Tax Guide for
Cigarettes and Tobacco Products

Tax Guide for Cigarettes and Tobacco Products

New Information

  • Senate Bill (SB) 395 (Stats. 2021, Ch. 489) enacted the Healthy Outcomes and Prevention Education (HOPE) Act, which imposes the California Electronic Cigarette Excise Tax (CECET). Beginning July 1, 2022, if you are a retailer of electronic cigarettes containing or sold with nicotine, you must:
    • Have a CECET permit (account),
    • Collect the CECET at the rate of 12.5 percent of the retail selling price of electronic cigarettes containing or sold with nicotine from the purchaser at the time of sale,
    • File a CECET return electronically, and
    • Pay the tax to us.
  • For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

    • Suspension of Senate Bill (SB) 793. A referendum to ban retailers from selling or possessing with the intent to sell or offer for sale menthol and mint flavored cigarettes and most flavored tobacco products is on the ballot for the November 8, 2022, statewide general election. SB 793 is suspended pending the outcome of this election. For more information regarding the ballot measure, please visit the Secretary Of State website.
    • Sign Up for CDTFA Updates – subscribe to our email lists and receive the latest news and other announcements.

Helping your business succeed is important to us.

Understanding the tax and fee issues specific to cigarette and tobacco products businesses can be time-consuming and complicated, so it is important that you get the information you need in a timely and understandable way, helping you focus on starting and growing your business.

This guide will help you better understand the tax and licensing obligations for retailers, distributors, wholesalers, manufacturers, importers, and consumers of cigarettes and tobacco products.

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Under the California Cigarette and Tobacco Products Tax Law (Revenue and Taxation Code section 30003), “cigarette” is defined as a rolled product for smoking of any size or shape that:

  • Is made of any tobacco, flavored or not, and
  • Has a wrapper made of paper or another material.

Exception: Flavored cigarettes are banned in the United States (see the Industry Topics section for more information). Products wrapped in tobacco or with a cover made mostly of tobacco (for example, cigars) are not cigarettes when they weigh more than three pounds per thousand sticks. Instead, these products are considered tobacco products.

Note: Marlboro iQOS HeatSticks are cigarettes and have been added to the Office of Attorney General's California Tobacco Directory as of June 30, 2020.

"Tobacco products" are defined under the California Cigarette and Tobacco Products Tax Law (Revenue and Taxation Code section 30121(b)).

Tobacco products include, but are not limited to:

  • Smoking or pipe tobacco (including shisha)
  • Chewing tobacco
  • Snuff
  • Cigars
  • Little cigars[1]
  • Any product containing, made of, or derived from any amount of tobacco that is intended for human consumption[1]
  • Any product containing, made of, or derived from any amount of nicotine that is intended for human consumption[1]
  • Examples include:

    • Any product containing synthetic nicotine that is intended for human consumption
    • Any product containing nicotine derived from plants such as tobacco, eggplant, potatoes, or synthetically created, that is intended for human consumption
  • Electronic cigarettes or any device or delivery system sold in combination with nicotine or any liquid or substance containing nicotine in their original manufacturer packaging as one unit or sold for a single price before or when the liquid or substance containing nicotine is distributed1
  • Any component, part, or accessory of an electronic cigarette that is used during the operation of the device when sold in combination with nicotine or any liquid or substance containing nicotine in their original manufacturer packaging as one unit or sold for a single price before or when the liquid or substance containing nicotine is distributed (for example, a battery used in the operation of the device sold with nicotine for a single price)1

Notes

  1. Tobacco products do not include cigarettes. Tobacco products do not include any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes (for example, nicotine patches) when that product is marketed and sold solely for such approved use. Effective April 1, 2017, Proposition 56 (passed November 2016) amended the definition of “tobacco products” under the California Cigarette and Tobacco Products Tax Law (Revenue and Taxation Code section 30121). Prior to April 1, 2017:
    • Little cigars were considered cigarettes for taxation purposes and required a cigarette tax stamp;
    • Tobacco products (other than cigars, smoking or chewing tobacco, or snuff) had to contain at least 50 percent tobacco;
    • Any products containing, made of, or derived from nicotine and not containing 50 percent or more of tobacco were not necessarily tobacco products;
    • Electronic cigarettes sold with nicotine and vape liquids containing nicotine were not tobacco products;
    • Any component, part, or accessory of an electronic cigarette when sold with nicotine were not tobacco products.
  2. Nicotine does not include any food products as defined in Revenue and Taxation Code section 6359.
  3. Electronic cigarettes do not include delivery devices (for example, eCigarettes or vape pens) sold individually or with a liquid or substance containing 0mg nicotine and are not considered tobacco products for taxation purposes; however, they are subject to retail licensing (see “STAKE ACT Definition of Tobacco Products for Retailer Licensing Purposes”).

A "tobacco product" is defined under the Stop Tobacco Access to Kids Enforcement (STAKE) Act for cigarette and tobacco products retailer licensing purposes.

Tobacco products, for cigarette and tobacco products retailer licensing purposes, include:

  • Any product containing, made, or derived from tobacco or nicotine that is intended for human consumption.
  • Any electronic smoking or vaping device that delivers nicotine or other vaporized liquids.
  • Any component, part, or accessory of a tobacco product, whether or not sold separately.

Examples include, but are not limited to, cigarette papers or wrappers, electronic cigarettes, hookah (waterpipe), atomizers, vaping tanks or mods, and eLiquids or eJuices.

For more information about the retailer license requirement, see the Getting Started section, under Licenses Required. While we administer the cigarette and tobacco products retailer licensing requirements, the California Department of Public Health (CDPH) administers the STAKE Act. For more information on the STAKE Act definition of tobacco products, see the CDPH's website and their publication “What is a Tobacco Product under California Law?

Notes

  1. Under the Stop Tobacco Access to Kids Enforcement (STAKE) Act, Business and Professions Code section 22950.5 amended the definition of a tobacco product effective June 9, 2016. The STAKE Act definition of a tobacco product also applies to tobacco products retailers for the cigarette and tobacco products retailer license requirement under the Cigarette and Tobacco Products Licensing Act of 2003, Business and Professions Code section 22971.7, effective January 1, 2017.
  2. The California Cigarette and Tobacco Products Licensing Act of 2003 does not affect any laws or regulations regarding cannabis or cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consuming cannabis or cannabis products into the human body. Cigarettes and tobacco products may not be sold at the same location that is licensed as a cannabis business.

The cigarette and tobacco products tax is paid by a distributor upon the distribution of cigarettes and tobacco products in California.

A distribution includes the sale, use, or consumption of untaxed cigarettes, or untaxed tobacco products in California, and the placing of untaxed cigarettes or untaxed tobacco products into a vending machine or retail stock in California (Revenue and Taxation Code Section 30008).

Cigarettes are subject to both the cigarette tax and the cigarette and tobacco products surtaxes, collectively referred to as cigarette taxes. The taxes are assessed on each cigarette distributed in California.

Cigarette distributors pay the taxes by purchasing cigarette tax stamps from the CDTFA. Distributors are required to affix the tax stamp to each package of cigarettes before distribution. In turn, distributors receive a purchase discount of 0.85 percent of the total tax value per purchase order to help offset the cost of affixing cigarette tax stamps. As of April 1, 2017, the 0.85 percent discount for cigarette tax stamps is capped at the first one dollar ($1.00) in denominated value of the stamp (Revenue and Taxation Code section 30166). Distributors pass the cigarette taxes on to their customers, as part of the selling price of the cigarettes. The cost of the cigarette tax stamp includes all of the aforementioned taxes.

Visit the tax rate page to view current and historical cigarette tax rates.

Tobacco products (products other than cigarettes) are subject to the cigarette and tobacco products surtaxes.
The tobacco products tax is imposed upon the distribution of tobacco products and is paid by tobacco products distributors.

A tobacco products distributor is required to calculate the amount of tobacco products tax due by applying the tobacco products tax rate to the wholesale cost of the tobacco products distributed in California and pay the total amounts owed each reporting period.

Visit the tax rate page to view current and historical tobacco products tax rates.

Tobacco Products Tax Rate Calculation

The CDTFA annually determines the tobacco products tax rate, which is equivalent to the combined rate of the taxes imposed on cigarettes. The calculation of the rate is based on the wholesale cigarette prices reported to the CDTFA as of March 1 each year, and is effective during the next fiscal year (July 1 through June 30). The tobacco products tax rate is calculated by dividing the tax rate imposed on cigarettes by the average wholesale cost of cigarettes:

C/W = X
C = Tax rate per cigarette
W = Weighted average wholesale cost of one cigarette
X = Tax rate on tobacco products

Starting with fiscal year 2021-22, the tobacco products tax rate calculation is based on cigarette sales as reported to CDTFA by cigarette manufacturers and importers for the preceding November through January. Prior to fiscal year 2021-22, the rate calculation was based on the wholesale premium brand cigarette price as of March 1, as published by the Tobacco Merchants Association.

The cigarette tax rate is $0.1435 per cigarette stick. Typically, a pack of cigarettes contains 20 sticks of cigarettes. Using this example, the cigarette tax rate on a pack of 20 cigarettes is $2.87.

Of the total two dollars and eighty-seven cents ($2.87) cigarette tax rate per package of twenty (20) cigarettes (or equivalent amount of tobacco products):

  • Two dollars ($2.00) are deposited into the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund (Prop. 56, effective April 1, 2017)
    These funds are to be used for various purposes and programs, including:
    • Increased funding for existing healthcare programs and services,
    • Use prevention programs among all Californians, but particularly the youth, and
    • Medical research for cancer, heart and lung tobacco-related diseases.
  • Fifty cents ($0.50) are deposited into the California Children and Families Trust Fund (Prop. 10, effective January 1, 1999)
    These funds are used for programs that encourage proper childhood development, including:
    • The development of professional and parental education and training,
    • Informed selection of childcare,
    • Development and education of childcare providers, and
    • Research into the best practices and standards for all programs and services relating to early childhood development.
  • Twenty-five cents ($0.25) are deposited into the Cigarette and Tobacco Products Surtax Fund (Prop. 99, effective January 1, 1989)
    These funds may only be used for the following purposes:
    • Tobacco-related health education programs and disease research,
    • Medical and hospital care and treatment of patients who cannot afford those services, and for whom payment will not be made by any private coverage or federal program, and
    • Programs for fire prevention; environmental conservation; protection, restoration, enhancement, and maintenance of fish, waterfowl, and wildlife habitat areas; and enhancement of state and local parks and recreation.
  • Ten cents ($0.10) are deposited into the Cigarette Tax Fund
    • These funds are transferred to the General Fund.
  • Two cents ($0.02) are deposited into the Breast Cancer Fund
    • These funds support breast cancer-related research and breast cancer screening for uninsured women.

Cigarette and tobacco products license fees are deposited in to the Cigarette and Tobacco Products Compliance Fund solely for the purpose of implementing, enforcing, and administering the California Cigarette and Tobacco Products Licensing Act of 2003.

How to Use This Guide

The Getting Started section provides information about the licenses required, registration, renewals, and filing your tax forms online, including a link to our Cigarette and Tobacco Product Online Filing webpage where you will find online filing and reporting resources.

The Retailer & Wholesaler, Distributor, Manufacturer & Importer, and PACT Act & Consumer sections provide detailed information specific to each person along the cigarette and tobacco products supply chain.

See the Industry Topics and Resources sections for helpful information and references.

If You Need Help

If at any time you need assistance with topics included in this guide – or with topics not included – feel free to contact us by telephone or email. Contact information and hours of operation are available in the Resources section.

If you have suggestions for improving this guide, please contact us via email.

Licenses Required

Cigarette and Tobacco Products Licensing Act of 2003

The Cigarette and Tobacco Products Licensing Act of 2003 (Licensing Act) requires us to administer a statewide program to license all persons engaged in the sale of cigarettes and tobacco products in California: manufacturers, importers, distributors, wholesalers, and retailers. These people are required to obtain and maintain a license to sell cigarettes or tobacco products in California. Distributors, wholesalers, and retailers must obtain a separate license for each location where they will sell cigarettes or tobacco products. They may purchase/sell cigarettes and tobacco products only from or to other licensed entities along the supply chain.

California voters approved Proposition 99 (effective January 1989), the Tobacco Tax and Health Protection Act of 1988, which increased the cigarette tax rate and added an equivalent tax on other tobacco products. As a result, tobacco products distributors are also required to hold a license under the Cigarette and Tobacco Products Tax Law for tax reporting and paying. In addition, cigarette and tobacco products wholesalers are required to hold a license under the Cigarette and Tobacco Products Tax Law for information reporting purposes.

Licenses issued under the Licensing Act and the Cigarette and Tobacco Products Tax Law are required in addition to a seller's permit for sales tax or other licenses that may be required. Depending on your business operations, you may be required to obtain more than just a California cigarette and tobacco products license. Before registering for a Cigarette and Tobacco Products Retailer's License, you should check with your local health department, cities, and counties for any local tobacco licensing requirements, which may be more restrictive. Visit the CalGold website for help with permit and licensing requirements by local authorities as well as other state or federal authorities.

California Healthy Outcomes and Prevention Education (HOPE) Act

Beginning July 1, 2022, the HOPE Act requires us to collect the California Electronic Cigarette Excise Tax (CECET) from retailers who sell electronic cigarettes containing or sold with nicotine to consumers in California. If you are a retailer of electronic cigarettes containing or sold with nicotine to consumers in California, regardless if you are physically located within or outside California, you are responsible for registering for a CECET account with us. The HOPE Act requires a retailer of electronic cigarettes containing or sold with nicotine to:

  • Have a CECET permit (account),
  • Collect the CECET at the rate of 12.5 percent of the retail selling price of electronic cigarettes containing or sold with nicotine from the purchaser at the time of sale,
  • File a CECET return electronically, and
  • Pay the tax to us.

For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

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Any retailer that sells tobacco products as defined under the STAKE Act, such as 0mg nicotine vape liquids or electronic cigarettes sold without nicotine, is required to hold a Cigarette and Tobacco Products Retailer's License from us in order to engage in the retail sale of these products.

This retailer licensing requirement does not apply to cannabis or cannabis products. See our Overview section, under STAKE Act Definition of Tobacco Products for Retailer Licensing Purposes.

Below is a chart to help you understand if a cigarette and tobacco products retailer license is required.

Product Sold Is a Cigarette and Tobacco Products Retailer's License Required? References
eJuice or eLiquid (vape liquids) containing nicotine Yes BPC 22971(s)
RTC 30121(b)
BPC 22972
BPC 22950.5
BPC 22971.7
eJuice or eLiquid (vape liquids) containing no amount of nicotine or 0mg nicotine Yes[2] BPC 22950.5
BPC 22971.7
Electronic smoking or vaping device, component, part, or accessory sold without nicotine Yes[2] BPC 22950.5
BPC 22971.7
Electronic smoking or vaping device, component, part, or accessory sold with nicotine Yes[1] [2] BPC 22971(s)
RTC 30121(b)
BPC 22972
BPC 22950.5
BPC 22971.7
Cigarette papers or wrappers, hookah (waterpipe), pipes, or any other instruments or things designed for smoking or ingesting tobacco or nicotine Yes[2] BPC 22950.5
BPC 22971.7
Cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consumption of cannabis or cannabis products No[2] SB x2-5, SEC. 28

Notes

  1. Effective April 1, 2017. Proposition 56 updated the definition of tobacco products (Revenue and Taxation Code section 30121(b)).
  2. Effective January 1, 2017. Senate Bill (SB) x2-5 (Stats. 2016, Ch. 7), signed into law on May 4, 2016, updated the definition of tobacco products under the STAKE Act (BPC section 22950.5), effective June 9, 2016. The STAKE Act definition of a tobacco product also applies to tobacco products retailers for the cigarette and tobacco products retailer license requirement under the Cigarette and Tobacco Products Licensing Act of 2003, Business and Professions Code section 22971.7 effective January 1, 2017.

