Regulations of electronic cigarettes are expected to be a top priority for states and cities in 2014. But some of the new laws being considered bans on use in public places like restaurants and bars, and high sin taxes are based on the assumption that electronic cigarettes, battery powered devices that produce a nicotine vapor, are exactly like the real thing. If it looks like a duck and quacks like a duck, the thinking goes, it must be a duck.
But it isn’t that simple, say e cigarette makers, and if policy makers overreach, they ll face a fight with e cigarette smokers and manufacturers who say it’s irrational to treat electronic cigarettes like regular cigarettes, and that the laws, which might dissuade smokers from switching to a safer product, may even be bad for public health.
I m looking forward to federal regulation. But each state doing its own thing in absence of a federal framework, I think is a mistake, says Miguel Martin, the president of LOGIC Technology, an electronic cigarette maker in New Jersey.
It seems like every week another city or state has a new electronic cigarette rule under consideration. Utah, North Dakota and New Jersey ban using electronic cigarettes in public places like bars and restaurants. New York City, Chicago and Los Angeles are considering similar bans. Maryland s Prince George s county, a suburb of Washington, has agreed to hold off on a ban pending the results of a study on the risks. Proponents of such bans say second hand vapor might be harmful and that electronic cigarettes glamorize smoking at a time when anti smoking advocates have largely succeeded in stigmatizing it.
Minnesota is the only state that taxes electronic cigarettes (at 95% of their wholesale price), but industry insiders say they expect electronic cigarette taxes to proliferate in 2014. Utah, Oklahoma, and Hawaii have tried and failed to impose taxes on electronic cigarettes. Lawmakers in South Carolina and Oregon have also considered electronic cigarette taxes, making them likely candidates to continue the debate next year.
The flurry of state regulation has started without any guidance from the federal government the FDA, which missed a deadline to start the regulatory process in October, says it will announce its intention to regulate electronic cigarettes as a tobacco product in December, kicking off a regulatory process that will take months.
E cigarette makers say the patchwork of state laws without a federal framework will result in an unintelligent approach to electronic cigarettes that could lead to unintended consequences.
LOGIC’s Martin, a former executive for tobacco giant Phillip Morris, says that absent federal regulation, state taxes would punish retailers who check ID and create incentives for people to buy electronic cigarettes over the Internet, where ID isn t as easily verified. LOGIC prohibits sales to customers under 18. There s a knee jerk reaction to tax. It has cigarette in the name, ‘I don t know what the thing is, let s treat it like a cigarette.’ What if science turns out to show that there s a health benefit to using e cigarettes over cigarettes and you have a financial disincentive to use them? he says.
Craig Weiss, the CEO of the Arizona based manufacturer NJOY, agrees. If you make it just as inconvenient and expensive to smoke an electronic cigarette as a Marlboro, people are going to keep smoking Marlboros. Is that really the unintended consequence they want? To keep them smoking? Because that is what they are doing and we know the consequence of that is people are going to die a painful and early death.
In response, some advocates of regulation in the public health community say it doesn t make sense to subject non smokers to any kind of fine particle pollution, even though there is wide agreement that e cigarettes are much less toxic than traditional cigarettes.
Stanton Glantz, a professor at the University of California San Francisco medical school and a leading expert on the effects of secondhand tobacco smoke, says electronic cigarette vapor still emits harmful fine particles in the air. “If you look at absolute levels of risk of electronic cigarettes , they are pretty bad, because a cigarette is just ridiculously toxic and ridiculously polluting,” he said in a September TIME story. “If you go into a bar or casino where there is a lot of smoking, the only way to get the air that polluted outdoors is to be downwind from a large forest fire. If you say an electronic cigarette is only 10% to 20% less polluting than a massive forest fire, that’s not so good.”
State and city regulations are likely to see major push back from the electronic cigarette industry and e cigarette smokers, many of whom believe that electronic cigarettes have helped them quit smoking. If states get this wrong, if they incorrectly tax electronic cigarettes, you are going to see a lot of litigation from e cigarette companies, says Christian Berkey, CEO and founder of Johnson Creek in Wisconsin, the largest producer of the liquid used in electronic cigarettes. Berkey says that electronic cigarettes have not produced any proven public health costs that justify taxing them the way regular cigarettes are taxed.
States are also likely to face challenges from grassroots protesters and some members of the public health community who ve become excited about the prospect that electronic cigarettes could provide safer alternative to smoking that is actually popular with smokers. Roughly 1,000 people protested at the Hawaii legislature when it considered a tax on electronic cigarettes in 2012, a measure that eventually failed. And electronic cigarette smokers many of whom call themselves vapers puffed on their electronic cigarettes at a New York City council hearing to protest a public use ban in December. In a recent op ed in the New York Times cautioning against over regulation of electronic cigarettes, professors Amy Fairchild and James Colgrove of Columbia s Mailman School of Public health wrote If e cigarettes can reduce, even slightly, the blight of six million tobacco related deaths a year, trying to force them out of sight is counterproductive.
