply the tax credit as provided in Sec.
46.223.
(c) File tax return and pay tax. After computing the floor stocks
tax, the dealer must file a return even if no tax is due. See Sec.
46.233 for payment methods if tax is due.
(d) Maintain records. The dealer must maintain all records used to
determine the quantity of articles subject to floor stocks tax and the
quantity of articles held for sale on April 1, 2009 that are not
subject to floor stocks tax. The dealer must also maintain records of
all computations used to determine the amount of tax owed. Refer to
Sec. 46.241.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Inventories
Sec. 46.201 General.
(a) Date. The dealer must take an inventory to establish the
quantities of articles subject to the floor stocks tax held for sale on
April 1, 2009. The dealer must take the physical inventory or record
(book) inventory not earlier than March 26, 2009 and not later than
April 10, 2009.
(b) Reconciliation. If the dealer takes a physical inventory on any
day other than April 1, 2009, the resulting records must be reconciled
to reflect the actual quantity of articles held at 12:01 a.m. on April
1, 2009. These records must include all supporting records of receipt
and disposition.
(c) Method. The dealer may take a physical inventory in accordance
with Sec. 46.202 or a record (book) inventory in accordance with Sec.
46.203. The following table lists the taxable articles and the method
to use for each to determine quantities:
------------------------------------------------------------------------
Article Inventory method
------------------------------------------------------------------------
Small cigarettes.................. Count the number of cigarettes.
Large cigarettes 6\1/2\'' or less Count the number of large
in length. cigarettes.
Large cigarettes more than 6\1/ Keep a separate count for each size
2\'' in length. of large cigarette. Count each 2\3/
4\'', or fraction thereof, as one
small cigarette.
Small Cigars...................... Count the number of small cigars.
Snuff............................. Count the number of packages at each
weight, noting the weight in pounds
and ounces. Convert the ounces to
pounds.
Chewing tobacco................... Count the number of packages at each
weight, noting the weight in pounds
and ounces. Convert the ounces to
pounds.
Pipe tobacco...................... Count the number of packages at each
weight, noting the weight in pounds
and ounces. Convert the ounces to
pounds.
Roll-your-own tobacco............. Count the number of packages at each
weight, noting the weight in pounds
and ounces. Convert the ounces to
pounds.
Cigarette papers 6\1/2\'' or less Count the number of cigarette
in length. papers, divide by 50, and round up
if there is any remainder.
[[Page 14488]]
Cigarette papers more than 6\1/ Count the number for each size of
2\'' in length. cigarette paper. Count each 2\3/
4\'', or fraction thereof, as new
cigarette paper. Divide adjusted
total by 50 and round up if there
is any remainder.
Cigarette tubes 6\1/2\'' or less Count the number of cigarette tubes,
in length. divide by 50, and round up if there
is any remainder.
Cigarette tubes more than 6\1/2\'' Count the number for each size of
in length. cigarette tube. Count each 2\3/
4\'', or fraction thereof, as one
cigarette tube. Divide adjusted
total by 50 and round up if there
is any remainder.
------------------------------------------------------------------------
Sec. 46.202 Physical inventory requirements.
The dealer's physical inventory must result in a written record of:
(a) The quantity and type of each article subject to floor stocks
tax recorded in sufficient detail to determine the tax rate as stated
in Sec. 46.222. See the table in Sec. 46.201(c) for the information
required for each type of article;
(b) The date and time the inventory was taken;
(c) The name of the individual(s) conducting the inventory and the
name of the dealer for whom the inventory was taken; and
(d) The location where the inventory was taken (street address,
city and State).
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.203 Record (book) inventory requirements.
