NEW REGULATIONS RELATING TO MANUFACTURE OF TOBACCO PRODUCTS
Manufacturers of tobacco products:
Purpose. This industry circular is to call your attention to
the new regulations in 26 CFR Part 270, concerning the manufacture
of tobacco, cigars, and cigarettes, which become effective
October 1, 1961, to highlight the major changes in procedures
and requirements, and to furnish information to aid you in the
transition from the superseded regulations to the new regulations.
A reprint of the regulations, as published in the Federal Register
on August 31, 1961, is attached.
Regulations to be Superseded. These new regulations will
supersede the provisions of existing regulations in 26 CFR Part
270, 26 CFR Part 275, and Subpart E of 26 CFR Part 296, insofar
as they relate to the domestic manufacture of tobacco products.
Provisions relating to importation of tobacco products will be
contained in the regulations in 26 CFR Part 275 which part also
becomes effective on October 1, 1961.
Background. Industry Circular No. 61-27, dated June 20, 1961,
advised you of the publication of the proposed regulations in the
Federal Register on June 7, 1961 (26 F. R. 5046). These new regu-
lations are primarily intended to bring together in one part all
internal revenue provisions relating to the domestic manufacture
of tobacco products and to institute the tobacco products factory
concept as contemplated by the Excise Tax Technical Changes Act of
1958 (Public Law 85-859, 72 Stat. 1275).
Qualification as a Manufacturer of Tobacco Products. On and
after the effective date of the new regulations in Part 270 any
application for a new permit should be as a "Manufacturer of
Tobacco Products," and the new permit will be issued without limi-
tation as to the kind of tobacco product that may be manufactured
or received in bond.
If you hold a permit as a manufacturer of cigars and cigarettes
or as a manufacturer of tobacco on October 1, 1961, you may con-
tinue the operations authorized by such permit. However, if you
wish to qualify as a manufacturer of tobacco products without
limitation as to the kind of product you may produce or receive,
you must make application on Form 2093 to your assistant regional
commissioner (alcohol and tobacco tax) for a permit as a manu-
facturer of tobacco products. For example, if you hold both a
"C" and a "T" permit in the same city, town, or village and wish
to combine these operations under one permit, or if you hold a
"T" permit and desire to receive cigarettes in bond, you must
make application and qualify as a manufacturer of tobacco products.
Where application for permit is made on a Form 2093 printed
prior to April 1961 you should modify item 6 to show "Manufacturer
of Tobacco Products" as the business in which you will be engaged.
If you do not make application for a permit as a manufacturer
of tobacco products, the assistant regional commissioner will issue
you a substitute permit as a manufacturer of tobacco products to
replace your permit as a manufacturer of cigars and cigarettes or
as a manufacturer of tobacco. This substitute permit will bear a
notation limiting operations thereunder either to cigars and
cigarettes or to manufactured tobacco, consistent with your present
Permit Numbers. New series of numbers will be assigned to
permits issued as "Manufacturer of Tobacco Products" whether or
not the permit is limited to the manufacture of specific kinds of
products. A separate numerical series, beginning with "1", will
be used for each State, the number to be prefaced by the symbol
"TP" and followed by the name (or abbreviation) of the State. You
may, if you desire, request retention of the number in your present
permit, and insofar as possible it will be reassigned to you.
Therefore, if you wish to retain your present number you should
notify your assistant regional commissioner by letter not later
than September 25,1961. If you have not notified the assistant
regional commissioner by this date that you wish to retain your
present number, he will issue your new or substitute permit with
a number in the new series.
Bonds. Your present bond (Form 2099 for a manufacturer of
tobacco or Form 2100 for a manufacturer of cigars and cigarettes)
will continue in effect unless you requalify as a manufacturer of
tobacco products or are otherwise required by regulations to file
a new bond. A new bond, as well as a bond to strengthen or super-
sede an outstanding bond on Form 2099 or 2100, should be filed on
Form 3070, "Bond - Manufacturer of Tobacco Products."