Cigarette tax common questions – wisconsin department of revenue
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- When the cigarette tax rate increases, an inventory tax is charged to all permittees and retailers who possess stamped cigarettes held for resale on which the cigarette tax was paid at the prior rate and upon unaffixed stamps in the possession of distributors.
- The inventory tax is the amount by which the cigarette tax rate increases.
- The inventory tax return is due 30 days after the effective date of the tax increase.
Yes. If you file your return late, you will be charged
- Late filing fee $10
- Delinquent interest 1.5% of the amount of tax due per month
- Penalty a false or fraudulent return may be charged equal to the tax that the person evaded or attempted to evade sec. 139.315, Wis. Stats. .
Yes. If you handle cigarettes at the wholesale level in Wisconsin, you must have a cigarette permit issued by the Department of Revenue (DOR). If you apply for a cigarette permit, you must hold a Business Tax Registration (BTR) Certificate sec. 73.03(50), Wis. Stats. .
- To apply for a BTR Certificate and a cigarette permit call the Excise Tax Unit at (608) 266 6701 or email excise
- There is a $20 registration fee for the BTR Certificate.
- The certificate is renewable every two years for $10.
Note The BTR certificate and cigarette permits are valid until canceled by the permittee or until revoked by DOR. You only need one BTR certificate regardless of the number of permits or licenses you hold with DOR.
DOR issues these wholesale cigarette permits
Types of Wholesale Permits/(Account Prefix) Statute Fee Term of Permit Wisconsin distributor (400) sec. 139.34 none 2 years Wisconsin jobber (401) sec. 139.34 none 2 years Wisconsin multiple retailer (402) sec. 139.34 none 2 years Wisconsin vendor (403) sec. 139.34 none 2 years Wisconsin cigarette warehouse (404) sec. 139.34 none 2 years Out of state distributor (407) sec. 139.34 none 2 years Out of state jobber (408) sec. 139.34 none 2 years Out of state multiple retailer (409) sec. 139.34 none 2 years Out of state vendor (410) sec. 139.34 none 2 years Manufacturer (412) sec. 139.34 none 2 years Importer (413) sec. 139.34 none 2 years Wisconsin and out of state cigarette salespersons sec. 139.37 none 2 years
If you are a permittee or retailer and purchased cigarettes from sources that do not hold a permit with DOR, our Alcohol and Tobacco Enforcement Unit may confiscate the cigarettes secs. 139.321(2) and 139.40, Wis. Stats. .
- Security required
- Security is required (e.g., cash, bond) from cigarette distributors who do not file their monthly returns and/or do not pay the cigarette tax due in a timely manner.
- The Secretary of Revenue will determine the amount of security required sec. 139.322, Wis. Stats. .
Cigarette distributors must pay the cigarette tax. They are required to purchase tax stamps from DOR and apply a stamp to each pack of cigarettes.
How to purchase cigarette tax stamps
A cigarette distributor can purchase stamps on credit or COD. To purchase stamps on credit a distributor must have enough security on file to cover their stamp purchase amount and must submit payment along with their monthly cigarette tax returns on or before the 15th day after the month they receive the stamps. A cigarette distributor who purchases stamps on COD must pay for the stamps prior to being issued the stamps by DOR.
Discount plus printing and Shipping Charges sec. 139.32, Wis. Stats.
- As a distributor, you receive a 0.7% tax discount when you purchase stamps to help offset the costs you incur when you apply the stamps to packs of cigarettes sec. 139.32(5), Wis. Stats. .
- As a distributor, you are responsible for the costs associated with printing and shipping the stamps sec. 139.32(5m), Wis. Stats. .
- If you have questions about stamps, call (608) 266 3282.
- NOTE You cannot order cigarette stamps by phone.
Cigarette use tax secs. 139.321 and 139.33, Wis. Stats.
- Only cigarette distributors licensed by DOR, are allowed to bring cigarettes into Wisconsin when the Wisconsin cigarette tax has not been paid.
- To show the tax was paid, a distributor must apply the cigarette tax stamp to all packs of cigarettes to be sold in Wisconsin.
- Cigarettes brought into Wisconsin that are not stamped with a Wisconsin cigarette tax stamp (this includes cigarettes stamped with another state’s tax stamp) are untaxed cigarettes.
Persons other than cigarette distributors who bring untaxed cigarettes into Wisconsin (this includes cigarettes stamped with another state’s tax stamp) must pay a use tax on the cigarettes.
