<<Prev Rule

Texas Administrative Code

Next Rule>>
TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER HCIGAR AND TOBACCO TAX
RULE §3.121Definitions, Imposition of Tax, Permits, and Reports

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Bonded agent--A person in Texas who is an agent for a principal located outside of Texas and who receives cigars and tobacco products in interstate commerce and stores the cigars and tobacco products for distribution or delivery to distributors under orders from the principal.

  (2) Cigar--A roll of fermented tobacco that is wrapped in tobacco and that the main stream of smoke from which produces an alkaline reaction to litmus paper.

  (3) Common carrier--A motor carrier registered under Transportation Code, Chapter 643, or a motor carrier operating under a certificate issued by the Interstate Commerce Commission or its successor agency.

  (4) Distributor--A person who:

    (A) receives tobacco products from a manufacturer for the purpose of making a first sale in Texas;

    (B) brings or causes to be brought into Texas tobacco products for sale, use, or consumption.

  (5) Factory list price--The published manufacturer gross cost to the distributor.

  (6) Export warehouse--A location in this state from which a person receives tobacco products from manufacturers and stores the tobacco products for the purpose of making sales to authorized persons for resale, use, or consumption outside the United States.

  (7) First sale--Except as otherwise provided by this section, the term means:

    (A) the first transfer of possession in connection with purchase, sale, or any exchange for value of tobacco products in intrastate commerce;

    (B) the first use or consumption of tobacco products in this state; or

    (C) the loss of tobacco products in this state whether through negligence, theft, or other loss.

  (8) Importer or import broker--A person who ships, transports, or imports into Texas tobacco products manufactured or produced outside the United States for the purpose of making a first sale in this state.

  (9) Manufacturer--A person who manufactures or produces tobacco products and sells tobacco products to a distributor.

  (10) Manufacturer's representative--A person who is employed by a manufacturer to sell or distribute the manufacturer's tobacco products.

  (11) Manufacturer's list price--The published manufacturer gross cost to the distributor. The term is synonymous with factory list price.

  (12) Manufacturer's listed net weight--For the purposes of calculating and reporting the state excise tax due on tobacco products other than cigars, the taxable net weight for a tobacco product is the weight of the finished product as shown or listed by the product manufacturer on the product can, package, shipping container, or the report required by Tax Code, §155.103(b).

  (13) Permit holder--A bonded agent, distributor, importer, manufacturer, wholesaler, or retailer required to obtain a permit under Tax Code, §155.041.

  (14) Place of business--the term means:

    (A) a commercial business location where tobacco products are sold;

    (B) a commercial business location where tobacco products are kept for sale or consumption or otherwise stored and may not be a residence or a unit in a public storage facility; or

    (C) a vehicle from which tobacco products are sold.

  (15) Retailer--A person who engages in the practice of selling tobacco products to consumers and includes the owner of a coin-operated vending machine.

  (16) Tobacco product--A tobacco product includes: a cigar; pipe tobacco, including 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 to be smoked in a pipe; chewing tobacco, including plug, scrap, and any kind of tobacco suitable for chewing and that is not intended to be smoked; snuff or other preparations of finely cut, ground, powdered, pulverized or dissolvable tobacco that is not intended to be smoked; roll-your-own smoking tobacco, including granulated, plug-cut, crimp-cut, ready rubbed, any form of 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 or cigars, or use as wrappers thereof; or other tobacco products, including an article or product that is made of tobacco or a tobacco substitute and that is not a cigarette.

  (17) Trade discount, special discount, or deals--Includes promotional incentive discounts, quantity purchase incentive discounts, and timely payment or prepayment discounts.

  (18) Weight of a cigar--The combined weight of tobacco and nontobacco ingredients that make up the total product in the form available for sale to the consumer, excluding any carton, box, label, or other packaging materials.

  (19) Wholesaler--A person, including a manufacturer's representative, who sells or distributes tobacco products in this state for resale but who is not a distributor.

(b) Imposition of tax. A tax is imposed and becomes due and payable when a permit holder receives cigars or tobacco products for the purpose of making a first sale in this state.

  (1) Tax Rates.

    (A) the tax on cigars is calculated at

      (i) $.01 per 10 or fraction of 10 on cigars that weigh three pounds or less per thousand;

      (ii) $7.50 per thousand on cigars that weigh more than three pounds per thousand and that are sold at factory list price, exclusive of any trade discount, special discount, or deal, for 3.3 cents or less each;

      (iii) $11 per thousand on cigars that weigh more than three pounds per thousand and that are sold at factory list price, exclusive of any trade discount, special discount, or deal, for more than 3.3 cents each, and that contain no substantial amount of nontobacco ingredients; and

      (iv) $15 per thousand on cigars that weigh more than three pounds per thousand and that are sold at factory list price, exclusive of any trade discount, special discount, or deal, for more than 3.3 cents each, and that contain a substantial amount of nontobacco ingredients.

    (B) Effective September 1, 2009, House Bill 2154, enacted by the 81st Legislature, 2009, changed the tax for tobacco products other than cigars to a tax based on the manufacturer's listed net weight for an individual product's can or package and a rate for each ounce and proportionate rate on all fractional parts of an ounce of weight for that product. The tax imposed on a can or package of a tobacco product that weighs less than 1.2 ounces is equal to the amount of the tax imposed on a can or package that weighs 1.2 ounces. A new rate is imposed for state fiscal years 2010, 2011, 2012, 2013, and 2014. The rate for each ounce and proportionate rate on all fractional parts of an ounce in effect for FY 2014 apply to each fiscal year thereafter. The tax rate in effect for a state fiscal year that occurs according to this subparagraph does not affect the taxes imposed before that fiscal year, and the rate in effect when those taxes were imposed continues in effect for the purposes of the liability for and collection of those taxes. The new rates imposed for state fiscal years 2010, 2011, 2012, 2013, 2014, and thereafter are set forth in this subparagraph.

