Date of Adoption: February 21, 2003.
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 and 82.01.060(2).
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: This rule was previously adopted on an emergency basis to provide tax information regarding the effects of chapter 325, Laws of 2002. This legislation 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. The department is again adopting Rule 185 on an emergency basis because a permanent rule cannot be adopted before the expiration date of the previous emergency adoption. There have been no changes to the rule being adopted with this filing.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 1, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.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:
Pilot Rule Making:
or Other Alternative Rule Making:
Effective Date of Rule: Immediately.
February 21, 2003
Alan R. Lynn
Legislation and Policy Division
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.
(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
(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.
[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 errors in the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.