- These persons must contact the Department of Revenue in writing within 15 days of bringing in untaxed cigarettes declaring the number of cigarettes brought in and remitting the use tax due (see Form CT 121s).
- The use tax rate is the same rate as the Wisconsin cigarette tax (see question #4).
- If the use tax is not paid when due, we charge delinquent interest of 1.5% of the amount of use tax due per month. We may also charge a penalty of $25 per each 200 cigarettes (1 carton).
- A Wisconsin Combined Cigarette Use Tax and Sales and Use Return, Form CT 121s may be printed from our website.
Note
- Members of the Armed Forces of the United States are not required to report and pay the use tax on cigarettes issued to them by the federal government or purchased in any Armed Forces Post Exchange or service store.
- Cigarettes sold to state or federally operated veterans’ hospitals are also not subject to the use tax.
You must pay your taxes by electronic funds transfer (EFT) if your liability was more than $1,000 in the previous calendar year. For more information, visit the Electronic Funds Transfer page or call (608) 264 9918.
Your tax liability is determined and paid based on one of the following returns sec. 139.38, Wis. Stats. .
There are three types of cigarette tax returns
- Wisconsin Distributor’s Cigarette Tax Return, Form CT 100.
- Wisconsin Distributor’s Cigarette Tax Return Out of State Permittees, Form CT 105.
- Quarterly Report of Wisconsin Tax Paid Cigarettes Purchased, Form CT 114 (informational report, no tax due).
If you did not receive all of the cigarette stamps ordered, report your order as invoiced by the Department of Revenue (DOR) on Form CT 104, Monthly Schedule of Purchases and Ending Inventory of Unaffixed Wisconsin Cigarette Stamps, and
- Report the purchase on lines 2 18.
- Complete an affidavit for the missing stamps and obtain witness signatures.
- Attach affidavit to Form CT 104.
- Deduct the lost, stolen, or missing cigarette stamps on line 21 of Form CT 104.
As a distributor, you are liable for the cigarette tax on lost, stolen, or missing stamps. If you find errors with your order, you should
- Call the Wisconsin Department of Revenue immediately with any discrepancy you find in your stamp order. Contact us at (608) 266 6701.
- If the carrier doesn’t have documentation on the order weight, weigh the order when you receive it, and note any dis
crepancies, visual defects, etc. - Keep all packaging and make sure the order is untouched until you are notified that DOR released it.
- Take photos and document the names of all personnel who had contact with the stamp order from the time you received the order.
If you received more cigarette stamps than you ordered, contact DOR at (608) 266 6701 for further instructions.
- How do I file my cigarette return?
You are required to file all cigarette tax reports and returns electronically. For more information, visit our cigarettes and tobacco products web page at
- What should I do if filing electronically causes a hardship?
If you feel filing electronically causes you a hardship, you must request a waiver. If the Secretary of Revenue determines the requirement causes a hardship, the Secretary may waive your requirement to file electronically.
To request a waiver, you must
- Request the waiver in writing. Mail your written request to
Mandate Waiver Request 5 77
Wisconsin Department of Revenue
PO Box 8949
Madison, Wisconsin - Clearly state why the requirement causes a hardship.
- The Secretary of Revenue may consider the following factors when deciding if this requirement causes a hardship
- An unusual circumstance that may prevent you from filing electronically.
Example You do not have access to a computer connected to the internet. - Any other factor the Secretary determines is relevant.
- An unusual circumstance that may prevent you from filing electronically.
- If you have any questions, contact us at (608) 266 6701.
- Request the waiver in writing. Mail your written request to
- When are cigarette returns due?
All cigarette returns are due by the 15th day of the month following the period covered by the return sec. 139.38(2), Wis. Stats. . Example a return for October is due November 15.
If a return is filed late, you will be charged
- A $10 late filing fee sec. 139.38(5), Wis. Stats. .
- A 5 to 25% late return penalty.
- Are any cigarettes exempt from the cigarette tax?
Yes. The following are exempt from the Wisconsin cigarette tax sec. 139.31(3), Wis. Stats.
- Cigarettes shipped by interstate commerce to customers in other states for sale outside Wisconsin.
- Cigarettes sold to the Armed Forces (e.g., Fort McCoy, Coast Guard stations, etc.) or state or federally operated veterans’ hospitals.
- Cigarettes sold to interstate carriers of passengers for hire to be resold to bona fide passengers being transported.
- Is an excise tax imposed on electronic cigarettes (E Cigarettes) in Wisconsin?
No, electronic cigarettes (E Cigarettes) and other accessories (e.g. lighters, pipes, pipe cleaners, tubes, etc.) that do not include tobacco do not fall under Wisconsin’s cigarette or tobacco product tax statutes and therefore are not subject to Wisconsin excise tax or permits requirements.
