Virginia Tax and Licensing Rules for Tobacco Distributors & Retailers
All tobacco products, other than cigarettes, are subject to Virginia’s excise tax on other tobacco products (OTP) along with other licensing requirements. Manufacturers, importers, remote retailers, wholesalers, and other tobacco businesses with a presence in Virginia must understand their regulatory obligations. Proactively Managing your compliance is essential for avoiding penalties and minimizing your interactions with Virginia’s Department of Taxation. With our guide, learn about the major compliance issues facing companies that sell OTP and how our tobacco tax consulting firm can be of help the next time you have a tax or licensing concern in Virginia.
What License Does Your Business Need to Sell Tobacco Products in Virginia?
Your licensing needs for selling tobacco products in Virginia will depend on if you are a distributor responsible for the first sale of OTP in the state to retailers or other distributors. You’ll need a Tobacco Products Tax Distributor’s License if your business does any of the following:
- Manufactures tobacco products in Virginia for future sale in the state.
- Ships product to tobacco retailers in Virginia for future sale in the state.
- Is a remote tobacco retailer (i.e., in-state sellers who sell over the internet out-of-state or out-of-state sellers who ship to consumers in Virginia and have either $100,000 in annual revenue or complete 200 separate transactions in a calendar year).
- Tobacco retailers who purchase OTP from distributors not currently on Virginia’s licensed distributor list.
You can apply for your Virginia Tobacco Products Tax Distributor’s License by submitting a completed Form TT-1 along with TT-1 Schedule A, which is a personal data sheet for those with ownership or control authority over your business. The application fee is $600 and is valid for a period of 3 years. However, submission of additional TT-1 Schedule A after the initial application will incur an additional $100 fee per background check. Other tobacco retailers do not need a separate license but will need to register their business with the Virginia Department of Taxation to report and pay their sales tax on transactions. However, retailers can find themselves in trouble if they purchase OTP for resale from unlicensed distributors without having their own distributor license to report their OTP excise tax.
How Virginia’s Tobacco Products Tax Works
The sale of tobacco products in Virginia is subject to two different levels of taxation. The first is the excise tax on tobacco products, which applies when a distributor makes a first sale in the state. The second is the standard sales tax that applies when a retailer makes a direct sale to a consumer. The excise tax applies to a broad range of tobacco products with different rates depending on the type of OTP. For example:
- RYO tobacco: 10% of the manufacturer’s sale price
- Loose leaf tobacco:
- 42 cents for a unit less than 4 ounces
- 80 cents for a unit between 4 and 8 ounces
- $1.40 for a unit over 8 ounces and up to 24 ounces
- 42 cents for a unit over 24 ounces plus 42 cents for every 4-ounce increment beyond 16 ounces
- Heated tobacco: $2.25 per tick
- Liquid nicotine: 6.6 cents per milliliter
- Moist snuff: 36 cents per ounce
- All other tobacco products: 20% of the manufacturer’s sale price
The distributor is responsible for collecting the tax from the purchaser and remitting the tax along with their monthly tobacco products tax return (Form TT-8). Additional monthly reports may apply to your business if you sell RYO tobacco (Forms AG-1 or AG-2). All monthly reports are due on the 20th day of the month after the month for which you are reporting.
Note: If you are a tobacco manufacturer that ships products into Virginia, then you must submit an annual report of your shipments (due on the 20th of February). The report must contain the following information:
- The names and addresses of recipients of your tobacco products.
- The type, brand, and quantity of OTP shipped.
- The total number of units and their weights.
What Are the Penalties for Noncompliant Distributors and Retailers of OTP in Virginia?
A tobacco wholesaler or retailer that fails to comply with Virginia’s laws for the sale and taxation of OTP may unnecessarily subject themselves to a variety of civil and criminal penalties. Depending on the nature of your violation, you may be looking at one or more of the following penalties:
- Suspension or termination of your license to sell OTP
- Accrual of interest and penalties (up to 20%) for nonpayment of OTP tax
- Additional penalties (up to 50%) for any false or fraudulent OTP tax return filing
- Misdemeanor criminal charges for falsification of a distributor license application
- Civil penalties range from $500 for a first offense up to $250,000 for willful misconduct.
Get Regulatory Support for Your Virginia OTP Tax and Licensing Needs
Tobacco Tax Refund, Inc. is a consulting firm committed to helping tobacco businesses with their compliance issues before Virginia’s Department of Taxation. We serve as a cost-effective resource on a wide range of matters pertaining to your license applications, OTP tax audits, challenging excise tax assessments, and claiming your available tax credits or refunds. If you have concerns about your compliance in Virginia or need help with an upcoming audit, our consultants are ready to lend their support.
Schedule a consultation with Tobacco Tax Refund, Inc. today.