WSR 02-13-082

EMERGENCY RULES

DEPARTMENT OF REVENUE


[ Filed June 17, 2002, 1:43 p.m. , effective July 1, 2002 ]

Date of Adoption: June 17, 2002.

Purpose: WAC 458-20-185 explains the tax reporting responsibilities of tobacco distributors.

Citation of Existing Rules Affected by this Order: Amending WAC 458-20-185 Tax on tobacco products.

Statutory Authority for Adoption: RCW 82.32.300.

Other Authority: Section 5, chapter 325, Laws of 2002.

Under RCW 34.05.350 the agency for good cause finds that immediate adoption, amendment, or repeal of a rule is necessary for the preservation of the public health, safety, or general welfare, and that observing the time requirements of notice and opportunity to comment upon adoption of a permanent rule would be contrary to the public interest.

Reasons for this Finding: Chapter 325, Laws of 2002, amended chapter 82.26 RCW, Tax on tobacco products, by adding definitions, adding a new class of tobacco distributor, and explaining the obligations applicable to the new class of tobacco distributor. A revision of this rule is necessary to provide immediate information to taxpayers, tax practitioners, and department staff to use in determining the tax liability of tobacco distributors. There is insufficient time to adopt a permanent rule before the July 1, 2002, effective date of the legislation.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 1, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 1, Repealed 0.
Effective Date of Rule: July 1, 2002.

June 17, 2002

Russell W. Brubaker

Assistant Director

Legislation and Policy Division


AMENDATORY SECTION(Amending WSR 94-10-061, filed 5/3/94, effective 6/3/94)

WAC 458-20-185   Tax on tobacco products.   (1) Introduction. This ((section)) rule explains the tax liabilities of persons engaged in business as a distributor or subjobber of tobacco products. It addresses only those taxes which apply exclusively to tobacco products. See WAC 458-20-186 for tax liabilities associated with taxes which apply exclusively to cigarettes.

Recent changes to the tobacco products tax program include the following:

(a) Initiative 773, which imposed a surtax on tobacco products effective January 1, 2002. The rate of the surcharge is set forth in RCW 82.26.028; and

(b) Chapter 325, laws of 2002, which is effective July 1, 2002. This legislation:

(i) Added a new class of distributor, see subsection (2)(b)(iv) of the rule;

(ii) Provided a definition of person specific to the tobacco products tax, see subsections (2)(g) and (h) of the rule;

(iii) Added a new taxable event regarding the handling of tobacco products upon which the tax has not been imposed, see subsection (3) of the rule; and

(iv) Provided for invoice requirements to be established by rule, see subsection (4)(b) of the rule.

(2) Definitions.

(a) "Tobacco products" means all tobacco products except cigarettes. The term includes cigars, cheroots, stogies, periques; granulated, plug cut, crimp cut, ready rubbed or other smoking tobacco; snuff, snuff flour, cavendish, plug, twist, fine cut, or other chewing tobacco; shorts, refuse scraps, clippings, cuttings, sweepings, or other kinds or forms of tobacco.

(b) "Distributor" means

(i) Any person engaged in the business of selling tobacco products in this state who brings or causes to be brought into this state from without the state any tobacco products for sale, or

(ii) Any person who makes, manufactures, or fabricates tobacco products in state for sale in this state, or

(iii) Any person engaged in the business of selling tobacco products without this state who ships or transports tobacco products to retailers in this state.

(iv) Any person engaged in the business of selling tobacco products in this state who handles for sale any tobacco products that are within this state but upon which tax has not been imposed.

(c) "Subjobber" means any person, other than a tobacco manufacturer or distributor, who buys tobacco products from a distributor and sells them to persons other than the ultimate consumers.

(d) "Sale" means any transfer, exchange, or barter, in any manner or by any means whatsoever by any person for a consideration. It includes all gifts by persons selling tobacco products.

(e) "Wholesale sales price" means the established manufacturer's price to the distributor, exclusive of any discount or other reduction.

(f) "Business" means any trade, occupation, activity, or enterprise engaged in for the purpose of selling or distributing tobacco products in this state.

(g) "Person" means any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, the state and its departments and institutions, political subdivision of the state of Washington, corporation, limited liability company, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise. The term excludes any person immune from state taxation, including the United States or its instrumentalities, and federally recognized Indian tribes and enrolled tribal members, conducting business within Indian country.

(h) "Indian country" means the same as defined WAC 458-20-192 (2)(b).