You may need a seller's permit as well as multiple cigarette and tobacco products licenses. For example:

  • If you are a distributor that intends to sell directly to consumers, you will need:
    • A seller's permit,
    • A distributor's license, and
    • A retailer's license.
  • If you are a manufacturer/importer that intends to sell to wholesalers and retailers, you will need:
    • A seller's permit
    • A manufacturer/importer's license, and
    • A distributor's license.
  • If you are a wholesaler that intends to sell directly to consumers, you will need:
    • A seller's permit,
    • A wholesaler's license, and
    • A retailer's license.
  • In addition to the above, if you intend to sell electronic cigarettes containing or sold with nicotine to consumers, you will also need a CECET permit (account). For more information, see our Tax Guide for California Electronic Cigarette Excise Tax.

Please note: you must have a distributor's license before you purchase any untaxed cigarettes or tobacco products. A person may hold a distributor's license or wholesaler's license, but not both. The Cigarette and Tobacco Products Tax Law license may often be referred to as your “tax account” or “tax reporting account”, which is for reporting requirements, such as filing tax returns, reports, and schedules.

Permit, License, and Account Requirements

For the business activities listed below, the following permits, licenses, and/or accounts are required.

Business Activity Sales &
Use Tax Law
Cigarette and Tobacco Products Licensing Act Cigarette and Tobacco Products Tax Law/HOPE Act/Federal PACT Act
Sell cigarettes and/or tobacco products at retail Seller's Permit Cigarette and Tobacco Products Retailer's License CECET permit (account)[4]
vaporizers, nicotine liquid, etc. at a retail location in California Seller's Permit Cigarette and Tobacco Products Retailer's License CECET permit (account)[4]
Sell cigarettes at wholesale Seller's Permit Cigarette and Tobacco Products Wholesaler's License[2] Cigarette Wholesaler's License[2]
Import cigarettes from outside
of the United States
Seller's Permit Cigarette Manufacturer's/Importer's License Cigarette Distributor's License[3]
Manufacture cigarettes Seller's Permit Cigarette Manufacturer's/Importer's License Cigarette Manufacturer's License
Stamp and distribute cigarettes to wholesalers and/or retailers Seller's Permit Cigarette and Tobacco Products Distributor's License[3] Cigarette Distributor's License[3]
Sell tobacco products at wholesale Seller's Permit Cigarette and Tobacco Products Wholesaler's License[2] Tobacco Products Wholesaler's License[2]
Import and/or manufacture tobacco products Seller's Permit Tobacco Products Manufacturer's/Importer's License Tobacco Products Manufacturer's/Importer's License
Distribute tobacco products Seller's Permit Cigarette and Tobacco Products Distributor's License[3] Tobacco Products Distributor's License[3]
Ship or deliver cigarettes originating outside California into California N/A N/A Cigarette Common Carrier Account
Sell, transfer, or ship for-profit cigarettes, smokeless tobacco, or Electronic Nicotine Delivery Systems (ENDS) without nicotine originating outside California into California Seller's Permit** N/A Prevent All Cigarette Trafficking (PACT) Act Account*
Sell, transfer, or ship for-profit to consumers cigarettes, smokeless tobacco, or ENDS with nicotine originating outside California into California Seller's Permit** Cigarette and Tobacco Products Distributor's License[3] Cigarette Distributor's License[3], and/or Tobacco Products Distributor's License[3], CECET permit (account)[4], and PACT Act Account*
Transport on land more than 400 unstamped cigarettes and/or untaxed tobacco products valuing $25.00 or more within California N/A N/A Cigarette and Tobacco Transporter's Permit

Notes

  1. If you sell, transfer, or ship for-profit cigarettes, roll-your-own/smokeless tobacco, or ENDS into California, see the PACT Act under the PACT Act & Consumer section. There are additional requirements under Federal Law, the Jenkins Act, 15 U.S.C. sections 375-378, amended by the PACT Act, and the 2021 Omnibus Appropriations Bill HR 133 section 601).
  2. For registration requirements for sales and use tax, please review our guide, Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision.
  1. The California Cigarette and Tobacco Products Licensing Act of 2003 does not affect any laws or regulations regarding cannabis or cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consuming cannabis or cannabis products into the human body. Cigarettes and tobacco products may not be sold at a location that is licensed as a cannabis business.
  2. These licenses are not allowed if licensee is a distributor. A Wholesaler's license may not be issued to an out-of-state person selling at an out-of-state location.
  3. These licenses are not allowed if licensee is a wholesaler.
  4. A California Electronic Cigarette Excise Tax (CECET) permit (account) is required if you sell electronic cigarettes containing or sold with nicotine to consumers. For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

Online Registration – Register with us online for your cigarette and tobacco products license, a seller's permit, and any other permits, licenses, or accounts.

Online registration is the convenient way to register and is available 24 hours a day. Upon registration, you will be required to pay the applicable license fees.

If you are applying for a distributor's license, you will be required to post a minimum $1,000 security deposit before the license can be issued (Revenue and Taxation Code section 30141 and 30142; Regulation 4018.

There are no security deposit requirements for a retailer's, wholesaler's, or manufacturer's/importer's license.

All licensees registered under the California Cigarette and Tobacco Products Licensing Act of 2003 must renew/maintain their license(s) annually. A license is not assignable or transferable.

Remember, you may not sell cigarettes and/or tobacco products at any location without a valid cigarette and tobacco products license for that location. For more information about online license renewals, please see our frequently asked questions.

License Periods

Retailers

A retailer's license is valid for a 12-month period. A retailer that adds an additional retail location will renew the retailer's license for that retail location based on a 12-month period beginning in the month that the retailer's license for the first retail location was obtained.

Wholesalers and Distributors

A wholesaler or distributor's license is valid for one calendar year (January through December).

Manufacturers and Importers

Manufacturers and importers must maintain their license and affirm certain certifications annually (Business and Taxation Code section 22979).

Renewal Reminders

Approximately 60 days prior to your license expiring, we will send you an email and paper notice reminding you to renew your license and will send you another reminder email notice approximately 30 days prior to your license expiring. If you do not renew your license before your license period expires, we will send you a final email notice indicating that your license has expired and the date it expired. It is important to renew your license before it expires, as you must have a valid license for each location in order to purchase or sell cigarettes and/or tobacco products at each location.

How to Renew

Renew your license by logging on to our online services system with your username and password. If you do not have a username and password, you must create one using our Sign Up Now process. If you need assistance with creating a username and password, watch our video tutorials. Our online services system is free to use. The only cost is your license(s) renewal fee.

License Renewal Fee

Cigarette and tobacco products distributors, wholesalers, and retailers must pay an annual fee per location to renew their license. Cigarette and tobacco products manufacturers and importers pay a one-time administration/license fee. License fees are not prorated.

Visit the tax rate page to view current and historical cigarette and tobacco products tax rates and license fees for retailers, wholesalers, distributors, manufacturers, and importers.

On our tax rate page, you may find licensing fees under the heading Cigarette and Tobacco Products Licensing Act and tax rates under Cigarette and Tobacco Products Tax.

Filing Deadlines – Find your filing due dates.

  • Due Date: Unless otherwise specified, all tax returns and reports must be filed and payments must be made on or before the 25th day of the calendar month following the reporting period.
  • For example: a return or report for the monthly reporting period of April 2021 would be due on or before May 25, 2021, along with the total payment amount due.

File Online – Go paperless! File your tax forms online with us. The services are fast and free! Some of our online filing resources are listed below.

You must file all applicable cigarette and tobacco products tax returns, reports, and schedules even if you made no transactions or deliveries during the reporting period. You may be required to file other returns or reports with us. You must keep and maintain all your records at your licensed premises in California, unless we have approved another location.

Online Payment Options – Make payments online.

Taxpayer Online Service Portal – Update your business information and keep your accounts current by logging in to our online services system. You may also notify us of any business changes by using form CDTFA-345-SP, Notice of Business Change, Special Taxes and Fees Accounts.

Tax Forms

  • CDTFA-501-CD, Cigarette Distributor/Importer Tax Report
    • CDTFA-810-CTI, Cigarette Tax Receipt Schedule
    • CDTFA-810-CTF, Cigarette Tax Disbursement Schedule
      • CDTFA-810-CTE, Instructions for Preparing Cigarette Tax Schedules

  • CDTFA-413-ACTS, Cigarette Distributor's Report of Returned Stamps

  • CDTFA-501-CT, Tobacco Products Distributor Tax Return
    • CDTFA-501-CTT, Tobacco Schedule T
    • CDTFA-810-CTN, Electronic Cigarettes and Vaping Products that Contain Nicotine Tax Disbursement Schedule

Under Revenue and Taxation Code section 30188, every licensed cigarette wholesaler in this state is required to file a report showing their cigarette inventory activity.

  • CDTFA-501-CW, Cigarette Wholesaler's Report
    • CDTFA-810-CTI, Cigarette Tax Receipt Schedule
      • CDTFA-810-CTE, Instructions for Preparing Cigarette Tax Schedules

Licensed tobacco products wholesalers do not have a tobacco reporting requirement, but must maintain records.

  • CDTFA-501-CM, Cigarette Manufacturer's Tax Return of Taxable Distributions in California
    • CDTFA-810-CTF, Cigarette Tax Disbursement Schedule
      • CDTFA-810-CTE, Instructions for Preparing Cigarette Tax Schedules

  • CDTFA-501-TIM, Tobacco Products Manufacturer/Importer Return of Taxable Distribution of Samples in California
    • CDTFA-501-MIT, Schedule Manufacturer/Importer Report of Tobacco Products Delivered or Shipped into California

Common carriers making a delivery of cigarettes, originating outside of California, to a consignee located in California, must file a report on or before the 25th day of the calendar month following the calendar month in which the delivery of the cigarettes or tobacco products was made (Regulation 4041). The delivery report is informational only; no tax or fee is due.

  • CDTFA-1071, Common Carrier's Report of Cigarette Deliveries of Interstate or Foreign Shipments of Cigarettes Destined California Points

A retailer selling electronic cigarettes containing or sold with nicotine to consumers must electronically file quarterly CECET returns using our Online Services and pay the CECET quarterly. You must file your CECET returns separately from any other reports or returns you are required to file. For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

Cigarettes and/or Tobacco Products

A consumer is required to file returns online and pay on or before the last day of the calendar month following the end of a calendar quarter. A consumer is required to report the amount of untaxed cigarettes and/or tobacco products received in the preceding calendar quarter and pay the amount of tax due (Revenue and Taxation Code section 6451, 6452, 30008, 30107, and 30187). For example, if you purchased cigarettes and tobacco products without paying the California excise/use taxes at the time of purchase anytime between January 1, 2022 and March 31, 2022 (the first calendar quarter of the year 2022), you must file and pay the 1st quarter 2022 excise and use tax by April 30, 2022.

  • A combined online return is used to report both the excise and use taxes for your cigarettes and/or tobacco products purchases. Whether you have filed a return with us in the past or if this is your first time filing, go to our Online Services page, click on File a Return, click on Cigarette & Tobacco Internet Purchases Return, and then follow the prompts to report your purchases, file a return, and pay the excise and use taxes.

If you do not file on time, you may owe a 10 percent late filing penalty on the amount of tax due and interest at our current rate. You may receive a delinquency notice and/or a compliance assessment for tax, penalty and interest based on the invoices received from the out-of-state companies complying with the Jenkins Act or other documentation available to us. You will then have 30 days to pay or dispute the liability.

PACT Act reports must be filed with us no later than the 10th day of each calendar month for the previous calendar month's shipments. For example, reports for the reporting month of September 2022 would be due by October 10, 2022. The reports must contain detailed information on each transaction made during the previous calendar month. Separate PACT Act monthly reports are to be filed for cigarettes, roll-your-own/smokeless tobacco, and electronic nicotine delivery systems (ENDS).

Go paperless! File PACT Act reports using our online services system. We have developed an Excel file template to help you file online. The Excel file template is also available after you log in to file your report online. The template may be used for filing periods August 2019 and after. Note: The template was updated to include ENDS effective March 27, 2021.

For more information about the PACT Act, see the PACT Act under the PACT Act & Consumer section.

Retailer

A retailer is a person who sells cigarettes or tobacco products directly to the public from a California retail location. A retailer includes a person who operates vending machines from which cigarettes or tobacco products are sold in California (Business and Professions Code (BPC) section 22971(p)).

A retailer cannot purchase or be in possession of unstamped (untaxed) cigarettes or untaxed tobacco products unless the retailer also has the cigarette and tobacco products distributor's licenses and accounts for the location. For example, a retailer must hold a California Cigarette and Tobacco Products Distributor's License and tax account if the retailer purchases untaxed tobacco products from a seller located out-of-state that did not charge the excise tax. See our Distributor section.

Beginning July 1, 2022, the HOPE Act requires us to collect the California Electronic Cigarette Excise Tax (CECET) from retailers who sell electronic cigarettes containing or sold with nicotine to consumers in California. If you are a retailer of electronic cigarettes containing or sold with nicotine, regardless if you are physically located within or outside California, you are responsible for registering for a CECET account with us. The HOPE Act requires a retailer of electronic cigarettes containing or sold with nicotine to:

  • Have a CECET permit (account),
  • Collect the CECET at the rate of 12.5 percent of the retail selling price of electronic cigarettes containing or sold with nicotine from the purchaser at the time of sale,
  • File a CECET return electronically, and
  • Pay the tax to us.

For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

Retail Location

A retail location means both of the following:

  • Any building from which cigarettes or tobacco products are sold at retail.
  • A vending machine.*

*A separate Cigarette and Tobacco Products Retailer's License is required for each vending machine. If you operate multiple vending machines at a single location, you will need a separate license for each vending machine.

A Tobacco Product Retailer May also be a Tobacco Product Manufacturer

A tobacco product manufacturer (Regulation 4077, Tobacco Product Manufacturer) is:

  • Any person, including any repacker or relabeler, who manufactures, fabricates, assembles, mixes, blends, combines, processes, or labels a finished tobacco product.
  • An owner of a brand or formula for a tobacco product who contracts with another person to complete the fabrication and assembly of the product to the brand or formula owner's standard.
  • A tobacco product retailer who mixes, blends, or combines a tobacco product that is not suitable for human consumption, such as liquid nicotine, with other ingredients or components to make a tobacco product that is suitable for human consumption.

