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Business Taxes Law Guide—Revision 2024

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Cigarette and Tobacco Products Tax Regulations

Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 9. Cigarette and Tobacco Products Tax Law Regulations

Article 1. General Provisions

Regulation 4001. Cigarette.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4002. Distribution.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4003. Package.

[Repealed May 4, 1982, effective August 19, 1982.]

Article 2. Use of Stamps or Meter Impressions

Regulation 4007. Requirement Beginning September 1, 1959.

[Repealed May 4, 1982, effective August 19, 1982.]

Article 3. Distributor's and Wholesaler's License

Regulation 4001. Retail Stock.

Reference: Sections 30008 and 30109, Revenue and Taxation Code; Authority Cited: Section 30451, Revenue and Taxation Code

(a) "Retail stock" means and includes:

(1) All cigarettes and tobacco products intended and available for sale to consumers by a person who holds a retailer license; and

(2) All cigarettes and tobacco products displayed for sale to consumers by a person who concurrently holds a distributor license and a retailer license at the same location.

(A) Cigarettes and tobacco products that are stored in the area where retail sales are made are deemed to be retail stock. Cigarettes and tobacco products that are securely stored away from the area where retail sales are made are not considered retail stock.

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

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

(ii) Untaxed cigarettes and tobacco products must be in the original manufacturer packaging, with an unbroken seal, and they must be secured, segregated, and separated from inventory accessible by consumers. Untaxed tobacco products must be segregated and secured separately from tax-paid tobacco products away from the retail area.

(B) Walk-in humidors. Tobacco products inside a walk-in humidor displayed for sale to consumers are retail stock. Tobacco products inside a walk-in humidor in the original manufacturer packaging with an unbroken seal, secured, segregated and separated from retail stock, and not displayed for sale to consumers are not retail stock. Examples of areas that are separated and segregated from retail stock include, but are not limited to, the following secured areas:

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

(b) A person who is both a licensed retailer and a licensed distributor, but who only makes retail sales to consumers and does not make any sales for resale to other licensees, holds all inventory intended for sale in retail stock.

(1) All cigarettes and tobacco products placed in retail stock have been distributed. Tax is due upon distribution.

(2) Unless the contrary is established, it shall be presumed that all cigarettes and tobacco products no longer in a distributor's possession, including when they have been lost through an unexplainable disappearance, have been distributed. The presumption may be rebutted by a preponderance of the evidence demonstrating that an explainable disappearance, such as theft, has occurred.

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

(A) Police reports (Required and must have been filed timely)

(B) Insurance claims

(D) Video surveillance

(E) Photographs

(F) Detailed tobacco inventory reports

(G) Cigarette and tobacco purchase invoices (Required)

(H) Proof of prosecution related to charges of theft of cigarettes or tobacco products.

History—Adopted February 22, 2017, effective July 1, 2017.

Regulation 4011. Requirement for Distributor's License.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4011. Distributors Not Engaged in Business in this State.

Reference: Sections 30108 and 30140.1, Revenue and Taxation Code

Persons who are not engaged in business in this state may apply for a distributor's license. Holders of such licenses are required to file a certified monthly report or return with the Board on Board of Equalization Form BOE-501-CTS entitled "Cigarette and Tobacco Products Tax Return for Shipments to California Consumers" reporting the following: distributor's name, account number, his or her total number of distributions of cigarettes, total excise tax due on cigarettes, total cost of tobacco purchased, total excise tax due on cost of tobacco products, total excise tax due for all cigarettes and tobacco products, remitting payment of taxes, including any applicable interest or penalty, the name and address of each purchaser from whom an order is taken, the number of cigarettes and/or type, quantity, and wholesale cost of tobacco products sold and delivered pursuant to each order, and the amount of tax required to be collected from each purchaser. Further, the licensee is required to collect the tax, give receipts for the collected tax, and pay the tax to the Board in the same manner as licensees engaged in business in this state.

History—Adopted August 1, 2001, effective June 12, 2002.

Regulation 4012. License Application.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4013. Passenger Carriers and Authorized Sellers.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4014. Registration of Unlicensed Distributors.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4015. Wholesaler's License Application.

[Repealed May 4, 1982, effective August 19, 1982.]

Article 4. Distributor's Bond

Regulation 4016. Bond of Distributor.

[Repealed June 22, 1983, effective October 6, 1983.]

Regulation 4017. Deposits in Lieu of Surety Bonds.

[Repealed October 25, 1972, effective November 30, 1972.]

Regulation 4018. Amount of Security.

