Effective July 1, 2008, the Massachusetts cigarette tax has increased by an additional 50 mills per cigarette ($1.00 per package of 20 and $1.25 per package of 25). As of July 1, the new excise rates are:

  • $2.51 per package of 20 cigarettes

  • $3.1375 per package of 25 cigarettes

All packages of stamped cigarettes held in inventory as of July 1, 2008, and all unapplied stamps held by stampers as of July 1, 2008, are subject to an additional tax at the rate of 50 mills per cigarette. Every manufacturer, wholesaler, vending machine operator, unclassified acquirer, retailer, or stamper who, as of the commencement of business on July 1, 2008, has an inventory of cigarettes for sale or holds any unapplied stamps is required to file a return with the Commissioner of Revenue providing a complete inventory of cigarettes and stamps, and must pay the additional 50 mill per cigarette tax. These returns are due by July 21, 2008.

  • Stampers should file
  • Non-Stampers (including Retailers) should file
  • Vending Machine Operators should file

The above forms contain instructions for inventory procedures to be used to compute the tax due.

Notice to Massachusetts Cigarette Stampers and Licensees
Updated July 14, 2008

On July 3, 2008, the Massachusetts Legislature passed the fiscal year 2009 budget. Section 35 of the budget expands the definition of "cigarette" in G.L. c. 64C, § 1 to include "little cigars," which are defined as "rolls of tobacco wrapped in leaf tobacco or any substance containing tobacco and as to which 1,000 units weigh not more than 3 pounds." The Governor is expected to sign the budget no later than Sunday, July 13, 2008. If adopted as anticipated, this amended definition of "cigarette" will take effect as of July 1, 2008. The Department has posted a list of little cigar brands pdf format of lilcigars.pdf
on its website.

Once the budget is signed, "little cigars," as defined, will be taxed as cigarettes. The excise rate on little cigars will no longer be 30 percent of the price paid, but will be $2.51 per pack of twenty. All packs of little cigars sold in Massachusetts will be required to be stamped with a current Massachusetts cigarette stamp.

The Department recommends that stampers and licensees check the Department's website and follow the news closely between the date of this Notice and July 13, 2008 for reports that the Governor has signed the budget. Once the Governor has signed the budget, stampers must begin to apply the current Massachusetts cigarette stamp to packs of little cigars, and sales of unstamped packs of little cigars to retailers will be illegal. Because the effective date of the tax is July 1, 2008, retailers should consider limiting their purchases of unstamped packs this week. Unstamped packs of little cigars held by retailers and other non-stampers will be subject to seizure by the Department starting September 1, 2008.

Retailers are not responsible for payment of the cigar excise on stamped packs of little cigars because the stamp indicates that the excise has already been paid. However, once the Governor has signed the budget, retailers are responsible for the excise of $2.51 per pack of 20 little cigars on all unstamped packs they may sell, generally from inventory obtained before the law change. Retailers may add $2.51 a pack to their selling price of unstamped packs and claim a credit for the 30 percent cigar excise, if any, that they paid with a Form Cigar-1 for a prior quarter. The Form Cigar-1 for the third quarter of 2008, which the Department will mail to retailers shortly, will have a line for claiming the credit. The Form Cigar-1 for the third quarter of 2008 will be due on October 20, 2008. Retailers must maintain appropriate documentation to substantiate the payment of the excise for which they claim a credit.

Effective October 1, 2008, cigars and smoking tobacco will be taxed at the wholesale level. Therefore, the Form Cigar-1 for the third quarter of 2008 is expected to be the final Form Cigar-1 to be completed by retailers. The Department will issue guidance about this change in the law in the near future.

Retailers should submit Form Cigar-1, along with payment of the cigar and smoking tobacco excise, for the second quarter of 2008, by July 20, 2008, as they normally would. The amended definition of cigarettes has no effect on the tax on little cigars in the second quarter of 2008.

Please forward this Notice to any of your customers and suppliers who may be affected by it.

See also, TIR 08-9.