Since early 2013, the Florida Department of Business and Professional Regulation
decided to re-try prior litigation under a different theory. In short,
Florida attempted to tax federal excise tax, shipping and other charges
under its wholesale tobacco tax regime. However, Florida court’s
delivered 3 punishing blows to the Department in October 2016. The cases called
Good Times Pinellas LLC, and
Global Hookah all but put an end to Florida’s insistence on taxing federal tax
By way of brief background, Florida taxes tobacco based on 85% of the “wholesale
sales price” or a tobacco product. Wholesale sales price is defined
as the established price for which a manufacturer sells tobacco to a distributor.
In 2012, Florida’s Second District Court of Appeals (“DCA”)
stated that the term “wholesale sales price” is based only
on the manufacturer’s price of the tobacco product and not on the
FET and shipping. This seemingly simple statement has now become the source
of very successful tobacco tax distributor litigation in Florida and throughout
Micjo, Inc. v. DBPR has set the tone for all future tobacco tax litigation.
Micjo, the Department took the position that the FET and shipping were taxable
if they were charged by the manufacturer on the initial sale. In practicality,
this meant if the tobacco was domestically made, the FET and shipping
were taxable but if the tobacco was foreign in origin, the FET and shipping
escaped tax. Several refund cases ensued.
On October 14th, 2016, Florida Second DCA spoke on the issue again and disagreed with
the Department’s analysis and ruled in favor of the taxpayer. Therefore,
it appears that FET and shipping are not taxable in Florida.
Based on the Department’s analysis, several distributors banded together
and fought the case on the administrative law front. If the Department
makes a pocliy that is not clear from the statute, then the Department
must go through rulemaking under Florida law. The taxpayers in
Florida Bee argued that their policy to tax FET and shipping based on manufacturer
locale was an unadopted rule and, thus, invalid. On October 20, 2016,
the First District Court of Appeal ruled in the taxpayer’s favor,
which put an end to the Department’s non-rule policy. In addition,
the court awarded appellate
Finally, in the
Global Hookah case, the Department did not believe the taxpayer’s records as to
the amount of the tobacco purchases. With no statutory authority, the
Department assessed the taxpayer on a hypothetical 450% mark-up. Following
an administrative hearing, the judge ruled in favor of the taxpayer and
said the assessment was invalid.
Tobacco tax distributors may once again give praise to the courts for accurately
curtailing a state agency’s attempt to generate more tobacco tax
revenue. With these landmark decisions setting precedent in Florida so
that the term “wholesale sales price” is based only on the
manufacturer’s price of the tobacco product and not the invoice
price, the same approach may be taken nationwide in state’s with
Even most good tax professionals do not deal with oddball taxes like tobacco
taxes. Tobacco tax law is a complex area of law that requires a unique
knowledge of and experience in these matters. But dealing with these unique
issues is 100% of what our firm handles. We challenge the state tobacco
taxing agency at every level from audit to protest, to controversy. Day
in and day out, this is simply what we do.
In addition, if you are located in Alaska, California, Colorado, Connecticut,
Delaware, Illinois, Indiana, Iowa, Maine, Montana, New Jersey, New Hampshire,
Oregon, North Dakota, Utah, or Wisconsin 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.
Micjo, Inc. v. Department of Business and Professional Regulation, Division
of Alcoholic Beverages and Tobacco.
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
partner in the law firm Moffa, Sutton, & Donnini, PA, based in Fort
Lauderdale, Florida. Mr. Donnini has extensive knowledge handling wholesale
tax controversy and refunds.
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.