Reference: Sections 30141, 30142, and 30167, Revenue and Taxation Code.

(a) The amount of security shall be fixed by the board. The board may increase or reduce the amount of security at any time, but in no event shall the amount of security be less than $1,000.

(b) When a distributor is authorized to purchase stamps or meter register settings on the deferred payment basis, the security shall be fixed in an amount no less than 70 percent of the amount, and no more than twice the amount, as fixed by the board, of deferred payment purchases which the distributor may have unpaid at any time.

History—Adopted June 24, 1959.

Amended September 13, 1961.

Amended January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. In subdivision (a), replaced "bond" with "security" and deleted second sentence, relating to security required for distributors who do not affix stamps. In subdivision (b), replaced "pursuant to the Cigarette Tax Law, his bond" with "the security", replaced "equal to" with "no less than", and added "and no more than twice the amount" after "70 percent of the amount".

Article 5. Inventories

Regulation 4021. Opening Inventory.

Reference: Sections 30182, 30188, 30453, and 30454, Revenue and Taxation Code.

Every distributor or wholesaler engaged in the sale of cigarettes shall take a physical inventory of cigarettes on hand as of the time the distributor or wholesaler first engages in the sale of cigarettes as a distributor or wholesaler. A report of a first physical inventory taken shall be filed with the board on or before the 25th day of the calendar month following the calendar month in which the distributor or wholesaler first engages in the sale of cigarettes as a distributor or wholesaler.

History—Adopted June 24, 1959.

Amended October 10, 1968, effective November 13, 1968.

Amended September 26, 2001, effective February 15, 2002. Deleted subdivision (b), which related to wholesalers, and "distributor or wholesaler" to remaining paragraph.

Regulation 4022. Inventories of Cigarettes.

Reference: Sections 30182, 30188, 30453, and 30454, Revenue and Taxation Code.

(a) Every distributor, importer, and wholesaler engaged in the sale of cigarettes shall file with the Department by the 25th day of each calendar month a certified report and the supporting schedules required by subdivisions (c) and (d), which includes a reconciliation of the cigarettes in inventory at the end of the month covered by the report. Distributors and importers must also report the number of cigarettes contained in packages to which tax stamps are affixed and the number of cigarettes in packages not bearing tax stamps.

(b) If the distributor, importer, or wholesaler has a cycle count inventory system and perpetual inventory system in place, the monthly reconciliation shall be based on the perpetual inventory report run on the last business day of the month for which the distributor's, importer's, or wholesaler's report is filed. However, at least once every calendar year, the monthly reconciliation shall be based on a physical inventory of cigarettes on hand on the last business day of the month for which the distributor's, importer's, or wholesaler's report is filed.

A "cycle count inventory system" is a system that provides evidence that all cigarettes are counted on a regular basis, with each item being counted at least once every three-month period.

A "perpetual inventory system" is a system in which inventory records are maintained and updated continuously as items are purchased or sold.

(c) A distributor or importer engaged in the sale of cigarettes shall submit a cigarette disbursement schedule, which must contain the name and account number of the licensee filing the schedule, the month and year covered by the schedule, the schedule code for the activity being reported, and the following information regarding each cigarette disbursement:

(1) The buyer's name and federal employer identification number (FEIN);

(2) The address (street, city, state, zip code, and country) where the cigarettes were delivered;

(3) The Tax Jurisdiction Code;

(4) The name of the manufacturer of the cigarettes disbursed;

(5) The Master Settlement Agreement status of the manufacturer of the cigarettes disbursed;

(6) The brand or variant name of the cigarettes disbursed, and the corresponding Universal Product Code (UPC);

(7) The unit of measure for the UPC, for example, case, carton, pack, or sticks, and the quantity of the cigarettes disbursed as identified by the unit of measure for the UPC;

(8) The date and number of the bill of lading or other shipping documents;

(9) The total number of cigarettes disbursed;

(10) The total sales price of the cigarettes disbursed reported in U.S. dollars; and

(11) For disbursements made using a delivery service:

A. The name of the delivery service;

B. The FEIN of the delivery service;

C. The complete address and telephone number of the delivery service; and

D. The sales price, reported in U.S. dollars, of the cigarettes that were delivered.

(d) A distributor, importer, or wholesaler engaged in the sale of cigarettes shall submit a cigarette receipt schedule, which must contain the name and account number of the licensee filing the schedule, the month and year covered by the schedule, the schedule code for the activity being reported, and the following information regarding each receipt of cigarettes:

(1) The seller's name and FEIN;

(2) The complete address, including country, from which the product originated;

(3) The Tax Jurisdiction Code;

(4) The name of the manufacturer of the cigarettes received;

(5) The Master Settlement Agreement status of the manufacturer of the cigarettes received;

(6) The brand or variant name of the cigarettes received, and the corresponding UPC;

(7) The unit of measure for the UPC, for example, case, carton, pack, or sticks, and the quantity of the cigarettes received as identified by the unit of measure for the UPC;

(8) The date and number of the bill of lading or other shipping document; and

(9) The total number of cigarettes received.