A tobacco products retailer is not a tobacco product manufacturer solely because:

  • A retailer packages liquid nicotine with other items as one unit.
  • A retailer allows its customers to mix, blend, or combine liquid nicotine and other components after a sale has been made.
  • A retailer packages finished tobacco products, such as cigars, together as one unit.
  • A retailer mixes, blends, or combines finished tobacco products, such as pipe tobacco.

A tobacco products retailer who is a tobacco product manufacturer must also be licensed with us as a tobacco products distributor. A tobacco products retailer who is not licensed as a tobacco products manufacturer, importer, or distributor must purchase their tobacco products from a licensed tobacco products distributor or wholesaler.

For more information about tobacco products manufacturers, see our Manufacturer & Importer section.

Cigarette Wholesaler

A cigarette wholesaler is a person, other than a licensed cigarette distributor, who sells taxed (stamped) cigarettes, obtained from a licensed distributor or another licensed wholesaler, for resale at a specific California location. A cigarette wholesaler may not hold a distributor's license. An out-of-state person selling at an out-of-state location is not a wholesaler and may not be licensed as a cigarette wholesaler. Cigarette wholesalers cannot purchase or be in possession of unstamped (untaxed) cigarettes.

Tobacco Products Wholesaler

A tobacco products wholesaler is a person, other than a licensed tobacco products distributor, who sells tax-paid tobacco products for resale at a specific California location. A tobacco products wholesaler may not hold a distributor's license. An out-of-state person selling at an out-of-state location is not a wholesaler and may not be licensed as a tobacco products wholesaler. Tobacco products wholesalers cannot purchase or be in possession of untaxed tobacco products.

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As a retailer or wholesaler of cigarettes and tobacco products, you must:

  • Obtain a Seller's Permit.
  • Maintain a valid California Cigarette and Tobacco Products Retailer's or Wholesaler's License. See publication 78, Sales of Cigarettes and Tobacco Products in California – License Requirement for Retailers.
  • Maintain a CECET permit (account) (if you are a retailer who sells electronic cigarettes containing or sold with nicotine). For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.
  • Conspicuously display your license at each retail location in a manner visible to the public (retailers only).
  • Keep complete and legible purchase invoices (and sales invoices if you are a wholesaler) for cigarettes and tobacco products for four years.*
  • Keep purchase invoices (and sales invoices if you are a wholesaler) at each licensed location for at least one year after the date of the purchase or sale.* Certain information must be listed on each purchase invoice. See below for Purchase Invoice Requirements. Wholesalers must include certain information on each sales invoice. See below for Sales Invoice Requirements for Wholesalers.
  • Allow CDTFA staff or law enforcement officers to review your purchase invoices (and sales invoices if you are a wholesaler) upon request.*
  • Purchase and sell only those cigarettes and roll-your-own (RYO) tobacco authorized for sale in California as listed on the Office of the Attorney General's California Tobacco Directory.
  • Purchase cigarettes and tobacco products only from California licensed distributors or wholesalers. You may not purchase cigarettes or tobacco products from any person who is not licensed under the Cigarette and Tobacco Products Licensing Act of 2003, or whose license has been suspended or revoked. You are responsible for verifying your suppliers have a valid cigarette and tobacco products license with us. To verify that you are purchasing from a licensed distributor or wholesaler with a valid license, go to our Resources section of this guide, under Verify a License. There is also a link to check if a license is currently suspended. Retailers may not purchase cigarettes or tobacco products from other retailers(Revenue and Taxation Code section 30478). Wholesalers may not purchase their products directly from an importer or manufacturer.*
  • Wholesalers may only sell cigarettes or tobacco products to wholesalers and retailers licensed under the Cigarette and Tobacco Products Licensing Act of 2003. Wholesalers may not sell to any person who is not licensed with us or whose license has been suspended or revoked. Retailers may only sell to consumers. Wholesalers are responsible for verifying their buyers have a valid cigarette and tobacco products license with us. To verify that you are selling to a licensed person with a valid license, go to the Resources section of this guide, under Verify a License. There is also a link to check if a license is currently suspended.*
  • Only purchase cigarettes affixed with valid California tax stamps and California tobacco products tax-paid products.*
  • File a monthly report (cigarette wholesalers only).*
  • File a quarterly CECET return (retailers who have CECET account only). For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.
  1. Does not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to the tobacco products tax; however, they are subject to retail licensing.

The cigarette and tobacco products purchase invoices you receive from distributors and/or wholesalers must be legible and include the following information:

  • The name, address, telephone number, and license number of the distributor or wholesaler from whom you purchased the cigarettes or tobacco products (it is illegal to buy cigarettes or tobacco products from a person who does not have a license).
  • Your name, address, and cigarette and tobacco products retailer's or wholesaler's license number.
  • An itemized list of the cigarettes or tobacco products purchased. Cigarettes must be listed by the brand and style names, flavor, filter, and/or packaging when applicable, number of cartons or packs sold, and the sales price. Tobacco products must be listed by brand, type (such as pipe, cigars, or RYO), flavor, packaging (such as pouches, tins, or boxes), quantity sold, and sales price.
  • The date you purchased the cigarettes or tobacco products.
  • The amount of California cigarette and tobacco products taxes due to CDTFA by the distributor on the sale of cigarettes and tobacco products listed on the invoice. Please note: a licensed distributor who is also a licensed retailer or manufacturer may include this statement instead of providing the amount of cigarette and tobacco products taxes due to CDTFA: “All California cigarette and tobacco products taxes are included in the total amount of this invoice.”

These purchase invoice requirements do not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to the tobacco products tax; however, they are subject to retail licensing.

Wholesalers must include the following information on each sales invoice.* Each sales invoice must be legible.

  • The name, address, telephone number, and license number of the wholesaler.
  • The name, address, and license number of the business purchasing the cigarettes or tobacco products. You may not legally sell cigarettes or tobacco products to an unlicensed buyer or purchase them from an unlicensed seller.
  • The date the cigarettes or tobacco products are sold.
  • An itemized list of the cigarettes or tobacco products sold. Cigarettes must be listed by the brand and style names, flavor, filter, and/or packaging when applicable, number of cartons or packs sold, and the sales price. Tobacco products must be listed by brand, type (such as pipe, cigars, or RYO), flavor, packaging (such as pouches, tins, or boxes), quantity sold, and sales price.
  • The amount of California cigarette and tobacco products taxes due to CDTFA by the distributor on the sale of cigarettes and tobacco products. However, a distributor that is also a retailer or manufacturer must include either one of the following on each invoice for the sale of cigarettes or tobacco products:
    • A statement that reads: “All California cigarette and tobacco products taxes are included in the total amount of this invoice.”
    • The amount of cigarette and tobacco products taxes due to CDTFA by the distributor on the distribution of cigarettes and tobacco products.

* Does not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to the tobacco products tax; however, they are subject to retail licensing.

Generally, the sale or transfer of cigarettes and tobacco products between retailers is not permitted. However, if a retailer owns more than one store and the retailer's licenses are held by the same legal entity, that retailer may be allowed to transfer cigarettes or tobacco products between stores belonging to the same legal entity so long as transfer logs are maintained.

Transfer logs must be prepared at the time of transfer. Transfer logs created or provided after an inspection are not acceptable. Legible transfer logs and copies of purchase invoices must be kept at each of the retailer's locations involved in the transfer. Transfer logs must include:

  • The transferring retailer's address and license number where the original purchase was made.
  • The receiving retailer's address and license number where the product was transferred.
  • The supplier's name, license number, purchase invoice number, and date of original purchase.
  • A detailed description of each product transferred (for example, brand, type of package, flavor, style, etc.).
  • The quantity of each product transferred.

These retailer's product transfer requirements do not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to these requirements; however, they are subject to retail licensing.

Sample Retailer's Transfer Log

Store Transferring Product Store Receiving Product Date of Transfer Items Transferred Original Purchase From
A Street Market
123 A Street
Anywhere, CA
Retailer 091-000000
B Street Market
123 B Street
Anywhere, CA
Retailer 091-111111
March 2, 2010
  • 50 packs Marlboro cigarettes, 100s
  • 5 boxes Romeo y Juliet Cigars (25 ea)
LD Tobacco Distributors
Distributor 090-222222
February 14, 2010
Invoice# 12345
A Street Market
123 A Street
Anywhere, CA
Retailer 091-000000
B Street Market
123 B Street
Anywhere, CA
Retailer 091-111111
January 31, 2011
  • 7 rolls Grizzly Long Cut, Mint (5 ea)
  • 2 packs Black & Mild cigars, wine flavor (5 ea)
S&W Wholesale
Wholesaler 090-333333
December 27, 2010
Invoice# 54321

Retailers

We offer free instructor-led classes at our offices located throughout the state to help you better understand the state's requirements and your responsibilities as a retailer of cigarettes and tobacco products in California.

This information is also available as an online seminar, and allows you to submit questions electronically to us for a timely response.

Wholesalers

We offer an online seminar for cigarette and tobacco products wholesalers to help you better understand the state's requirements and your responsibilities as a wholesaler of cigarettes and tobacco products in California.

The information is presented in sections by topic so you can view the information at your own pace. We highly recommend you view all the topics provided to help you understand and comply with California's cigarette and tobacco products licensing and tax laws. The online seminar webpage also allows you to electronically submit your cigarette or tobacco products questions directly to the CDTFA for a timely response.

The cigarette and tobacco products tax is paid by a distributor upon the distribution of cigarettes and tobacco products in California. A distributor may not be a wholesaler. A wholesaler may not be a distributor. A distribution includes the sale, use or consumption of untaxed cigarettes or untaxed tobacco products in California, and the placing of untaxed cigarettes or untaxed tobacco products into a vending machine or retail stock in California (Revenue and Taxation Code section 30008).

Cigarette Distributor

A cigarette distributor is a person who purchases untaxed (unstamped) cigarettes and makes the distribution of cigarettes in California. A cigarette distributor may not hold a wholesaler's license. In general, distributors purchase cigarettes before any California cigarette tax is due, and then sell stamped cigarettes to wholesalers, other distributors, and retailers. Distributors pay the taxes by purchasing cigarette tax stamps from CDTFA. A cigarette distributor is required to affix the California cigarette tax stamp to each package of cigarettes prior to distribution to indicate that taxes have been paid. Once the cigarette packs are stamped, distributors can sell the stamped cigarettes to wholesalers, retailers, and other distributors. Anyone who distributes cigarettes in California must register with us as a cigarette distributor.

Tobacco Products Distributor

A tobacco products distributor is a person who engages in the distribution of tobacco products in California. A tobacco products distributor may not hold a wholesaler's license. In general, distributors purchase tobacco products before any California tobacco products tax is due and then pay the tax when the tobacco products are sold or distributed. A tobacco products distributor is required to calculate the tobacco products tax due based on the wholesale cost (Regulation 4076) of the tobacco products distributed and remit the total amount owed each month with their tax return. Anyone who distributes tobacco products in California must register with us as a tobacco products distributor and sell only to distributors, wholesalers, or retailers with a valid CDTFA cigarette and tobacco products license.

Out-of-State Tobacco Products Distributor

For detailed information about tobacco products sales by an out-of-state licensed distributor to an in-state licensed distributor, see the Industry Topics section, under the Distributors heading.

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Distributors of cigarettes or tobacco products must:

Notes

  1. These requirements do not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to these requirements; however, they are subject to retail licensing.

Cigarettes are subject to excise taxes. Cigarette distributors pay the excise taxes to the State of California by purchasing cigarette tax stamps from us. Distributors must affix a stamp to each package of cigarettes prior to distribution to indicate that taxes have been paid.

Distributors receive a purchase discount of 0.85 percent, which is capped at the first one dollar ($1.00) in denominated value (the denomination number refers to the number of cigarettes in the package) to help offset the costs of applying the stamps. Distributors may include the cost of the stamps in the amounts they charge their customers.

To purchase cigarette tax stamps, you must register as a cigarette distributor. For information on how to become a cigarette distributor, please refer to publication 63, Cigarette Distributor Licensing and Tax Stamp Guide.

Information About

Tax Stamp Forms and Publications

Questions on Tax Stamps? Contact Us

  • By Email
  • By Phone
    1-916-341-6923 Stamp Desk
    1-916-327-6235 Stamp Desk Fax
  • By Mail
    California Department of Tax and Fee Administration
    Cigarette Tax Stamp Program, MIC: 41
    P.O. Box 942879
    Sacramento, CA 94279-0041

We offer an online seminar for cigarette and tobacco products distributors to help you better understand the state's requirements and your responsibilities as a distributor of cigarettes and tobacco products in California.

The information is presented in sections by topic so you can view the information at your own pace. We highly recommend you view all the topics provided to help you understand and comply with California's cigarette and tobacco products licensing and tax laws. The online seminar webpage also allows you to electronically submit your cigarette or tobacco products questions directly to us for a timely response.

Manufacturer

A manufacturer is a person who manufactures cigarettes and/or tobacco products sold in California (Business and Professions Code section 22971(l)). There are some reporting requirements imposed on manufacturers and there are additional restrictions which carry potential tax consequences regarding product promotions and samples provided to recipients at no cost, as set forth in Regulation 4081.

A tobacco product manufacturer (Regulation 4077) is:

  • Any person, including any repacker or relabeler, who manufactures, fabricates, assembles, mixes, blends, combines, processes, or labels a finished tobacco product.
  • An owner of a brand or formula for a tobacco product who contracts with another person to complete the fabrication and assembly of the product to the brand or formula owner's standard.
  • A retailer who mixes, blends, or combines a tobacco product that is not suitable for human consumption, such as liquid nicotine, with other ingredients or components to make a tobacco product that is suitable for human consumption. For more information about a retailer who is also a tobacco product manufacturer, see our Retailer & Wholesaler section.

Importer

An importer is any purchaser who purchases for resale in the United States cigarettes and/or tobacco products manufactured outside the United States for the purpose of making a first sale or distribution within the United States (Revenue and Taxation Code section 30019).

