If Department of Revenues across the country always had their way, then
anything containing even the smallest amount tobacco would be considered
a “tobacco product.” Thankfully for the tobacco industry,
we have a legal process that can put a halt to many agency final determinations. In
Creager Mercantile Company, Inc. v. Colorado Department of Revenue, the Colorado Department of Revenue (“DOR”) issued a final
determination stating that Blunt Wraps sold by Creager Mercantile Company
(“Creager”) were within the meaning of the statute. Essentially,
the DOR claimed by itself that blunt wraps were taxable so that it could
receive more revenue. This would mean that every tobacco products other
than cigarettes would be taxed at 40% of the manufacturer’s list
price. The Taxpayer decided to fight back.
Beginning in December 2006, the DOR had a fabulous idea that it would issue
an FYI Notice to all taxpayers stating that it, miraculously, would begin
considering all products containing
any amount of tobacco to be “tobacco products” within the meaning
of the statute. This “FYI” is a complete headscratcher, as
the sole body responsible for creating statute is the Colorado legislative
body—think back to middle school civics class. The DOR on its own
terms unilaterally decided to drive up their own revenue stream by taxing
more tobacco products. Thus, we have the case at hand. Although three
issues were raised on appeal, the appellate court agreed with the first
claim that blunt wraps are
not “tobacco products” within the meaning of section 39-28.5-101(5),Colorado Statutes.
To tackle the issue as to whether blunt wraps are included in the “tobacco
products” definition, the court in
Creager broke down its analysis into three parts: 1) First, in interpreting tax
statutes, the court must resolve doubts in favor of the taxpayer; 2) When
a general term follows a list of things in a statute, we apply the principle
of ejusdem generis; and 3) Consider the other provisions relating to tobacco
products in their relation to their other realms of statutory law. Essentially,
the court in
Craeger clearly understood the nature of taxing statutes in the long-standing rule
that taxing power and taxing acts are strictly construed against the taxing
authority and in favor of the taxpayer. Carrying this philosophy through
their analysis as well as the fact any doubt must be resolved in favor
of the taxpayer, the court began their interpretation of the phrase “other
kinds and forms of tobacco, prepared in such a manner as to be suitable
for chewing or for smoking in a pipe or otherwise.”
The Court looked at the definitions for the particular taxing statute.
Clearly, the DOR failed to carefully read the definition of “tobacco
products” before it unilaterally decided to tax all products. The
Colorado legislature specifically identified several types of cigars,
chewing tobacco, and other types of tobacco used for a pipe or hand-rolled
cigars or cigarettes as part of “tobacco products.” What is
missing from this definition? Blunt wraps.
Think about what a blunt wrap is used for; a blunt wrap is not intended
to be use by itself, a blunt wrap is intended to be used as a source for
consuming other tobacco products. The items listed in the “tobacco
products” statute are items that may be consumed, clearly blunt
wraps fall outside this category. Due to the fact that the blunt wraps
fall outside the consumption categories listed in the statute, the rule
of ejusdem generis—rule of interpretation where a class of general
wording must be follow and cannot be expanded upon—must be used
to exclude blunt wraps from the “tobacco products” definition.
To once again expand on the fact that the Colorado DOR was attempting to
read in language that was not there, the court followed the legislative
history of the “tobacco products” in its use outside the taxing
realm. “Tobacco products” have been consistently expanded
upon since its introduction in 1987 Colorado criminal code. Since then,
“tobacco products” definition has gone from any product containing
tobacco intended for usage to being replaced with the broader terms of
any “cigarette, tobacco product, or nicotine product.” In
comparison to the taxing statute of “tobacco products,” the
definition has remained the same since its enactment. Clearly, the tax
context of the term “tobacco products” has a much narrow meaning
than the criminal context. Had the Colorado legislature intended to broaden
the taxing statute, then it would have done so. Therefore, the court in
Creager ultimately made the proper determination that the Colorado DOR was once
again starving for greater revenue streams and unlawfully decided to expand
the statute on its own.
This once again goes to show that so many tobacco tax distributors should
be filing a refund and are potentially missing out on those opportunities.
If you think you might be entitled to tobacco tax refunds, then act now.
Generally, there is a 2-4 year statute of limitations. This means you
have 2-4 years from the date you wrongfully paid the tobacco tax to ask
the state for the overpayment back. Many of our clients at Tobacco Tax
Refunds, Inc. are not even aware that they are overpaying tobacco tax
to their state. That is, until they allow us to review their records.
We can conduct a detailed review and analysis of your records to help
you determine whether you did in fact overpay.
Our firm is with you through the entire process, from needed communications
with tax authorities or vendors, to the end result of receiving the amounts
you are owed. We handle all the claim preparation, filing and more - everything
is done for you so all you have to do is focus on running your business.
In addition, we work to prevent future overpayments through our planning
and consulting actions, so that you have more resources available to your
business in the future.
We have represented millions of dollars in refund claims. Our team knows
the ins and outs of the refund process for each state and we know exactly
how to file an effective claim.
Find out what our experienced tax professionals can do to help.
Contact us at (888) 918-4690 for a
See also -
Brandys Products v DBPR - Florida Blunt Wraps Case
About the author: Mr. Donnini is the president and founder of Tobacco
Tax Refunds, Inc. He is also multi-state sales and use tax attorney and
an associate in the law firm Moffa, Gainor, & Sutton, PA, based in
Fort Lauderdale, Florida. Mr. Donnini has extensive knowledge handling
wholesale tax controversey and refunds.
In his law practive 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.