Other Tobacco Products (“OTP”) Distributors often believe that they “know” how much OTP tax should be paid on each OTP product. How do they “know” their OTP product is taxable? They “know” this, because one of three things occurred: 1) habitual business practice, 2) the state told them the OTP products are taxable, or 3) their tax professional told them the OTP products are taxable. Despite this, you may be one of hundreds of OTP wholesales overpaying OTP tax on your tobacco purchases.
A Florida court highlighted in Micjo v. Department of Business and Professional Regulation that many wholesale tobacco taxing statutes only require tax to be paid on the tobacco itself, not line items such as Federal Excise Tax and Shipping Costs. There have even been further cases expanding on this ruling to the degree that does not matter if the Federal Excise Tax is separately stated on the invoice.
Although many Virginia OTP wholesalers may “know” that whether Virginia’s OTP tax should apply is an issue, not many Virginia OTP wholesalers take an action against the issue. Under Virginia law, section 58-1-1021.02, Virginia Statutes, states that OTP tax is applied to OTP products “at the rate of 10 percent of the manufacturer's sales price of such tobacco products.”(emphasis added). If you, as a tobacco tax distributor, are buying OTP products from another OTP distributer and not directly from the manufacturer, then you are likely overpaying tobacco tax on the distributer’s mark-up.
Some OTP manufacturers make a tobacco distributor’s life easier by listing the sales price to their distributors. Then, a tobacco distributor simply should apply for a refund, likely have some “friendly” conversations with the state, and hopefully have the overpayment refunded.
However, if the OTP manufacturer’s price is not listed on the invoice, most OTP distributors “know” that providing the manufacturer’s price is a burdensome task. In fact, a New York case established the OTP manufacturer markup was significant and, as such, tens of millions of dollars was refunded back to New York taxpayers.
With Virginia’s similar law, OTP wholesalers may benefit from a similar theory. We, at Tobacco Tax Refund, have the information to assist. All you have to do is give us a call. From there, we will file your refund, communicate with the state taxing agency, and work with counsel, if necessary, to litigate the case so that you may receive your money back. To make things even better, we take refund cases on contingency, so the risk is on us!
In addition, if you are located in Alaska, Colorado, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Mississippi, Montana, North Dakota, New Jersey, New Hampshire, South Dakota, Utah, 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.