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As a manufacturer or importer of cigarettes and tobacco products, you must:

  • Obtain a Seller's Permit.
  • Maintain a valid Cigarette and/or Tobacco Products Manufacturer/Importer's License.
  • Submit to CDTFA a list of all brand families that you manufacture or import.
  • Update the list of brand families that you manufacture or import whenever you manufacture or import a new brand or additional brand, or stop manufacturing or importing a listed brand.
  • Consent to the jurisdiction of the California courts for the purpose of enforcing the Cigarette and Tobacco Products Licensing Act of 2003, appoint a registered agent for service of process in this state, and identify that agent to CDTFA.
  • Certify when the license is granted and each year upon license renewal that all packages of cigarettes the licensee manufactures or imports and distributes in this state fully comply with subdivision (b) of the Revenue and Taxation Code section 30163, and that the cigarettes contained in those packages are the subject of filed reports that fully comply with all requirements of the federal Cigarette Labeling and Advertising Act (15 U.S.C. Sec. 1331-1340; 21 U.S.C. Sec. 387c) for the reporting of ingredients added to cigarettes.
  • A cigarette manufacturer or importer must waive any sovereign immunity defense or post a surety bond as provided in the Business and Professions Code section 22979(a)(4).
  • A manufacturer or importer that is a “tobacco product manufacturer” as defined in Health and Safety Code section 104556, subdivision (i), selling cigarettes to consumers within the state, must certify to CDTFA that it is a “participating manufacturer” as defined in subsection II(jj) of the ”Master Settlement Agreement“ (MSA), or is in full compliance with paragraph (2) of subdivision (a) of the Health and Safety Code Section 104557.
  • In accordance with the Business and Professions Code section 22979.2(c), all California cigarette manufacturers and importers are required to comply with a one-time license administration fee. The fee amount charged shall correspond with your respective market share of cigarettes manufactured or imported and sold in this state during the next calendar year as estimated by CDTFA.
  • In accordance with the Business and Professions Code section 22979.23(a), all California manufacturers or importers of chewing tobacco or snuff must submit a one-time license fee.
  • In accordance with the Business and Professions Code section 22979.23(b), all California manufacturers or importers of tobacco products, excluding chewing tobacco or snuff, must submit a one-time license fee.
  • Make sure your sales invoices meet all legal requirements (Business and Professions Code section 22979.5). Each sales invoice must be legible and include the following information:
    • Your name, address, and telephone number.
    • Your cigarette and tobacco products manufacturer license number or your cigarette and tobacco products importer license number.
    • The name, address, and cigarette and tobacco products license number of the business purchasing the cigarettes or tobacco products. You may not legally sell cigarettes or tobacco products to an unlicensed buyer.
    • An itemized listing of the cigarettes or tobacco products sold.
    • If you are an original importer that is also a distributor and only if you are using your cigarette and tobacco products importer license to sell cigarettes or tobacco products to another distributor, you should include a statement on your sales invoice that identifies any cigarettes or tobacco products sold without tax under Revenue and Taxation Code section 30105.
  • File tax returns and reports. See Filing, Payments, and Account Maintenance in the Getting Started section for more information.
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PACT Act

Prevent All Cigarette Trafficking (PACT) Act

The federal PACT Act requires any person engaged in the activities described below to register with both the California Department of Tax and Fee Administration (CDTFA) and the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and file monthly reports with CDTFA. The PACT Act requirements apply to all sales of cigarettes, roll-your-own/smokeless tobacco, and electronic nicotine delivery systems (ENDS), including sales to consumers and sales between businesses.

The PACT Act requirements with CDTFA commonly apply to out-of-state businesses.

Generally, businesses located in California do not have a PACT Act registration and reporting requirement with CDTFA, unless you are doing business in Indian country within the exterior limits of California.

If you are engaged in the activities described below with a state other than California, see the topic below “PACT Act Requirements with Other States, Localities, or Indian Country – Shipped in Interstate Commerce Out of California”.

The following chart provides examples of activities that require you to have a PACT Act account and file monthly PACT Act reports with us.

Activities that require you to have a PACT Act account and file monthly PACT Act reports with CDTFA:
Interstate Commerce Origin/Shipped from Interstate Commerce Destination/Shipped into Activities Products
Outside California California
  • Sell, transfer, or ship for profit in interstate commerce.
  • Advertise
  • Offer
  • cigarettes
  • roll-your-own tobacco
  • smokeless tobacco
  • ENDS
Outside California Indian country within California
  • Sell, transfer, or ship for profit in interstate commerce.
  • Advertise
  • Offer
  • cigarettes
  • roll-your-own tobacco
  • smokeless tobacco
  • ENDS
Non-Indian country within California Indian country within California
  • Sell, transfer, or ship for profit in interstate commerce.
  • Advertise
  • Offer
  • cigarettes
  • roll-your-own tobacco
  • smokeless tobacco
  • ENDS
Indian country within California Non-Indian country within California
  • Sell, transfer, or ship for profit in interstate commerce.
  • Advertise
  • Offer
  • cigarettes
  • roll-your-own tobacco
  • smokeless tobacco
  • ENDS
Indian country that is different from destination Indian country, within California Indian country that is different from origin Indian country, within California
  • Sell, transfer, or ship for profit in interstate commerce.
  • Advertise
  • Offer
  • cigarettes
  • roll-your-own tobacco
  • smokeless tobacco
  • ENDS

The PACT Act provides several definitions, including, but not limited to:

  • Attorney general – means, with respect to a state, the attorney general or other chief law enforcement officer of the state.
  • Cigarette – generally is defined in section 2341 of title 18, United States Code excludes a cigar (as defined in section 5702 of the Internal Revenue Code of 1986), and includes:
    • Roll-your-own tobacco; and
    • An electronic nicotine delivery system (ENDS).
  • Common carrier – any person (other than a local messenger service or the United States Postal Service) that holds itself out to the general public as a provider for hire to transport merchandise by water, land, or air (regardless of whether or not the person actually operates the vessel, vehicle, or aircraft for such transportation) between a port or place and a port or place in the United States.
  • Consumer – any person that purchases cigarettes, roll-your-own/smokeless tobacco, or ENDS; and does not include any person lawfully operating as a manufacturer, distributor, wholesaler, or retailer of cigarettes, roll-your-own/smokeless tobacco, or ENDS.
  • Delivery sale – any sale of cigarettes, roll-your-own/smokeless tobacco, or ENDS to a consumer if:
    • the consumer submits the order for the sale by means of a telephone or other method of voice transmission, the mail, or the Internet or other online service, or the seller is otherwise not in the physical presence of the buyer when the request for purchase or order is made; or
    • the cigarettes, roll-your-own/smokeless tobacco, or ENDS are delivered to the buyer by common carrier, private delivery service, or other method of remote delivery, or the seller is not in the physical presence of the buyer when the buyer obtains possession of the cigarettes, roll-your-own/smokeless tobacco, or ENDS.
  • Delivery seller – a person who makes a delivery sale.
  • Electronic nicotine delivery system (ENDS) – any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device. ENDS includes:
    • E-cigarettes, e-hookah, e-cigar, vape pens, advanced refillable personal vaporizers, electronic pipes, and
    • Any component, liquid, part, or accessory of an ENDS device, without regard to whether the component, liquid, part, or accessory is sold separately from the device.
  • ENDS do not include a product that is 1) approved by the Food and Drug Administration (FDA) for sale as a tobacco cessation product or any other therapeutic purpose, and 2) marketed and sold solely for such purpose.

  • Indian country – has the meaning as described in section 1151 of title 18, United States Code, except that within the State of Alaska that term applies only to the Metlakatla Indian Community, Annette Island Reserve; and includes:
    • Any other land held by the United States in trust or restricted status for one or more Indian tribes.
  • Indian tribe, tribe, or tribal – refers to an Indian tribe as defined in section 4(e) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(e)) or as listed pursuant to section 104 of the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 479a-1).
  • Interstate commerce – generally means:
    • commerce between a state and any place outside the state,
    • commerce between a state and any Indian country in the state, or
    • commerce between points in the same state but through any place outside the state or through any Indian country.
    • Into a state, place, or locality – a sale, shipment, or transfer of cigarettes, roll-your-own/smokeless tobacco, or ENDS that is made in interstate commerce shall be deemed to have been made into the state, place, or locality in which such products are delivered.
  • Person – an individual, corporation, company, association, firm, partnership, society, state or local government, Indian tribal government, governmental organization of such a government, or joint stock company.
  • Smokeless tobacco – any finely cut, ground, powdered, or leaf tobacco, or other product containing tobacco, that is intended to be placed in the oral or nasal cavity or otherwise consumed without being combusted.
  • State – each of the several states of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States.
  • Tobacco tax administrator – the state, local, or tribal official duly authorized to collect the tobacco tax or administer the tax law of a state, locality, or tribe, respectively. For example, a local government or a Native American tribe that applies their own local or tribal taxes on cigarettes, roll-your-own/smokeless tobacco, or ENDS.
  • Use – includes the consumption, storage, handling, or disposal of cigarettes, roll-your-own/smokeless tobacco, or ENDS.

California CDTFA – Register with us from our Online Services page. Under the heading Registration, select Register a New Business Activity.

Federal ATF – Contact the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for information on how to register.

Monthly – PACT Act reports must be filed with us (not with the ATF).

Due Date – not later than the 10th day of each calendar month for each and every shipment made into California during the previous calendar month.

File Online – Go paperless! File your PACT Act reports online with us. Below are some resources to help you file online:

Any person engaged in the activities described below must register and file reports with the ATF and with the other state(s) tobacco tax administrators, localities, or Indian country.

Any person who sells, transfers, or ships for profit cigarettes, roll-your-own/smokeless tobacco, or ENDS in interstate commerce in which such products are shipped out of California into a state, locality, or Indian country of an Indian tribe taxing the sale or use of such products, or who advertises or offers such products for such a sale, transfer, or shipment, must contact the state(s), locality, or Indian country of an Indian tribe receiving the cigarettes, roll-your-own/smokeless tobacco, or ENDS to register and file monthly PACT Act reports with them; and also for your state, local, or tribal tax reporting requirements and responsibilities.

Background

The federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) administers and enforces the PACT Act.

The PACT Act of 2009 or PACT Act (Senate Bill 1147), amended the federal Jenkins Act of 1949 (15 U.S.C. sections 375-378 and CCTA 18 U.S.C. section 2341-2346) to, among other things, revise provisions governing the collection of taxes on, and trafficking in, cigarettes and smokeless tobacco by requiring Internet and other remote sellers of cigarettes and smokeless tobacco to comply with the same laws that apply to local cigarette and tobacco retailers; revised the federal definition of cigarette to include roll-your-own tobacco and to exclude cigars.

The 2020 PACT Act amendment, “Preventing Online Sales of E-Cigarettes to Children Act”, effective March 27, 2021, revised and amended the original federal definition of “cigarette” in the PACT Act to include electronic nicotine delivery systems (ENDS) (Federal Law 2021 Omnibus Appropriations Bill HR 133 section 601).

The PACT Act requires any person who sells, transfers, or ships for profit cigarettes, roll-your-own/smokeless tobacco, or ENDS in interstate commerce, whereby such cigarettes, roll-your-own/smokeless tobacco, or ENDS are shipped into a state (such as California), a locality, or an Indian country of an Indian tribe taxing the sale or use of cigarettes, roll-your-own/smokeless tobacco, or ENDS, or who advertises or offers cigarettes, roll-your-own/smokeless tobacco, or ENDS for such a sale, transfer, or shipment must register and file monthly reports with the state tobacco tax administrator into which shipment is made or in which such advertisement or offer is disseminated.

Additional Resources

Consumer

If you purchase cigarettes and/or tobacco products for your own use from outside California or over the Internet without paying both the California cigarette and tobacco products excise taxes and California use tax at the time of your purchase, you are required to file a return online to report your purchases and pay those taxes to us. You may not report and pay these taxes on your Sales and Use Tax return or on your California state income tax return. This includes cigarettes or tobacco products shipped into California that were purchased through the mail, by telephone, or online. For information regarding California use tax, please visit our guide for Use Tax.

You will not owe the cigarette excise taxes if you personally bring less than 400 cigarettes (typically 20 packs or two cartons) into California for your own use or consumption, but you will still owe the use tax.

You will be liable for the payment of taxes to the CDTFA unless your purchase invoices show you paid the California cigarette and tobacco products excise taxes and California sales or use taxes. You should keep documents that show what you paid on your purchase (for example, bills, receipts, invoices, and so forth.) and all working papers used to prepare your returns.

Consumers of cigarettes and/or tobacco products are required to:

  • Report the amount of cigarettes and/or tobacco products received in the preceding calendar quarter,
  • File a tax return, and
  • Submit the amount of tax due on or before the last day of the month following the end of a calendar quarter.

Below are some special/important notices you might find helpful:

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General

Cigarette and Tobacco Products Tax Regulation 4001 further clarifies and defines retail stock for cigarette and tobacco products tax purposes. The cigarette and tobacco products tax (excise tax) is imposed on the distribution of untaxed cigarette and tobacco products in this state. A distribution includes, among other things, placing of untaxed cigarette and tobacco products in retail stock for purposes of selling the products to consumers.

What is considered retail stock?

  • Retail stock includes cigarette and tobacco products that are stored in the area where retail sales are made and available for sale to consumers by a person who holds a retailer's license.
  • If you hold both a California distributor's license and a retailer's license, purchase untaxed products, and only make retail sales to consumers; then all cigarette and tobacco products in your inventory are considered retail stock, distributed in this state, and the excise tax is due (regardless of where the product is placed or stored). All cigarette packs placed in retail stock must have a cigarette tax stamp affixed.
  • If you hold both a California distributor's license and a retailer's license, purchase untaxed products, and make sales to licensed distributors, wholesalers, or retailers; then the untaxed cigarette and tobacco products that are placed or stored in the area where retail sales are made are considered to be retail stock, distributed in this state, and the excise tax is due. All cigarette packs placed in retail stock must have a cigarette tax stamp affixed. However, the untaxed cigarette and tobacco products that are securely stored away from the area where retail sales are made are not considered retail stock. The untaxed products must be in the original manufacturer's packaging, with an unbroken seal, and they must be secured, segregated, and separated from your entire retail inventory, including your tax-paid products that you store or hold in areas not accessible to consumers.

Examples of secured, segregated, and separated from retail stock include, but are not limited to, the following areas:

  • a secured store room or closet;
  • a secured back office;
  • inside a locked cabinet, safe or other similar storage container; or
  • behind a locked wire-cage door or similar encumbrance.

Walk-in humidors

Tobacco products placed inside a walk-in humidor displayed for sale to consumers are considered retail stock. If you hold both a California distributor's license and a retailer's license, purchase untaxed tobacco products, and only make retail sales to consumers, your entire inventory is considered retail stock, whether or not the untaxed tobacco products are separately stored away. The excise tax is due immediately upon placing the untaxed tobacco products in retail stock.

If you hold both a California distributor's license and a retailer's license and you sell to other tobacco products licensees in addition to consumers, untaxed tobacco products are not considered retail stock if the product is placed in a walk-in humidor in the original manufacturer's packaging with an unbroken seal, secured, segregated, and separated from retail stock, and not on display for sale to consumers.

Examples of secured, segregated and separated from retail stock include, but are not limited to, the following areas:

  • inside a locked cabinet, safe, or similar secured storage container, or
  • behind a locked wire-cage door, or similar encumbrance.

Presumption of Distribution

It is presumed that all cigarette and tobacco products no longer in a distributor's possession have been distributed. Unless the contrary is established, this presumption includes instances where cigarette and tobacco products have been lost through an unexplainable disappearance.

You can rebut this presumption by demonstrating that an explainable disappearance, such as theft, has occurred. However, product placed in retail stock is already distributed and there is no presumption that may be rebutted.

Examples of evidence that may overcome the presumption include, but are not limited to:

  • Timely police reports (required)
  • Insurance claims
  • Insurance reimbursements
  • Cigarette and tobacco purchase invoices (required)
  • Video surveillance footage
  • Photographs
  • Detailed tobacco inventory reports
  • Proof of prosecution for theft of cigarettes and tobacco products

The Master Settlement Agreement (MSA) is a legal contract between 46 states, including California, and five U.S. Territories, with participating tobacco manufacturers. The contract was entered into in 1998, in settlement of various lawsuits, and provides for the allocation of funds to states and certain territories. The MSA restricts cigarette advertising and marketing by participating tobacco manufacturers in various ways, including a ban on cartoons in tobacco advertisements, youth exposure to sampling, certain sponsorships, and most outdoor advertisements.

