INFORMATION REGARDING THE INCREASE IN THE CIGARETTE EXCISE AND SMOKELESS TOBACCO EXCISE
The increase on the cigarette excise and smokeless tobacco excise will be effective at the opening of business on July 31, 2013.
Cigarettes: The amount of the increase on cigarettes will be $1.00 per pack of 20’s and $1.25 per pack of 25’s.
For a pack of 20 cigarettes the new excise will be $ 3.51.
For a pack of 25 cigarettes the new excise will be $ 4.3875.
Smokeless Tobacco: The tax rate on smokeless tobacco will increase from 90% to 210% of the wholesale price paid.
Inventory Tax for Cigarettes and Unapplied Old Stamps:
An inventory tax will be imposed on all stamped cigarettes (including little cigars) and all unapplied stamps, on hand at the opening of business on the effective date. Form CIS (Cigarette Inventory Tax Return for Stampers) must be filed by August 20, 2013 to remit the inventory tax. This return will include all cigarettes in transit that will be delivered by you on or after July 31, 2013.
Stamps on hand at the opening of business on the effective date will be subject to the additional excise. The excise is due on all stamps on hand on July 31, 2013 and any stamps in transit that are invoiced at the old rate.
An inventory of all unstamped cigarettes will also be required on the inventory return.
Please retain all documentation for audit purposes.
Information for the monthly returns Form CT-1 and CTS-1NR:
The August 2013 monthly return will be for the period July 31 – August 31 2013.
Inventory on Form CT-1 & CTS-1NR – The beginning Inventory (line 1) for the August 2013 return (beginning July 31, 2013) will be the ending inventory (line 4) from the July 2013 return (ending July 30, 2013) times the new tax rates. This should match what was reported on Form CIS.
For the ending inventory (line 4) for August 2013 use the rates of $3.51 for 20’s and $ 4.3875 for 25’s
Use the rate .1755 per cigarette for Form CT-1 on lines 14, 17 and 19 and for Form CTS-1NR on lines 7, 14 and 16.
Use the new smokeless tobacco excise rate of 210% on line 21 for Form CT-1 and on line 18 for Form CTS-1NR.
Retailers will also be subject to the inventory tax. Form CIN (Cigarette Inventory Tax Returns for Non-Stampers) will be mailed to all the licensed retailers.
You may file an Application for Abatement (CA-6) for all misapplied and unusable red and gold stamps if you do not include them in your unstamped inventory. Note: all stamps on hand on August 1 2013, must be included in the inventory.
Increased riders on your bond may be necessary. If required, please submit your increase as soon as possible.to the Cigarette and Tobacco Excise Unit.
If you have any other questions regarding the increase, please call the Cigarette and Tobacco Excise Unit at 617-887-5090.
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 (Updated March 1, 2012) 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.