FLORIDA TOBACCO WHOLESALER UPDATE – DBPR DECLARES WRAPS NOT TAXBALE
Following the Brandy’s decision on April 6, 2016, the taxing agency, Department of Business & Professional Regulation, Division of Alcoholic Beverages & Tobacco (DABT) admitted defeat on the issue of blunt wraps taxability. Specifically, DABT stated in a memo on April 11, 2016 that homogenized tobacco wrap products are not taxable.
The Division appeared to draw a distinction between the homogenized wrap product and the whole leaf tobacco product. However, the opinion issued in the first DCA does not seem to show such a distinction. In fact, the court opinion focused on whether the tobacco was “loose” or whether it a uniform, cohesive product, cut to a predetermined shape.
Under Florida law, in order for Florida wholesale tax to apply to the wrap product, the wrap must be a “tobacco product” under Florida law. A tobacco product for tax purposes is defined as:
[L]oose tobacco suitable for smoking; snuff; snuff flour; cavendish; plug and twist tobacco; fine cuts and other chewing tobaccos; shorts; refuse scraps; clippings, cuttings, and sweepings of tobacco, and other kinds and forms of tobacco prepared in such manner as to be suitable for chewing; but "tobacco products" does not include cigarettes, as defined by s. 210.01(1), or cigars.
It does not seem to matter whether the wrap is made of paper or tobacco, contrary to the Department’s memo.
DABT also went on to state that any assessment will be dismissed. Interestingly, the Department did not appear to comment on any outstanding refund cases. However, it would appear that the Department has little choice but to also pay refunds to those who mistakenly paid Florida tax on the products.
It will be interesting to see the Department’s course of action going forward. More importantly for those who have paid tax on this product, they should likely file refunds to protect their rights whether they are distributing the homogenized or whole leaf product. I will do my best to keep the industry apprised as this issue unfolds.
About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini earned an LL.M. in Taxation at NYU. You can read more about Mr. Donnini in his firm BIO HERE.
AUTHORITY
DBPR ABT – No Tax on Blunt Wraps Memo – dated 4-11-16
ADDITIONAL RESOURCES
FLORIDA DBPR ABT LOSES BLUNT WRAPS TAXABILITY CASE, published March 15, 2015, by Jerry Donnini, Esq.
FLORIDA ABT PUSHES TO AMEND FLORIDA WHOLESALE TOBACCO TAX LAW, published May 5, 2015, by Jerry Donnini, Esq.
FL LITIGATION UPDATE – BLUNT WRAPS NOT TAXABLE IN FLORIDA, published April 8, 2016, by Jerry Donnini, Esq.
READ MORE ARTICLES ON FLORIDA ALCOHOL BEVERAGE AND TOBACCO TAXES BY CLICKING HERE!