CIGARS AND CIGARETTES FOR RATION KITS
AND IN-FLIGHT MEALS
Manufacturers of Tobacco Products:
Recently questions have been raised as to the proper procedure for
removal from tobacco products factories of cigars and cigarettes for
use by the Federal Government in ration kits, in-flight meals, etc,
where the products may be exported but are not specifically designated
for direct export.
The regulations in 26 CFR Part 295 apply to removals for use of the
United States under all instances, except where the products are specifically designated for direct export by the governmental agency in which
case the regulations in 26 CFR Part 290 are applicable.
It is not always known at the time of removal from the factory, or
even when packed into ration kits or military in-flight meals, whether
the product will be exported because some ration kits are used in the
United States on military maneuvers and to stock fallout shelters and
military in-flight meals are often consumed on domestic flights.
Consequently, all removals for use of the United States, except where
the governmental agency specifically designates direct export should
properly be made for "Use of the United States" under the regulations
in 26 CFR Part 295 and not under the export regulations.
Where cigars or cigarettes are shipped tax-exempt under Part 295
for packing in ration kits or meals other than directly to the governmental-agency, it is the manufacturer's responsibility to assure and
have evidence available at the factory that the recipient has authority
to receive them for the government agency for packaging under governmental contract.
Such evidence should include the identity of the contract and
the name and address of both the governmental contracting office and the
agency to which delivery is to be made. Where such evidence of a legitimate government contract is available then the manufacturer making the
removal is relieved of tax liability on the cigars and cigarettes under
26 CFR 295.35 when the private contractor receives the products as agent
for the government. The private contractor is thereafter responsible to
the United States for the tax on those cigars and cigarettes received by
him but not accounted for.
Harold A. Serr
Director, Alcohol and Tobacco Tax Division