Other Tobacco Products (“OTP”) Distributors often believe that
they “know” how much OTP tax should be paid on each OTP product.
How do they “know” their OTP product is taxable? They “know”
this, because one of three things occurred: 1) habitual business practice,
2) the state told them the OTP products are taxable, or 3) their tax professional
told them the OTP products are taxable. Despite this, you may be one of
hundreds of OTP wholesales overpaying OTP tax on your tobacco purchases.
A Florida court highlighted in
Micjo v. Department of Business and Professional Regulation that many wholesale tobacco taxing statutes only require tax to be paid
on the tobacco itself, not line items such as Federal Excise Tax and Shipping
Costs. There have even been further cases expanding on this ruling to
the degree that does not matter if the Federal Excise Tax is separately
stated on the invoice.
Although many Virginia OTP wholesalers may “know” that whether
Virginia’s OTP tax should apply is an issue, not many Virginia OTP
wholesalers take an action against the issue. Under Virginia law, section
58-1-1021.02, Virginia Statutes, states that OTP tax is applied to OTP
products “at the rate of 10 percent
of the manufacturer's sales price of such tobacco products.”(emphasis added). If you, as a tobacco tax distributor, are buying
OTP products from another OTP distributer and not directly from the manufacturer,
then you are likely overpaying tobacco tax on the distributer’s mark-up.
Some OTP manufacturers make a tobacco distributor’s life easier by
listing the sales price to their distributors. Then, a tobacco distributor
simply should apply for a refund, likely have some “friendly”
conversations with the state, and hopefully have the overpayment refunded.
However, if the OTP manufacturer’s price is not listed on the invoice,
most OTP distributors “know” that providing the manufacturer’s
price is a burdensome task. In fact, a New York case established the OTP
manufacturer markup was significant and, as such, tens of millions of
dollars was refunded back to New York taxpayers.
With Virginia’s similar law, OTP wholesalers may benefit from a similar
theory. We, at Tobacco Tax Refund, have the information to assist. All
you have to do is give us a call. From there, we will file your refund,
communicate with the state taxing agency, and work with counsel, if necessary,
to litigate the case so that you may receive your money back. To make
things even better, we take refund cases on contingency, so the risk is on us!
In addition, if you are located in Alaska, Colorado, Delaware, Idaho, Illinois,
Indiana, Iowa, Kansas, Maine, Mississippi, Montana, North Dakota, New
Jersey, New Hampshire, South Dakota, Utah, or other states with similar
laws then you might have a refund based on our theory and proprietary
information. Give us a call to get started today!
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. If you have any questions please
do not hesitate to contact him via email [email protected]
or phone at 954-639-4496.