The Massachusetts Legislature recently amended Chapter 64C (the "Cigarette Excise") of the General Laws by adding two new sections, sections 7A and 7B. See St. 1996, c. 203, § 3, effective October 1, 1996. Newly-added section 7B ("the cigar excise") of Chapter 64C imposes an excise on cigars and smoking tobacco that are sold, imported or acquired for sale, and held for sale or consumption in the Commonwealth. The purpose of this Technical Information Release ("TIR") is to explain the rules governing the collection, payment and reporting of the cigar excise imposed by G.L. c. 64C, § 7B.
Effective October 1, 1996, the cigar excise is imposed on cigars and smoking tobacco sold, imported or acquired and held for sale or consumption in the Commonwealth. The cigar excise will be collected from retailers of cigars and smoking tobacco on a quarterly basis, in accordance with the provisions of this TIR. Initial returns under this excise will be due on January 20, 1997 for the period October 1, 1996-December 31, 1996.
B. Collection and Remittance of the Cigar Excise
1. No adhesive stamps
In contrast to the cigarette excise imposed under G.L. c. 64C, §§ 6, 7, and 7A, the excise imposed by G.L. c. 64C, § 7B on cigars and smoking tobacco will not be collected through the use of adhesive stamps. Rather, it must be collected and paid on a quarterly basis by the ultimate retail vendors of such products. The excise will be collected from retailers of cigars and smoking tobacco who:
1. are required to file returns under G.L. c. 62C, § 16 for products sold in Massachusetts;
2. sell, acquire, or import, cigars and/or smoking tobacco; and
3. hold cigars or smoking tobacco for sale or consumption in Massachusetts.
The requirements for filing cigar excise returns are set forth in section IIB, 2, below.
2. Cigar Excise Returns
Retail vendors are responsible for collecting and remitting the cigar excise at the time required for filing the Cigar and Smoking Tobacco Quarterly Excise Return. Vendors who function both as wholesalers and retailers of cigars and smoking tobacco that are imported or acquired for sale, held for sale or consumption in the Commonwealth, and sold during the period pay the excise only with respect to cigars and smoking tobacco acquired for retail sale. Vendors subject to the excise must pay the tax on new Form Cigar 1.
The first return, covering the period October 1, 1996-December 31, 1996, will be due on January 20, 1997 and must be filed quarterly thereafter. The amount due on each return equals fifteen percent of the price paid by the retail vendor to purchase cigars and smoking tobacco that are sold at retail, imported or acquired for sale at retail and held for retail sale, or consumption in the Commonwealth during the period. The operation of the cigar excise does not alter any sales or use tax collection requirements arising under Chapters 64H or 64I, respectively.
3. Consolidated returns
The Commissioner will allow chain stores and other retail vendors currently filing consolidated sales tax returns to file consolidated Cigar and Smoking Tobacco Quarterly Excise Returns. In addition, the Commissioner will allow chain stores and other retail vendors not currently filing consolidated sales tax returns to do so. For further information, taxpayers wishing to file consolidated returns must contact the Cigarette Excise Unit at (617) 887-5090.
4. Credit for tax paid on returned cigars and smoking tobacco products
Retail vendors may claim a credit against the cigar excise already paid with respect to cigars and smoking tobacco products they return to their suppliers, or sell at wholesale. This credit may be taken on Form Cigar 1 at the time of filing.
Example: A retail vendor who meets the requirements of section IIB.1 files his first quarterly Cigar and Smoking Tobacco Quarterly Return, Form Cigar 1 on January 20, 1997, for the period covering October 1, 1996-December 1, 1996. The vendor paid $1,000 for cigars and smoking tobacco subject to the cigar excise, and remitted 15% of that amount (i.e., $150) as the amount of the cigar excise due with the return.
On his next quarterly return, the retail vendor files Form Cigar 1, covering the period January 1, 1997-March 31, 1997. If the vendor has returned cigars or smoking tobacco products upon which the cigar excise has previously been paid, the vendor may take a credit for that portion of the cigar excise attributable to returned cigars or smoking tobacco. Thus, if the vendor has $100 worth of such returned products for the previous quarter, the vendor may take a credit of $15 (15% x $100) on the Form Cigar 1 submitted for the current quarter. This credit may be applied against the amount due on the current return. The retail vendor must then submit the balance of the excise due with the return. All retail vendors must maintain records sufficient to document any credit claimed.
C. Licensing requirements for vendors of cigars and smoking tobacco
While G.L. c. 64C requires retailers to have a separate license for the sale of cigarettes, ( See G.L. c. 64C, § 2; G.L. c. 62C, § 67), new section 7B adds no separate licensing requirements for sales of cigars. As a result, every retailer licensed as a vendor under G.L. c. 64H is already properly licensed to sell cigars. A person who is not currently a vendor, and who wishes to sell cigars must register as a vendor by Filing Form TA-1.
D. Penalties for failure to comply with G.L. c. 64C, § 7B
Except as otherwise expressly provided, all provisions of Chapter 64C and 62C with respect to the assessment, collection, payment, abatement, verification, and administration of taxes, including penalties, are, as far as pertinent, applicable to the excise tax imposed by G.L. c. 64C, § 7B.
All retail vendors must maintain records sufficient to document the information shown on cigar excise returns, including but not limited to invoices, credit memoranda, and any other records required under G.L. c. 62C, § 25. See 830 CMR 62C.25.1 for further information with respect to recordkeeping requirements.
Commissioner of Revenue
January 6, 1997