18
TOBACCO OUTLET BUSINESS
NOVEMBER/DECEMBER 2012
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NEWS & TRENDS
When they head to the polls in
November, Missouri voters will have
the opportunity to support Proposition
B, a proposal that would raise the
state’s cigarette tax from its current
17
cents to 90 cents. Supporters
say the move will bring in an extra
$283 million to $423 million a year in
tax revenue, much of which will be
earmarked for public schools.
However, those figures may be
optimistic. The tax hike would bring
Missouri to 33rd in the ranking of state
cigarette taxes, with a significantly
higher rate than many neighboring
states, including Kentucky, Tennessee,
Nebraska and Kansas. Taxes in those
states range from 60 cents in Kentucky
to 79 cents in Kansas.
Neither candidate running for
governor—Democratic Gov. Jay
Nixon and his Republican challenger,
Dave Spencer—support the measure.
In the last decade, measures to
raise the state’s cigarette tax have
been defeated not once, but twice.
However, this year’s proposal is not
being fought by tobacco companies,
reportedly because the measure
includes a provision that would
eliminate a pricing advantage enjoyed
by cigarette companies that didn’t
participate in the national tobacco
settlement in 1998. Proposition B also
would levy a 25 percent tax on loose
tobacco for rolling cigarettes and a
15
percent tax on cigars and other
tobacco products, according to the
report.
Missouri Puts Cig Tax Hike to a Vote
If Proposition B passes, the state will no longer have the lowest cigarette tax in the nation.
The federal Alcohol, Tobacco Tax
and Trade Bureau (TTB) recently
issued a guidance document on how
the agency will enforce the recently
enacted law classifying operators of
in-store RYO machines as cigarette
manufacturers. Titled “Cigarette-
Making Machines and Other Tobacco
Product Machines Made Available for
Use by Consumers,” the document
states that:
•
The person who makes a machine
available for consumer use is the
person liable for the federal excise tax
on the tobacco products produced.
•
A common business affected by
the new federal law is the retailer who
makes cigarette-making machines
available for the use of its customers.
•
A person who sells a machine
directly to a consumer at retail for
a consumer’s personal home use is
not making the machine available for
commercial purposes and therefore
not a cigarette manufacturer if the
machine is not used at a retail location
and the machine is designed to
produce tobacco products only in
personal use quantities.
•
A person who makes available a
RYO machine to consumers for the
purpose of manufacturing cigarettes
will need to obtain a TTB permit to
act as a cigarette manufacturer, file
federal excise tax returns and pay
the applicable excise taxes, as well
as pay a special occupational tax,
obtain a bond and comply with the
federal recordkeeping, reporting and
inventory requirements.
In addition to the above, the
document also addressed the issue
of individuals who have sought to
form “nonprofit” membership clubs in
hopes of avoiding the need to pay the
federal excise tax and comply with the
permitting, bonding, recordkeeping,
reporting and inventory requirements.
The guidance document states
that “Based on TTB’s current
understanding of these scenarios
and the applicable law, it is extremely
unlikely that TTB will conclude that
these [nonprofit] organizations are
exempt from excise tax liability and
associated IRC [Internal Revenue
Code] obligations.”
TTB Guidance on Commercial rYo Machines Issued
Document suggests membership concept will not help in-store Ryo retailers.