No. 29709: R865-20T. Tobacco Tax

DAR File No.: 29709
Filed: 03/19/2007, 04:18
Received by: NL

NOTICE OF REVIEW AND STATEMENT OF CONTINUATION

Concise explanation of the particular statutory provisions under which the rule is enacted and how these provisions authorize or require the rule:

Section 59-14-202 requires that cigarette licenses be issued only to a person owning or operating the place where cigarette vending machine sales are made. It requires a separate license for each location sales are made. It also provides instructions pertaining to license issuance. Section 59-14-204 imposes a cigarette tax and provides the rates of the tax imposed. It states that the tax shall be imposed upon the first purchase of cigarettes in the state. Section 59-14-205 provides that the cigarette tax shall be paid by affixing stamps on cigarettes, unless otherwise provided in rule by the Tax Commission. It requires that all cigarettes sold in the state of Utah be stamped within 72 hours of their receipt in the state and prior to sale in Utah. It also allows the Tax Commission to draft rules allowing cigarettes to remain unstamped in the hands of the wholesaler or distributor under certain conditions. The law also gives the Tax Commission authority to create rules aiding in the enforcement and collection of cigarette tax. Section 59-14-206 sets forth procedures for design, sales, deposit of revenues, redemption, and discounts for cigarette stamps. Section 59-14-212 requires all manufacturers, distributors, or retailers that affix a stamp to imported cigarettes to provide certain information to the Tax Commission regarding those imported cigarettes; indicates that the required information shall be reported on a quarterly basis; and provides a penalty for failure to comply. Section 59-14-301 requires all manufacturers, distributors, and retailers of tobacco products to register with the Tax Commission. It also requires persons subject to this section to post a bond as a prerequisite to registering. Section 59-14-302 imposes a tax on the sale, use, or storage of tobacco products in Utah. The tax is imposed on the first purchase of the product in Utah. Section 59-14-303 requires that tobacco tax be remitted to the Tax Commission on a quarterly basis; requires manufacturers, and wholesalers to provide detailed invoices showing where the products were distributed if they were not sold to consumers; and provides penalties for not paying tax. Section 59-14-401 allows a refund of cigarette tax on cigarettes and tobacco products sold outside of the state of Utah to a regular dealer in these articles. Section 59-14-404 gives the Tax Commission authority to enter on the premises of a taxpayer to examine books and papers pertaining to the cigarette or tobacco products tax, or to secure any information directly or indirectly concerned with the enforcement of Title 59, Chapter 14.

Summary of written comments received during and since the last five-year review of the rule from interested persons supporting or opposing the rule:

No written comments have been received.

Reasoned justification for continuation of the rule, including reasons why the agency disagrees with comments in opposition to the rule, if any:

Section R865-20T-1 clarifies that the cigarette tax and tobacco products tax are imposed upon the first purchase, use, storage, or consumption in the state, and clarifies that no tax is due from a nonresident or tourist who purchases cigarettes outside the state for use, storage, or consumption inside the state. Section R865-20T-2 provides that tax due on imported cigarettes may be paid by affixing stamps or by filing a monthly return. Section R865-20T-3 states that each vending machine selling tobacco is to be licensed as a separate place of business. The license will be posted in a conspicuous place on the machine. The section also provides guidelines for application for license and to change the place of business. Section R865-20T-5 provides that sellers of tobacco products are not required to post bond if a previous seller has paid the tax on the products. Section R865-20T-6 provides that cigarette stamps shall be sold to licensed and bonded dealers; provides that stamps may be delivered on consignment; and indicates who may request the stamps. Section R865-20T-7 clarifies that sales of cigarettes and tobacco products to vendors outside the state are not subject to this tax. This section also provides guidelines on records that must be maintained to evidence this exemption. Section R865-20T-8 requires manufacturers, jobbers, distributors, wholesalers, retailers, users, or consumers of tobacco products or cigarettes to keep records necessary to determine the amount of tax due on the sale and consumption of these products for a period of three years. Section R865-20T-9 allows inventories of cigarettes held by manufacturers to be delivered to wholesalers or jobbers without being stamped. The records of those deliveries must be kept with information provided in the rule, and made available to the Tax Commission. Section R865-20T-10 provides guidelines to renew a cigarette and tobacco products license or to reinstate a revoked or suspended license. Section R865-20T-11 allows manufacturers, distributors, wholesalers, and retailers that are required to provide, on a quarterly basis, a copy of the importer's federal import permit and customs form, to exclude those items from enclosure with their quarterly report so long as that information is kept in their records, and provided to the Tax Commission upon request. Therefore, this rule should be continued.

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Tax Commission
Auditing
210 N 1950 W
SALT LAKE CITY UT 84134

Direct questions regarding this rule to:

Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at [e-mail]

Authorized by:

D'Arcy Dixon, Commissioner