If you sell or plan to sell tobacco products in Texas, then permit compliance and tax reporting obligations should be a top priority for your business operation. A lack of awareness toward your responsibilities as a Texas tobacco business can lead to surprise tax bills, fines, criminal charges, suspension or termination of your permit, and other unfortunate penalties. The Texas Comptroller’s Office regularly investigates and audits tobacco distributors and retailers to look for regulatory violations. Get a head start on understanding your compliance obligations with our Texas tobacco permitting and tax reporting guide.
Getting Your License to Sell Tobacco Products in Texas
Texas requires any business that sells tobacco products in the state to obtain a permit from the Comptroller’s Office in addition to having a general sale and use tax permit (form 201). The type of permit you need will depend on where your tobacco sales are in the chain of distribution. Texas distinguishes businesses that sell tobacco products into the following classifications, and it’s possible your tobacco business activities involve more than one of these categories:
- Retailer: Someone who sells directly to the consumer, which includes using a vending machine.
- Wholesaler: Someone who offers tobacco products for resale to other wholesalers or retailers.
- Distributor: Anyone who purchases, manufactures, or transports tobacco products for the purpose of making the first sale in the state of Texas.
- Manufacturer: Anyone who makes tobacco products for sale or distribution.
- Importer: Anyone who delivers tobacco products into Texas for purposes of a first sale that were manufactured outside the U.S.
Retailers will need to submit form 193, and all other tobacco product businesses will need form 175. If you recently purchased a business that sells tobacco products, you’ll still need to submit a new application even though the business had one under the prior owner.
What Do I Need to Complete the Texas Tobacco Permit Application?
The Texas tobacco permit application is not overly complex, but accurately completing it will be necessary for getting your permit as quickly as possible and avoiding subsequent noncompliance issues. The information generally needed to complete the applications includes:
- Your taxpayer information
- Information about where you will sell the tobacco products (e.g., address, business record storage, when you will start selling, etc.)
- Delivery information if you plan to make internet or mail order sales
- Use of vending machines to sell tobacco products
- Vehicle information if you plan to sell from one
- Vehicle permits and fees if you are a distributor or wholesaler
Along with the completed form, you will need to pay the applicable fee for your permit (e.g., $180 for a retailer or $300 for a distributor). You will need to renew your permits according to Texas’ timelines depending on your permit type, most of which are on an annual basis (except for retailer permits that renew every even-numbered year).
You May Need an E-Cigarette Retailer Permit
Texas recently established a requirement for retailers to obtain a separate e-cigarette retailer permit (form AP-242) for selling, storing, or making a delivery of sale to consumers in the state. Along with the application is a $180 fee that will require renewal every even-numbered year. The penalty for selling e-cigarettes without the proper permit is $2,000 in addition to possible criminal charges (each day of operating without a permit constitutes a separate violation.
Additional Tobacco-Related Fees You May Have to Pay
If your tobacco business participates in either of the following activities, then you may be responsible for the payment of additional fees and reporting:
- A Roll Your Own (RYO) Special Fee for non-settling manufacturer (NSM) or subsequent participating manufacturer (SPM) tobacco products
- A Fee for purchasing outdoor advertising of tobacco products (form 69-118)
Reporting Tobacco Sales to the Texas Comptroller’s Office
As a manufacturer, distributor, or wholesaler, you are responsible for submitting monthly reports detailing your sales or transfers of tobacco products. The reports are due electronically on the 25th of each month for your sales from the month prior (e.g., you file January’s reporting by February 25th). Diligent completion of this reporting is essential for compliance with Texas’ tobacco product taxes and fees and requires submission of detailed information about your sales (e.g., purchaser information, type of product, amount, date of sale, etc.).
Who Is Responsible for Paying the Texas Tobacco Product Tax?
In addition to standard sales tax, Texas imposes a tobacco products tax when a permit holder receives OTP for the purpose of making of a first sale in the state (usually to a wholesaler or retailer). That permit holder is responsible for remitting the tobacco tax to the Texas Comptroller’s Office via TEXNET. As a result, you must keep records and other proof of your purchases or sales to show the tobacco tax is paid on the tobacco in your possession. Likewise, wholesalers and retailers will want to keep good records of the tobacco they purchase from other Texas permit holders to show they are not responsible for the tax on the tobacco product in their inventory. This may include confirming purchases of tobacco are coming from parties with an active permit.
Requesting a Refund for Overpayment of Tobacco Taxes in Texas
If you overpaid on the amount of tobacco-related taxes owed, it might be possible to obtain a refund or credit from the Texas Comptroller. The process generally requires submitting amended reporting along with a signed letter stating the amount and reason for the tobacco tax refund. You will also need to provide supporting documentation, such as the date of tax payment and copies of related invoices.
For More Help with Texas Tobacco Licensing and Tax Matters
The consultants at Tobacco Tax Refund Inc. are ready to help businesses with all matters related to their tobacco licensing and tax reporting. This includes processing applications, compliance issues, obtaining tax refunds, and representation in challenging unfair assessments of tax or related penalties. If you have any questions about the rules for selling tobacco products in Texas, please consider a consultation with our office.
Contact us for assistance with your Texas tobacco permit application or other tax and regulatory needs.