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Frequently Asked Questions regarding TTB Ruling 2010-4, Cigarette-making Machines in Retail Establishments
NOTICE
On Monday, November 15, 2010, the United States District Court for the Northern District of Ohio temporarily enjoined the Department of the Treasury, the Alcohol and Tobacco Tax and Trade Bureau (TTB) and "their agents, servants, employees, successors, representatives and assigns, and all others in active concert and privity with them who receive actual notice" from enforcing the provisions of Chapter 52 of the Internal Revenue Code dealing with manufacturers of tobacco products against retailers who maintain commercial cigarette-making machines on their premises for use by consumers to facilitate the manufacturing of cigarettes, as interpreted in TTB Ruling 2010-04. Read entire NOTICE.
TTB has held:
- The proprietor of a retail establishment who is in the business of making cigarettes for others, or who facilitates the making of cigarettes by or for others by providing the use of a commercial cigarette-making machine at its premises is engaged in the business of a tobacco products manufacturer and must qualify for and obtain a permit from TTB to engage in such business.
- The proprietor must also obtain a bond and comply with the applicable regulatory recordkeeping, reporting, and inventory requirements.
- As a manufacturer of tobacco products, the proprietor is liable for the payment of tax on the cigarettes produced.
- Once qualified as a manufacturer of tobacco products, a proprietor may for example, under the Internal Revenue Code of 1986 (IRC), obtain roll-your-own tobacco, processed tobacco, and cigarette papers or tubes, transferred by a TTB-permitted manufacturer or released from customs custody without payment of tax for use in the manufacture of cigarettes.
The laws and regulations governing tobacco products, processed tobacco, and cigarette papers and tubes can be found in IRC Chapter 52 of Title 26 of the United States Code and Title 27 of the Code of Federal Regulations (CFR) Part 40, accessible from our TTB.gov homepage, under “Regulatory and Formal Guidance,” “Statutes” and “Regulations.”
| CMM1. |
How do I obtain an application to become a tobacco products manufacturer?
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| A. |
The application packet is available at our Tobacco Permits page (TIP: This page is easy to find from anywhere on TTB.gov; simply roll your mouse over the “Tobacco” commodity tab on the main banner above, and then select “Permits” when it appears in the dropdown menu.) Here you will find links to the various TTB tobacco permit applications; select “Tobacco Products Manufacturer” to obtain your application packet. |
| CMM2. |
How do I file the application? |
| A. |
You must file the application and supporting documents in duplicate, with an original signature. A photocopy is sufficient as long as the original signature appears on all forms where required. You must file a complete application packet, including the bond. We recommend you keep a copy of the application you file with us. |
| CMM3. |
Where is the application mailed? |
| A. |
You must mail the complete application packet and supporting documents to TTB’s National Revenue Center (NRC) at the following address.
