Commissioner's Directive #43
SUMMARY OF CHANGES:
Aside from nonsubstantive, technical changes, this version of the directive has been changed to reflect the enactment of HEA 1001-2013, which, in pertinent part, amended IC 6-7-2-7 and IC 6-7-2-8 to provide that a person selling other tobacco products (OTP) through an Internet website is required to obtain a distributor's license and remit the OTP tax to the department. The directive also has been changed in accordance with HEA 1006-2013, which, in pertinent part, changes Class D felonies to Level 6 felonies.
INTRODUCTION
The purpose of this commissioner's directive is to provide an interpretation of the Other Tobacco Products Tax as it applies to the wholesale price of tobacco products and moist snuff taxed by the ounce and an interpretation of who is a tobacco distributor that is liable for the tax. This directive applies to other tobacco products distributors as defined in IC 6-7-2-2 .
DISCUSSION
"Tobacco product" means:
(1) Any product made from tobacco, other than a cigarette, that is made for smoking, chewing, or both; or
(2) Snuff, including moist snuff.
"Moist snuff" means any finely cut, ground, or powdered tobacco that is not meant to be smoked or placed in the nasal cavity.
The Other Tobacco Products Tax is imposed on tobacco distributors per IC 6-7-2-7 , which reads:
A tax is imposed on the distribution of tobacco products in Indiana at the rate of 24% of the wholesale price of the tobacco products other than moist snuff or for moist snuff, $.40 per ounce, and a proportionate tax at the same rate on all fractional parts of an ounce. If the tax calculated for the fractional part of an ounce carried to the third decimal place results in the numeral in the third decimal place being greater than 4, the amount of tax shall be rounded to the next additional cent.
The distributor of the tobacco products, including a person who sells tobacco products through an Internet website, is liable for the tax. The tax is imposed at the time the distributor:
(1) Brings or causes tobacco products to be brought into Indiana for distribution;
(2) Manufactures tobacco products in Indiana for distribution; or
(3) Transports tobacco products to retail dealers in Indiana for resale by those retail dealers.
A distributor, including a person who sells tobacco products through an Internet website, must obtain a license before distributing tobacco products in Indiana.
An unlicensed wholesaler/retailer purchasing tobacco products through a catalogue or other media from a person not licensed as an Indiana distributor must register as a distributor and pay the tax on the wholesale price of the other tobacco products or, if purchasing moist snuff, pay the tax based on the number of ounces. A wholesaler/retailer failing to register and comply with the law commits a Class B misdemeanor. However, the offense is a Level 6 felony if it is committed with intent to evade the tax imposed or to defraud the state.
The term "wholesale price" is defined in IC 6-7-2-6 as follows: "As used in this chapter, 'wholesale price' means the net price shown on an invoice and at which the manufacturer of the tobacco products sells tobacco products other than moist snuff to distributors, excluding any discount or other reduction that is not shown on the invoice."
The department's position is that temporary reduction or discounts for the purpose of promoting certain tobacco products are deductible from the original price in determining the "wholesale price" of tobacco products if the finished tobacco product(s) container is prepackaged indicating a monetary discount. The "wholesale price" for other tobacco products prepackaged in multiple units is the actual price paid and not an imputed cost based on the manufacturer's price per single unit. Purchase discounts, quantity discounts, trade discounts, or any other reductions are deductible when determining the "wholesale price" of tobacco products for purposes of imposing the Other Tobacco Products Tax if the discount is shown on the invoice.
A manufacturer, an importer, a broker, or a shipper of other tobacco products or moist snuff bringing such products into Indiana for the purpose of giving such products away for any type of promotional purpose must pay the tax due on all such products. In applying the Other Tobacco Products Tax to samples, the "wholesale price" is the standard price charged for the single-unit tobacco product before deduction of any discount, including temporary promotional discounts.