(a) The dealer may use a record (book) inventory if the dealer has
source records that show:
(1) The quantities of receipts and dispositions of all articles
subject to floor stocks tax;
(2) The types and quantities of articles actually on hand as if a
physical inventory had taken place on April 1, 2009. See the table in
Sec. 46.201(c) for the information required for each type of article;
(3) The name and address of the consignor and consignee. For over
the counter sales by retail dealers, the consignee name and address is
not required;
(4) The date of receipt or disposition of the articles; and
(5) The brand name of each product.
(b) If the dealer does not take the inventory as of the close of
business on the last business day before April 1, 2009, the records
must be reconciled as provided in Sec. 46.201(b).
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.204 Articles in transit.
The dealer must include articles subject to floor stocks tax that
are in transit in the inventory if the dealer holds title to those
articles. If the dealer has transferred title to the article, the
dealer must document the title transfer in writing. For example, the
dealer may mark the bill of lading with a written statement that
indicates the time and place of the title transfer.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.205 Guidelines to determine title to articles in transit.
The dealer may use the following guidelines to establish who holds
title to articles in transit.
(a) If State law mandates the change in title, then no agreement or
contract between seller and buyer can alter it.
(b) In the absence of State law governing the change of title
between seller and buyer, the Uniform Commercial Code allows the seller
and buyer to agree when title passes.
(c) If there is no State law or agreement between the seller and
buyer, the Uniform Commercial Code states that title transfer depends
on how the seller ships the articles.
(1) If the shipment is free on board (F.O.B.) destination, the
title transfer occurs when the seller completes the physical delivery
of the articles.
(2) If the shipment is free on board (F.O.B.) shipping point, the
title transfer occurs at the time and place of shipment, which is
generally by common carrier.
Sec. 46.206 Articles in a foreign trade zone.
If articles subject to floor stocks tax are stored in a foreign
trade zone established under the Foreign Trade Zone Act (the Act of
June 18, 1934, 48 Stat. 998, 19 U.S.C. 81a et seq.), the dealer is
liable for the tax and must take an inventory in accordance with Sec.
46.207 or when either of the following conditions apply:
(a) Internal revenue taxes have been determined or customs duties
liquidated, with respect to the articles pursuant to the first proviso
of section 3(a) of the Foreign Trade Zone Act; or
(b) Articles are held by a customs officer pursuant to the second
proviso of section 3(a) of the Foreign Trade Zone Act.
Sec. 46.207 Articles held in bond.
If the dealer is a manufacturer or an export warehouse proprietor
and holds articles in TTB bond on April 1, 2009, the floor stocks tax
does not apply to those articles. Likewise, if the dealer holds
articles in a customs bonded warehouse on which tax has not been paid
or determined, the floor stocks tax does not apply on those articles.
However, if the dealer on April 1, 2009, holds articles in a customs
bonded warehouse or foreign trade zone on which tax has been paid or
determined pursuant to 26 U.S.C. 5703(b)(2)(B), the floor stocks tax
applies to those articles.
Sec. 46.208 Unmerchantable articles.
Articles that the dealer holds for return to a supplier because of
some defect are not subject to the floor stocks tax. However, the
dealer must segregate any such unmerchantable articles and include them
in a separate section of the inventory record. The dealer cannot
include as unmerchantable any items that may be held because of poor
market demand or to reduce the dealer's inventory. If, for any reason,
the tobacco products or cigarette papers or tubes that were determined
to be unmerchantable are not subsequently returned or destroyed, the
dealer must file an additional floor stocks tax return and pay tax on
such products plus any applicable penalties and interest.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.209 Articles in vending machines.
There is no exemption for articles in vending machines. They are
subject to the floor stocks tax and must be included in the dealer's
inventory record.
Sec. 46.210 Articles marked ``not for sale'' or ``complimentary''.
Articles marked ``not for sale'' or ``complimentary'' that are part
of a sale (for example, buy two packs and get one pack free) are
subject to the floor stocks tax and must be included in the physical or
record (book) inventory as provided in Sec. Sec. 46.202 or Sec.
46.203.
Tax Liability Calculation
Sec. 46.221 Floor stocks tax rates.
