Information Release

XT 2006-01 - Excise and Motor Fuel Tax Division Information Release – Tobacco Requirements - Issued July, 2006

The purpose of this information release is to address the numerous changes to the tax code affecting the licensing, sale, transportation and reporting of both cigarette and other tobacco products, made in Am. Sub. H.B. 66 and Am. Sub. H.B. 530. This information release summarizes these changes in the following categories: 1) Licensing and reporting requirements for cigarette manufacturers and importers; 2) Licensing requirements for cigarette wholesalers; 3) Restrictions on the sale and shipment of cigarettes; 4) Registration and reporting requirements for Other Tobacco Product (OTP) manufacturers, importers, and brokers; 5) Licensing requirements for OTP distributors; 6) Restrictions on the sale and shipment of OTP; 7) Record keeping and reporting requirements; and 8) Miscellaneous issues. 

Licensing & Reporting Requirements for Cigarette Manufacturers and Importers

All manufacturers and importers that sell cigarettes into Ohio must apply for and obtain a license from the Ohio Department of Taxation. These licenses are to be renewed annually on or before the fourth Monday of May. A list of all cigarette manufacturers and importers is public information and will be posted on the department’s Web site at tax.ohio.gov. It is illegal for any cigarette wholesaler to buy from a manufacturer or importer that is not licensed and listed on this site. 

Ohio licensed cigarette wholesalers located outside Ohio must purchase from Ohio licensed cigarette manufacturers or importers, but only if those cigarettes are being sold into Ohio.     

As part of the Ohio licensing requirement, all manufacturers and importers will be required to prove that their product(s) are legal for sale in Ohio. Cigarette brands that are listed on the Attorney General’s Web site will suffice as such proof. Any cigarette brands not listed on this site may only be sold to cigarette wholesalers for sale into another state and such cigarettes must be legal for sale in such other state.    

The issuing of an Ohio license to a manufacturer does not excuse a manufacturer from the certification process required under section 1346.05 of the Ohio Revised Code.

All Ohio licensed cigarette manufacturers and importers must file monthly reports detailing the brand and quantities of all cigarettes shipped into Ohio as well as the name and address of the recipient along with all invoice numbers and invoice dates. Any manufacturer or importer that fails to file the required reports may have its Ohio license suspended or revoked and may no longer sell its products into Ohio. 

Licensing Requirements of Cigarette Wholesalers

No changes were made to the requirement that all cigarette wholesalers obtain Ohio licenses.  These Ohio wholesale licenses are issued by the county auditor’s office and are still renewed on or before the fourth Monday in May. A list of all cigarette wholesalers is now public information and will be posted on the Department of Taxation’s Web site at tax.ohio.gov. Cigarette wholesalers will be classified as either: 1) Ohio stamping cigarette wholesalers; 2) Ohio non-stamping cigarette wholesalers; 3) multi-state stamping cigarette wholesalers; or 4) out-of-state licensed cigarette wholesalers.

In addition to obtaining an Ohio wholesale cigarette license from the county auditor’s office, all cigarette wholesalers must also establish an account with the Department of Taxation. The information obtained by the department will be used to properly classify the wholesaler into one of the four categories below:

    

(1) Ohio stamping cigarette wholesaler – located in Ohio and stamps cigarettes only for sale in the state of Ohio. Must receive authority from the department in order to purchase cigarette tax stamps.

(2) Ohio non-stamping cigarette wholesaler – purchases and distributes cigarettes on which the
tax has already been paid. Essentially, a sub-jobber with no authority to purchase and/or apply tax stamps.

(3) Multi-state-stamping cigarette wholesaler – located in Ohio but stamps cigarettes for sale in Ohio as well as other states.

(4) Out-of-state licensed wholesaler – located outside Ohio but stamps and sells cigarettes into Ohio. Must receive authority from the department in order to purchase cigarette tax stamps.



Restrictions on the Sale and Shipment of Cigarettes

Licensed cigarette retailers may only purchase stamped cigarettes from Ohio licensed cigarette wholesalers. Licensed cigarette wholesalers may sell cigarettes between each other under certain circumstances. Ohio licensed cigarette wholesalers may purchase cigarettes from cigarette manufacturers or importers that have obtained a license from the Department of Taxation, or as stated above, from other Ohio licensed cigarette wholesalers under certain circumstances.

The following transactions are not permitted:

No cigarettes may be sold into Ohio unless the cigarette manufacturer or importer has obtained an Ohio license. These Ohio-licensed cigarette manufacturers and importers will be posted on the department’s Web site. Additionally, licensed cigarette manufacturers or importers may only sell to stamping cigarette wholesalers. Cigarette manufacturers and importers may not sell to non-stamping cigarette wholesalers or cigarette retailers. 

