Frequently Asked Questions
The following are various frequently asked questions concerning the cigarettes tax, the tobacco products tax and several other issues related to cigarettes and tobacco products.
1. What is the definition of a cigarette?
A “cigarette” is defined under the cigarette tax law as:
(1) any roll for smoking containing tobacco or any substitute for tobacco wrapped in paper or in any substance other than a tobacco leaf; or
(2) any roll for smoking containing tobacco or any substitute for tobacco, wrapped in any substance, weighing three pounds per thousand or less, however labeled or named, which because of its appearance, size, type of tobacco used in the filler, or its packaging, pricing, marketing, or labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in item (1).
Since the imposition of the cigarette tax applies to “all cigarettes made of tobacco or any substitute for tobacco,” cigarettes that do not contain tobacco, such as clove cigarettes, are subject to the tax.
In addition, a cigar (or any other roll for smoking that contains tobacco or any substitute for tobacco) which weighs three pounds per thousand or less, regardless of how its labeled or named, is considered a cigarette for the purposes of the cigarette tax if because of its appearance, size, type of tobacco used in the filler, or its packaging, pricing, marketing, or labeling, it is likely to be offered to, or purchased by, consumers as a cigarette.
2. What is the definition of tobacco products?
The term “tobacco products” is defined in the law to mean “cigars, cheroots, stogies, periques, granulated, plug cut, crimp cut, ready rubbed, and other smoking tobacco, snuff, snuff flour, cavendish, plug and twist tobacco, fine-cut, and other chewing tobacco, shorts, refuse scraps, clippings, cuttings and sweepings of tobacco, and other kinds and forms of tobacco, prepared in a manner to be suitable for chewing or smoking in a pipe or otherwise, or both for chewing or smoking, but does not include cigarettes.”
3. What is the tax rate on cigarettes?
The tax rate for cigarettes is $0.0285, on each cigarette. Cigarettes are typically sold in packs of 20 or packs of 25; therefore, the tax on a pack of 20 cigarettes is $0.57 and the tax on a pack of 25 cigarettes is $0.7125.
4. What is the tax rate on tobacco products?
The tax rate on tobacco products is five percent of the manufacturer’s price. The manufacturer’s price is “the established price at which a manufacturer sells to a wholesaler.”
5. What is the “established manufacturer’s price” as used in the statute with respect to the tax on tobacco products?
In addressing several issue with respect to what constitutes the “established price,” South Carolina Revenue Ruling #94-7 advised:
1. The “established price” of snuff, chewing tobacco and smoking tobacco for purposes of calculating the tobacco tax on promotional packages, products received free of charge, and promotional allowances, as described in the facts, is as follows:
(a) Promotional Packaging - A product packaged for the consumer as part of a “buy one get one free” or similar promotion by the manufacturer is a packaged unit with an established price that is distinct and separate from the established price for the same product sold individually. Therefore, the established price is the recognized and accepted sum of money asked by the manufacturer for each packaged unit during the promotion.
(b) Products Received Free of Charge - If a manufacturer offers a wholesaler, during a specified time period, the opportunity to receive one case of a product free of charge if he purchases one or more cases of the same product, the total price that the wholesaler pays is the “established price” for all the cases of the product received under the promotion.
For example, if the wholesaler purchases 10 cases for $200 and receives 1 case free, the established price upon which the tax is calculated for all 11 cases is $200. A transaction must be viewed based upon its substance rather than its form. As such, the taxpayer in the example has purchased 11 cases for $200.
(c) Promotional Allowance - If a manufacturer offers a promotion that merely reduces the price of the product, the established price is the recognized and accepted sum of money asked by the manufacturer for the product during the promotion.
For example, the product may normally sell for $175 per case; however, the manufacturer is offering for a limited time the product for $160 per case with the invoice showing a unit price of $175 and a promotional allowance of $15. As a result of the promotion, the established price is $160.
2. The “established price” for the purpose of calculating the tobacco tax is the amount charged by the manufacturer to the wholesaler before any cash discounts for early payment are taken.
6. Who is required to be licensed?
A cigarette and tobacco products license must be obtained, at no cost, by the following persons before engaging in the sale of cigarettes or tobacco products in South Carolina:
(1) Wholesalers of cigarettes or tobacco products.
(2) Retailers that purchase untaxed cigarettes or untaxed tobacco products.
(3) Vending machine operators selling cigarettes or tobacco products through vending machines placed on another person’s premises.
(4) Sales representatives for manufacturers of cigarettes or tobacco products.