[[Page 14489]]
----------------------------------------------------------------------------------------------------------------
Product Floor stocks tax rate
----------------------------------------------------------------------------------------------------------------
Small cigars............................. $48.502 per thousand.
Small cigarettes......................... 30.83 per thousand.
Large cigarettes 6[frac12] inch or less 64.74 per thousand.
in length.
Large cigarettes more than 6[frac12] inch 30.83 per thousand units of length.
in length.
Snuff.................................... 0.925 per pound.
Chewing tobacco.......................... 0.3083 per pound.
Pipe tobacco............................. 1.7342 per pound.
Roll-your-own............................ 23.6831 per pound.
Cigarette papers......................... 0.0193 per 50 papers or fraction thereof
Cigarette tubes.......................... 0.0386 per 50 tubes or fraction thereof.
----------------------------------------------------------------------------------------------------------------
Sec. 46.222 Determination of amount of tax due.
After the dealer has taken the inventory, the dealer must convert
the inventory quantities to taxable units using the table below. For
tobacco products, round the quantities to two decimal places. The
dealer must then apply the applicable tax rate for each type of taxable
article using the table in Sec. 46.221 to determine the amount of tax
due.
------------------------------------------------------------------------
Product Computation
------------------------------------------------------------------------
Small cigars weighing not more than 3 Divide number of cigars by
pounds thousand. 1,000 and multiply by the
small cigar tax rate.
Small cigarettes weighing not more than Divide number of cigarettes by
3 pounds thousand. 1,000 and multiply by the
small cigarette tax rate.
Large cigarettes weighing more than 3 Divide number of cigarettes by
pounds thousand, measuring 6\1/2\ or less in length. large cigarette tax rate.
Large cigarettes weighing more than 3 Mathematically adjust the
pounds thousand, measuring more than number of large cigarettes
6\1/2\ in length. using the instructions below.*
Divide the adjusted number of
large cigarettes by 1,000 and
multiply by the small
cigarette tax rate.
Snuff.................................. Multiply the total in pounds by
the snuff tax rate.
Chewing tobacco........................ Multiply the total in pounds by
the chewing tobacco tax rate.
Pipe tobacco........................... Multiply the total in pounds by
the pipe tobacco tax rate.
Roll-your-own.......................... Multiply the total in pounds by
the roll-your-own tax rate.
Cigarette papers 6\1/2\ or Divide the number of cigarette
less in length. papers by 50, add 1 if there
is a remainder, and multiply
that number by the cigarette
paper tax rate.
Cigarette papers more than 6\1/2\ in length. number of cigarette papers
using the instructions below.*
Divide the adjusted number of
cigarette papers by 50, add 1
if there is a remainder, and
multiply that number by the
cigarette paper tax rate.
Cigarette tubes 6\1/2\ or Divide the number of cigarette
less in length. tubes by 50, add 1 if there is
a remainder, and multiply that
number by the cigarette tube
tax rate.
Cigarette tubes more than 6\1/2\ in length. number of cigarette tubes
using the instructions below.*
Divide the adjusted number of
cigarette tubes by 50, add 1
if there is a remainder, and
multiply that number by the
cigarette tube tax rate.
------------------------------------------------------------------------
*Large cigarettes, cigarette papers, and cigarette tubes more than 6\1/
2\ inch in length are counted as multiple units. Each 2\3/4\ inch or
fraction of the length is counted as a separate taxable unit. For each
different length of product in this category, divide the length by 2\3/
4\ inch and add 1 to the result if there is a remainder. Multiply the
number of cigarettes, cigarette papers, or tubes of that length by the
resulting number.
Sec. 46.223 Tax credit.
The dealer is allowed a credit of up to $500 against the total
floor stocks tax. However, controlled groups are eligible for only one
credit for the entire group. The credit may be divided equally among
the members or apportioned in any other manner agreeable to the
members.
