The federal Alcohol, Tobacco Tax and Trade Bureau (TTB) has issued a guidance document on how the agency will enforce the recently enacted law classifying operators of cigarette roll-your-own machines as cigarette manufacturers. A "guidance" document is a written statement as to how the TTB intends to interpret and enforce a particular federal law.
In the recently released guidance document titled "Cigarette-Making Machines and Other Tobacco Product Machines Made Available for Use by Consumers," the TTB states the following:
- The person who makes a machine available for consumer use is the person liable for the federal excise tax on the tobacco products produced.
- A common business affected by the new federal law is the retailer who makes cigarette-making machines available for the use of its customers.
- A person who sells a machine directly to a consumer at retail for a consumer's personal home use is not making the machine available for commercial purposes and, therefore not a cigarette manufacturer, if the machine is not used at a retail location and the machine is designed to produce tobacco products only in personal use quantities.
- A person who does make available a roll-your-own machine to consumers for the purpose of manufacturing cigarettes will need to obtain a TTB permit to act as a cigarette manufacturer, file federal excise tax returns and pay the applicable excise taxes, pay a special occupational tax, obtain a bond and comply with the federal recordkeeping, reporting and inventory requirements.
In addition, the guidance document also makes reference to the change in federal law applying to those persons who have formed "nonprofit" membership clubs in an attempt to avoid paying the federal excise tax and complying with the permitting, bonding, recordkeeping, reporting and inventory requirements. The guidance document states that "Based on TTB's current understanding of these scenarios and the applicable law, it is extremely unlikely that TTB will conclude that these [nonprofit] organizations are exempt from excise tax liability and associated IRC [Internal Revenue Code] obligations.
A copy of the TTB Guidance document accompanies this article.
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