Revenue and Taxation Code (R&TC) section 30165.1 requires the Attorney General to compile and publish a directory of cigarette and RYO tobacco manufacturers and brand families. A person may not sell, offer, possess for sale, or import for personal consumption any cigarettes or RYO tobacco in California unless the manufacturer and brand family are listed in that directory (except if the product is solely for sale out-of-state). In addition, it is illegal for any person to affix or cause to be affixed any tax stamp or meter impression to a pack of cigarettes or pay the tax on RYO tobacco unless the tobacco products manufacturer and brand family are listed in the directory. Cigarettes or RYO tobacco not listed on that directory are subject to seizure by CDTFA and law enforcement agencies. The Attorney General posts the California Tobacco Directory online on their California Tobacco Directory page. You can also subscribe to receive Tobacco Directory Notices by providing your email address on the Attorney General's California Tobacco Directory webpage or by sending an email to their directory subscription mailbox. You will receive an email acknowledging that the Attorney General has received and recorded your email address.

The Attorney General must provide distributors and wholesalers with written notice of any changes to the directory after it is first published (R&TC section 30165.1(c)(3)). Distributors and wholesalers are required to provide the written notices received from the Attorney General to their customers. For more information, see publication 407, Master Settlement Agreement.

Anyone that violates these provisions may be subject to civil and criminal penalties and the seizure of any noncompliant product. In addition, we may revoke or suspend your license. For additional information on the citation process under this Licensing Act, see publication 152, Cigarette and Tobacco Products Inspections, and publication 161, Criminal Citations Include A Civil Administrative Process.

Routine inspections are conducted to ensure compliance with California state laws that control the sale of cigarettes and tobacco products in California. These inspections are authorized by the California Cigarette and Tobacco Products Licensing Act of 2003 (Division 8.6 of the California Business and Professions Code), Cigarette and Tobacco Products Tax Law (Part 13, Division 2 of the Revenue and Taxation Code), and the California Cigarette Fire Safety and Firefighter Protection Act (Division 12 of the California Health and Safety Code). For more information on the inspection process, please see publication 152, Cigarette and Tobacco Products Inspections and the Investigations Bureau's Cigarette and Tobacco Products Inspection Program webpage.

Inspectors make sure that:

  • You have a valid Cigarette and Tobacco Products license pursuant to the Licensing Act and Tax Law and any other business permits or licenses that may be required.
  • You conspicuously display your licenses at each location in a manner visible to the public (retailers only).
  • You keep purchase and/or sales invoices at each licensed location for at least one year after the date of purchase.
  • You bought your cigarettes and tobacco products from a CDTFA-licensed cigarette and/or tobacco products distributor, wholesaler, manufacturer, or importer (sales between retailers are prohibited) and have supporting purchase invoices for your inventory.
  • The cigarettes in your inventory:
    • Have valid California tax stamps attached,
    • Do not include flavored cigarettes (excluding menthols),
    • Are listed on the California Tobacco Directory as legal to sell in California (RYO tobacco must also be listed on the directory), and
    • Comply with the “low ignition propensity” fire safety requirements of California.
  • The California tobacco products tax was paid on your other tobacco products.
  • The STAKE Act signage is displayed at each cash register and other points of sale.

Note: California Distributors may be in possession of unlisted cigarettes or unlisted RYO tobacco if sales and delivery of these brands are made only to out-of-state customers.

Our inspectors have the authority to inspect any location where cigarettes or tobacco products are sold, produced, or stored and any site where there is evidence of tax evasion related to cigarette or tobacco products or non-compliance with the MSA (Revenue and Taxation Code section 30435). To see a list of MSA compliant manufacturers and brands, check the California Tobacco Directory. Upon entering your business, our inspectors will present their official identification and credentials to you or your employees. Any person who refuses to allow an inspection is guilty of a misdemeanor and is subject to a fine.

CDTFA inspectors and law enforcement officers may inspect your location and seize any untaxed cigarettes and/or tobacco products, including cigarettes without tax stamps, with stamps from other states, or with counterfeit or reused tax stamps; non-MSA compliant cigarettes or RYO tobacco; and/or tobacco products upon which tax is due but has not yet been paid to us. Any retailer or wholesaler in possession of untaxed cigarettes and/or tobacco products is subject to penalties such as suspension or revocation of its license and/or imprisonment, or both. Please note: distributors may possess cigarettes stamped with other state stamps, unlisted cigarettes or unlisted RYO tobacco if sales and delivery of these brands are made only to out-of-state customers.

To help prevent cigarette tax evasion, CDTFA was given the authority (Assembly Bill 1901) to seize and destroy any "unaffixed" cigarette tax stamps aggregated for reuse (for example, a collection or accumulation of "unaffixed" stamps for reapplying to untaxed packs of cigarettes). Effective January 1, 2017, it is a misdemeanor for any person to possess, sell or offer to sell, or buy or offer to buy, any false, fraudulent, or "unaffixed" cigarette tax stamps. For purposes of this law, "unaffixed stamps" means tax-paid cigarette tax stamps purchased by a licensed distributor and previously affixed to cigarette packs. For more information about our inspections and your rights, see publication 152, Cigarette and Tobacco Products Inspections.

You may be subject to civil and criminal penalties and the seizure and/or forfeiture of any noncompliant product if you violate any of the provisions of the:

Any person who intentionally evades the reporting, assessment, or payment of cigarette or tobacco products taxes that would otherwise be due is guilty of cigarette or tobacco products tax evasion. Evasion of tax liabilities over $25,000 in a 12-month period is a felony.

For more information about cigarette and tobacco products inspection program, citation appeal process, tax evasion, Licensing Act violations, or to file a complaint and report tax evasion, see publication 161, Criminal Citations Include A Civil Administrative Process, or visit the Investigations Bureau’s Cigarette and Tobacco Products Inspection Program webpage and Report Tax Fraud webpage.

A “mobile location” does not meet the definition of a retail location.

If you operate from a catering truck, lunch wagon, or other mobile facility, you may not hold a California Cigarette and Tobacco Products Retailer's License and therefore, cannot sell cigarettes or tobacco products from your truck, wagon, or other mobile facility in California.

Cigarettes and RYO tobacco that contain certain characterizing flavors (excluding menthol) are considered adulterated and are banned from manufacture, import, or sale in the United States.

See publication 429, Flavored Cigarettes Banned in the United States.

Marlboro iQOS HeatSticks are cigarettes and have been added to the Office of Attorney General's California Tobacco Directory as of June 30, 2020.

Cigarettes are subject to the excise tax. As such, cigarette distributors must affix the tax stamp to each package of Marlboro iQOS HeatSticks prior to distribution to indicate that the excise tax has been paid.

“Engaged in business in this state” (RTCsection 30108) means any of the following:

  • Maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse, or storage place, or other place of business.
  • Having any representative, agent, salesperson, canvasser, or solicitor operating in this state under the authority of the distributor or its subsidiary for the purpose of selling, delivering, or the taking of orders for cigarettes or tobacco products.

If you are an out-of-state seller who is engaged in business in California and selling cigarettes or tobacco products, including cigars, to any person other than a licensed cigarette and tobacco products distributor, such as a licensed cigarette and tobacco products wholesaler or retailer, or a consumer, you are required to register with us for the appropriate cigarette and tobacco products distributor licenses and tax accounts and collect the taxes required. If you are an out-of-state seller who is not engaged in business in California and are selling cigarettes or tobacco products, including cigars, to a person other than a licensed cigarette and tobacco products distributor, such as a licensed cigarette and tobacco products wholesaler or retailer, or a consumer, you may voluntarily register with us for the appropriate cigarette and tobacco products distributor licenses and tax accounts to collect the taxes required. Out-of-state sellers of cigarettes or tobacco products to California consumers should read the information contained in the Delivery Sellers topic.

Below is a chart providing examples for what cigarette and tobacco products licenses and accounts are required, depending if you are or are not engaged in business in California:
Type of Products You Sell Are You Located in California or in a State Outside of California? Are You Engaged in Business in California (RTC section 30108)? Sales To What Cigarette and Tobacco Products Licenses and Accounts Are Required?
Cigarettes Outside California Yes
  • Wholesalers
  • Retailers
  • Cigarette and Tobacco Products Distributor License
  • Cigarette Distributor License (account)
  • Cigarette Stamp Account
  • PACT Act account
Tobacco Products Outside California Yes
  • Wholesalers
  • Retailers
  • Cigarette and Tobacco Products Distributor License
  • Tobacco Products Distributor License (account)
  • PACT Act account (does not apply to cigars)
  • Cigarettes
  • Tobacco Products
Outside California Yes Consumers
  • Cigarette and Tobacco Products Distributor License
  • Cigarette Distributor License (account)
  • Cigarette Stamp Account
  • Tobacco Products Distributor License (account)
  • PACT Act account (does not apply to cigars)
  • CECET permit (account)[1]
Cigars Outside California No Consumers None, but may voluntarily register for:
  • Cigarette and Tobacco Products Distributor License
  • Tobacco Products Distributor License (account)

Notes

  1. A California Electronic Cigarette Excise Tax (CECET) permit (account) is required if you sell electronic cigarettes containing or sold with nicotine to consumers. For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

A delivery seller is any person who makes a delivery sale (RTC section 30101.7).

A delivery sale means the sale of cigarettes or tobacco products (except cigars) into and within California when any of the following are true:

  1. The consumer submits the order via the Internet or other online service, telephone or other voice transmission, or mail.
  2. The seller and consumer are not in the physical presence of each other when:
    • the consumer makes the purchase or order, or
    • the consumer takes possession of the cigarettes or tobacco products.
  3. The cigarettes or tobacco products are delivered to the consumer by common carrier, private delivery service, or other remote delivery method.
A delivery seller must be registered with us to engage in the delivery sale of cigarettes and tobacco products (except cigars) to a consumer in California. For example:
Type of Products You Sell as a Delivery Seller Delivery Seller Location What Licenses and Accounts Are Required?
Cigarettes Outside California
  • Cigarette and Tobacco Products Distributor License
  • Cigarette Distributor License (account)
  • Cigarette Stamp Account
  • PACT Act account
Tobacco Products (except cigars[1]) Outside California
  • Cigarette and Tobacco Products Distributor License
  • Tobacco Products Distributor License (account)
  • PACT Act account
  • CECET permit (account)[2]

Notes

  1. If you are located in a state other than California within the U.S. and engaged in business in this state per R&TC section 30108 and selling cigars to consumers located in California, you still must be registered with us as a tobacco products distributor, but you are not required to have a PACT Act account with us because the PACT Act and R&TC section 30101.7 do not apply to cigars. For more information about engaged in business in California, see our industry topic “Engaged in Business in this State.”
  2. A California Electronic Cigarette Excise Tax (CECET) permit (account) is required if you sell electronic cigarettes containing or sold with nicotine to consumers. For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

Examples of what type of license(s) are required (in addition to a Seller's Permit):

Retailers

Example 1: Retailer A only sells eLiquid or eJuice products that do not contain nicotine or tobacco.

  • Regardless if the eLiquid or eJuice products contain nicotine or tobacco or not, Retailer A is required to register with us for a Cigarette and Tobacco Products Retailer's License.

Example 2: Retailer B sells tax-paid vape liquids that contain nicotine and no other tobacco products such as cigars, chew, or snuff.

  • Retailer B is required to register with us for a Cigarette and Tobacco Products Retailer's License.
  • Retailer B is required to register with us for a California Electronic Cigarette Excise Tax (CECET) permit (account). For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

Example 3: Retailer C purchases vape liquids that contain nicotine from an unlicensed distributor located outside California.

  • Retailer C is required to register with us for a Tobacco Products Distributor's License and a Cigarette and Tobacco Products Distributor's License.
  • Retailer C is required to register with us for a Cigarette and Tobacco Products Retailer’s License because Retailer C makes sales to consumers.
  • Retailer C is required to register with us for a California Electronic Cigarette Excise Tax (CECET) permit (account). For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.
Wholesalers

Example 4: Wholesaler A purchases untaxed vape liquids that contain nicotine from an unlicensed distributor located outside of California.

  • Wholesaler A is required to register with us for a Tobacco Products Distributor's License and a Cigarette and Tobacco Products Distributor's License.
  • Wholesaler A must close its existing Wholesaler's license.
  • In addition to these licenses, if Wholesaler A sells vape liquids that contain nicotine directly to consumers, Wholesaler A is also required to register with us for a Cigarette and Tobacco Products Retailer's License.

Example 5: Wholesaler B purchases tax-paid nicotine products for resale.

  • Wholesaler B is required to hold a Tobacco Products Wholesaler's License and a Cigarette and Tobacco Products Wholesaler's License in order to purchase these products for resale.
  • In addition to the license, if Wholesaler B sells these products directly to consumers, Wholesaler B is required to register with us for a Cigarette and Tobacco Products Retailer's License.
Distributors

Example 6: Distributor A solely sells eLiquid or eJuice products that do not contain nicotine or tobacco.

  • Distributor A is not required to register with us for a tobacco products license since the eLiquid or eJuice products do not contain nicotine or tobacco.
  • Distributor A is required to register with us for a Tobacco Products Distributor's License and Cigarette and Tobacco Products Distributor's License if Distributor A sells untaxed eLiquid or eJuice products that do contain nicotine or tobacco.
  • Distributor A is also required to register with us for a Cigarette and Tobacco Products Retailer's License if Distributor A also sells these products, regardless if the products contain nicotine or not, directly to consumers.
Manufacturers

Example 7: Company A manufactures nicotine vape liquids in California and sells them to stores located in California and online directly to customers located in California.

  • Company A is required to register with us for a Tobacco Products Distributor's License, Cigarette and Tobacco Products Distributor's License, Tobacco Products Manufacturer's/Importer's License, and a Cigarette and Tobacco Products Manufacturer/Importer's License.
  • Company A is required to obtain a Cigarette and Tobacco Products Retailer's License for selling vape liquids directly to consumers from a California retail location.

Example 8: Company B is engaged in business in California (as defined in Revenue and Taxation Code section 30108(c)), manufactures nicotine vape liquids outside of California, and sells them to a store located in California.

  • Company B can only sell to licensed distributors in California.
    • If Company B obtains a Cigarette and Tobacco Products Distributor License and Tobacco Products Distributor’s License with us, Company B could then sell to California wholesalers, retailers, and consumers.
  • Company B is required to hold a Tobacco Products Manufacturer's/Importer's License, Cigarette and Tobacco Products Manufacturer's/Importer's License, and PACT Act account with us to engage in the sale of nicotine vape liquids (tobacco products) in California.
  • A California licensed distributor may not purchase tobacco products from an unlicensed manufacturer who is required to be licensed.
  • The distributor located in California who purchases the nicotine vape liquids from Company B is required to report and pay the tobacco products tax due to us upon distribution in California and hold a Tobacco Products Distributor's License.
  • California licensed wholesalers may not purchase tobacco products directly from California licensed manufacturers. (Business and Professions Code section 22980.1).