Alcohol and Tobacco Tax and Trade Bureau
National Revenue Center, Room 8002
550 Main Street
Cincinnati, OH 45202-5215 |
| CMM4. |
Will my tobacco product manufacturer’s permit expire? |
| A. |
No. In general, the permit remains in effect until it is surrendered by you or until TTB suspends or revokes your permit due to statutory or regulatory violations. We note that a permit may be suspended, and subsequently revoked, if the permit holder has no activity under the permit for a period of one year. |
| CMM5. |
As the proprietor of a retail establishment that currently owns or leases a commercial cigarette-making machine, do I have to obtain a permit to manufacture tobacco products? |
| A. |
The proprietor of a retail establishment who makes cigarettes or facilitates the making of cigarettes by or for others by providing the use of a machine at its premises must obtain a permit as a tobacco product manufacturer. |
| CMM6. |
As the proprietor of a retail establishment that currently owns or leases a commercial cigarette-making machine, can my customers continue to use my cigarette-making machine while my application for a permit to manufacture tobacco products is being processed by TTB? |
| A. |
No. You must immediately discontinue the use of the cigarette-making machine until you receive a permit to manufacture tobacco products. The IRC provides that no person shall commence the business of a tobacco products manufacturer without first filing a bond (26 U.S.C. 5711(a)) and an application for the permit (26 U.S.C. 5712) and shall not engage in the business of a tobacco products manufacturer without holding such permit (26 U.S.C. 5713(a)). An application for permit may be denied if the applicant fails to meet the statutory qualifications (26 U.S.C. 5712(1) – (3). |
| CMM7. |
What type of bond must I file? |
| A. |
You must file either a surety bond, TTB F 5200.26, Tobacco Bond – Surety, or a collateral bond, TTB F 5200.25, Tobacco Bond – Collateral. |
| CMM8. |
What amount of bond do I need? |
| A. |
The minimum bond is $1,000 and the maximum bond is $250,000. The amount of an individual bond shall be not less than the total amount of tax liability on all tobacco products manufactured in your factory, received in bond from other factories and from export warehouses, and released to you in bond from customs custody, during any calendar month. See 27 CFR 40.133 and 40.134. |
| CMM9. |
What records must I keep? |
| A. |
As a manufacturer of tobacco products, you must keep records of your operations and transactions in accordance with regulatory sections 27 CFR 40.181 through 40.187. |
| CMM10. |
What reports must I file? |
| A. |
You must make a report, in accordance with 27 CFR 40.202, on TTB F 5210.5, Report - Manufacturer of Tobacco Products or Cigarette Papers and Tubes, for each month and for any portion of a month during which you engage in business. You may file your reports electronically using Pay.gov, a Department of the Treasury system for processing and filing electronic payments/returns for federal excise taxes and operational reports. More information about this system can be found at our e-payment information page. |
| CMM11. |
Must I make an inventory and report the inventory to TTB? |
| A. |
Every manufacturer of tobacco products must make an accurate inventory on TTB F 5210.9, Inventory - Manufacturer of Tobacco Products or Processed Tobacco, in accordance with, and as such times as required by, 27 CFR 40.201. Such inventories must include all tobacco products and processed tobacco for which records are required under 27 CFR 40.182 (Record of processed tobacco) and 27 CFR 40.183 (Record of tobacco products). |
| CMM12. |
Am I required to pay any taxes? |
| A. |
Yes. As a manufacturer of tobacco products, the proprietor is liable for the payment of Federal excise tax on the cigarettes manufactured, in accordance with 26 U.S.C. 5703(a)(1) and 27 CFR 40.26. Visit our Forms page to find TTB F 5000.24, Excise Tax Return, and find applicable tax rates at our Tax and Fee Rate page. |
| CMM13. |
Do I pay any other taxes? |
| A. |
Yes. You must pay a special occupational tax (SOT) at a rate specified by 27 CFR 40.32. SOT is either $500 or $1000 and must be made on TTB F 5630.5t, Special Tax Registration and Return-Tobacco. Additionally, you may be subject to State and local taxes on tobacco products. For questions on those requirements, we recommend you contact the appropriate tax administrator. |
| CMM14. |
How must I package and label the cigarettes? |
| A. |
In order to comply with TTB’s regulations, the packages for the cigarettes must comply with all of the conditions of 27 CFR 40.211 and the packages must bear marks, labels, and notices as required by 27 CFR 40.212, 40.213, and 40.215, respectively. In accordance with 27 CFR 40.211, all tobacco products must be put up by the manufacturer in packages which shall be of such construction as will securely contain the products and maintain the required marks and notices. In addition, the statutory and regulatory provisions administered by other Federal agencies (such as the U.S. Food and Drug Administration) also may require specific marks, statements, or notices appear on tobacco product packages. Meeting the TTB requirements for packages, marks, labels, and notices does not imply that such packages meet the requirements of other Federal agencies. |
| CMM15. |
Who can I call with questions? |
| A. |
You may call TTB’s National Revenue Center (NRC) @ 1-877-882-3277 or 1-513-684-3334. |
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