Like many states, Florida imposes a wholesale tobacco tax on the sale of
tobacco products. Seems pretty simple? However, like many states, the
law left open whether the tax should apply to the full invoice price a
distributor pays for the tobacco, or should the invoice exclude non-tobacco
items such as Federal Excise Tax and shipping? Back in 2012, a case called
Micjo held that
tobacco tax should only apply to tobacco and not FET. Since then many distributors
have been getting refunds for mistakenly paid Florida tax on FET.
Similarly, the way the law was written back in the 1980's, did not
envision this new wave products, like cigar wraps or blunt wraps. In Florida,
an administrative court determined that Florida law does not apply to
and does not tax blunt wraps.
Even though the agency adamantly opposes such an interpretation it has
tried for several years to get the law changed. As recently as last year,
the Department has pushed for a change that would tax FET and apply Florida's
85% tax to blunt wraps. For the details on that change, please read my
article from last year. For several reasons, Florida never was able to
get the amendment passed in 2015.
In 2016, the Florida Department of Business and Professional Regulation
is at it again. In HB 7099, Florida is at it again. The "it"
is that Florida is attempting to tax non-tobacco items such as FET. It
is also determined to tax blunt wraps or cigar wraps.
In connection with the Micjo issue, Florida imposes an 85% tax on the "wholesale
sales price" of tobacco. The newly defined "wholesale sales
price" would mean:
The full price paid by the distributor to acquire the tobacco products,
including charges by the seller for the cost of materials, the cost of
labor and service, charges for transportation and delivery, the federal
excise tax, and any other charge, even if the charge is listed as a separate
item on the invoice.
In addition a "tobacco product" would be "loose tobacco,
wraps," under the new law.
Florida's proposed change appears to be a direct response to the Department's
unhappiness with the refunds claimed by dozens of distributors. It is
unclear whether the law will apply retroactively. If the law operates
on a prospective basis, distributors will be allowed to make refunds for
the prior three years. If you are in another state with similar tobacco
tax laws, it might be time to hurry up and claim your refund before your
state changes its law too!
In his law practice Mr. Donnini's primary practice is multi-state sales
and use tax as well as state corporate income tax controversy. Mr. Donnini
also practices in the areas of federal tax controversy, federal estate
planning, Florida probate, and all other state taxes including communication
service tax, cigarette & tobacco tax, motor fuel tax, and Native American
taxation. Mr. Donnini obtained his LL.M. in Taxation at NYU. Mr. Donnini
is licensed to practice law in Florida. Have questions? Please do not
hesitate to contact Mr. Donnini via email at
[email protected] or phone at