Under section 270.133 of the new regulations it is your respon-
sibility to determine the sufficiency of the bond (based on the total
quantity of all tobacco products manufactured, received in bond from
other factories and export warehouses, or released in bond from customs custody, during any calendar month), and when the bond is
no longer sufficient to immediately file a strengthening or
The maximum amount of the individual bond of a manufacturer of
tobacco products has been reduced to $250,000 for a manufacturer
producing or receiving cigarettes in bond, $150,000 for a manufacturer
producing or receiving cigars in bond, and $25,000 for a manufacturer
producing or receiving manufactured tobacco in bond. Where more
than one kind of product is produced or received in a factory the bond
for that factory need not exceed the largest maximum amount prescribed
for the products produced or received therein. For example, the amount
of bond for a manufacturer producing or receiving cigarettes and
tobacco need not exceed $250,000, the maximum prescribed for
You are no longer required to have available at the factory the
copy of the approved bond returned to you by the assistant regional
Blanket Bonds. If you operate more than one factory in the same
region you may file a blanket bond for any or all of the factories in
the same region based on the following:
Total amount of individual bonds
Amount of blanket bond
Less than $250,000
100 percent of total amount
$250,000 but not in excess of $500,000
$250,000 plus 50 percent of all over $250,000
$500,000 or more
$375,000 plus 25 percent of all over $500,000
Other Businesses in Factory. Provisions have been included in the
new regulations whereby you may, upon approval of the Director, Alcohol
and Tobacco Tax Division, conduct businesses within the factory other
than as a manufacturer of tobacco products.
Semimonthly Tax Returns. The new semimonthly tax return, Form
3071, "Tax Return - Manufacturer of Tobacco Products," should be
used after the effective date of the new regulations. The informa-
tion required to be shown on this form is substantially the same as
was required on the superseded tax return form except that the
listing of daily removals subject to tax is no longer required.
Your tax return for the period of changeover to the new regu-
lations ( Sept. 24, 1961 through October 8, 1961) should be
filed on the new tax return, Form 3071. If you requalify as a
manufacturer of tobacco products you must file a semimonthly tax
return for that portion of the return period through the date of
discontinuance of business under your old permit and another tax
return for that portion of the return period beginning with the
date of commencing business under the new permit. In both cases
the tax returns are required to be filed not later than the third
business day following the close of the return period.
Records. As in the superseded regulations, the new regulations
provide that a manufacturer who does not maintain commercial records
which adequately reflect his operations must keep records on internal
revenue forms. New records Form 3063, "Record of Tobacco Materials
(Manufacturer of Tobacco Products)," Form 3064,"Record of Manufactured
Tobacco," Form 3065, "Record of Large Cigars," and Form 3066, "Record
of Small Cigars and Large and Small Cigarettes," have been provided
for use on and after the effective date of the new regulations.
Under the new regulations, if you desire to keep your factory
records on a 24-hour cycle of operation other than a calendar day
you should make application to your assistant regional commissioner
(alcohol and tobacco tax) for such authorization. A 24-hour cycle
of operation once so established may be changed only by like appli-
cation approved by the assistant regional commissioner.
The individual removal record system which you provide in
support of removals subject to tax (as required by section 270.184
of the regulations) should not include tax determined products re-
ceived and removed with no change in tax status, unless such in-
dividual record clearly identifies such previously tax determined
products. If the record system used to support removals subject to
tax includes previously tax determined products, then in the absence
of some positive differentiation between these two kinds of removals
tax must be determined and paid on all products recorded in such
Inventories. If you requalify as a manufacturer of tobacco
products under the new regulations you must make and submit to the
assistant regional commissioner (alcohol and tobacco tax) concluding
and commencing inventories. The commencing inventory will be on
Form 3067, "Inventory - Manufacturer of Tobacco Products." Where
only one factory is concerned the commencing inventory will also
serve as the concluding inventory. However, where two or more
factories are to be combined under one permit, separate concluding
inventories for each factory must be made and submitted, on Forms
3067 if made on or after October 1, 1961, or on Forms 2130 or
2131 if made on September 30, 1961.