History—Adopted June 24, 1959.

Amended October 10, 1968, effective November 13, 1968.

Amended September 26, 2001, effective February 15, 2002. Deleted existing language concerning inventories of cigarettes and replaced with new language.

Amended December 27, 2021, effective December 27, 2021. The amendments reformatted the first paragraph of the regulation as subdivision (a), renumbered old subdivision (a) as subdivision (b), and deleted old subdivision (b), which provided, "If the distributor or wholesaler does not have a cycle count inventory system and perpetual inventory system in place, the monthly statement shall be based on the inventory on hand at the end of the month covered by the report. However, at least once every six months, the monthly statement shall be based on a physical inventory of cigarettes on hand performed within the last five days of the month for which the distributor's or wholesaler's report is filed"; added new subdivisions (c) and (d); revised renumbered subdivision (a) to add ", importer," replace "furnish with his or her monthly" with "file … calendar month a," "to the board, on Board of Equalization Form BOE-501-CD entitled ‘Cigarette Distributor's Tax Report’ or Board of Equalization Form BOE-501-CW entitled ‘Cigarette Wholesaler's Report,’" with "and the supporting schedules … which includes," "statement" with "reconciliation," "on hand" with "in inventory," a comma with a period after "the report," and "showing" with "Distributors and importers must also report," delete "on hand" from before "contained" and "or meter impressions" after "stamps" in two places, add "of cigarettes in packages," and delete the last sentence, which provided, "The statement shall be furnished in one of the following manners:"; revised renumbered subdivision (b) to add ", importer," replace "statement" with "reconciliation" in two places, and add ", importer’s," in two places; and added references to Government Code sections 15570.22 and 15570.24 to the regulation’s authority note.

Regulation 4023. Inventories of Stamps and Meter Units.

Reference: Sections 30182, 30453, and 30454, Revenue and Taxation Code.

Every distributor engaged in the sale of cigarettes shall keep daily records of the number of tax stamps and meter units used in the distributor's affixing operations and shall record daily the meter register readings of the meters employed. The distributor shall take physical inventories of unused tax stamps on hand as of the end of each month and shall furnish, with his or her monthly report to the board, a statement of all unaffixed and affixed tax stamps and meter units on hand at the end of the month covered by the report.

History—Adopted June 24, 1959.

Amended September 13, 1961.

Amended September 26, 2001, effective February 15, 2002. Deleted gender-specific references.

Article 6. Records

Regulation 4026. Records.

Reference: Sections 30453 and 30454, Revenue and Taxation Code.

(a) General. Every distributor, every wholesaler, and every manufacturer, of cigarettes and tobacco products, shall maintain and make available for examination on request by the board or its authorized representatives, records in the manner set forth at California Code of Regulations, Title 18, Section 4901.

(b) Specific Applications. In addition to the record keeping requirements set forth in subdivision (a), every cigarette manufacturer and every tobacco products manufacturer shall comply with the following requirements:

Every cigarette manufacturer or tobacco products manufacturer dealing in, transporting, storing or warehousing cigarettes or tobacco products in this state or otherwise engaged in business in this state as a distributor shall keep and maintain at his or her place of business in this state, or at the warehouses or storage places from which cigarettes or tobacco products are released or delivered by the manufacturer, a record of all releases or deliveries of cigarettes or tobacco products from each storage place or warehouse in this state and shall keep and maintain either within the state or at the manufacturer's home office, a record of all the manufacturer's shipments of cigarettes or tobacco products from points outside this state to points within this state. Such records shall be made available at any time during normal business hours to the board or its authorized representatives for examination upon request.

History—Adopted June 24, 1959.

Amended September 26, 2001, effective February 15, 2002. Deleted existing language concerning records and added new subdivisions (a) through (k).

Amended February 5, 2003, effective May 28, 2003. The underscored citation indicates an electronic hyperlink to the cite. Common administrative provisions for special taxes programs have been consolidated in Chapter 9.9 Special Taxes Administration. General record keeping requirements can be found at the cite referenced in subdivision (a). Subdivision (b) has been added to identify additional record keeping requirements for cigarette manufacturers and tobacco products manufacturers.