Example 9: Company C is not engaged in business in California (as defined in Revenue and Taxation Code section 30108(c)), manufactures nicotine vape liquids outside of California, and sells them directly to customers located in California.

  • Company C is not required to hold a manufacturer's license from us.
  • Instead, the businesses who purchase from Company C owe the tobacco products tax upon sale or distribution in California and are required to register with us for a tobacco products distributor's license. This would be considered a distribution according to Revenue and Taxation Code section 30008, which includes the sale, use or consumption of untaxed cigarettes or tobacco products in California.
  • The businesses would owe the tobacco products tax based on the wholesale cost, which in this situation would be the amount the business paid to Company C, not including any discounts or trade allowances.
  • If the California customer is a consumer, Company C is required to hold a Tobacco Products Distributor's License, Cigarette and Tobacco Products Distributor's License (Revenue and Taxation Code section 30101.7), and PACT Act account with us.

Example 1: Business A purchases untaxed eLiquids containing nicotine from a manufacturer (either in-state or out-of-state).

  • Business A is considered a tobacco products distributor and owes the tobacco products tax to us upon distribution in California.
  • Sales invoices from licensed distributors must include a statement that indicates the California tobacco products taxes have been paid on the tobacco products sold.

Example 2: Business B purchases untaxed eLiquids containing nicotine from an out-of-state vendor who is not licensed by us as a tobacco products distributor and sells to stores in California.

  • Business B is considered a tobacco products distributor and owes the tobacco products tax to us upon distribution in California.
  • Only licensed distributors may be in possession of untaxed tobacco products.
  • Licensed distributors must include a statement on their sales invoices that indicates the California tobacco products taxes have been paid on the tobacco products sold.

Example 3: Business C, a licensed tobacco products distributor, is located in California and sells eLiquids containing nicotine online to stores outside of California.

  • Sales of tobacco products delivered to customers at an out-of-state location are exempt from the California tobacco products tax.

Example 4: Business D manufactures eLiquids containing nicotine in California and sells them directly and online across the U.S., including to California distributors, wholesalers, retailers, and consumers.

  • Business D is considered a tobacco products manufacturer, distributor, and retailer.
  • Business D, as a tobacco products manufacturer, can make tax exempt sales to licensed distributors in California.
  • Business D, as a tobacco products distributor, owes the tobacco products tax to us upon distribution to California licensed wholesalers, retailers, and consumers in California.
  • Since Business D sells directly to consumers, Business D is also considered a tobacco products retailer.
  • Because Business D sells to consumers and is considered a retailer, Business D is required to register with us for a California Electronic Cigarette Excise Tax (CECET) permit (account). For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

Example 5: Business E is a licensed distributor located in California and sells tobacco products that were purchased ex-tax from a manufacturer to Business F, another licensed distributor located in California.

  • Business E owes the tobacco products tax to us upon this distribution.

Example 6: Business G is an original importer that holds a tobacco products importer's license and sells untaxed tobacco products to Business H, a licensed distributor.

  • An importer is any purchaser who purchases for resale in the United States tobacco products manufactured outside the United States for the purpose of making a first sale or distribution within the United States (Revenue and Taxation Code section 30019).
  • Business G's sale to Business H is exempt (Revenue and Taxation Code section 30105).
  • Business H (the licensed distributor) owes the tobacco products tax to us upon distribution in California.

Example 7: Business J, who is engaged in business in California, manufactures nicotine vape liquids outside of California and sells them to Business K located in California for resale.

  • Business J is required to be licensed as a manufacturer because they are engaged in business in California.
  • Business J is required to hold a PACT Act account with us because they make interstate sales to California customers.
  • Business K may not purchase nicotine products from an unlicensed manufacturer who is required to have a license.
  • Business K is considered a distributor, is required to hold a tobacco products distributor's license, and owes the tobacco products excise tax to us upon distribution in California.

You may file a claim for refund using our online services. If you believe you have paid more taxes directly to us than you owe, you may file a claim for refund.

To submit a claim for refund, simply login using your username and password and click on the account for which you want to request a refund. Click on the More link under the I Want To section. Then, select the Submit a Claim for Refund link and follow the prompts.

You may also file a claim for refund using the form CDTFA-101, Claim for Refund or Credit, or file an amended return stating the specific reason(s) for the overpayment. Additional details about filing a claim for refund can be found at our Special Taxes and Fees Refund page.

For additional information regarding claiming a refund for cigarette tax stamps, read Publication 63, Cigarette Distributor Licensing and Tax Stamp Guide.

Time Limit for Filing a Claim for Refund

Be sure to file your claim for refund by the applicable deadline. If you do not file on time, the CDTFA cannot consider your claim, even if you overpaid the tax. You must file a claim for refund by whichever of the following dates occur later:

  • Three years after the due date of the return on which you overpaid the tax
  • Six months after the date you overpaid the tax
  • Six months after the date a determination (billing) became final
  • Three years after the date the CDTFA collected an involuntary payment, such as from a levy or lien

Exported Tax-Paid Tobacco Products

Retailer or Wholesaler

If you purchased tax-paid tobacco products from an out-of-state California licensed distributor and you subsequently exported or shipped those tobacco products to a buyer outside of California, you may file a claim for refund directly with the CDTFA for the excise taxes paid on those tobacco products. Claims for the excise tax paid on these purchases may only be made if the tax is separately stated on the wholesaler or retailer's purchase invoice from the out-of-state California licensed distributor.

Distributor

A claim for refund or credit based upon the exportation of tax-paid tobacco products from this state to a point outside this state must be filed within three months after the close of the calendar month in which the tobacco products were exported. (Cigarette and Tobacco Products Tax Regulation 4063.5) A distributor may only receive a refund or credit for the exportation of tax-paid tobacco products for which they remitted the tax directly to the CDTFA. A refund or credit does not apply to the exportation of tax-paid tobacco products that a distributor purchased tax-paid.

California Cigarette and Tobacco Products Tax Regulation 4041, Common Carrier Delivery Reports, requires that every common carrier making deliveries of cigarettes, originating outside California to a consignee located in California, must file a report to us, on or before the 25th day of the calendar month, following the calendar month in which the delivery of the cigarettes or tobacco products was made.

For example, a report for the April 2022 reporting period would be due on or before May 25, 2022. A report must be filed each month even if no deliveries were made. The delivery report is informational only; no tax or fee is due. Reports are filed online through our online services. Please refer to the top of this page for information regarding filing online. The report must include the following information concerning the shipment:

  • The name of the shipper and the point of origin;
  • The name of the consignee and the address to which the products were delivered;
  • The date and number of the waybill covering the shipment;
  • The number of cases, bales or other containers of cigarettes delivered, and the quantity of cigarettes contained therein, and the quantity of tobacco products delivered, as shown by the shipping documents; and
  • In the case of rail shipments, the car initials and number; and
  • In the case of water shipments, the name of the vessel and the number of the steamship bill of lading.

Proposition 56

What was the floor stock tax and cigarette stamp adjustment tax? Who owed it?

With the passage of Proposition 56, starting April 1, 2017, the cigarette tax increased from $0.87 to $2.87 on a pack of 20 cigarettes. The additional cigarette tax created a requirement for retailers and wholesalers to report and pay the “floor stock tax” and for distributors to report and pay the “stamp adjustment tax.”

What was the floor stock tax and cigarette stamp adjustment tax based on?

Inventory counts:

Proposition 56 required retailers and wholesalers to take inventory of all stamped packages of cigarettes in their possession or control as of 12:01 a.m. on April 1, 2017, to report and determine the amount of floor stock tax due. It also required distributors to take inventory of all cigarette tax stamps (affixed and unaffixed) in their possession or control as of 12:01 a.m. April 1, 2017, to report and determine the amount of cigarette stamp adjustment tax due.

The following items should not have been included in your inventory count:

  • Retailers and wholesalers:
    • Stamped packages of little cigars.
  • Distributors:
    • Stamped packages of little cigars.
    • Excess unaffixed tax stamps – 10 denomination

For more information on how Proposition 56 affected little cigars for tax purposes, see How did Proposition 56 affect the taxation of little cigars? below.

Floor stock tax and cigarette stamp adjustment tax rates:

For retailers and wholesalers, the floor stock tax was applied to the inventory counts at the equivalent rate of:

  • $2.00 per pack of twenty (20) cigarettes
  • $2.50 per pack of twenty-five (25) cigarettes

For distributors, the cigarette stamp adjustment tax was applied to the cigarette inventory counts that had stamps affixed as of April 1, 2017, and unaffixed tax stamps purchased prior to April 1, 2017, at the equivalent rate of:

  • $2.00 per tax stamp – 20 denomination
  • $2.50 per tax stamp – 25 denomination

Were electronic cigarettes (eCigarettes) and vape liquids containing nicotine subject to the cigarette floor stock tax?

No. Proposition 56 limited the cigarette floor stock tax to cigarettes only (Revenue and Taxation Code section 30130.52). eCigarettes and vape liquids containing nicotine were taxed as tobacco products as of April 1, 2017.

In addition, the cigarette floor stock tax did not apply to tobacco products such as cigars, pouch tobacco, snuff, chewing tobacco, and as of April 1, 2017, little or small cigars.

Is the floor stock tax return and/or cigarette stamp adjustment tax return available on the CDTFA website?

Yes. Below are the links to the returns:

  • Retailers: CDTFA-501-Q1, Cigarette Dealer (Retailer) Floor Stock Tax Return
  • Wholesalers: CDTFA-501-Q2, Cigarette Wholesaler Floor Stock Tax Return
  • Cigarette Distributors: CDTFA-501-Q3, Cigarette Distributor Cigarette Stamp Adjustment Tax Return

Do I need to keep records of my inventory counts when I determined the floor stock tax and/or cigarette stamp adjustment tax?

Yes. Retailers and wholesalers should keep inventory records of their stamped cigarettes and distributors should keep inventory records of their affixed and unaffixed cigarette tax stamps that were in their possession or under their control as of 12:01 a.m. on April 1, 2017, to substantiate their tax returns.

When were floor stock tax returns/cigarette stamp adjustment tax returns and payment of the additional tax due?

The Cigarette Dealer (Retailer) Floor Stock Tax Return, Cigarette Wholesaler Floor Stock Tax Return, and Cigarette Distributor Cigarette Stamp Adjustment Tax Return and payment were due July 1, 2017. Because July 1, 2017, was a Saturday, the due date was Monday, July 3, 2017. If you file after July 3, 2017, you will owe interest and penalties.

How do I pay the floor stock tax and cigarette stamp adjustment tax?

We offer a number of convenient payment methods. You can make payments directly from your bank account, credit card, check, or money order. Information regarding payment options may be found under “Make a Payment”.

How did Proposition 56 affect the taxation of little cigars?

Prior to April 1, 2017, little cigars were taxed as cigarettes and required a cigarette tax stamp. Proposition 56 revised the definition of “tobacco products” (Revenue and Taxation Code section 30121(b)) thereby including little cigars as tobacco products.

As of April 1, 2017:

  • Little cigars must not be affixed with a cigarette tax stamp.
  • Licensed distributors may distribute little cigars that are affixed with a cigarette tax stamp as “tax paid” tobacco products until their inventories of these stamped products are exhausted.
  • Little cigars are taxed upon distribution at the tobacco products tax rate based on the wholesale cost of these products.
  • Licensed distributors owe the tobacco products tax on the distribution of unstamped little cigars.

For more information on how to report stamped packages of little cigars for the floor stock tax and cigarette tax stamp adjustment tax, see What was the floor stock tax and cigarette stamp adjustment tax based on? above.

What do I do with my existing inventory after I paid the floor stock tax and stamp adjustment tax?

Retailers and wholesalers who have reported and paid the floor stock tax may exhaust their inventory of cigarette packs affixed with the old cigarette tax stamps.

Distributors who have reported and paid the stamp adjustment tax may exhaust their inventory of pre-Proposition 56 cigarette tax stamps (affixed and unaffixed), except for unaffixed tax stamps bearing the “10” designation. Unaffixed tax stamps with the “10” designation were used to stamp packages of little cigars, which were taxed as “cigarettes” prior to April 1, 2017. Since starting April 1, 2017, little cigars are taxed as tobacco products and do not require a tax stamp, distributors may return any unaffixed “10” denomination cigarette tax stamps to the CDTFA for a refund. See below for more information about obtaining a refund.

I'm a distributor and had unaffixed tax stamps bearing the “10” designation for stamping little cigars. Since little cigars are taxed as tobacco products upon distribution as of April 1, 2017, was I able to get a refund for these stamps?

Yes. Distributors were able to return their excess unaffixed “10” cigarette tax stamps to the CDTFA for a refund. Distributors should have sent their claim for refund by mail to the Appeals and Data Analysis Branch, P.O. Box 942879, Sacramento, CA 94279-0033, or fax to 1-916-323-9497, or email the Appeals and Data Analysis Branch. CDTFA staff contacted the distributor and provided instructions on how to return the stamps.

I'm a retailer with over 100 separate retail locations. Could I have filed a printed spreadsheet containing the cigarette floor stock tax information (including account numbers) for all my locations or did I need to complete and file an individual floor stock tax return form for each of my locations?

All retailers should have filed an individual floor stock tax return form for each of their retail location(s).

I'm a retailer and a wholesaler. Did I have to complete two separate floor stock returns?

Retailers that are registered as wholesalers were required to report both their retail and wholesale cigarette stock and pay the floor stock tax on their CDTFA-501-Q2, Cigarette Wholesaler Floor Stock Tax Return, for each business location.They were required to complete the CDTFA-501-Q1, Cigarette Dealer (Retailer) Floor Stock Tax Return, by checking the box on the front of the return and providing their cigarette wholesaler account number to indicate that they also have a cigarette wholesaler account and are reporting and paying the floor stock tax on their cigarette wholesaler floor stock tax return. They were required to sign, date, and file this return with the CDTFA.

I am a Native American retailer with a retail business located on an Indian reservation that sells cigarettes at retail. Was I required to file a floor stock tax return and pay the tax on my inventory of cigarettes?

Native American retailers with a retail business selling cigarettes located on an Indian reservation were required to file a floor stock tax return with the CDTFA but may indicate zero due.

Since the cigarette tax rate increase took effect on April 1, 2017, was a new cigarette tax stamp issued?

Yes. Effective April 1, 2017, a new red/orange tax stamp replaced the old gold/yellow tax stamp. It is recommended that you first sell/distribute cigarettes with the gold/yellow tax stamp affixed. For more information, see Publication 403, California's Counterfeit-Resistant Cigarette Tax Stamp.

Was a new $2.00 tax stamp for the additional cigarette tax required to be applied in conjunction with the old cigarette tax stamp?

No. Once cigarette distributors exhaust their inventory of old (pre-Proposition 56) gold/yellow tax stamps, they should have begun affixing the new (post-Proposition 56) red/orange cigarette tax stamp to cigarette packs prior to subsequent distribution. Retailers and wholesalers were required to pay a floor stock tax on their inventory of stamped cigarette packs and were allowed to exhaust their inventory of cigarette packs affixed with the old cigarette tax stamps. Distributors were required to pay a cigarette tax stamp adjustment tax on their inventory of affixed and unaffixed cigarette tax stamps. Proposition 56 did not impose a time limit for distributors, wholesalers or retailers to exhaust their inventories of cigarette packs affixed with the old tax stamps.

