AMENDMENT OF REGULATIONS IN 26 CFR PART 280
Dealers in tobacco materials:
Purpose. This industry circular is to advise you that regulations in 26 CFR
Part 280, relating to dealers in tobacco materials, have been amended by
Treasury Decision No. 6457 published in the Federal Register of March 24, 1960,
(25 FR 2480) effective June 1, 1960, and to acquaint you with some of the
Background. The Treasury decision implements the Internal Revenue Code
of 1954, as amended by the Excise Tax Technical Changes Act of 1958, and
makes certain clarifying and conforming changes in the regulations.
Amendments. Subpart E, "Qualification Requirements," has been amended
to delete the provisions relating to permits, since dealers in tobacco materials
were eliminated from the permit system by Public Law 85-859. Section 280.61,
"Establishment and places of storage," provides that an establishment of a
dealer in tobacco materials in which he carries on such business may consist of
more than one building, or portions of buildings, provided such buildings are
located in the same internal revenue region and that records covering the receipt
and disposition of all tobacco materials are maintained at a designated building
in the establishment. Buildings or portions of buildings, in any location in the
United States, in addition to those comprising the establishment, may be used by
a dealer in tobacco materials in connection with the operation of his establish-
ment, as warehouses solely for storage, insofar as tobacco materials are
concerned, if he maintains at the designated building in that establishment the
required records covering the tobacco materials at each such place of storage.
Since dealers in tobacco materials were eliminated from the permit system,
section 280.62, "Corporate documents," section 280.63, "Articles of partner-
ship or association," and section 280.64, "Trade name certificate," are
eliminated. The only document that is required to be submitted to, and approved
by, the assistant regional commissioner, for a person to qualify as a dealer in
tobacco materials, is the bond, Form 2101, as set forth in section 280.65.
Dealers in tobacco materials are not required to furnish a diagram of their
premises, but will describe in the bond, Form 2101, the buildings and portions of
buildings which constitute the establishment by listing each such place by
number, street, and city, town, or village, and State. Places used for the storage
of tobacco materials need not be listed in the bond; however, under the terms of
the bond, the bond applies to materials stored in such places. Presently
qualified dealers in tobacco materials need not furnish a new bond on Form
2101, but may continue to operate under their existing bonds, unless the assistant
regional commissioner requests such new bond.
Section 280.89 is deleted. This means that it will no longer be necessary
for you to notify the assistant regional commissioner of the addition or dis-
continuance of places of storage. The needs of the Revenue Service are satisfied
because the records required to be kept by section 280.127 will disclose the
locations where tobacco materials are stored.
Section 280.53 exempts a bona fide association of farmers or growers of
tobacco, marketing leaf tobacco grown by farmer or grower members, from the
provisions of 26 CFR Part 280, if such association maintains records of all leaf
tobacco acquired or received and sold or otherwise disposed of by the associa-
tion. This section, as amended, prescribes no particular form of records, but
requires that information be readily ascertainable from the records maintained
and that the records be retained for two years following the close of the year
covered in such records and made available for inspection by any internal
revenue officer upon his request.
Section 280.54, "Speculator," makes it clear that a person who (a) buys
leaf tobacco on the floor of an auction warehouse of a qualified dealer in tobacco
materials, places the tobacco on the floor of such warehouse for resale, and
does not remove the tobacco from the warehouse, or (b) buys leaf tobacco from
a farmer or grower, places the tobacco on the floor of an auction warehouse of
a qualified dealer in tobacco materials for sale, and does not remove the tobacco
from the warehouse, or (c) purchases and sells warehouse receipts for tobacco
materials without taking physical possession of the tobacco materials covered
thereby, is, with respect to such operations, exempt from qualification as a
dealer in tobacco materials and from the other provisions of 26 CFR Part 280.
Section 280.106, "Approval of bond and extension of coverage of bond,"
provides that the bond and all extensions of coverage of bond must be retained
by the dealer in tobacco materials in the building of his establishment in which
the records are maintained and must be made available for inspection by any
internal revenue officer upon his request.
Inquiries. Inquiries regarding this circular should refer to its number and
be addressed to your assistant regional commissioner (alcohol and tobacco tax).
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division
IRS - D. C. - 58065