INDUSTRY CIRCULAR 2011-3 ADDRESSES IMPORTATION OF TOBACCO PRODUCTS AND CALCULATING THE TAX ON IMPORTED LARGE CIGARS
We respond to industry requests by issuing guidance on the calculation of the Federal excise tax on imported large cigars. Specifically, this Industry Circular addresses what sales transaction creates the "sale price" that is the basis for the tax. It also reminds tobacco product importers of the statutory provisions that cover tax payments on transfers of tobacco products between customs bonded warehouses or foreign trade zones.
TTB’S CONTINUED FLOOR STOCKS TAX EXAMINATION
We continue to review, analyze, and collect tobacco data to facilitate our targeting analysis and selection of companies for Floor Stocks Tax (FST) examinations. A recent examination of a large tobacco warehouse and multi-located retailer operation determined the taxpayer underpaid its FST liability by more than $2.2M. At one of its tobacco warehouses, the taxpayer erroneously counted cartons of cigarettes as packs, resulting in a 90% understatement of FST. The same taxpayer also overpaid FST for in-transit products it no longer owned as of the March 31, 2009 inventory cut-off date. After considering both underpayments and overpayments, the taxpayer owed an additional $2.2M plus applicable penalties and interest. Recent examinations of four additional taxpayers discovered $16,000 of additional FST liability related to underpayments due to inaccurate counts or unauthorized tax credits. To date, our FST examinations have identified more than $13.7 million in additional floor stocks tax liabilities plus applicable penalties and interest.
If you suspect illegal activity regarding the diversion of tobacco products or cigarette papers or tubes outside the legal distribution chain, please contact the TTB Intelligence Division.
Diversion includes, for example, tax evasion, theft, distribution of counterfeit products, and distribution in the United States of products marked for export or for use outside the U.S. Diversion may also include Internet sales of tobacco products not in compliance with Federal, State, or local laws.
For information on the Federal laws that apply to the unlawful transportation, shipment, or sale of cigarettes and other tobacco products, please refer to Industry Circular 99-2, or contact the Intelligence Division.
The Intelligence Division can be reached by:
Phone: 1-877-TTB-FAQS (877-882-3277).
Washington, DC 20220 If you suspect illegal sales of cigarettes, such as sales to or by minors, or if you wish to report smoking in establishments that have State or local laws against such activities, please contact the appropriate State or local agency. We do not regulate these issues.
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