Wholesalers and retailers must obtain a license for each place of business. Vending machine operators and sales representatives; however, are only required to obtain one license. Vending machine operators, while only required to obtain one license, must maintain an up-to-date list of the location of each cigarette or tobacco products vending machine in South Carolina.
7. Do cigarette and tobacco products representatives have to be licensed by the department?
8. What is the cost of a cigarette or tobacco products tax license?
There is no cost to obtain a cigarette or tobacco products tax license.
9. Are smoke shops required to obtain a tobacco products license if they purchase all tax paid products?
No. Retailers are only required to obtain a license if they purchase untaxed cigarettes or untaxed tobacco products.
10. Are cigarette and tobacco products licenses transferable?
No. A license is only valid for the person in whose name it is issued and only for the transaction of business at the place designated in the license.
11. What form is used to apply for a cigarette or tobacco products tax license?
Form L-915 is used to apply for a cigarette or tobacco products tax license.
12. Is a bond required in order to obtain a license?
Person who are liable for the cigarettes tax are required to post a surety bond or submit statements of financial stability satisfactory to the Department. These are required to cover possible losses from a taxpayer’s failure to remit the cigarette or tobacco products due.
A bond or statement of financial stability is not specifically required with respect to the tobacco products tax. However, tobacco products licensees who are not liable for the cigarette tax can be required to post a bond if the licensee fails to pay the tobacco products tax for as many as two filing periods in a 12 month period.
13. Who is required to file a cigarette tax return and when is it due?
The cigarette tax is imposed upon:
(1) every person engaged within South Carolina in the business of selling cigarettes, or
(2) every person within South Carolina importing, receiving or acquiring cigarettes from outside of South Carolina or from any source whatsoever.
The tax is imposed on the person first receiving the untaxed cigarettes for sale, distribution or other disposition in South Carolina and upon any person first importing, receiving or acquiring untaxed cigarettes from outside South Carolina for use or consumption.
The tax applies whether the cigarettes are sold or otherwise disposed of in South Carolina, unless the sale or disposition is otherwise exempt under the law. In other words, if the person liable for the tax is unable to account for any cigarettes, such cigarettes are subject to the tax.
Cigarette tax returns are due on or before the 20th of the month following the month in which the sale, distribution or disposition of the cigarettes occurred. Payment of the cigarette tax due must be remitted with each return.
Cigarette and tobacco products taxes are remitted using the same form - Form L-922.
14. Who is required to file a tobacco products tax return and when is it due?
The tobacco products tax is imposed upon every person engaged within South Carolina in the business of selling tobacco products as a distributor. A distributor is:
(1) any person engaged in the business of selling tobacco products in South
Carolina who brings or causes to be brought into South Carolina from without
South Carolina any tobacco products for sale;
(2) any person who makes, manufacturers, or fabricates tobacco products in South Carolina for sale in South Carolina; and
(3) any person engaged in the business of selling tobacco products outside of South Carolina who ships or transports tobacco products to retailers in South Carolina to be sold by such retailers in South Carolina.
Essentially, the tax is imposed on the person first receiving the untaxed tobacco products for sale, distribution or other disposition in South Carolina and upon any person within South Carolina importing, receiving or acquiring tobacco products from outside of South Carolina or from any source whatsoever for use or consumption.
The tobacco tax return is due on or before the 20th of the month following the month in which the sale, distribution or disposition of the tobacco products occurred. Payment of the tobacco products tax due must be remitted with each return.
Cigarette and tobacco products taxes are remitted using the same form - Form L-922.
15. What is a “gratis” cigarette or a “gratis” tobacco product?
A “gratis” cigarette or tobacco product is one which is usually given away during some type of tobacco promotion or advertising event and the item is identified by being marked “Not for Resale”, or some other appropriate term. The distributor is responsible for paying the tax on “gratis” cigarettes and “gratis” tobacco products.
16. Are tax stamps currently required to be on cigarette packages?
No. The law requiring stamps was repealed effective Jan. 1. 1996. The payment of license tax on cigarettes is by a reporting method rather than by tax stamps. That law eliminated stamps, but implemented a report to be completed that describes the number of cigarettes sold or disposed of.
17. Are cigarettes that do not contain tobacco, such as “clove” cigarettes, subject to the tax?
Yes. The tax is imposed “upon all cigarettes made of tobacco or any substitute therefore.”
18. Are tobacco products substitutes subject to the tax?
Only substitutes for cigarettes are subject to the tax. The tax on tobacco products applies to forms of tobacco prepared in a manner suitable for chewing, smoking or other consumption.
19. What is the definition of a contraband cigarette?
Cigarettes found at any point within South Carolina on which the tax has not been paid are subject to confiscation by the Department, its employees and any peace officer of the State and are contraband cigarettes.