Regulation 4027. Cigarette Manufacturer and Tobacco Products Manufacturer or Importer Monthly Return and Schedules.

Reference: Sections 30102, 30103, 30105, 30453 and 30454, Revenue and Taxation Code.

(a) Each cigarette manufacturer and each tobacco products manufacturer or importer shall file with the Department by the 25th day of each calendar month a certified return and supporting schedules, for the preceding calendar month, with respect to:

(1) All of its distributions of unstamped (untaxed) cigarettes and untaxed tobacco products as samples;

(2) All of its nontaxable sales and deliveries of cigarettes or tobacco products in interstate or foreign commerce or to a licensed distributor, common carrier engaged in interstate or foreign passenger service, U.S. military exchange or commissary, or the U.S. Veterans Administration; and

(3) All of its shipments of cigarettes or tobacco products from a point outside this state to a point within this state made or authorized by the manufacturer during the preceding calendar month.

The releases, deliveries and shipments for each purchaser shall be grouped together in the report.

(b) A cigarette manufacturer's return shall contain the total number of cigarettes distributed subject to tax, including the giving away of unstamped cigarettes as samples. A cigarette manufacturer shall also file a cigarette disbursement schedule with its return that satisfies the requirements of Regulation 4022, subdivision (c), and contains all its nontaxable cigarette disbursements.

(1) The wholesale cost of tobacco products given away as samples; and

(2) The total wholesale cost of tobacco products included in all its nontaxable disbursements.

(d) A tobacco products manufacturer or importer shall also file a tobacco products disbursement schedule with its return, which must contain the manufacturer's or importer's name and account number, the month and year covered by the schedule, and the following information regarding each nontaxable tobacco products disbursement:

(1) The date of the delivery or shipment of the nontaxable tobacco products;

(2) The name of the purchaser;

(3) The tobacco products distributor's California License Number required under section 22975 of the Business and Professions Code, or exemption code;

(4) The invoice or document number for the delivery or shipment;

(5) The type of tobacco product delivered or shipped;

(6) The tobacco product brand name and, in the case of "roll your own" tobacco, the Universal Product Code (UPC);

(7) The ounces of "Roll your own" tobacco delivered or shipped; and

(8) The wholesale cost of the nontaxable tobacco products.

The above information need not be supplied with respect to tobacco products which are non-tax-paid under the provisions of Chapter 52 of the Internal Revenue Act of 1954, as amended, and are released, delivered or shipped in internal revenue bond or customs control.

(e) In lieu of the monthly certified return and supporting schedules required by subdivision (a) of this section, a manufacturer or importer may arrange with the Department to supply the required information by supplying data processing media or other data in such manner and in such format as is satisfactory to the Department.

History—Adopted June 24, 1959.

Amended September 13, 1961.

Amended November 3, 1967.

Amended September 26, 2001, effective February 15, 2002. Added references to tobacco products and tobacco products manufacturers and deleted gender-specific language throughout the regulation. In the first sentence of subdivision (a), removed "he releases or delivers" after "storage places from which" and added "or tobacco products are released or delivered by the manufacturer". In subdivision (b), deleted "such" after "each" and added "described in paragraph (a) above" after "manufacturer" in the first sentence, deleted "in a form prescribed by the board" after "shall be" and added "on Board of Equalization Form … from Storage in California or Shipped into California", added "or tobacco products" to subdivision (b)(4), and added "or type, quantity and wholesale cost of tobacco products" to subdivision (b)(5).

Amended February 5, 2003, effective May 28, 2003. Deleted record keeping requirements in (a) and renumbered (b) to (a) and (c) to (b). General record keeping requirements can be found at California Code of Regulations, Title 18, Section 4901.