Retailers

Beginning July 1, 2022, the HOPE Act requires us to collect the California Electronic Cigarette Excise Tax (CECET) from retailers who sell electronic cigarettes containing or sold with nicotine to consumers in California. If you are a retailer of electronic cigarettes containing or sold with nicotine, regardless if you are physically located within or outside California, you are responsible for registering for a CECET account with us. The HOPE Act requires a retailer of electronic cigarettes containing or sold with nicotine to:

  • Have a CECET permit (account),
  • Collect the CECET at the rate of 12.5 percent of the retail selling price of electronic cigarettes containing or sold with nicotine from the purchaser at the time of sale,
  • File a CECET return electronically, and
  • Pay the tax to us.

For more information, see the Tax Guide for California Electronic Cigarette Excise Tax.

If a retailer makes available a commercial cigarette-making machine for use by customers, federal law requires the retailer to obtain a permit as a “manufacturer of tobacco products” from the Alcohol and Tobacco Tax and Trade Bureau (TTB). Under the Cigarette and Tobacco Products Licensing Act of 2003, the retailer does not manufacture cigarettes if the retailer does not own the tobacco when it is manufactured into cigarettes. In this scenario, the retailer is not required to register with us as a cigarette manufacturer.

It is against federal law to operate as a manufacturer of tobacco products without a TTB permit, and doing so without proper permits risks civil and/or criminal liability. The TTB has instructed that retailers operating without a permit “must immediately cease operations until a TTB permit is obtained.” The TTB's enforcement efforts have included investigations of retail locations where the machines are made available to members of a “social club” or “non-profit.” The TTB has indicated that the non-profit status of the “person” making the machine available is not relevant in evaluating “commercial purposes” under Internal Revenue Code section 5702 and has found members of a “social club” or “non-profit” to be in violation of the law and has assessed taxes.

Please note: These requirements do not apply to cannabis businesses that only use the making or rolling machine to roll cannabis or cannabis products. Furthermore, cigarette and tobacco products may not be sold at the same location that is licensed as a cannabis business.

The minimum age to purchase cigarettes and tobacco products in California is 21, except for active duty military personnel in the U.S. Armed Forces.

See the California Department of Public Health's Tobacco 21 website for more information.

Electronic cigarettes, personal vaporizers, eCigars, eHookahs, ePipes, and vaping devices are some of the terms used to describe electronic nicotine delivery systems (ENDS). Generally, these ENDS heat a liquid solution or “eLiquid,” which typically, but not always, contains nicotine as well as varying flavorings and other ingredients, to create a vapor that the user inhales.

The ENDS that do not contain nicotine or are not sold in a kit that contains nicotine, are considered tobacco products for retail licensing purposes, but not for tax purposes. Thus, the sale of ENDS that do not contain nicotine or are not sold with nicotine are not subject to the California excise tax on tobacco products. However, a California Cigarette and Tobacco Products Retailer's License is required if you sell ENDS that do not contain nicotine or are not sold with nicotine to a consumer in California. A distributor or wholesaler does not need to be licensed under the California Cigarette and Tobacco Products Licensing Act of 2003 to sell ENDS that do not contain nicotine or are not sold with nicotine to a retailer.

Beginning July 1, 2022, the sale of ENDS that contain nicotine or are sold in a kit with nicotine are subject to the California electronic cigarette excise tax (CECET). Retailers of electronic cigarettes containing or sold with nicotine are required to collect from the purchaser the CECET at the rate of 12.5 percent of the retail selling price. Accordingly, electronic cigarette retailers are required to hold a California Cigarette and Tobacco Products Retailer’s License and a CECET permit (account). For more information regarding the sales and reporting requirements for CECET, please see our Tax Guide for California Electronic Cigarette Excise Tax.

Important Note: The California Cigarette and Tobacco Products Licensing Act does not apply to cannabis or other cannabis products such as cannabis vape pens or accessories. In addition, cigarette and tobacco products may not be sold at the same location that is licensed as a cannabis business.

A tobacco product manufacturer (Regulation 4077, Tobacco Product Manufacturer) is:

  • Any person, including any repacker or relabeler, who manufactures, fabricates, assembles, mixes, blends, combines, processes, or labels a finished tobacco product.
  • An owner of a brand or formula for a tobacco product who contracts with another person to complete the fabrication and assembly of the product to the owner's standard.
  • A retailer who mixes, blends, or combines a tobacco product that is not in a form suitable for human consumption, such as liquid nicotine, with other ingredients or components to make a tobacco product that is suitable for human consumption.

A tobacco products retailer is not a tobacco product manufacturer solely because:

  • A retailer packages liquid nicotine with other items as one unit.
  • A retailer packages finished tobacco products, such as cigars, together as one unit.
  • A retailer allows its customers to mix, blend, or combine liquid nicotine and other components after a sale has been made.
  • A retailer mixes, blends, or combines finished tobacco products, such as pipe tobacco.

A tobacco products retailer who is a tobacco product manufacturer must also register as a tobacco products distributor. A tobacco products retailer who is not licensed as a tobacco products manufacturer, importer, or distributor must purchase its tobacco products from a licensed tobacco products distributor or wholesaler.

For more information about manufacturers, see our Manufacturer & Importer section.

Distributors

“Wholesale cost” means the cost of tobacco products to the distributor prior to any discounts or trade allowances (Revenue and Taxation Code section 30017). The wholesale cost is used to calculate the tax amount due for tobacco products distributions.

Regulation 4076, Wholesale Cost of Tobacco Products, provides more clarification on wholesale cost for your reference.

Regulation 4076(a), Wholesale Cost of Tobacco Products, defines:

Arm's-length transaction

An “arm's-length” transaction is a sale entered into in good faith and for valuable consideration that reflects the fair market value in the open market between two informed and willing parties, neither under any compulsion to participate in the transaction.

Discounts or trade allowances

“Discounts or trade allowances” are price reductions, or allowances of any kind, whether stated or unstated, and include, without limitation, any price reduction applied to a supplier's price list. The discounts may be for prompt payment, payment in cash, bulk purchases, related-party transactions, or 'preferred-customer' status.

Electronic cigarettes

“Electronic cigarettes” or “e-cigarettes” are devices or delivery systems sold in combination with nicotine that can be used to deliver the nicotine in aerosol or vapor form to a person, and the liquids ("e-liquid" and "e-juice”) such devices or delivery systems heat to create the aerosol or vapor. Electronic cigarettes include any component, part, or accessory of such a device or delivery system that is used during the operation of the device when sold in combination with any liquid or substance containing nicotine. Electronic cigarettes also include any liquids or substances that contain nicotine, regardless of whether they are sold in combination with any device, delivery system, or any component, part, or accessory of such a device or delivery system. If nicotine is not sold in combination with devices, delivery systems, components, parts, accessories, liquids, or substances, then those items are not electronic cigarettes.

Finished tobacco products; finished condition

“Finished tobacco products” and tobacco products in “finished condition” are tobacco products that will not be subject to any additional processing before distribution in the state.

Sold in combination with

Electronic cigarettes are “sold in combination with” nicotine when:

  • Any of the items are sold with any nicotine liquid or substance in their original manufacturer packaging as one unit, or
  • Sold for a single price before or when the nicotine liquid or substance is distributed.

Tobacco products

The definition of “tobacco products” (starting April 1, 2017) includes all products containing, made, or derived from tobacco or nicotine that are intended for human consumption, except cigarettes, any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes where that product is marketed and sold solely for such approved use, and food products as defined in Revenue and Taxation Code section 6359. Tobacco products include, but are not limited to, cigars, little or small cigars, chewing tobacco, electronic cigarettes, pipe tobacco, and snuff.

If finished tobacco products are purchased by a distributor from a supplier in an arm's-length transaction, the wholesale cost of the tobacco product is (Regulation 4076(b)(1)):

  • The amount paid for the tobacco product prior to discounts and trade allowances,
  • Including any federal excise tax,
  • Excluding any transportation charges for shipment originating within the United States.

Discounts and trade allowances must be added back when determining the wholesale cost.

Presumption of Non-Arm's-Length Transactions

Sales, purchases, and transfers of tobacco products are rebuttably presumed to not be at arm's-length if they are between related parties such as (Regulation 4076(d)):

  • Relatives (by blood or marriage, which relationships include, but are not limited to, spouses, parents, domestic partners, children and siblings);
  • Partners or a partnership and its partners;
  • A limited liability company or association and its members;
  • Commonly controlled corporations;
  • A corporation and its shareholders; or
  • Persons, as defined in Revenue and Taxation Code section 30010, and entities under their control or between commonly controlled entities.

How to Rebut a Transaction Presumed Not to Be at Arm's-Length

If we determine that a sale, purchase, or transfer of tobacco products was between related parties, the distributor may rebut the presumption that the sale, purchase, or transfer was not at arm's-length by showing that the price, terms, and conditions of the transaction were substantially equivalent to those that would have been negotiated between unrelated parties.

Wholesale Cost of Non-Arm's Length Transactions

If tobacco products are purchased in a non-arm's length transaction, the correct wholesale cost to be reported by the distributor may be determined using any of the alternative methods of estimating or calculating wholesale cost as provided in Regulation 4076(c), which is also provided below under the heading “Wholesale Cost of Tobacco Products – Alternative Methods of Estimating or Calculating Wholesale Cost in Certain Situations”.

If a manufacturer or an importer is also the distributor, the wholesale cost of tobacco includes (Regulation 4076(b)(2)):

  • All manufacturing costs. Manufacturing costs:
    • Include overhead expenses directly or indirectly attributable to the production of finished tobacco products, which can include, but are not limited to:
      • Production and administrative salaries,
      • Depreciation,
      • Repairs and maintenance,
      • Rent and utilities for the production facilities, and
      • Equipment.
    • Must be allocated to each product unit by a reasonable and consistent pro-rata accounting method.
    • Do not include overhead expenses that are not directly or indirectly attributable to the production of finished tobacco products. These costs can include, but are not limited to, salaries and other expenses for business activities involving selling, distribution, marketing, finance, information technology, human resources, and legal activities.
  • The cost of raw materials (including waste materials not incorporated into finished tobacco products) prior to any discounts or trade allowances,
  • The cost of labor,
  • Federal excise taxes paid,
  • U.S. Customs taxes paid,
  • Freight or transportation charges for shipment of materials and unfinished products from a supplier to a manufacturer concurrently licensed as a distributor, but excludes domestic freight or transportation charges for shipment of finished tobacco products.

If a manufacturer or importer of tobacco products is also a distributor, the correct wholesale cost to be reported by the distributor may be determined using any of the alternative methods of estimating or calculating wholesale cost as provided in Regulation 4076(c), which is also provided below under the heading “Wholesale Cost of Tobacco Products - Alternative Methods of Estimating or Calculating Wholesale Cost in Certain Situations”.

The correct wholesale cost to be reported by the distributor may be determined by using any of the alternative methods of estimating or calculating the wholesale cost as described in Regulation 4076(c), if the following situations apply:

  • If a manufacturer or importer of tobacco products is also a distributor. (Regulation 4076(b)(2))
  • If tobacco products costs include express, implicit, or unstated discounts or trade allowances. (Regulation 4076(b)(3))
  • If tobacco products are not purchased in an arm's length transaction. (Regulation 4076(b)(4))

The following resources or methods, as described in Regulation 4076(c), may be used:

  • A publicly or commercially available price list that the distributor used to determine the prices of tobacco products sold to customers in arm's-length transactions during the time period at issue, less an estimate based on best available information of the distributor's or a similarly situated distributor's profit.
  • If a publicly or commercially available price list is not available, industry data from the time period to be estimated or calculated that provides reasonable evidence of typical tobacco product costs during such time period, including, but not limited to:
    • Evidence reasonably indicative of the same or similar tobacco products typical costs for similarly situated distributors, with appropriate adjustments to such costs as indicated by all the facts and circumstances.
    • All the direct and indirect costs that the supplier paid or incurred with respect to acquisition, production, marketing, and sale of the tobacco products sold by the supplier to the distributor, with appropriate adjustments to such costs as indicated by all the facts and circumstances, plus a reasonable estimate of the supplier's profit.
    • The price of the same or similar tobacco products as reflected in a supplier's price list, with appropriate adjustments to such price as indicated by all the facts and circumstances.
    • The retail price of the same or similar tobacco products as reflected in a retailer's price list, with appropriate adjustments to such price as indicated by all the facts and circumstances, less reasonable estimates of the retailer's and distributor's profits.
    • Additional methods not mentioned above, with our approval.

Regulation 4076(e), Wholesale Cost of Tobacco Products, provides examples of estimating or calculating the wholesale cost of tobacco products:

Example 1: Distributor B produces handmade cigars.

  • Since Distributor B makes the cigars, Distributor B is a manufacturer in addition to a distributor.
  • Distributor B would compute the wholesale cost of their tobacco products by including their manufacturing costs. See description of all costs to include under the heading “Wholesale Cost of Tobacco Products – If a Manufacturer or Importer is also the Distributor” or Regulation 4076(b)(2).

Example 2: Distributor C purchases tobacco products from a subsidiary corporation in which it owns or controls more than 50 percent of the voting stock.

  • Due to this corporate relationship between seller and buyer, we presume that the sale and purchase were not at arm's-length, and the presumption is not rebutted by Distributor C.
  • In the absence of an arm's-length transaction, the methods discussed under the heading “Wholesale Cost of Tobacco Products – Alternative Methods of Estimating or Calculating Wholesale Cost in Certain Situations” or in Regulation 4076(c) may be used to determine the correct wholesale cost.

Example 3: Distributor D acquires tobacco products free of charge and reports no wholesale cost for the products on its Tobacco Products Distributor Tax Return.

  • However, Distributor D acquired such tobacco products at a 100 percent discount or trade allowance.
  • In the absence of an arm's-length transaction, the methods discussed under the heading “Wholesale Cost of Tobacco Products – Alternative Methods of Estimating or Calculating Wholesale Cost in Certain Situations” or in Regulation 4076(c) may be used to determine the correct wholesale cost.

Example 4: Distributor E, with a Tobacco Products Importer's License, acquires tobacco products or finished tobacco products from a supplier outside the United States.

  • Distributor E's tobacco products costs include, in addition to all other production or acquisition costs, the costs of all U.S. Customs fees and federal excise taxes paid or incurred by Distributor E with respect to such tobacco products.

Example 5: Distributor F receives three tobacco products packaged as one unit, as a “three for the price of two” promotional package, labeled with a single UPC barcode.

  • As the products are packaged together as one inseparable unit, tax is based on the total package price.

Example 6: Distributor G receives two units, to sell as a “buy one, get one free” promotion. Each unit is separately packaged and each unit is labeled with a UPC barcode.

  • Because one unit is being provided for free, tax would apply to the wholesale cost of each separate unit as calculated by a method discussed under the heading “Wholesale Cost of Tobacco Products – Alternative Methods of Estimating or Calculating Wholesale Cost in Certain Situations” or in Regulation 4076(c).

