Information Release

XT 2017-05 - Excise & Energy Tax Division Seeks Comments on Current Cigarette Rules – Issued September 2017

Executive Order 2011-01K and Senate Bill 2 of the 129th General Assembly, require state agencies to draft rules in collaboration with stakeholders, assess and justify any adverse impact on the business community, and provide an opportunity for the affected parties to provide input on the rules.

As part of the Department’s five-year rule review process, the Excise & Energy Tax Division proposes the following:

Rule Number Proposed Change

5703-15-10

5703-15-11

5703-15-12

5703-15-13

5703-15-14

5703-15-15

5703-15-16

5703-15-17

No Change

No Change

No Change

Change

No Change

No Change

Change

Change

5703-15-13 Monthly reports of cigarettes shipped by wholesale cigarette dealers.

(A)(1) As used in this rule:

(a) "Unstamped cigarettes" means packages of cigarettes that do not bear an Ohio cigarette tax stamp or meter impression.

(b) "Sale" has the same meaning as in division (D) of section 5743.01 of the Revised Code and includes delivery or other distribution.

(2) Each licensed wholesale cigarette dealer shall submit to the tax commissioner cigarette sales reports on or before the last day of each month. Such reports shall cover the sale of both stamped and unstamped cigarettes during the preceding month to points outside of Ohio to other cigarette wholesale dealers, and sales made to an agency of the federal government. The reports shall be filed on a form and in a manner prescribed by the commissioner. The reports shall be filed with the monthly report that is required by rule 5703-15-14 of the Administrative Code.

(B) Whenever a licensed wholesale cigarette dealer is required to file an inventory return pursuant to rule 5703-15-16 of the Administrative Code, the dealer shall also file cigarette sales reports, in substance the same as those required by paragraph (A) of this rule, reporting the sale of cigarettes during the period from the first day of the month through the day upon which the inventory was conducted. The reports shall be filed on or before the thirtieth day after the date of the inventory and shall be submitted with the reports required by paragraph (B) of rule 5703-15-14 of the Administrative Code.

(C) When reports have been filed pursuant to paragraph (B) of this rule, the next cigarette sales reports due pursuant to paragraph (A) of this rule shall include the sale of cigarettes during the period from the day after the inventory to the end of the month.

5703-15-16 Cigarette wholesaler inventories and inventory returns.

(A) The department of taxation may conduct an inventory of a licensed cigarette wholesale dealer's stock of cigarettes, cigarette tax stamps, meter impressions, and other means of identification, at any time during regular business hours. A copy of the inventory findings shall be left with the wholesale dealer or the dealer's authorized agent or employee.

(B) In addition to the return required by section 5743.03 of the Revised Code, each licensed cigarette wholesale dealer, whose stock has been the subject of an inventory conducted by the department of taxation, shall file with the department of taxation a return showing the dealer's entire purchases and sales of cigarettes, tax stamps, meter impressions, and other means of identification, together with any other information requested by the tax commissioner, for the period from the last day covered by the dealer's preceding tax return through the day on which the inventory was conducted. The return shall be made on a form prescribed by the commissioner which shall be delivered to the dealer at the same time as the inventory report. The return shall be filed on or before the thirty-first day after the inventory is conducted. When an inventory return has been filed pursuant to this paragraph, the dealer's next return required by section 5743.03 of the Revised Code, shall report the purchases and sales for the period from the day after the inventory to the end of the semiannual monthly period.

(C) Remittance of any tax deficiency shall be made with the inventory return required by paragraph (B) of this rule. Failure to file the return shall subject the wholesale dealer to the same penalties mandated by section 5743.03 of the Revised Code for failure to file the return required by that section.

5703-15-17 Storage of unstamped cigarettes by dealer.

(A) As used in this rule:

(1) "Dealer" means the holder of a current valid wholesale cigarette dealer's license issued pursuant to section 5743.15 of the Revised Code and who is authorized to purchase cigarette tax indicia from the treasurer of state Department of Taxation.

(2) "Unstamped cigarettes" means packages of cigarettes, to which Ohio cigarette tax indicia have not been applied and upon which the Ohio cigarette tax has not been paid.

(3) "Place of business" means the location where the dealer applies tax indicia to cigarettes, as referenced on his license.

(4) "Public warehouse" means a place operated by a person in the business of storing goods for others for consideration.

(5) "Warehouseman" means the individual, partnership, corporation, or other person that controls and operates a public warehouse.

(B) Except as provided in this rule, no dealer shall store unstamped cigarettes at any place other than his place of business.

(C) A dealer may store unopened cases of unstamped cigarettes at the same public warehouse where the manufacturer of the cigarettes, from whom the dealer purchased them, stored the cigarettes immediately prior to such purchase. The dealer may store unopened cases of unstamped cigarettes at any other public warehouse only after approval of the department of taxation.

(D) Within forty-eight hours of the purchase from the manufacturer, the dealer shall, in writing, notify the department of taxation that he is storing unstamped cigarettes at a public warehouse. The dealer shall disclose the name and location of the warehouse and the quantity of cigarettes purchased.

(E) Any cigarettes owned by the dealer and stored at a place other than his place of business shall be considered part of the dealer's inventory for purposes of Chapter 5743. of the Revised Code and Chapter 5703-15 of the Administrative Code.

(F) No unstamped cigarettes shall be transported between warehouses, or between a warehouse and a dealer's place of business, by any means other than by a regulated common carrier.

(G) A dealer shall not transfer title of unstamped cigarettes to any person in this state except the cigarette manufacturer from whom they were purchased. A dealer shall not transfer possession of such unstamped cigarettes to any person other than a warehouseman or regulated common carrier.

(H) A warehouseman or other person who acquires an interest in unstamped cigarettes through lien or judgment may only sell such cigarettes to a dealer or cigarette manufacturer, and then, only after prior approval of the department of taxation.

(I) Any violation of this rule constitutes cause for revocation of the dealer's wholesale license by the tax commissioner.

All comments regarding these rules should be sent to Keven Kuhns, Division Counsel, Excise & Energy Tax Division, at keven.kuhns@tax.state.oh.us by September 22, 2017.