Amended December 27, 2021, effective December 27, 2021. The amendments revised the title of the regulation to add "Cigarette," delete "’s," from the end of "Manufacturer," add "and Tobacco Products Manufacturer or Importer," and replace "Report" with "Return and Schedules"; revised the first sentence in subdivision (a) to replace "or" with "manufacturer and each," add "or importer" before "shall," replace "board" with "Department," "20th" with "25th," "report" with "return and supporting schedules, for the preceding calendar month," add a colon after "respect to," add new subdivision (a)(1), and reformat the text after "respect to," which provided that "all releases and deliveries of cigarettes and tobacco products in this state and all shipments of cigarettes … during the preceding calendar month" as subdivisions (a)(2) and (3); revised reformatted subdivision (a)(2) to replace "all releases" with "All of its nontaxable sales" and "this state" with "interstate or foreign commerce … Administration;"; replaced "all" with "All of its" in reformatted subdivision (a)(3); deleted the third sentence from subdivision (a), which provided, "The report shall be on Board of Equalization Form BOE-501-MC entitled "Manufacturer's Report of Cigarettes Released from Storage in California or Shipped into California" or Board of Equalization Form BOE-501-MT entitled "Manufacturer's Report of Tobacco Products Released from Storage in California or Shipped into California" and shall show the following information with respect to each release, delivery or shipment: (1) the date of the release, delivery or shipment; (2) the location from which the release, delivery or shipment was made; (3) the name and address of the purchaser; (4) the address of the place to which the cigarettes or tobacco products were shipped, released or consigned; (5) the number of cigarettes or type, quantity and wholesale cost of tobacco products released, delivered or shipped; (6) the invoice or document number and date thereof representing the release, delivery or shipment; (7) if released to a licensed distributor, the license number of such distributor; and (8) in the case of a cancellation of any release, delivery or shipment, information indicating the transaction was cancelled"; added new subdivisions (b) through (d); reformatted the fourth sentence in subdivision (a) as the second sentence in subdivision (d) and deleted "cigarettes or" from before "tobacco," and replaced "c" with "C" in "Chapter"; renumbered old subdivision (b) as subdivision (e); replaced "reports" with "certified return and supporting schedules" and "paragraph" with "subdivision," added "or importer," and replaced "board" with "Department" in two places in renumbered subdivision (e); added references to Government Code sections 15570.22 and 15570.24 to the regulation’s authority note; and added references to Revenue and Taxation Code sections 30102, 30103, and 30105 to the regulation’s reference note.

Regulation 4028. Period for Which Records to Be Kept.

[Repealed September 26, 2001, effective February 15, 2002.]

Regulation 4029. Failure to Keep Records.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4030. Wholesaler's Records.

[Repealed May 4, 1982, effective August 19, 1982.]

Article 7. Tax Reports

Regulation 4031. Distributor's and Wholesaler's Report.

(a) Every distributor required to be licensed shall on or before the 25th day of each calendar month, file a report with the board of all acquisitions and distributions of cigarettes for the preceding calendar month, together with such other information as is required on the report form. The report shall be made on a form prescribed by the board.

(b) Every wholesaler required to be licensed shall on or before the 25th day of each calendar month, file a report with the board of all acquisitions and sales of cigarettes for the preceding calendar month, together with such other information as is required on the report form. The report shall be made on a form prescribed by the board.

History—Adopted June 24, 1959.

Amended January 12, 1968.

Amended October 10, 1968, effective November 13, 1968.

Regulation 4031.1. Payment by Electronic Funds Transfer.

Reference: Sections 30190 and 30192, Revenue and Taxation Code.

Payments by electronic funds transfer shall be made in accordance with California Code of Regulations, Title 18, Section 4905.

History—Adopted March 22, 2005, effective July 7, 2005. The underscored citation indicates an electronic hyperlink to the cite.

Regulation 4032. Passenger Common Carrier Report.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4033. Consumer's or User's Report.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4034. Report of Shipments to Consumers.

Reference: Sections 30105.5, 30108, 30140, 30151, 30182, 30183, 30453, and 30454, Revenue and Taxation Code.

(a) Every person engaged in business in this state who sells or solicits orders for cigarettes, the use or consumption of which is subject to the tax, must file a certified return with the board, on Board of Equalization Form BOE-501-CI entitled "Cigarette and Tobacco Products Excise Tax Return, on or before the 25th day of the calendar month following the calendar month in which the cigarettes were delivered in this state showing:

(1) the name and address of each purchaser from whom an order was taken;

(2) the number of cigarettes sold and delivered pursuant to each order; and

(3) the amount of tax required to be collected from each purchaser, together with a remittance of such tax.

(b) Every person engaged in business in this state who sells or solicits orders for tobacco products, the use or consumption of which is subject to the tax, must file a return with the board as follows:

(1) If the person is required to be a licensed tobacco products distributor, he or she shall report on the tobacco products distributor's monthly certified tax return (Board of Equalization Form BOE-501-CT entitled "Tobacco Products Distributor Tax Return") the wholesale cost of all tobacco products distributed to consumers, together with a remittance of the tax due. The return shall be filed on or before the 25th day of the calendar month following the calendar month in which the tobacco products were delivered in this state.