Example 7: Distributor H receives a three percent discount for paying their supplier within 10 days of receipt of their items.

  • To calculate the wholesale cost, Distributor H must add the three percent discount to the price paid for the products.

Regulation 4076(f), provides examples of items that are and are not tobacco products as of April 1, 2017, and additional examples of estimating or calculating the wholesale cost of tobacco products:

Example 1: Distributor K produces finished nicotine products intended for human consumption.

  • Since K makes tobacco products, K is considered a manufacturer in addition to a distributor.
  • Therefore, to compute the wholesale cost of K's tobacco products, K would include the costs described under the heading “Wholesale Cost of Tobacco Products – If a Manufacturer or Importer is also the Distributor” or in Regulation 4076(b)(2).

Example 2: Distributor L purchased two types of vaping kits. Both types of kits are sold to Distributor L as a single unit in their original manufacturer packaging and contain a personal vaping device, tank, atomizer coil, USB charger, A/C adapter and a bottle of finished flavored e-liquid. Kit #1 has 1.80 percent nicotine content in its e-liquid while Kit #2 has no nicotine in its e-liquid.

  • Kit #1 is an electronic cigarette because Kit #1 contains a personal vaping device and related components, parts, or accessories that are sold in combination with liquid containing nicotine.
  • When Kit #1 is distributed, Distributor L would need to report the tobacco products tax based on the wholesale cost of Kit #1 as a unit.
  • Kit #2 is not an electronic cigarette because nicotine is not sold in combination with the items in Kit #2 and the tobacco products tax would not apply to Kit #2 because it is not a tobacco product.

Example 3: Distributor M purchased 100 packages of vaping Kit #3, which the manufacturer packaging states contains the following: a personal vaping device, tank, atomizer coil, USB charger and A/C adapter. Distributor M also purchased 100 packaged bottles of finished, flavored e-liquid containing 3.20 percent nicotine. Distributor M intends to sell both packages to wholesalers and retailers and will separately charge wholesalers and retailers for packages containing Kit #3, and packages containing a bottle of the finished, flavored e-liquid containing nicotine as part of each sale of both items in the same transaction.

  • Distributor M will need to report the tobacco products tax on the wholesale cost of the packages containing bottles of finished, flavored e-liquid containing nicotine because e-liquid containing nicotine is an electronic cigarette and, therefore, a tobacco product, but not on the packages of Kit #3, which are not electronic cigarettes or tobacco products, because the items in Kit #3 are not sold in combination with a liquid or substance containing nicotine.

Example 4: Distributor N sells closed-system vaping devices to wholesalers and retailers. The devices are manufactured so that they contain finished, flavored e-juice containing nicotine, they are immediately ready to use when purchased, and new devices cannot be sold without nicotine.

  • The closed-system vaping devices are electronic cigarettes or e-cigarettes because they are sold in combination with a liquid or substance containing nicotine.
  • Distributor N will need to report the tobacco products tax on the entire wholesale cost of each closed-system e-cigarette.

Example 5: Retailer P purchases e-juice containing nicotine tax-paid from a licensed tobacco products distributor. Retailer P, as a promotion, will package and sell the tax-paid e-juice containing nicotine with a battery, power adapter and carrying case all for a single price.

  • The retailer's packaged product is not an electronic cigarette for purposes of the tobacco products tax and the retailer's wholesale cost of the packaged product is not subject to the tobacco products tax because the distribution of the e-juice containing nicotine occurred prior to Retailer P's promotional sale.

Example 6: Distributor Q advertises that if customers purchase ten (10) disposable e-cigarette cartridges prefilled with e-juice that has a nicotine content of 1.8 percent they will receive their choice of two accessories for free that were not packaged with the cartridges in the cartridges' original manufacturer packaging as one unit. The billing invoices show the price charged for the cartridges and a separate charge of $0 for the accessories.

  • The tobacco products tax would apply to the wholesale cost of the cartridges only since the accessories are not packaged with the cartridges by the manufacturer as one unit and the accessories are not sold with the cartridges for a single price.

Example 7: Distributor R, who also manufactures finished tobacco products, rents a facility where it manufactures and stores finished tobacco products. The facility also houses the offices for Distributor R's entire operation, including the sales and general administration offices. Distributor R pays the sum of $10,000.00 per month in rent for the facility. Distributor R utilizes five percent of the total volume of space for manufacturing finished tobacco products.

  • Because a portion of the rented facility is used for manufacturing purposes, Distributor R must allocate a proportionate share of its rent expense to its calculation of its manufacturing costs.
  • In this example, Distributor R must allocate five percent of the monthly rent ($10,000 x 5% = $500) to the wholesale cost of the finished tobacco products Distributor R manufactures at the facility.

Example 8: Distributor S purchases un-taxed 60 ml. containers of finished e-liquid containing nicotine from an out-of-state company. Distributor S places each 60 ml. container of finished e-liquid containing nicotine into a single package along with a vaping kit put together by Distributor S which contains a personal vaping device, tank, atomizer coil, USB charger and an AC adapter. Distributor S will distribute the e-liquid containing nicotine by selling these combined packages to other distributors, wholesalers, retailers and consumers in California for a single price.

  • When Distributor S sells each combined package containing un-taxed e-liquid containing nicotine for a single price, the entire package will be an electronic cigarette, and tax will apply to the wholesale cost of the entire package.

The sale of tobacco products by an out-of-state California-licensed tobacco products distributor to an in-state California-licensed tobacco products distributor is not considered a distribution of tobacco products in California by the out-of-state seller. Instead, the licensed distributor in California who purchases the tobacco products from out-of-state and who makes the distribution of tobacco products in California owes the applicable excise tax.

License Requirements

An out-of-state distributor who is engaged in business in California must have a California distributor license for licensing and tax reporting purposes (Revenue and Taxation Code [R&TC] section 30108). An out-of-state distributor who is not engaged in business in California may apply for a distributor license (R&TC section 30140.1) for licensing and tax reporting purposes. Out-of-state California-licensed distributors have the same responsibilities and requirements as in-state California-licensed distributors.

“Engaged in business” includes, but is not limited to:

  • Maintaining, occupying, or using any type of business location. This includes use that is temporary, direct or indirect, or through any type of subsidiary or agent.
  • Having a representative in California who sells, delivers, or takes orders of tobacco products.

Distributor licenses are required for each business location that distributes tobacco products in California (R&TC section 30140). A warehouse/storage location is not considered a location that distributes tobacco products unless direct tobacco products distributions are made from that warehouse/storage location.

Calculation of Tax

The excise tax is due on the in-state California licensed tobacco products distributor's wholesale cost of the tobacco products. The in-state distributor's wholesale cost is usually the list price on their purchase invoice from their supplier prior to any discounts or trade allowances. The tax rate that applies is the rate in effect at the time the in-state distributor sells the tobacco products. For additional information on the wholesale cost, please read Regulation 4076, Wholesale Cost of Tobacco Products. In-state distributors responsible for paying the excise tax on taxable distributions (sales) must: indicate the excise tax on the sales invoice issued to customers; calculate the excise tax due based on their wholesale cost; report their distribution of the tobacco products, based on the date sold, on the tax return (Tobacco Products Distributor Tax Return) provided by the state; and pay the total amount due to the state.

For reference, view the Special Notice (L-506, September 2017), Tobacco Product Sales by Out-of-State Distributors to In-State Distributors.

Cigarettes

The measure of tax is different for a “Buy 1 Get 1 Free” unit of cigarettes. With cigarettes, the two packages cannot be viewed as one unit for tax purposes because the cigarette tax is based on each cigarette (stick) distributed, not wholesale cost, and both packages require a tax stamp. In short, cigarettes are taxed per each cigarette (stick) distributed and tobacco products are taxed based on the wholesale cost to the distributor.

Tobacco Products

When multiple cans of chewing tobacco, for example, are sold by a manufacturer to a licensed distributor in a one-pack unit commonly referred to as “Buy 1, Get 1 Free,” or “Three for the Price of Two,” what is the measure of tax? See examples below:

Example 1: Distributor A receives three tobacco products packaged as one unit, as a “three for the price of two” promotional package, labeled with a single UPC barcode. As the products are packaged together as one inseparable unit, tax would apply on the total package wholesale price.

Example 2: Distributor B receives 2 units, to sell as a“buy one, get one free” promotion. Each unit is separately packaged and each unit is labeled with a UPC barcode. Because one unit is being provided for free, tax would apply to the wholesale cost of each separate unit.

The following sales and distributions of cigarettes and tobacco products are generally not subject to the tax although these transactions may be subject to reporting requirements. This list is not intended to be all-inclusive.

  • Sales of cigarettes or tobacco products by the original importer to a licensed distributor if the cigarettes or tobacco products are manufactured outside the United States (Revenue and Taxation Code (R&TC) section 30105);
  • Sale or gift of federally tax-free cigarettes or tobacco products when the cigarettes or tobacco products are delivered directly from the manufacturer under Internal Revenue bond to a veteran's home of the State of California or a hospital or domiciliary facility of the United States Veterans' Administration for gratuitous issue to veterans receiving hospitalization or domiciliary care. The tax shall not apply to the use or consumption of such cigarettes or tobacco products by the institution or by the veteran patients or domiciliaries (R&TC section 30105.5);
  • Sales of cigarettes or tobacco products by the manufacturer to a licensed distributor (R&TC section 30103);
  • Sales by a distributor to a common carrier engaged in interstate or foreign passenger service. (R&TC section 30104); Note: To properly support your claim for the interstate commerce exemption, you must:
    • Maintain adequate documentation. Evidence of delivery of cigarettes or tobacco products to a destination outside of California must be retained by the distributor. In the case of cigarettes or tobacco products for foreign export, copies of United States Customs shippers' export declarations filed with the Collector of Customs or other documentary evidence of export must be obtained and retained.
    • Claim the correct wholesale cost for tobacco products. All distributions of untaxed tobacco products must be included in the wholesale cost of distributions. With proper documentation, sales of tobacco products which are shipped to a buyer outside of California may be claimed as an exempt sale. The amount claimed is the wholesale cost to the distributor, not the distributor's selling price.
  • Sales to United States military exchanges, commissaries, ships' stores, or the U.S. Department of Veterans Affairs (R&TC section 30102);
  • Distributions of federally untaxed cigarettes or tobacco products that are under Internal Revenue bond or U.S. Customs control (R&TC section 30102.5);
  • An individual shipment of not more than 400 cigarettes (typically 20 packs or 2 cartons) personally transported into California (R&TC Section 30106);
  • Sales and distributions of cigarettes and tobacco products that cannot be taxed by the state under the U.S. Constitution or federal law, or under the California Constitution or state law, such as shipments to purchasers in other states, territories, or foreign countries when the cigarette and tobacco products are not to be returned to California before use.

Native Americans

Native American retailers

A Native American retailer in California who buys untaxed tobacco products or cigarettes without a California tax stamp and sells them to non-Native Americans in Indian Country is required to collect the cigarette and tobacco products excise taxes from those purchasers and pay the excise tax to us.

If the Native American retailer does not collect and pay the excise taxes due, the non-Native American purchaser is ultimately liable for the excise taxes. Non-Native Americans who purchase cigarettes without California tax stamps or untaxed tobacco products from a Native American retailer, owe the cigarette and tobacco products excise and use taxes. The non-Native American purchaser must file a return with us to report purchases and pay applicable California cigarette and tobacco products excise and use taxes. For more information on how non-Native American purchasers report and pay excise and use taxes, see the PACT Act & Consumer section.

Distributors

There are no special exemptions from the state's cigarette and tobacco products excise taxes for sales of cigarettes and tobacco products to Native Americans. A non-Native American cigarette or tobacco products distributor who sells cigarettes or tobacco products to Native American must pay cigarette and tobacco products excise taxes and apply California cigarette tax stamps to the cigarette packages.

License Requirement

To comply with California law, Native American Tribes are generally required to obtain and maintain the appropriate cigarette and tobacco products license(s) in order to make sales in California of cigarettes and tobacco products to businesses or consumers.

If a Native American Tribe operates on its own tribal land and exclusively makes sales to members of its own tribe, that Native American Tribe is not required to hold a cigarette and tobacco products license.

If a Native American Tribe makes sales of cigarettes and tobacco products to non-Native Americans or tribe members of a different Native American tribe, however, California law requires the Native American Tribe to obtain a cigarette and tobacco products license since those sales must be reported and the tax must be collected and remitted to CDTFA.

License Fee

If a Native American Tribe is required to hold a cigarette and tobacco products license in order to sell cigarettes and tobacco products to non-Native Americans or tribe members of a different Native American tribe in California, the license fee for a cigarette and tobacco products license does not apply to that Native American Tribe.

Disclaimer

This page summarizes the law and applicable regulations in effect when it was written. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between text on this webpage and the law, the decision will be based on the law and not on this webpage.

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

Laws

Regulations

Related Guides

Publications

Tax Rates and License Fees

Special/Important Notices

Archives:

2017

2016

Online Seminars and Instructor-led Classes

Verify a License

Select one of the following links below for a current list of licensed California cigarette and tobacco products distributors, wholesalers or retailers. You are responsible for verifying the entity you are purchasing from or selling to has a valid cigarette and tobacco products license.

Public Data

Enforcement/Tax Evasion

Related Websites

Other Helpful Resources

  • Contact Us – A listing of CDTFA contacts for your questions and concerns.
  • Sign Up for CDTFA Updates – Subscribe to our email lists and receive the latest news, newsletters, tax and fee updates, public meeting agendas, and other announcements.
  • Videos and How-To Guides – These resources will help you avoid common mistakes, file your tax returns online, and more.
  • City and County Tax Rates – A listing of current and historical tax rates.
  • Find a Sales and Use Tax Rate – Enter an address and find the sales and use tax rate for that location.
  • Online Services – Learn about the online services CDTFA offers.
  • Verify a Permit, License or Account – You can use this application to verify a seller's permit, Cigarette and Tobacco products license, Covered Electronic Waste Recycling (eWaste) Fee account, or Underground Storage Tank Maintenance Fee Account.
  • Office Locations and Addresses – A comprehensive listing of all CDTFA offices and contact information.
  • Get It In Writing! – Tax and fee laws can be complex, and you are encouraged to put your tax questions in writing. You may also send your request in a letter to: Special Taxes and Fees, MIC:31, California Department of Tax and Fee Administration, P.O. Box 942879, Sacramento, CA 94279-0031.
  • Taxpayers' Rights Advocate (TRA) – The TRA Office helps taxpayers when they are unable to resolve a matter through normal channels, such as speaking to a supervisor, or when there are apparent rights violations.
  • GO-Biz – The Governor's Office of Business and Economic Development offers extensive information on state, local, and federal permit requirements. For a listing of their assistance centers, visit their website.
  • CalGold – Provides help with permit and licensing requirements for other state, federal, and local authorities. For example, you may need to register with the Franchise Tax Board or the Employment Development Department. You may also want to consult with a tax professional or your local city and county authorities for assistance regarding other agencies' requirements or restrictions.
  • California's Tax Service Center – A one-stop tax help and resource website that guides taxpayers to forms and services they need.