The following transactions are permitted with prior approval of the Department of Taxation:

The sale of unstamped cigarettes between cigarette wholesalers is permitted only with prior approval of the department. Such approval will only be granted if the selling wholesaler was the original purchaser of the cigarettes from an Ohio licensed cigarette manufacturer or importer. This requirement also applies to shipments between locations of affiliated wholesalers. Shipments through Ohio (no origin, destination, or stops in Ohio) do not require this consent; however, these shipments do fall under the federal Cigarette Contraband Trafficking Act and all the requirements of this act must be adhered to. 

Prior approval is to be requested on a form prescribed for that purpose. This form must be submitted by the wholesaler that is to receive the cigarettes and shall contain the quantity and brands of the cigarettes being shipped. The approval must be carried in the vehicle transporting the cigarettes. Both the supplying wholesaler and receiving wholesaler will be faxed the approval. If the quantity received by the receiving wholesaler differs from the quantity approved to be shipped, the receiving wholesaler must notify the Department of Taxation within 48 hours of receipt. Failure of the receiving wholesaler to notify the department will be presumed to have received the quantity approved for shipment along with the resulting tax liability. If the shipment involves the transportation into, from, or through another state, it is the responsibility of the wholesalers to obtain whatever other approvals are needed in such other state to transport the cigarettes.  

The following transactions do not require the department’s approval:

Ohio-licensed cigarette manufacturers or importers may sell unstamped cigarettes to stamping cigarette wholesalers without the approval of the Department of Taxation. Licensed cigarette retailers may only purchase stamped cigarettes from Ohio licensed cigarette wholesalers and Ohio-licensed cigarette wholesalers may sell to licensed cigarette retailers without prior approval from the department.    

Registration and Reporting Requirements for OTP

Manufacturers, Importers, and Brokers

All manufacturers, importers and brokers of other tobacco products that sell other tobacco products into Ohio must register with the Department of Taxation. This registration must be renewed annually on or before the first day of February. It is illegal for any manufacturer, importer or broker of OTP to sell into Ohio without registering with the department.   

As part of the registration requirement, all manufacturers, importers and brokers will be required to prove that any roll-your-own tobacco being sold into or within Ohio is legal for sale in Ohio. Roll-your-own brands that are listed on the Attorney General’s Web site will suffice as such proof. Any brands of roll-your-own tobacco not listed on this site may be sold only to licensed OTP distributors for sale into another state and such roll-your-own must be legal for sale in such other state.   

The registration of an OTP manufacturer does not excuse such manufacturer from the certification process required under section 1346.05 of the Ohio Revised Code.

All Ohio registered OTP manufacturers, importers and brokers must file monthly reports detailing the brand, wholesale cost, type and quantities of all other tobacco products shipped into Ohio, as well as the name and address of the recipient along with all invoice numbers and invoice dates. Any manufacturer, importer or broker that fails to file the required reports may have its Ohio registration suspended or revoked and may no longer sell its products into Ohio. 

Licensing Requirements of OTP Distributors

All distributors of other tobacco products must obtain an Other Tobacco Products license.  All OTP licenses are still issued by the Department of Taxation and are renewed annually on or before the first day of February. In the past, persons dealing solely in tax-paid other tobacco products were not required to obtain an Ohio OTP distributor’s license. The new licensing requirements now require these sub-jobbers, or secondary distributors, to obtain an Ohio OTP license. Licenses are not required by retailers who purchase tax-paid other tobacco products and who only sell to ultimate consumers. 

A list of all OTP distributors is now public information and will be posted on the Department of Taxation’s Web site at tax.ohio.gov.     

Restrictions on the Sale and Shipment of OTP

Retailers may only purchase tax-paid other tobacco products from Ohio licensed OTP distributors.  Ohio licensed OTP distributors may purchase other tobacco products from registered OTP manufacturers, importers or brokers. Ohio licensed OTP distributors may sell other tobacco products between each other under certain circumstances. Licensed OTP distributors may purchase other tobacco products only from OTP manufacturers, importers or brokers that have registered with the Ohio Department of Taxation, or as stated above, from other Ohio licensed OTP distributors under certain circumstances. 

The following transactions are not permitted:

All manufacturers, importers or brokers of other tobacco products must be registered with the Department of Taxation. No manufacturer, importer or broker of other tobacco products that has not registered with the department may sell or ship other tobacco products into Ohio.    

The following transactions do not require the department’s approval:

Registered manufacturers, importers or brokers of other tobacco products may sell tobacco products into Ohio only to Ohio licensed OTP distributors. The identities of Ohio licensed distributors are subject to public disclosure and will be posted on the department’s Web site at tax.ohio.gov.  Registered OTP manufacturers, importers or brokers are not public information and will not be posted on this site. Therefore, in order for the OTP distributor to know they are purchasing from an Ohio registered OTP manufacturer, importer or broker, the OTP manufacturer, importer or broker must include, on their invoice, the following statement: “Registered by the State of Ohio; Registration number xxxxxxxx. The recipient named on the invoice responsible for paying the Ohio Other Tobacco Products Tax.”