Filing Requirements
Sec. 46.231 Floor stocks tax return.
Form 5000.28T09, 2009 Floor Stocks Tax Return--Tobacco Products and
Cigarette Papers and Tubes, is available for printing through the TTB
Web site (http://www.ttb.gov) or by mailing a request to the Alcohol
and Tobacco Tax and Trade Bureau, National Revenue Center, 550 Main
Street, Suite 8002, Cincinnati, OH 45202-5215.
Sec. 46.232 Preparation of floor stocks tax return.
The dealer must complete and file the floor stocks tax return in
accordance with the instructions for the form.?>
Sec. 46.233 Payment of floor stocks tax.
(a) Electronic funds transfer. If the dealer pays any other excise
taxes collected by TTB by electronic funds transfer, then the dealer
must also send the payment for the floor stocks tax by an electronic
funds transfer. Other dealers may voluntarily elect to pay the floor
stocks tax by electronic funds transfer. Electronic funds transfers of
floor stocks tax must be received on or before July 31, 2009.
(b) Check or money order. Dealers not paying floor stocks tax by
electronic fund transfer must pay by a check or money order sent with
Form 5000.28T09.
Sec. 46.234 Tax payment deadline.
Section 701 of Public Law 111-3 specifies a tax payment deadline of
August 1, 2009. However, section 5703(b)(2)(E) of the Internal Revenue
Code requires that when a due date falls on a Saturday, Sunday or a
legal holiday, the preceding day that is not a Saturday, Sunday or
legal holiday will be the due date. Therefore, the floor stocks tax is
due on July 31, 2009, since August 1, 2009, falls on a Saturday.
[[Page 14490]]
Sec. 46.235 Filing requirements for multiple locations.
The dealer may file a consolidated return if all locations or
places of business have the same employer identification number. The
dealer also has the option of filing a separate return for each place
of business or location.
Sec. 46.236 Articles in a warehouse.
(a) Articles warehoused at one or more locations must be reported
on the tax return representing the location where the articles will be
offered for sale.
(b) Articles offered for sale at several locations must be reported
on a tax return filed by one or more of the locations. The articles can
be reported by a single location or apportioned among several
locations.
Sec. 46.237 Controlled group member.
If the dealer is a member of a controlled group, but has its own
employer identification number, the dealer must file a separate floor
stocks tax return. The dealer may take the tax credit referred to in
Sec. 46.223 if it is apportioned to the dealer as a member of the
controlled group.
Records
Sec. 46.241 Required records.
The dealer must maintain:
(a) Inventory records;
(b) Tax computation records;
(c) Names, addresses and employer identification numbers of all
controlled group members, if applicable;
(d) A copy of the tax return, if the dealer filed one;
(e) A list of locations covered by the tax return; and
(f) A copy of any alternate method or procedure approval issued
under Sec. 46.263.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.242 Period for maintaining records.
The dealer must maintain the required records for a period of three
years from the due date of the tax return or the date the return was
filed, whichever is later. However, the appropriate TTB officer may
require, in writing, that the dealer keep these records for an
additional period of not more than 3 years.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.243 Articles at multiple locations.
The dealer must maintain a list of all places where the dealer
holds articles subject to the floor stocks tax. This list must include:
(a) Address;
(b) Name of the proprietor (if different);
(c) The employer identification number (if different); and
(d) Types and quantities of articles held at each location.
(Approved by the Office of Management and Budget under control
number 1513-0129)?>
Sec. 46.244 Location of records.
The dealer must keep the inventory records at the principal place
of business. All records must be made available to an appropriate TTB
officer upon demand.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Sec. 46.245 Errors in records.
If the inventory records or tax computation records contain an
error that resulted in an overpayment of tax, the dealer may file a
claim for refund. If the inventory or tax computation records contain
an error that resulted in an underpayment of tax, the dealer must file
an additional tax return on which the dealer shows and pays the
additional tax, interest and any applicable penalties.