Note 2011 Wis. Act 249 prohibits the trafficking in “nicotine products” to persons under 18 years of age. Per s. 134.66(1)(f)3, this would include “electronic” cigarettes since they contain nicotine.
- Will the Wisconsin Department of Revenue (DOR) refund any cigarette taxes I paid?
Yes, there are situations where a distributor or a Native American Tribe may be entitled to a refund
- Distributor Refunds sec. 139.36, Wis. Stats.
Licensed cigarette distributors may file Form CT 624 to obtain the following refunds- Unsalable cigarettes If you are a cigarette distributor and return packs of unsalable cigarettes to the manufacturer, you can receive a refund of the Wisconsin stamps tax you paid for the Wisconsin stamps affixed to those packs. You must complete a Wisconsin Form CT 624 and include verification from the manufacturer of the returned cigarettes.
- Unaffixed stamps We do not issue refunds to distributors who have ordered too many stamps in error for their use. However, a distributor may be entitled to a refund of the tax paid.
- For Wisconsin stamps not affixed to packs of cigarettes which are returned to the Department of Revenue (DOR) if the distributor is selling or closing their business.
- For tribal stamps not affixed to packs of cigarettes which are returned to DOR by a distributor who no longer sells cigarettes to Native American tribes.
- Native American Tribal Refunds
If your Tribe entered into agreements with the State of Wisconsin, your tribe is eligible for two differnt types of refunds- 30% refund the tribal council can receive a 30% refund of the cigarette tax paid for cigarettes sold by authorized retailers to enrolled tribal members living on the reservation or trust land over which the tribe has jurisdiction. The land must have been designated a reservation or trust land on or before January 1, 1983, or on a later date as determined by an agreement between DOR and the tribal council. The tribe must send the refund claim to DOR at the end of each quarter sec. 139.325, Wis. Stats., and sec. Tax 9.08, Wis. Admin. Code .
- 70% refund the tribal council can receive a 70% refund of the cigarette tax paid on cigarettes, sold by authorized retailers on reservation or trust land, over which your tribe has jurisdiction. The land must have been designated a reservation or trust land on or before January 1, 1983, or on a later date as determined by an agreement between DOR and the tribal council. A tribe may file no more than two refund claims (Form CT 001) within a calendar month sec. 139.323, Wis. Stats., and sec. Tax 9.08, Wis. Adm. Code .
- Distributor Refunds sec. 139.36, Wis. Stats.
- How do I correct a cigarette return that I already filed?
- You must electronically file an amended return. You are required to electronically file all cigarette tax reports, returns and amended returns, with the Department of Revenue (see question #10).
- If you are filing an amended cigarette tax return, you must file a true, corrected and complete return. The amended return must include all previously reported unchanged transactions as well as the corrected information.
- Do not file a return that only reports the changes.
- If I file an incorrect cigarette return, will I have to pay interest or penalties?
Yes. If you file an incorrect cigarette tax return, you will
- Be charged 12% interest per year on any additional taxes due sec. 139.44(9), Wis. Stats. .
- Be charged a 25% negligence penalty on any additional tax due if DOR can show negligence in the filing of the original return sec. 139.44(9), Wis. Stats. .
- Receive 3% interest per year on any refund issued sec. 139.44(9), Wis. Stats. .
- Should I notify the Department of Revenue (DOR) if the business changes its name, address, or ownership or if the business no longer operates in Wisconsin?
Yes. You must notify DOR immediately when your business has any change to its name, address, or ownership or when the business stops operating in Wisconsin.
- You must inform us in writing of any changes. You may do this by letter, email or by attaching a note to your return.
- If your name or ownership changes and you receive a new Federal Employer Identification Number (FEIN), you must cancel your current permit/license and file an application for a new permit/license with DOR. You will also be required to update your security with DOR.
- When you cease operations, you must file a cigarette return for the last period of operations even if you were in business only a few days during that period. You must continue to file a report until you have completely depleted your i
nventories of cigarettes and/or stamps. - If you have any questions about your cigarette tax permit, contact us at (608) 266 6701.
- What records should I keep for Wisconsin tax purposes, and how long should I keep them?
- You must keep a complete copy of your cigarette returns and business records for at least five years so DOR employees can verify your tax liabilities and your compliance with Master Settlement Agreement (MSA) requirements secs. 139.38(1), 139.39(6), and 995.12, Wis. Stats. .
- Required records include, but are not limited to purchase and sales receipts (whether taxable or exempt), and inventory, distribution, and product consumption records.
- You must maintain organized records in a format and place available for review by DOR during reasonable hours, including all business hours.
- If you do not maintain adequately your records, all the products you purchase or receive are subject to tax without benefit of any deductions.
- How can I get additional information or forms about the cigarette tax?