TTB Increases, Expands Scope of Taxes on Certain Tobacco Imports, Etc. (Changes Programmed in ACS)

TTB's temporary final rule also includes new criteria for denial of tobacco permits for export warehouse proprietors.

TTB has also issued a proposed rule requesting comments by June 1, 2009 on the temporary rule.

(TTB is amending its regulations under 27 CFR Parts 40, 41, 44, 46, and 71 to implement certain provisions of the Children's Health Insurance Program Reauthorization Act of 2009 (the Act), Public Law 111-3. Section 701 of the Act increases the rate of federal excise tax on tobacco products and cigarette papers and tubes removed from the factory or from internal revenue bond, or from Customs custody on or after April 1, 2009.

Section 701 of the Act also imposes a floor stocks tax on taxpaid or tax determined tobacco products (other than certain large cigars), and on cigarette papers and tubes. (The floor stocks tax previously only applied to cigarettes.))

TTB Increases Taxes for Imports of Tobacco Products, Cigarettes, Papers, Etc.

TTB's temporary final rule amends 27 CFR Part 41, Importation of Tobacco Products and Cigarette Papers and Tubes, to implement the increased tax rates for subject products removed from the factory or from internal revenue bond, or from Customs custody on or after April 1, 2009.

For example, the import excise tax rates are increased (partial list):

&8722; per pound of pipe tobacco from $1.0969 to $2.8311;

&8722; per thousand of small cigarettes from $19. 50 to $50.33;

&8722; per thousand of large cigarettes up to 6 1/2" long from $40.95 to $105.69;

&8722; per pound of chewing tobacco from $0.195 to $0.5033;

&8722; per 50 papers of cigarette papers up to 6 1/2" long from $0.0122 to $0.0315; and

&8722; per 50 tubes of cigarette tubes up to 6 1/2" long from $0.0244 to $0.0630.

(See TTB rule for complete amended tax rates, including increased rates for manufacturers, etc.)

TTB Expands Scope of Floor Tax to Include Cigarette Papers and Tubes, Etc.

TTB is also expanding the scope of the floor stocks tax to include cigarettes, small cigars (weighing 3 pounds or less per 1,000), snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco held for sale on April 1, 2009, other than under TTB or in customs custody. (Prior to April 1, 2009, this floor stocks tax applied only to cigarettes.)

TTB notes that this includes wholesale and retail dealers, as well as manufacturers and importers who are holding taxpaid or tax determined products.

(See TTB rule for filing and recordkeeping requirements for floor stocks tax returns and payments, etc.)

Amended Criteria for Denial of Tobacco Permits for Export Warehouses

TTB has also amended 27 CFR Part 44, Exportation of Tobacco Products and Cigarette Papers and Tubes, Without Payment of Tax or with Drawback of Tax, to, among other things, add the following conditions under 44.92 for grounds for denial of tobacco permits for export warehouse proprietors:

(i) The premises on which it is proposed to conduct the business are not adequate to protect the revenue; or

(ii) The applicant (including, in the case of a corporation, any officer, director, or principal stockholder and, in the case of a partnership, a partner)

• is, by reason of his business experience, financial standing, or trade connections or by reason of previous or current legal proceedings involving a felony violation of any other provision of Federal criminal law relating to tobacco products, processed tobacco, cigarette paper, or cigarette tubes, not likely to maintain operations in compliance with this chapter;
• has been convicted of a felony violation of any provision of Federal or State criminal law relating to tobacco products, processed tobacco, cigarette paper, or cigarette tubes; or
• has failed to disclose any material information required or made any material false statement in the application therefor.

(See TTB rule for complete amended regulatory language, including for suspension and revocation of tobacco permits, etc.)

Excise Tax Increases Have Been Programmed Into ACS

U.S. Customs and Border Protection has also issued a CSMS message announcing that the subject increases in the federal excise tax has been programmed into the Automated Commercial System.

¹A floor stocks tax is a one-time excise tax placed on a commodity undergoing a tax increase. The amount of the floor stocks tax is equal to the difference between the new tax rate and the immediately prior tax rate.

TTB contact - Amy Greenberg (202) 927-8210

TTB temporary final rule (D/N TTB-2009-0001; T.D. TTB-75, FR Pub 03/31/09) available at http://edocket.access.gpo.gov/2009/pdf/E9-7077.pdf

TTB proposed rule (FR Pub 03/31/09) available at http://edocket.access.gpo.gov/2009/pdf/E9-7076.pdf

TTB industry circular on subject taxes (No. 2009-1, dated 03/16/09) available at http://www.ttb.treas.gov/industry_circulars/archives/2009/ic2009_01.html

CBP CSMS message (CSMS-09-000155, dated 04/01/09) available at http://apps.cbp.gov/csms/viewmssg.asp?Recid=17543&page=&srch_argv=tobacco&srchtype=&btype=&sortby=&sby=