Reports. Forms 2134 and 2136, monthly reports of manufacturers
of tobacco and manufacturers of cigars and cigarettes, have been
superseded by a combined revised report, Form 3068, "Monthly Report -
Manufacturer of Tobacco Products." The new form, for reporting op-
erations and transactions occurring on and after October 1, 1961,
provides for reporting separately all tobacco products lost and
destroyed. Therefore, all tobacco products destroyed during the
month covered by the report, whether under internal revenue super-
vision or under authorization of the assistant regional commissioner,
should be reported on the "DESTRUCTION" line, while tobacco products
lost, either by theft or by casualty, should be reported on the
Reports for each month prior to the effective date of the new
regulations will be on Form 2134 or 2136, as appropriate, and re-
ports for each month thereafter will be on Form 3068. Where a
manufacturer requalifies the concluding and commencing reports
should be marked "Concluding Report" and "Commencing Report,"
An error was made in the printing of Form 3068 (April 1961)
and the footnote on the reverse of the form should read "Enter
total in item 24, column (a)," instead of "Enter total in item 23,
Packages. Manufacturers issued new or substitute permits may
use existing supplies of packaging materials bearing a "C" or "T"
permit number until the supplies are exhausted. Thereafter, the
packages must bear the "TP" permit number.
In recognition of the problems which arise in connection with
the transfer of packaging materials, or packages of tobacco products
in bond, from one factory to another, section 270.212 now provides
that the Director, Alcohol and Tobacco Tax Division, may authorize
the marking of packages with only the name of the manufacturer if
the factory of production is identified on the package by a state-
ment, symbol, or other means (other than the permit number),
approved by the Director.
Notice for Large Cigars. If you so desire, the word "Class"
may be eliminated from the notice for large cigars since it is no
longer required by regulation.
Receipt of Tobacco Products. Under the new regulations any
tobacco products which you are authorized to produce under your
permit or any tobacco products on which the tax has been determined
(including products on which the tax has been paid) may be received
into your factory without internal revenue supervision. However,
tobacco products on which the tax has been determined must be
segregated and so identified.
Destruction of Tobacco Products. If you desire to destroy
tobacco products which have been entered in your factory records
as manufactured or received, without salvaging the materials, you
should notify your assistant regional commissioner (alcohol and
tobacco tax) of the kind and quantity of tobacco products to be
destroyed, the intended method of destruction, and the date on
which you desire to destroy such products. The assistant regional
commissioner will, as provided in section 270.253, either authorize
you to accomplish the destruction without supervision or assign an
internal revenue officer to supervise the destruction.
Claims. The procedure for the filing of claims for allowance
or refund of tax under the new regulations is the same as under the
superseded regulations except that the schedule will be prepared on
Form 3069, "Schedule of Tobacco Products or Cigarette Papers or
Tubes Withdrawn from the Market," rather than on Form 177, and when
tobacco products are withdrawn from the market the assistant
regional commissioner may, upon receipt of the schedule, Form 3069,
assign an internal revenue officer to supervise disposition of the
tobacco products or he may authorize you to dispose of the products
The new regulations also prescribe the use of Form 2635,
"Claim - Alcohol and Tobacco Taxes," to be used by you when filing
a claim for remission or allowance of tax. You will continue to
use Form 843 when filing claims for abatement or refund of tax.
Sign. The new regulations discontinue the former requirement
that a sign be posted at the factory.
Retention of Records. All records required to be maintained,
including copies of authorizations, claims, inventories, notices,
reports, returns, schedules, etc., must be kept for three years
following the close of the calendar year in which made or filed or
in which the operations authorized are concluded.
Supply of Revised Forms. A supply of the Semimonthly Tax Return,
Form 3071, and Monthly Report, Form 3068, will be furnished all manu-
facturers. A supply of the appropriate Record Forms, Form 3063, 3064,
3065, and 3066,will be furnished those manufacturers who are presently
using internal revenue records rather than commercial records. Ad-
ditional supplies of these forms and any other forms required by the
new regulations may be obtained from your assistant regional
commissioner (alcohol and tobacco tax).
Forms to be Superseded. The Schedule of Taxpaid Tobacco
Products Withdrawn from the Market, Form 177, Inventories, Forms
2130 and 2131, Records, Forms 2141, 2142, and 2143, and Tax
Returns, Forms 2618, 2619, and 2620, become obsolete on October
1, 1961. Monthly Reports, Forms 2134 and 2136, become obso-
lete after reporting operations and transactions occurring for
the month of September 1961. Please destroy after these dates
any supply of the unused forms you may have on hand.
Inquiries. Inquiries regarding this circular should refer
to its number and be addressed to the office of your assistant
regional commissioner (alcohol and tobacco tax).
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division
Attachment (517 KB)