The Utah State Tax Commission lays down several rules and regulations for licensed retailers or distributors selling tobacco, electronic, and nicotine products. One of the key laws a retailer has to keep in mind is the licensing and tax laws right to avoid costly operational and compliance implications.
1. Licensing Fee
A seller is required to fulfill four steps:
- Business registration with the Utah Department of Commerce
- Licensing from the Tax Commission to allow the seller to advertise, display, and sell cigarettes, tobacco, nicotine, and electronic products
- Have a tobacco permit
Note: The seller will pay a one-time permit fee of $30, which will be renewed every three years for a fee of $20 for dealing in cigarette and tobacco products. If the permit has reached expiry, is revoked, or is suspended, there is a $30 fee for permit reinstatement.
The Utah Code 59-14-202 provides information on tobacco licensing in the state.
2. Utah Tobacco Taxes
The Utah State Tax Commission also administers the collection and remittance of taxes on tobacco-related products. Tobacco taxes can be considered a lucrative revenue source across all state and local governments after they accounted for $19 billion in 2019, of which 98% of the revenue was from state taxes.
In general, states apply varying rates on cigarettes, tobacco, electronic, and nicotine products. Utah ranks as the 21st state in terms of cigarette tax rates. The following is a breakdown of all tobacco-related products and the taxes imposed.
Cigarettes: Retailers, wholesalers, and distributors are required to stamp each pack of cigarettes before sale upon receiving them. The cigarette tax is $1.70 per 20-pack, while a 25-pack costs $2.125. NPM cigarettes are also subject to an additional $0.35 per 20-pack, adding to a total of $2.05 per pack. A 25-pack also costs another $0.4375 per pack, totaling $2.5625 per pack.
Rolling Machine Cigarettes: They are also taxed similarly to cigarettes at $1.70 per 20-pack
Little Cigars: The tax rate for little cigars is 8.5 cents for each little cigar.
E-cigarettes: E-cigarette substances or products attract a 56% tax rate on the manufacturer's sales price (MSP), which is filed through an E-filling.
Snuff: Snuff is taxed in moist or dry form. Moist snuff is taxed at $1.83 per ounce, while dry snuff is 86% of the manufacturer's list price (MLP).
Nicotine Products: The importation of nicotine products into Utah attracts taxes when first received in the state. The tax rate for prefilled non-therapeutic nicotine devices and non-therapeutic nicotine device substances is 56% of the manufacturer's sales price (MSP). In comparison, the tax rate for alternative nicotine products is $1.83 per ounce.
Other Tobacco Products (OTP): This includes products containing tobacco such as roll your own (RYO) tobacco, pipe tobacco, and cigars. They are taxed at 86% of the MSP.
3. Tobacco Tax Bond
As of July 1, 2021, an individual is required by the Utah State Tax Commission to pay a surety bond in compliance with Utah Code Title 59, Chapter 14. The surety bond acts as security for payment of taxes, penalties, or interests on tobacco and cigarettes. The bond rules apply to retailers, stampers, and distributors doing tobacco-related businesses in Utah.
The requirements are:
- Retailers: A retailer is required to pay a bond of a minimum of $500 for the purchase of untaxed nicotine products, prefilled e-cigarettes, or e-cigarette substances, plus a cigarette stamper bond and distributor bond where applicable.
- Cigarette stampers: They must pay a bond of at least $500 plus the distributor bond if it applies.
- Distributors: A distributor dealing in e-cigarette substances, prefilled e-cigarettes, nicotine products, and tobacco products is required to post a bond of a minimum of $500 or an amount equivalent to a three-month tax filing period. This also includes payment of the cigarette bond where applicable. The distributor could also end up paying a higher bond if they're flagged down for not sufficiently meeting their tax duties.
Conclusion
Tapping into Utah's market offers a promise of improved profitability and revenue for your tobacco business, provided you follow the tobacco laws to the latter. This includes the licensing, registration, and tax obligations that the Tax Commission expects of anyone doing business in the state.
Tobacco Tax Refund Inc. is a trusted advisor in all matters to do with tobacco-related business activities, including in the state of Utah. Go ahead and get in touch with our tax experts anytime.