The following transactions are permitted with prior approval of the Department of Taxation:

Unless authorized by the Tax Commissioner, Ohio licensed OTP distributors may only purchase other tobacco products from Ohio registered OTP manufacturers, importers and brokers. All other shipments between OTP distributors must have the prior approval of the Department of Taxation. Such approval will only be granted if the selling distributor was the original purchaser of the other tobacco products from a registered OTP manufacturer, importer or broker. This requirement also applies to shipments between locations of affiliated distributors. Prior approval is to be requested on a form prescribed for that purpose. This form must be submitted by the OTP distributor that is to receive the product and shall contain the quantity and brands of the products being shipped. This approval must be carried in the vehicle transporting the product. Both the supplying wholesaler and receiving wholesaler will be faxed the approval. If the quantity received by the receiving wholesaler differs from the quantity approved to be shipped, the receiving wholesaler must notify the Department of Taxation within 48 hours of receipt. If the receiving wholesaler fails to notify the department, such wholesaler will be presumed to have received the quantity approved for shipment along with the resulting tax liability. If the shipment involves the transportation into, from or through another state, it is the responsibility of the distributors to obtain whatever other approvals are needed in such other state to transport the other tobacco products.    

Record Keeping and Reporting Requirements

New reports have been prescribed for the monthly reporting of both cigarette and tobacco products purchased and sold in Ohio. The reports will be distributed by the Department of Taxation and may also be downloaded from the department’s Web site at tax.ohio.gov. The additional reports now require the reporting of both tax-paid and tax unpaid product. 

Every person shall maintain complete and accurate records of all purchases and sales of both cigarettes and other tobacco products and shall retain all invoices, bills of lading, and other documents relating to these purchases and sales. The invoices or documents shall be maintained for each place of business and shall show the name and address of the other party along with the quantity of cigarettes or other tobacco products sold or purchased. The records and documents shall be made available, upon request, to the Tax Commissioner and shall be preserved for a period of three years.

Miscellaneous Issues

Retailers Responsibility to Prove OTP Tax Paid – Retailers of other tobacco products must have proof of tax payment made on all other tobacco products in inventory. Although retailers of other tobacco products need not have an Ohio OTP license to sell these products, invoices from their supplier must state that the OTP tax has been paid along with the account number assigned to the supplier by the department. Any tobacco product in a retailer’s possession, for which evidence of payment of the other tobacco products tax is not available, is subject to seizure.    

 

Retailers Duty to Inspect Cigarettes – No changes have been made to the licensing requirements of cigarette retailers. Each retail dealer, within 24 hours after the receipt of any cigarettes at the retail’s place of business, and before the cigarettes are made available for sale, shall inspect the cigarettes to ensure that tax stamps are affixed. Please notify the Department of Taxation if any cigarettes are received without the proper Ohio tax stamp affixed. Whenever any cigarettes are found at a retail place of business without proper tax stamps affixed, it is presumed that such cigarettes are being kept in violation of Ohio tax laws and such product may be confiscated. 

Face-to-Face Requirement – In general, all cigarettes sold in Ohio must be sold in a face-to-face transaction. The face-to-face requirement is not applicable to cigarettes sold between Ohio licensed cigarette manufacturers, importers, wholesalers and retailers. Sales to consumers in Ohio must be sold in face-to-face transactions. Sales of cigarettes over the Internet, catalogue, mail order, phone order, or any other means that does not involve a face-to-face transaction are prohibited by section 2927.023 of the Ohio Revised Code.       

Attorney General’s Web Site – As part of Ohio's participation in the Master Settlement Agreement, only brands of cigarettes and roll-your-own tobacco that have been certified by the Attorney General’s office as legal for sale in Ohio may be sold in Ohio.  A list of legal brands is published on the AG’s Web site at www.ag.state.oh.us. Any brand of cigarette or roll-your-own tobacco not listed on this site may not be sold in Ohio and is subject to confiscation. Please note, the Master Settlement Agreement covers only cigarettes and roll-you-own tobacco. Other than roll-your-own tobacco, it does not include other tobacco products such as cigars, snuff, chewing tobacco and the like. These products are not listed on the Attorney General’s Web site and continue to be legal for sale in Ohio once the OTP tax has been paid.    

Any questions regarding this information release may be directed to:

Ohio Department of Taxation

Excise Tax and Motor Fuel Division

P O Box 530

Columbus, Oh.  43216-0530

(614) 466-7026