      (i) The rate for the state Fiscal Year 2010 (September 1, 2009 through August 31, 2010), is $1.10 per ounce and a proportionate rate on all fractional parts of an ounce for up to two ounces according to the following. An expanded chart showing rates for cans or packages greater than two ounces is available on the Window on State Government Web site.

Attached Graphic

      (ii) For the state Fiscal Year 2011 (September 1, 2010 through August 31, 2011), the tax rate and proportionate tax rate for fractional parts of an ounce for up to two ounces are as follows.

Attached Graphic

      (iii) For the state Fiscal Year 2012 (September 1, 2011 through August 31, 2012), the tax rate and proportionate tax rate for fractional parts of an ounce for up to two ounces are as follows.

Attached Graphic

      (iv) For the state Fiscal Year 2013 (September 1, 2012 through August 31, 2013), the tax rate and proportionate tax rate for fractional parts of an ounce for up to two ounces are as follows.

Attached Graphic

      (v) For state Fiscal Year 2014 (which begins September 1, 2013) and for each fiscal year thereafter, the tax rate and proportionate tax rate for fractional parts of an ounce for up to two ounces are as follows.

Attached Graphic

    (C) The tax imposed on a unit that contains multiple individual cans or packages is the sum of the taxes imposed under paragraph (1)(B) of this subsection, on each individual can or package intended for sale or distribution at retail. For example, on November 1, 2009 (Fiscal Year 2010) a distributor receives from a manufacturer for the purpose of making a first sale in Texas a unit of snuff that consists of 10 individual cans. Each can weighs 1.3 ounces. The effective tax rate for each can is $1.43. The total tax due for the unit is calculated by multiplying the effective tax rate on each individual can ($1.43) by the total number of individual cans in the unit (10 cans), for a total tax due of $14.30.

  (2) Free goods shall be taxed at the prevailing factory list price, except that each tobacco product other than cigars shall be taxed according to the manufacturer's listed net weight for the product and the applicable fiscal year rate for each ounce and proportionate rate for all fractional parts of an ounce according to paragraph (1)(B) of this subsection.

  (3) A person who receives or possesses tobacco products on which a tax of more than $50 would be due is presumed to receive or possess the tobacco products for the purpose of making a first sale in this state. This presumption does not apply to common carriers or to manufacturers.

  (4) A tax imposed on manufacturers, who manufacture tobacco products in this state, at the time the tobacco products are first transferred in connection with a purchase, sale, or any exchange for value in intrastate commerce.

  (5) The delivery of tobacco products by a principal to its bonded agent in this state is not a first sale.

  (6) If a manufacturer sells tobacco products to a purchaser in Texas and ships the products at the purchaser's request to a third party distributor in Texas, then the purchaser has received the tobacco products for first sale in Texas.

  (7) The person in possession of cigars or tobacco products has the burden to prove payment of the tax.

(c) Permits required. To engage in business as a distributor, importer, manufacturer, wholesaler, bonded agent, or retailer a person must apply for and receive the applicable permit from the comptroller. The permits are not transferable.

  (1) A person who engages in the business of a bonded agent, distributor, importer, manufacturer, wholesaler, or retailer without a valid permit is subject to a penalty of not more than $2,000 for each violation. Each day on which a violation occurs is a separate offense. A new application is required if a change in ownership occurs (sole ownership to partnership, sole ownership to corporation, partnership to limited liability company, etc.). Each legal entity must apply for its own permit(s). All permits issued to a legal entity will have the same taxpayer number.

  (2) Each distributor, importer, manufacturer, wholesaler, bonded agent, or retailer shall obtain a permit for each place of business owned or operated by the distributor, importer, manufacturer, wholesaler, bonded agent, or retailer. A new permit shall be required for each physical change in the location of the place of business. Correction or change of street listing by a city, state, or U.S. Post Office shall not require a new permit so long as the physical location remains unchanged.

  (3) Permits are valid for one place of business at the location shown on the permit. If the location houses more than one place of business under common ownership, an additional permit is required for each separate place of business. For example, a retailer must have a separate permit for each vending machine including several machines at one location.

  (4) A vehicle from which cigars and tobacco products are sold is a place of business and requires a permit. A motor vehicle permit is issued to a bonded agent, retailer, distributor, or wholesaler holding a current permit. Vehicle permits are issued bearing a specific motor vehicle identification number and are valid only when physically carried in the vehicle having the corresponding motor vehicle identification number. Vehicle permits may not be moved from one vehicle to another. Each cigar or tobacco product manufacturer's sales representative is required to purchase a wholesale dealer's permit for each manufacturer's vehicle operated. No cigar and tobacco product permit is required for a vehicle used only to deliver invoiced tobacco products.

  (5) The comptroller may issue a combination permit for cigarettes, tobacco products, or cigarettes and tobacco products to a person who is a distributor, importer, manufacturer, wholesaler, bonded agent, or retailer as defined by Tax Code, Chapter 154 and Chapter 155. A person who receives a combination permit pays only the higher of the two permit fees.

Cont'd...

Next Page Previous Page



Home TxReg TAC OM NewTac Public Footer Bar