(Approved by the Office of Management and Budget under control
number 1513-0129)
Claims
Sec. 46.251 Payment of tax required.
Before the dealer can file a claim for refund, the dealer must have
paid the floor stocks tax and subsequently determined that there was an
overpayment of the tax.
Sec. 46.252 Claim based on error on return.
If the dealer overpaid tax due to an error on the return, the
dealer may file a claim for refund. The claim must be filed within 3
years from the date the tax return was filed or 2 years from the time
the tax was paid, whichever is later. The dealer's claim must be filed
on TTB Form 2635 (5620.8). The claim must include detailed and
sufficient evidence explaining why the dealer believes the tax was
overpaid. The claim and supporting documentation must be mailed or
delivered to the address shown on the form.
(Approved by the Office of Management and Budget under control
number 1513-0030)
Sec. 46.253 Destruction of articles by a Presidentially-declared
major disaster.
After the dealer has paid the floor stocks tax, the dealer may file
a claim for refund of tax on articles lost, rendered unmarketable, or
condemned because of a Presidentially-declared major disaster. Subpart
C of this part prescribes the time, evidence, and procedures for filing
such a claim.
Sec. 46.254 Additional reasons for filing a claim.
(a) Manufacturer. Subparts I and K of part 40 of this chapter
prescribe the times, reasons and procedures for filing other claims for
refunds.
(b) Export warehouse proprietor. Subpart G of part 44 of this
chapter prescribes the time, evidence, and procedures for filing other
claims for refunds.
(c) Exported taxpaid. If taxpaid articles are shipped from the
United States, the dealer may file a claim for drawback of taxes under
subpart K of part 44 of this chapter.
(d) Importer. An importer may follow the procedures for filing a
claim as set forth in subpart I of part 41 of this chapter.
Alternate Methods or Procedures
Sec. 46.261 Purpose of an alternate method or procedure.
For purposes of this subpart, an alternate method or procedure is a
different way of meeting a requirement imposed by this subpart. An
alternate method or procedure must be approved in writing by TTB.
Sec. 46.262 Application.
The dealer seeking approval of an alternate method or procedure
under this subpart must apply in writing to the National Revenue
Center, 550 Main Street, Room 8002, Cincinnati, Ohio 45202-5215. The
dealer must describe the alternate method or procedure and reasons the
dealer wishes to use it. The dealer cannot use the alternate method
until the dealer receives written approval from the appropriate TTB
officer.
Sec. 46.263 Conditions for approval.
The alternate method or procedure may be approved if it meets all
of the following conditions:
(a) There is good cause for its use;
(b) It is consistent with the purpose and effect intended by the
prescribed method or procedure;
(c) It affords equivalent security to the revenue;
(d) It is not contrary to any provision of law;
(e) It will not result in an increase in cost to the Government;
(f) It will not hinder the effective administration of this subpart
such as delaying timely payment of taxes; and
(g) It is not a method or procedure that relates to the payment or
collection of tax.
[[Page 14491]]
Sec. 46.264 Withdrawal of an approval.
The approval will be withdrawn if revenue is jeopardized or
administration of this subpart is hindered. The appropriate TTB officer
will give the dealer a written notice of the withdrawal.
TTB Authorities
Sec. 46.270 [Reserved]
Sec. 46.271 Entry, examination and testimony.
Appropriate TTB officers, in performing official duties, may enter
any premises to examine articles subject to floor stocks tax. They may
enter the premises during the day or may also enter at night if the
premises are open. Appropriate TTB officers may audit and examine all
articles, inventory records, books, papers, or other resource data for
the purpose of ascertaining, determining, or collecting floor stocks
tax. They may take testimony, under oath, of any person when inquiring
as to proper payment of floor stocks taxes.
Sec. 46.272 Issuance of summons.
