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.