In a recent case, the Colorado Department of Revenue (“CDOR”)
acted under its own alleged authority when it unilaterally proclaimed
it could broaden the taxability of a tobacco product. Despite the CDOR’s
effort in December 2006, it is explicit, and quite well-known, the legislature
holds the enumerated power to alter the scope of the tax on a particular
product. Utilizing this well-recognized rule, the court in
Creager Mercantile Company, Inc. v. Colorado Department of Revenue ruled on the taxability of blunt wraps.
In the case, the focus was on a product called a cigar wrapper or a blunt
wrap. Each wrap is primarily composed paper and flavoring with only contains
a small amount of tobacco. For a wrap to be taxable, each wrap must fit
within the statutory definition of a tobacco product. The court in
Creager examined section 39-28.5-101(5) of the Colorado Statutes. The court more
specifically examined the phrase, “other kinds and forms of tobacco,
prepare in such a manner as to be suitable for chewing or for smoking
in a pipe or otherwise,” since a wrap is clearly not a cigarette
nor a cigar. Ultimately, the court ruled in favor of the taxpayer by declaring
that blunt wraps are not included in Colorado’s statutory definition
of Tobacco Products.
Michigan has a similar provision that does not appear to tax the wrap product.
Being that Michigan taxes, smoking tobacco and that blunt wraps are a
source of consumption of other tobacco products, not for use by itself,
the are likely not taxable in Michigan. Since the items explicitly included
in the definition of Tobacco Products are products that may be consumed,
blunt wraps clearly fall outside this category. Using the rule of ejusdem
generis – a rule of interpretation where a class of general wording
must be followed and cannot be expanded upon – must be used to exclude
blunt wraps from the Tobacco Products definition.
Many tobacco tax distributors may be missing out on refund opportunities,
since many tobacco tax distributors have been paying tax on blunt wraps
and should be entitled to a refund. Unbeknownst to many tobacco tax distributors,
there is a 2-4 year statute of limitations from the date of wrongfully
paid tobacco tax to ask for an overpayment refund from the state. Many
of our clients at Tobacco Tax Refund, Inc. are unaware that they have
been overpaying tobacco tax, until we inform them of such. We at Tobacco
Tax Refund, Inc. will conduct a detailed review and analysis of your records
to properly determine your tax exposure whether an overpayment has occurred.
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.
In addition, if you are located in Connecticut, Delaware, Georgia, Illinois,
Iowa, Kentucky, Maine, Maryland, Mississippi, North Dakota, Nebraska,
New Hampshire, Ohio, Oregon, Virginia, and Wisconsin, 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.