(2) If the person is required to be a registered tobacco products distributor, he or she shall file a certified return with the board, on Board of Equalization Form BOE-501-CTS entitled "Cigarette and Tobacco Products Tax Return", on or before the 25th day of the calendar month following the calendar month in which the tobacco products were delivered in this state showing:

(A) the name and address of each purchaser from whom an order was taken;

(B) the type, quantity, and wholesale cost of tobacco products sold and delivered pursuant to each order; and

(c) Every person engaged in business in this state who, as permitted by state law and the terms of the November 23, 1998 Master Settlement Agreements with the state which are applicable to the signatories to those Agreements, makes gifts of untaxed cigarettes or tobacco products as samples by means of shipment from an out-of-state point directly to a donee in this state shall collect the tax from the donee if the donee is other than a licensed distributor and shall give the donee a receipt showing the name and place of business of the donor, the name and address of the donee, the number of cigarettes donated, and the amount of tax required to be collected, or the type, quantity and wholesale cost of the tobacco products donated and a statement indicating that the tobacco products tax has been paid.

Each package of sample cigarettes shall have imprinted on it: "Not for Sale. Applicable state tax has been paid." and each package of sample tobacco products shall be clearly marked as a sample.

Donors of sample cigarettes shall notify the board in writing in advance of the shipment of the cigarettes into the state giving information as to the approximate date or dates, location or locations, brand, and the method of shipment into the state. Each donor of cigarettes and tobacco products shall file a return with the board on or before the 25th day of the calendar month following the calendar month in which the cigarettes or tobacco products were delivered in this state showing the number of cigarettes shipped into the state or the type, quantity and wholesale cost of the tobacco products and the amount of tax required to be collected from each donee, together with a remittance of such tax.

(d) The taxes required to be collected constitute debts owed by the distributor, or other person required to collect the taxes, to this state.

(e) "Engaged in business in the state" means and includes any of the following:

(1) 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.

(2) 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.

(f) The requirements of this regulation do not apply to those distributions of federally tax-free cigarettes or tobacco products which are exempt from tax under Section 30105.5 of the Revenue and Taxation Code.

History—Adopted June 24, 1959.

Amended January 12, 1968.

Amended October 10, 1968, effective November 13, 1968.

Amended April 11, 1972, effective May 14, 1972.

Amended September 26, 2001, effective February 15, 2002. Added "engaged in business in this state" after "Every person" and deleted "file reports with the board as follows:" following "must" in subdivision (a). Deleted subdivision (a)(1), deleted subdivision (a)(2) reference and "If the person is engaged in business in this state and is required to be a registered cigarette distributor, he or she shall", before "file a", replaced "report or" with "certified return", and added ", on Board of Equalization … Tax Return". Renumbered subdivision (A), (B), (C) to subdivision (1), (2), (3). Added new subdivision (b). Renumbered subdivisions (b), (c), (d) and (e) to subdivisions (c), (d), (e), and (f). In first paragraph of subdivision (c), added "who, as permitted by state law … those Agreements", changed "and making" to "makes", added "or tobacco products" after "untaxed cigarettes", deleted "at the time of making the gift, or, if the donee is not then obligated to pay the tax, at the time the donee becomes so obligated" after "in this state shall", and added "or the type, quantity … been paid". In the second paragraph of subdivision (c), deleted "such" after "Each package of", and added "and each package … marked as a sample". In the third paragraph of subdivision (c), removed "volume of the sample" after "brand". In subdivision (f), added "or tobacco products" after "cigarettes" and removed "to certain veteran's institutions" before "which" and removed "distributions" after "which". Removed gender specific language throughout regulation.

Regulation 4035. Tax Remittances.

Repealed May 4, 1982, effective August 19, 1982.]

Article 8. Other Reports

Regulation 4041. Common Carrier Delivery Reports.

Every common carrier making a delivery of cigarettes to a consignee in this State, the shipment of which originated outside this State, shall report to the board not later than the 25th day of the calendar month following the calendar month in which the delivery of the cigarettes or tobacco products was made, the following information concerning the shipment:

(a) the name of the shipper and the point of origin;

(b) the name of the consignee and the address to which delivered;

(d) the number of cases, bales or other containers of cigarettes delivered, the quantity of cigarettes contained therein, and the quantity of tobacco products delivered, as shown by the shipping documents; and

(e) in the case of rail shipments, the car initials and number; and

(f) in the case of water shipments, the name of the vessel and the number of the steamship bill of lading.

