Assembly Bill 1749 (Statutes 2006, Chapter 501) Cigarette & Tobacco Products – Frequently Asked Questions (FAQs)Open All Close All
License Required for Manufacturers and Importers of Tobacco Products
AB 1749 was signed into law September 27, 2006 and is comprised of several provisions affecting both the Business and Professions Code and the Revenue and Taxation Code. In general, it requires manufacturers and importers of tobacco products to comply with the invoicing and recordkeeping requirements currently applicable to manufacturers and importers of cigarettes under the Cigarette and Tobacco Products Licensing Act of 2003 (AB 71).
AB 1749 is effective January 1, 2007, but some of its provisions are not operative until May 1, 2007.
Among other things, AB 1749
- Requires manufacturers or importers of tobacco products who wish to sell in California to obtain and maintain a license under the Cigarette and Tobacco Products Licensing Act of 2003.
- Defines an importer as someone who buys cigarettes or tobacco products outside of the United States with the intent to distribute or resell for the first time in United States.
- Requires licensed manufacturers and importers to file monthly report with the Department. At a minimum, the report is required to include (1) a list of all licensed distributors that received the manufacturer's or importer's tobacco products, and (2) the products total wholesale cost.
- Prohibits a retailer or wholesaler from purchasing cigarettes or tobacco products from any manufacturer or importer; makes tobacco products manufacturer and importer prohibitions consistent with cigarette manufacturers and importers.
- Allows additional stamp payment deferral options for cigarette distributors.
- Increases the penalties for counterfeiting stamps, possessing for sale any package of cigarettes without a stamp, and transporting cigarettes or tobacco products into California without a permit.
Manufacturers or importers of tobacco products, such as all forms of cigars, chewing tobacco and snuff, as well as other products containing at least 50 percent tobacco and licensed distributors, wholesalers and retailers in California. Also, any cigarette distributor who desires to defer payments for stamps or meter register settings.
AB 1749 is effective January 1, 2007. However, the licensing provision for manufacturers and importers of tobacco products is not operative until May 1, 2007.
The law requires manufacturers or importers of tobacco products to obtain and maintain a license under the Licensing Act of 2003 (AB 71) to engage in the sale of tobacco products. In order to be eligible for obtaining and maintaining a license, a manufacturer or importer is required to do all of the following in the manner specified by the California Department of Tax and Fee Administration (CDTFA):
- Submit to the Department a list of all tobacco products they manufacture or import.
- Update the list of all tobacco products they manufacture or import whenever a new or additional product is manufactured or imported or a listed product is no longer manufactured or imported.
- Consent to jurisdiction of the California courts for the purpose of enforcement of this division and appoint a registered agent for service of process in this state and identify the registered agent to the Department.
- Require manufacturers or importers of tobacco products holding a license to file a monthly report with the Department, in a manner specified by the Department, which may be, but not limited to, electronic media.
Yes, a manufacturer or importer of chewing tobacco or snuff is required to submit an application with a one-time license fee of ten thousand dollars ($10,000). A manufacturer or importer of tobacco products, excluding chewing tobacco or snuff, is required to submit an application with a one-time license fee of two thousand dollars ($2,000). However, the one-time license fee for a manufacturer or importer of tobacco products is limited to ten thousand dollars ($10,000).
Manufacturers and importers of tobacco products will need to register online to apply for a Manufacturer/Importer Tobacco Products License, along with the applicable fee in order to obtain a license. In addition, as a manufacturer and/or importer you are required to file monthly reports with us. The reports are required to include:
- A list of all licensed distributors that received the manufacturer's or importer's tobacco products.
- The total wholesale cost of the products.
- Other information as requested by the Department.
- Manufacturers and importers of tobacco products will be subject to the same invoicing and record-keeping requirements, and penalty provisions for violations of the licensing Act as manufacturers and importers of cigarettes, as provided in existing law.
Visit the Online Services page, if you need to register for a Manufacturer/Importer Tobacco Product License.
Deferral Payment Options for Cigarette Distributors
AB 1749 allows for two additional deferral alternatives for a cigarette distributor that desires to defer payments for stamps or meter register settings purchases.
Payment Option I: Allows that no security be required for a distributor that desires to defer payments for stamps or meter register settings purchases, if the distributor's average monthly purchase of stamps for the previous 12 months does not exceed seventy-two thousand (72,000) stamps or meter register settings, and the distributor meets all of the following:
- The distributor has been licensed under this part for a minimum of five years;
- The distributor has not been delinquent in the filing of any reports or returns required under this part for the preceding three consecutive years;
- The distributor has not been delinquent in the payment of any tax under the Cigarette and Tobacco Products Tax Law, or for any other tax or fee administered or collected by the Department, for the preceding three consecutive years;
- The distributor provides to the Department and updates, as necessary, an electronic mail address for the purpose of receiving payment information, including, but not limited to, amounts owing for stamps and meter register settings purchased;
- Amounts owing for stamps purchased on the deferred-payment basis without a security are due and payable on or before Wednesday following the week in which the stamps were purchased.
- Any other criteria the Department may require.
Payment Option II: This bill reduces the security provided by a distributor desiring to defer payments for tax stamps to equal to not less than 25 percent of the amount and no more than twice the amount, as fixed by the Department, if that distributor elects to make payments on a weekly basis.
If that distributor elects to make payments on a weekly basis, the distributor will be:
- Required to remit the payment on or before Wednesday following the week in which the stamps and meter register settings were purchased.
- Every distributor electing to make payment on a weekly basis will be required to provide to the Department and update, as necessary, an electronic mail address for the purpose of receiving payment information, including, but not limited to, amounts owing for stamps and meter register settings purchased.
No security will be required for the purchases of tax stamps on deferred credit under payment option I. Distributors will not have expenditures in bond premiums or tie up additional cash in security deposits.
Distributors electing to make payments on a weekly basis are only required to post security on 25 percent of the deferred monthly stamp purchases.
- Cash Deposits
- Deposit accounts in banks, savings banks, and savings and loans including Insured Accounts, Fully Paid Investment, Bonus Investment Certificates and accumulative Investment Certificates
- State and Federal Credit Union Shares
- Surety Bonds
To apply for the deferral payment alternatives, you must complete and submit form CDTFA-356, Cigarette Distributor's Election to Defer Payment. You may click on this link to download this form from our website, or contact the Cigarette Stamp Desk to have it mailed. Please note, you can only apply for one option and upon approval by the Department, you will be required to remain in the authorized option for at least one year from the date the election is made.
Upon receipt and review of your application and required security, the Department will notify you in writing if you are qualified to participate in the deferral payment program.
What happens if a distributor fails to promptly pay for purchases of cigarette tax stamps on the deferred basis?
If a distributor fails to pay when payment is due, the Department is authorized to suspend a distributor's privilege to purchase tax stamps on credit. The Department may also pursue the distributor's security deposit.
If you have additional questions regarding the licensing and recordkeeping requirements, or the Cigarette and Tobacco Products Tax Law, please contact:
Special Taxes and Fees MIC 88
California Department of Tax and Fee Administration
450 N Street
PO Box 942879
Sacramento, CA 94279-7077
Staff is available to help you weekdays from 8:00 a.m. to 5:00 p.m., except State holidays, or you may write to the California Department of Tax and Fee Administration, Special Taxes and Fees, P.O. Box 948279, Sacramento, California, 94279-0088.
You may also e-mail your non-confidential tax questions to the Department.