Appropriate TTB officers can issue summonses when there is no
referral to the Justice Department under the authority stated in Sec.
70.22 of this chapter. The summons will state a place and time for such
items or person to appear. TTB will issue a summons to require:
(a) Any books of account or other data pertaining to liability for
floor stocks tax;
(b) Any person liable for the floor stocks tax or having possession
of books of account or other data; and
(c) Any other appropriate person in connection with the books or
tax liability.
Sec. 46.273 Refusing entry or examination.
If the dealer or another person in charge of the premises refuses
to admit any appropriate TTB officer or prevents any appropriate TTB
officer from examining the records or articles, the dealer may be
liable for the penalties described in 26 U.S.C. 7342 or 7212.
Sec. 46.274 Penalties for failure to comply.
If the dealer fails to follow the regulations set forth in this
subpart, TTB may apply applicable civil and criminal penalties under
the Internal Revenue Code of 1986. For example, failure to file and
failure to pay penalties may be assessed against the dealer if the
dealer does not timely file the tax return or timely pay the taxes due.
In addition, interest under 26 U.S.C. 6621 accrues for any underpayment
of tax and on all assessed penalties until paid.
PART 71--RULES OF PRACTICE IN PERMIT PROCEEDINGS
0
29. The authority citation for part 71 is revised to read as follows:
Authority: 26 U.S.C. 5271, 5181, 5712, 5713, 7805, 27 U.S.C.
204.
0
30. Section 71.46 is revised to read as follows:
Sec. 71.46 Suspension and revocation of tobacco permits.
Whenever the appropriate TTB officer has reason to believe that any
person has not in good faith complied with any of the provisions of 26
U.S.C. chapter 52 or regulations issued thereunder, or has not complied
with any provision of 26 U.S.C. which involves intent to defraud, or
has violated any of the conditions of his permit, or has failed to
disclose any material information required, or has made any materially
false statement, in the application for his permit, or has failed to
maintain his premises in such manner as to protect the revenue, or is,
by reason of previous or current legal proceedings involving a felony
violation of any other provision of Federal criminal law relating to
tobacco products, processed tobacco, cigarette paper, or cigarette
tubes, not likely to maintain operations in compliance with 26 U.S.C.
chapter 52, or has been convicted of a felony violation of any
provision of Federal or State criminal law relating to tobacco
products, processed tobacco, cigarette paper, or cigarette tubes, the
appropriate TTB officer shall issue a citation for the revocation or
suspension of such permit.
(72 Stat 1421, as amended; 26 U.S.C. 5713)
0
31. Section 71.49b is revised to read as follows:
Sec. 71.49b Denial of application for tobacco permit.
The appropriate TTB officer may issue a citation for the
contemplated disapproval of an application for a tobacco permit
provided for in 26 U.S.C. 5713, if the appropriate TTB officer on
examination of the application has reason to believe--
(a) The premises on which it is proposed to conduct the business
are not adequate to protect the revenue;
(b) The applicant for a permit does not meet the minimum
manufacturing and activity requirements in Sec. 40.61 of this chapter;
or
(c) The applicant (including, in the case of a corporation, any
officer, administrator, or principal stockholder and, in the case of a
partnership, a partner) is, by reason of his business experience,
financial standing, or trade connections, or by reason of previous or
current legal proceedings involving a felony violation of any other
provision of Federal criminal law relating to tobacco products,
processed tobacco, cigarette paper, or cigarette tubes, not likely to
maintain operations in compliance with 26 U.S.C. chapter 52, or has
been convicted of a felony violation of any provision of Federal or
State criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, or has failed to disclose any
material information required or made any material false statement in
the application.
(72 Stat. 1421, as amended; 26 U.S.C. 5712)
Signed: March 10, 2009.
John J. Manfreda,
Administrator.
Approved: March 12, 2009.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. E9-7077 Filed 3-27-09; 11:15 am]
BILLING CODE 4810-31-P