This report shall be made on a form prescribed by the board, which may include, but not be limited to, electronic media, and filed with the board at Sacramento.

History—Adopted June 24, 1959.

Amended October 10, 1968, effective November 13, 1968.

Amended January 27, 2010, effective March 30, 2010. Added a comma after "State" and added "or tobacco products" after "delivery of the cigarettes" in the first paragraph. Added a comma after "cigarettes delivered"; deleted "and" before "the quantity of cigarettes"; and added ", and the quantity of tobacco products delivered," after "contained therein" in subdivision (d). Added "the board, which may include, but not be limited to, electronic media," after "prescribed by" in the last paragraph. Added authority and reference notes.

Note. Authority cited: Sections 30451, Revenue and Taxation Code. Reference: Sections 30186 and 30454, Revenue and Taxation Code.

Article 9. Stamps

Regulation 4047. Transfer of Stamps.

Reference: Section 30164, Revenue and Taxation Code.

Without prior written approval of the board, a distributor may not sell to, transfer to, or exchange with another distributor or any other person stamps issued by the board, and may not sell, transfer or distribute packages of cigarettes accompanied by unaffixed stamps.

History—Adopted June 24, 1959.

Amended September 26, 2001, effective February 15, 2002. Added "Without prior written approval of the board," change "shall" to "may" after "distributor", and replaced "A distributor shall" with "and may".

Regulation 4048. Manner of Affixing Stamps.

Tax stamps shall be securely affixed to the bottom end of each standard package of 20 cigarettes. When affixed to "flats" or "rounds" the stamps shall be securely affixed to the lid or top of the individual package. Tax stamps shall not be affixed to the carton or larger container of cigarettes.

History—Adopted June 24, 1959.

Regulation 4049. Adherence of Stamps.

Tax stamps shall be affixed in such manner as to adhere securely to each package of cigarettes. If packages of cigarettes are wrapped in or covered by some substance to which the stamps do not readily adhere, such wrapper or covering must be roughened or treated so that the stamps will adhere securely thereto.

History—Adopted June 24, 1959.

Article 10. Metering Machines and Impressions

Regulation 4051. Metering Machines.

Only those metering machines as are approved by the board shall be employed for affixing meter impressions to packages of cigarettes. A distributor shall not affix meter impressions to packages of cigarettes unless he has first obtained authorization from the board to employ this method of affixation.

History—Adopted June 24, 1959.

Regulation 4052. Metering Machine Requirements.

A distributor desiring to use a metering machine shall apply to the board for authorization. The following terms and conditions are applicable to the use of metering equipment by a distributor:

(a) impressions will be made only by means of machines approved by the board and meters registered with the board;

(b) only clear and legible imprints will be used on packages of cigarettes distributed;

(c) impressions by a meter registered to the distributor will be made only on packages of cigarettes owned by the distributor;

(d) only ink approved by the board will be used;

(e) each meter will be kept in a safe place when not in use, and will be safeguarded when being transported;

(f) in case of theft, loss or mysterious disappearance of a meter or tampering therewith, the incident will be immediately reported to the board, to proper police authorities, and to the meter manufacturer;

(g) no meter will be transferred or otherwise disposed of without prior written permission of the board;

(h) no repairs will be made to a meter except by a duly authorized representative of the meter manufacturer and upon prior approval of the board; and

(i) any meter having a broken seal will be immediately reported to the board and to the manufacturer and will not be used by the distributor.

History—Adopted June 24, 1959.

Amended January 12 1968.

Regulation 4053. Revocation of Permission.

If a distributor issues illegible meter impressions or violates any regulation of the board relative to the use of metering machines, the board may revoke its authorization to the distributor to affix meter impressions to packages of cigarettes.

History—Adopted June 24, 1959.

Regulation 4054. Manner of Affixing Meter Impressions.

Tax meter impressions shall be clearly imprinted to the bottom end of each standard package of 20 cigarettes. Meter impressions shall not be imprinted on any package, carton, or container of cigarettes containing other than 20 cigarettes. All dies and other equipment must be regularly serviced and cleaned according to the instructions issued by the manufacturers of the equipment.

History—Adopted June 24, 1959.

Former Regulation 4054 repealed September 13, 1961, and former Regulation 4055 renumbered as 4054.

Article 10.5. Purchase of Tax Indicia

Regulation 4055. Where Purchased; Distributors' Discount.

Reference: Sections 30161, 30166, and 30167, Revenue and Taxation Code.

