Amended Definition of "Roll-Your-Own Tobacco"

We have been asked to clarify the TTB position with regard to the manufacture and importation of sheets of reconstituted tobacco in light of the amendments to the Internal Revenue Code of 1986 (IRC) by the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).  Specifically, we have been asked the following:

• Are sheets of reconstituted tobacco considered to be “roll-your-own tobacco” as that term is defined by the IRC, as amended by CHIPRA?

• Is a manufacturer of sheets of reconstituted tobacco required to have a permit as a tobacco products manufacturer when the “roll-your-own tobacco” definition amended by the CHIPRA goes into effect on April 1, 2009?  Is an importer of sheets of reconstituted tobacco required to have a permit as a tobacco products importer when the “roll-your-own tobacco” definition amended by the CHIPRA goes into effect on April 1, 2009? 

Under 26 U.S.C. 5702(o), as amended by CHIPRA,  the term “roll-your-own tobacco“ means “any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or for use as wrappers thereof.”  Specifically, CHIPRA added the words, “or cigars, or for use as wrappers thereof” to the end of the existing definition.  In the trade and in general terminology, "reconstituted tobacco" is ground or pulverized tobacco mixed with various adhesive agents and/or cellulose fibers derived from tobacco or other sources and formed into sheets.  The term “sheets” here refers to a form or size of product that cannot be used, without further manipulation, by the ultimate consumer as a wrapper for a cigar (also referred to at retail as a “wrap” or a “blunt”).

Sheets of reconstituted tobacco that are in sizes that cannot be readily used by the ultimate consumer as wrappers for cigars without further manipulation are not “roll-your-own” tobacco as contemplated by 26 U.S.C. 5702(o) as amended.  Accordingly, persons who produce or import reconstituted tobacco solely in sheets, rather than in sizes that can be readily used by the ultimate consumer as wrappers for cigars, are not manufacturers or importers of roll-your-own tobacco and therefore are not required to have a TTB permit as such.  A manufacturer that produces and removes reconstituted tobacco in a form or size that is ready for use by the ultimate consumer is a manufacturer of roll-your-own tobacco and must obtain a TTB permit as a tobacco product manufacturer to engage in such business on or after April 1, 2009.  Similarly, a person who imports reconstituted tobacco in a form or size that is ready for use by the ultimate consumer is an importer of roll-your-own tobacco and must obtain a TTB permit as an importer of tobacco products in order to engage in such business on or after April 1, 2009.  

Finally, whether a manufacturer or importer of sheets of reconstituted tobacco that are in sizes that cannot be readily used by the ultimate consumer as wrappers for cigars is required to qualify as a “manufacturer of processed tobacco” or an “importer of processed tobacco” will be addressed in detail in forthcoming TTB regulations.  CHIPRA includes a transitional rule whereby any person engaged in the business as a manufacturer or importer of processed tobacco on April 1, 2009, who submits an application to TTB within 90 days after April 1, 2009 (that is, on or before June 30, 2009) may continue to engage in that business pending final action by TTB on the permit application.

Tobacco Diversion

If you suspect illegal activity regarding the diversion of tobacco products or cigarette papers or tubes outside the legal distribution chain, please contact the TTB Intelligence Division.

Diversion includes, for example, tax evasion, theft, distribution of counterfeit products, and distribution in the United States of products marked for export or for use outside the U.S. Diversion may also include Internet sales of tobacco products not in compliance with Federal, State, or local laws.

For information on the Federal laws that apply to the unlawful transportation, shipment, or sale of cigarettes and other tobacco products, please refer to Industry Circular 99-2, or contact the Intelligence Division.

The Intelligence Division can be reached by:

Phone: 1-202-453-2173.

E-mail: ttbtobacco@ttb.gov

Mail:
Alcohol and Tobacco Tax and Trade Bureau
Attn: Intelligence Division, Room 200-W
1310 G Street, NW., Box 12
Washington, DC 20005

If you suspect illegal sales of cigarettes, such as sales to or by minors, or if you wish to report smoking in establishments that have State or local laws against such activities, please contact the appropriate State or local agency. These issues are NOT regulated by TTB.

Contact a Tobacco Industry Expert

Tobacco Section, Intelligence Division
Phone: 202-453-2045

General questions

Before submitting a question or concern, please visit our Frequently Asked Questions.

Tobacco Permits Applications and Taxes

If you have questions regarding permits, applications, bonds, tax payments, etc., you may contact the National Revenue Center.

• Online Form: Submit Inquiry
• Phone: 877-882-3277 (Toll Free)
  
  
• Mail:     TTB National Revenue Center
               550 Main Street, Room 8002
               Cincinnati OH 45202

Tobacco Export Warehouse

The law requires that everyone who intends to engage in tobacco export operations obtain a permit from TTB. Wondering how to get started as a tobacco export warehouse? Visit our industry startup guide: Getting Started in TTB-Regulated Industry. Have a permit to operate in the tobacco industry and looking for next steps? See our industry compliance guide: Maintaining Compliance in a TTB-Regulated Business.

Getting Started

To apply for a permit, you must submit an application and the required documentation. We encourage you to use Permits Online to file your original and amended applications with us for FREE! With Permits Online, we can process your application more quickly. Avoid delay in processing your applications by seeing our permit application Q&As about frequently overlooked items.

Read the brief introductory information letter before submitting your application. This letter describes TTB’s requirements to manufacture tobacco products and provides a printable checklist so you can track the steps of the application process as they are completed.

Key Tobacco Manufacturer Topics

	Types of Permits Packets for manufacturers of tobacco products and processed tobacco. You can apply online!		Tobacco Laws and Regulations Public guidance including FAQs, procedures, rulings and industry circulars
	Requirements for Manufacturers Information explaining the requirements you must meet to maintain your business		Bonds and Consents of Surety Bond forms, approved surety companies, purchasing a security for a collateral bond
	Taxes Tax rates and due dates, Pay.gov and help with filing and preparing excise tax returns		Submission of Tobacco Samples How and where to send your tobacco samples, and TTB’s Methods and procedures

Top Questions about the Tobacco Industry

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