TTB CHEMISTS PUBLISH TOBACCO PRODUCT STUDY IN SCIENTIFIC JOURNAL
Our Scientific Services Division recently published a paper in the Journal of Agricultural and Food Chemistry (Volume 60, Issue 47, pages 11714 to 11722) comparing two scientific techniques for analyzing tobacco products. The paper is titled "Comparison of Segmented Flow Analysis and Ion Chromatography for the Quantitative Characterization of Carbohydrates in Tobacco Products." The techniques discussed in the paper are widely used by the tobacco industry, and are used by the TTB Tobacco Laboratory to support rulemaking on the tax classification of tobacco products. Overall, the two techniques can provide similar conclusions regarding relative carbohydrate contents of tobacco products. However, analytical results from segmented flow analysis are generally about 20 percent higher than results from ion chromatography. The paper provides enhancements to the procedures for sample preparation that greatly reduce the differences observed in the reported results between the two techniques. For example, the average difference between the segmented flow and ion chromatographic results for flue-cured tobacco samples dropped 73 percent when the enhanced sample preparation procedure was used.
Read more about TTB's Tobacco Laboratory
CIGARETTE-MAKING MACHINES AND OTHER TOBACCO PRODUCT MACHINES MADE AVAILABLE FOR USE BY CONSUMERS
On July 6, 2012, the President signed into law the Moving Ahead for Progress in the 21st Century Act (also known as "MAP-21" or the "Highway Bill"). Under section 100122 of MAP-21, any person who for commercial purposes makes available, for consumer use (including the consumer’s personal consumption or use), a machine capable of making tobacco products is considered a "manufacturer of tobacco products" for purposes of the Internal Revenue Code of 1986 (IRC). In other words, the person who makes the machine available for consumer use is the person liable for the Federal excise tax on the resulting tobacco products. For purposes of the IRC, "tobacco products" include cigars, cigarettes, smokeless tobacco (snuff and chewing tobacco), pipe tobacco, and roll-your-own tobacco. A common business model affected by the MAP-21 amendment to the IRC is the retailer who makes cigarette-making machines available for the use of its customers.
Read TTB Guidance 2012-3
THREE SENTENCED ON CIGARETTE TRAFFICKING CHARGES
One year after a federal indictment charging the Belcorp Corporation, and others, with cigarette trafficking crimes was unsealed, a federal judge sitting in the United States District Court for the Western District of Virginia in Abingdon sentenced an individual and two corporate defendants for their roles in the scheme. The individual defendant was sentenced to 60 months of incarceration and three years of supervised release. The defendants were also ordered to pay over $9.4 million in restitution and were ordered to forfeit over $19 million. Two other individuals charged in the same indictment were previously sentenced to 24 and 30 months of incarceration with three years of supervised release.
In order to evade federal excise taxes and state escrow deposits, the defendants did not report to TTB all cigarettes being manufactured by Belcorp or report the number of cigarettes being withdrawn from the manufacturing plant. The defendants also purchased materials to manufacture cigarettes without the required invoices used for tracking, shipped tobacco products to locations without invoices, sold cigarettes under false invoices and sold cigarettes "off-invoice."
All of these actions caused the under-reporting of sales of Belcorp cigarettes in several states. The under-reporting resulted in the evasion of federal excise taxes, U.S. Department of Agriculture tobacco buyout funds, and escrow deposits due to the states under state law. The defendants laundered the proceeds of the fraud through a series of layered transactions involving a number of corporate entities, in order to conceal the proceeds of their criminal conduct and promote their criminal activity.
For more information, see the press release.
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