The confiscation of untaxed cigarettes applies to untaxed cigarettes in the possession of any wholesaler, retailer, or any other person, regardless of whether or not that person was the first person to receive the untaxed cigarettes into South Carolina. However, except for cigarettes being offered for sale, cigarettes must be in the possession of a wholesaler for more than 72 hours and in the possession of a retailer for more than 24 hours before they are subject to confiscation.
Since the cigarettes tax is no longer a stamp tax but is paid via a reporting method, it is not possible to determine whether the tax has been paid merely by inspecting the cigarettes themselves. Therefore, it must be determined by reviewing invoices and other records if the person in possession of the cigarettes (1) is registered to file and remit the cigarette tax or (2) has purchased the cigarettes from another person who is registered to file and remit the cigarette tax or (3) has otherwise purchased untaxed cigarettes.
20. Are contraband cigarettes subject to seizure?
21. Are vehicles used to transport contraband cigarettes subject to seizure?
22. Are cigarettes sold to the Federal Government taxable?
The following sales of cigarettes and tobacco products are exempt from the cigarettes or tobacco products tax:
(1) sales to the United States Government;
(2) sales to a United States Government instrumentality for Army, Navy, Marine or Air Force purposes and delivered to a place lawfully ceded to the United States; and
(3) sales to a United States Government instrumentality for Army, Navy, Marine or Air Force purposes and delivered to a ship belonging to the United States Navy for distribution and sale to members of the military establishment only.
23. Where do you report any evidence of possession of contraband cigarettes?
Contact the Collection Supervisor at the nearest Taxpayer Service Center of the South Carolina Department of Revenue to report any evidence of possession of contraband cigarettes. Locations and phone numbers for the Taxpayer Service Centers are:
Charleston Service Center: 1 Southpark Circle Suite 100 Charleston, S.C. 29407 Phone: 843-852-3600 Fax: 843-556-1780
Columbia Main Office: 301 Gervais Street P.O. Box 125 Columbia, S.C. 29214 Phone: 803-898-5000 Fax: 803-898-5822
Florence Service Center: 1452 West Evans Street P.O. Box 5418 Florence, S.C. 29502 Phone: 843-661-4850 Fax: 843-662-4876
Greenville Service Center: 545 North Pleasantburg Drive Greenville, SC 29607 Phone: 864-241-1200 Fax: 864-232-5008
Myrtle Beach Service Center: 1330 Howard Parkway P.O. Box 30427 Myrtle Beach, S.C. 29588 Phone: 843-839-2960 Fax: 843-839-2964
Rock Hill Service Center: 454 South Anderson Road Business and Technology Center Suite 202 P.O. Box 12099 Rock Hill, S.C. 29731 Phone: 803-324-7641 Fax: 803-324-8289
24. What penalties may be imposed for the sale and/or possession of untaxed cigarettes or tobacco products?
The penalty for the sale and/or possession of untaxed cigarettes or tobacco products is $50 to $500 for each violation.
25. Are tax refunds available for damaged cigarettes or damaged tobacco products which cannot be sold?
Yes. The cigarette tax and the tobacco products tax paid on cigarettes and tobacco products “which by reason of damage become unfit for sale and are destroyed by the dealer or returned to the manufacturer” may be refunded. However, the refund request must be filed with the department within three years of the time the tax return was filed.
26. Are cigarette and tobacco products sold on military installations within South Carolina subject to the tax?
Cigarettes and tobacco products sold to the U.S. Government for military use or resale to military personnel are exempt from the tax. However, anyone other than the federal government making sales of these products through a vending machine or other means on a military installation is subject to the tax.
27. What is the age limit for an individual to purchase cigarettes at retail?
A person must be at least 18 years old. It is unlawful for any person to sell, furnish, give or provide any minor under the age of eighteen years with cigarettes, tobacco, cigarette paper or any substitute therefor. Violating this section is punishable by a fine not exceeding $ 100 or by imprisonment for not more than one year or both in the discretion of the court. (See South Carolina Code §16-17-500 of the S.C. Code of Laws.)
28. Must you show a form of identification to purchase cigarettes at retail?
Common sense dictates that a retailer selling cigarettes or tobacco products or an individual distributing gratis cigarettes should request a legal form of identification prior to the sale of the product, or face the penalties provided for in the Code.
29. Where do you report any evidence of retail sales of cigarettes to minors?
Information concerning retail sales of cigarettes to minors should be reported to the local law enforcement agency.
30. Is the State of South Carolina a participant in the Master Settlement Agreement?