The 2012 Florida Appellate Court decision of
Micjo v. DBPR is one that is quickly gaining the attention of the entire United States.
Ruling in favor of tobacco distributors,
Micjo stated that Other Tobacco Products tax is only applicable to the tobacco
itself, not the federal excise tax nor shipping costs. Let’s use
an example, if an invoice charges $500 for tobacco, $100 for FET, and
$100 for shipping costs, then only the $500 charge for the tobacco is
taxable, not the entire $700 invoice.
This concept was taken a bit further in an intriguing development out of
Global Distributor & Wholesaler, Inc. v. Department of Revenue. This cases involved Global, a tobacco distributor that purchased tobacco
in foil bags that was subject to Oregon’s Other Tobacco Products
Tax. Global then would place bags into a tin canister, attach a label,
and would sell the products to tobacco retailers throughout Oregon. To
add to this, Global entered exclusivity deals with suppliers for a flat
fee monetary exchange.
As one would suspect, Oregon’s Department of Revenue wanted greater
tax revenue by arguing the tax applied to the entire total invoice. However,
the court did not budge on this argument. The Oregon court ruled that
the Other Tobacco Products tax should only apply to the tobacco and not
the other charges, FET, shipping, packaging, and exclusivity fees. The
court made their point exceptionally clear in the following example:
[S]uppose a distributor orders loose tobacco from a wholesaler of fine
tobacco products, and also orders lockboxes made of solid gold from another
wholesaler. If the distributor then inserted the tobacco into the golden
lockboxes, it would be unreasonable and onerous, and against any principle
of equity, to impose a tax on the containers based upon the wholesale
Tobacco Tax Refunds has taken the viewpoint that both
Global provide an exciting opportunity for tobacco distributors to a significant
refund claim. How is this so? Let’s look at the following example
and apply Maryland’s other Tobacco Products tax at a rate of 30%
of the manufacturer’s list price pursuant to section 12-105, Maryland Statutes:
Tobacco - $200,000
FET – $100,000
Shipping - $50,000
Packaging - $25,000
Exclusivity Fee - $25,000
Total Amount - $400,000
If the Oregon Department of Revenue’s approach in both
Global was used, then the taxpayer would be subjected to a $120,000, or 30% of
the entire $400,000 purchase.However, if the court's ruling in Oregon
applies to a similar statute in Maryland, then only the tobacco charge
would be subject to tax. Under the
Global approach, only the $200,000 tobacco charge would be subject to tax, which
would be a substatnial savings, or a substantial refund.
While many experienced tax professionals have not dealt with Other Tobacco
Products Taxes, we have. Tobacco Tax Refunds recognizes that manufacturer
and wholesale tobacco tax is a complex area requiring a great deal of
skill and understanding of the complex laws. Tobacco Tax Refunds has dedicated
ourselves to tobacco tax. We are not afraid to challenge any state tobacco
After all, with a refund claim, there everything to gain and not much to lose.
In addition, if you are located in Alaska, California, Connecticut, Delaware,
Illinois, Indiana, Iowa, Maine, Montana, New Hampshire, New Jersey, Oregon,
North Dakota, Utah, Wisconsin, or other states with similar laws then
you might have a refund based on Micjo. Give us a call to get started today!
Talking to us is FREE, so give us a call today at (888) 918-4690.
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 JerryDonnini@TobaccoTaxRefund.com
or phone at 954-639-4496.