(3) Nature of tax. The Washington state tobacco products tax is an excise tax levied on the value of the wholesale sales price on all tobacco products sold, used, consumed, handled, or distributed within the state(([.])). The rate of tax is a combination of statutory percentage rates found in RCW 82.26.020 ((and)), 82.26.025, and 82.26.028. Charts with current rates are available from the special programs division at the department of revenue. The tax is to be paid by the distributor at the time the distributor brings or causes to be brought into this state from without the state tobacco products for sale or handles for sale any tobacco products that are within this state but upon which tax has not been imposed. A retailer who fails to keep invoices as required in chapter 82.32 RCW is liable for the tax on any uninvoiced tobacco products.

(4) Books and records. Since the tobacco products tax is paid on returns as computed by the taxpayer rather than by affixing of stamps or decals, the law contains stringent provisions requiring that accurate and complete records be maintained and preserved for five years for examination by the department of revenue.

(a) The records to be kept by distributors include itemized invoices of tobacco products held, purchased, manufactured, brought in or caused to be brought in from without the state or shipped or transported to retailers in this state, and of all sales (including customers' names and addresses) of tobacco products except retail sales. All other pertinent papers and documents relating to purchase, sale, or disposition of tobacco products must be retained.

(b) Retailers and subjobbers must secure and retain legible and itemized invoices of all tobacco products purchased, showing name and address of the seller and the date of purchase.

(c) Records of all deliveries or shipments (including ownership, quantities) of tobacco products from any public warehouse of first destination in this state must be kept by the warehouse.

(5) Reports and returns. The tax is reported on the combined excise tax return, Form REV 40 2406, to be filed according to the reporting frequency assigned by the department. Detailed instructions for preparation of these returns may be secured from the department. Out-of-state wholesalers or distributors selling directly to retailers in Washington should apply for a certificate of registration, and the department will furnish returns for reporting the tax.

(6) Interstate and sales to U.S. The tax does not apply to tobacco products sold to federal government agencies, nor to deliveries to retailers or wholesalers outside the state for resale by such retailers or wholesalers, and a credit may be taken for the amount of tobacco products tax previously paid on such products.

(7) Returned or destroyed goods. A credit may also be taken for tobacco products destroyed or returned to the manufacturer on which tax was previously paid, but returns on which such credits are claimed must be accompanied by appropriate affidavits or certificates conforming to those illustrated below:


(a) Certificate of taxpayer.

Claim for Credit on Tobacco Products

Tax Merchandise Destroyed


The undersigned certifies under penalty of perjury under the laws of the state of Washington that the following is true and correct to the best of his/her knowledge:


That he/she is (Title) of the (Business Name) , a dealer in tobacco products; that the dealer has destroyed merchandise unfit for sale, said tobacco products having a wholesale sales price of $ . . . . . . ; that tobacco tax had been paid on such tobacco products; that the tobacco products were destroyed in the following manner and in the presence of an authorized agent of the department of revenue:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(State date and manner of destruction)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Attested to:

Date . . . . . . .

By . . . . . . . . . . . . . . . . . . . .

Signature of Taxpayer or

Authorized Representative.

. . . . . . . . . . . . . . . . . . . . . .

Position with Dealer

. . . . . . . . . . . . . . . . . . . . . .

Dealer

. . . . . . . . . . . . . . . . . . . . . .

Address of Dealer

APPROVED:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Authorized Agent of

Department of Revenue of the

State of Washington.


(b) Certificate of manufacturer.

Claim for Credit on Tobacco Products

Tax Merchandise Returned:


The undersigned certifies under penalty of perjury under the laws of the state of Washington that the following is true and correct to the best of his/her knowledge:


That he/she is (Title) of the (Business Name) , a manufacturer of tobacco products; that the manufacturer has received from (Dealer) , (Address) , a dealer in tobacco products within the State of Washington, certain tobacco products which were unfit for sale, the tobacco products having a wholesale sales price of $ . . . . . . .; that the tobacco products were destroyed in the following manner:


. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Indicate date and manner of destruction)

Credit issued on Memo No.

credit approved by:

. . . . . . . . . . . . . . . . . . . . . .

Signature of Taxpayer or

Authorized Representative

. . . . . . . . . . . . . . . . . . . . . .

on behalf of the Department

of Revenue - State of

Washington

. . . . . . . . . . . . . . . . . . . . . .

Name of Manufacturer

. . . . . . . . . . . . . . . . . . . . . .

Address

[Statutory Authority: RCW 82.32.300. 94-10-061, 458-20-185, filed 5/3/94, effective 6/3/94; 90-04-038, 458-20-185, filed 1/31/90, effective 3/3/90; 83-07-032 (Order ET 83-15), 458-20-185, filed 3/15/83; Order ET 71-1, 458-20-185, filed 7/22/71; Order ET 70-3, 458-20-185 (Rule 185), filed 5/29/70, effective 7/1/70.]

Reviser's note: The typographical error in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.

Reviser's note: The unnecessary underscoring in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.

Washington State Code Reviser's Office