Often, Other Tobacco Products (“OTP”) Distributors “know” that OTP tax must be paid on all OTP products. How do they “know” that their OTP products are taxable? OTP Distributors “know” this because of either a habitual business practice, a state agency told them that their OTP product is taxable, or a tax professional said the OTP product is taxable. Regardless, you may be one of the many OTP wholesalers overpaying on OTP tax for your tobacco purchases.
Micjo v. DBPR changed the tobacco taxing landscape when a Florida court ruled that many wholesale tobacco taxing statute only require that tobacco be paid on simply the tobacco itself. This would then mean that federal excise tax and shipping costs are excluded from the tobacco tax on the wholesale sales price. Further cases have even expanded that it does not matter if federal excise tax is separately stated on the invoice or not, it is still not taxable.
Despite many New Hampshire OTP wholesalers “knowing” that New Hampshire’s OTP tax application is an issue, not many have New Hampshire OTP wholesalers have taken any action against this issue. Under New Hampshire law, section 78:7-c, New Hampshire Statutes, states that OTP tax is imposed on “tobacco products other than cigarettes at a rate of 65.03 percent of the wholesale sales price.” If a tobacco tax distributor is buying OTP products from another OTP distributor and not directly from a manufacturer, then it is very likely that you are overpaying tobacco tax on the distributer’s mark-up.
In fact, some OTP manufacturers make things much easier on the tobacco distributor by listing the sales price to their tobacco distributers. A tobacco distributer would then simply apply for a refund – and have some “fun” conversations with the state – and hopefully have the overpayment refund.
If the OTP manufacturer’s price is not provided on the invoice, however, most OTP distributors “know” that it is a burdensome task to provide the manufacturer’s price. A New York case has in fact established that the OTP manufacturer markup was significant and tens of millions of dollars were refunded back to New York taxpayers as a result.
Since New Hampshire has a similar law, OTP wholesalers may benefit from a similar theory. Tobacco Tax Refund has the information to assist. It is as simple as giving us a call. We will then file your refund, communicate with the appropriate taxing agency, and work with opposing counsel, if necessary, to litigate the case so you can receive money back. To make things easier for our clients, we take refund cases on contingency, so the risk is on us!
In addition, if you are located in Alaska, Colorado, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Mississippi, Montana, North Dakota, New Jersey, South Dakota, Utah, Virginia or other states with similar laws then you might have a refund based on our theory and proprietary information. Give us a call to get started today!
In his law practice 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 obtained his LL.M. in Taxation at NYU. Mr. Donnini is licensed to practice law in Florida. If you have any questions please do not hesitate to contact him via email [email protected] or phone at 954-639-4496.