Cigarette tax stamps and meter register settings allowing the imprinting of meter impressions may be purchased by licensed distributors through stamp orders submitted to the board. Orders must include the distributor's account number, distributor's name and address, the quantity of stamps for each denomination, order date and the signature of the authorized individual. The tax stamps and meter register settings may be purchased for cash, and when authority has been granted in writing to a distributor, the tax stamps and meter register settings may be purchased on a deferred payment basis. In either case, a discount as provided by law will be allowed to a licensed distributor.

History—Adopted September 13, 1961.

Amended January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. Replaced "designated branch offices of banks located throughout the State. A list of the bank branch offices designated to sell stamps and set meter registers is available at offices of the board" with "locations designated by the board" and replaced "indicia" with "tax stamps and meter register settings".

Amended November 15, 2005, effective March 9, 2006. Replaced "at locations designated by the Board" with "through stamp orders submitted to the Board" in first sentence. Added new sentence "Orders must include the distributor's account number, distributor's name and address, the quantity of stamps for each denomination, order date and the signature of the authorized individual.

Regulation 4056. Units of Sale; Minimum Sales.

Reference: Sections 30161 and 30162, Revenue and Taxation Code.

Cigarette tax stamps designated for packages containing 10 cigarettes, 20 cigarettes and 25 cigarettes will be sold in rolls containing 1,200 or 30,000 stamps. Such stamps are sold in full rolls only and the smallest sale unit is one roll. The Board, at its discretion, may authorize the use of stamps of other denominated values and specification.

History—Adopted September 13, 1961.

Amended January 12, 1968.

Amended June 22, 1983, effective October 6, 1983. Added sentence authorizing use of stamps of "other denominated values and specifications."

Amended September 26, 2001, effective February 15, 2002. Amended regulation to reflect stamp denominations currently sold by board and to delete reference to water-applied stamps and meter register settings.

Amended November 15, 2005, effective March 9, 2006. Amended regulation to replace "heat-applied decal tax stamps" with "cigarette tax stamps" and to delete reference to multiple stamp denominations sold by the board.

Regulation 4057. Cash Sales of Tax Stamps or Meter Register Settings.

Reference: Sections 30161, 30162, and 30166, Revenue and Taxation Code.

Every distributor desiring to purchase tax stamps or meter register settings for cash shall file an application to register the individual authorized to order cigarette tax stamps, on a form approved by the board. The distributor shall identify and authorize in writing on the form the individual who may order stamps or meter register settings for this distributor's account and include the signature of the individual authorized to submit the tax stamps orders. If a distributor wishes to allow multiple individuals to submit cigarette tax stamp orders, a separate application is required for each individual authorized to order cigarette tax stamps. Orders for stamps or meter register settings shall be made by the distributor on order forms approved by the board. The distributor's authorization of such individual(s) shall continue in effect until written notice of revocation of the authority is delivered to the Board by registered mail or until written acknowledgment of receipt of the revocation is given by the board. Payment must be made for cash purchases at the time the stamps or meter register settings are ordered. The board may require cash, electronic funds transfer or certified or cashier's checks in payment of such purchases.

History—Adopted September 13, 1961.

Amended September 26, 2001, effective February 15, 2002. Changed "bank branch office" to "location", changed "indicia" to "stamps or meter register settings", added "meter register settings" after "time the stamps", deleted gender-specific language. Removed "or the meter is set and sealed. The State requires the bank to make an immediate deposit into the State Treasury for cash purchases and the bank is not permitted to extend credit therefor on behalf of the State" after "are received".

Amended November 15, 2005, effective March 9, 2006. Amended first sentence to requirement for "[e]very distributor desiring to purchase tax stamps or meter settings for cash shall file a 'Cigarette Tax Signature Card' " to "shall file an application to register the individual authorized to order cigarette stamps, on a form approved by the board." Deleted wording, "with the designated location where he or she will make his or her cash purchases of the tax stamps or meter register settings" after "on a form approved by the board." Added second and third sentence to clarify "the distributor shall identify and authorize in writing on the form the individual who may order stamps or meter register settings for this distributor's account and include the signature of the individual authorized to submit the tax stamp orders." If a distributor wishes to allow multiple individuals to submit cigarette tax stamp orders, a separate application is required for each individual authorized to order cigarette tax stamps." Added new provision in fifth sentence to clarify "the distributor's authorization of such individual(s) shall continue in effect until written notice of revocation of the authority is delivered to the board by registered mail or until written acknowledgment of receipt of the revocation is given by the board." Amended requirement for cash payments to be made at the time the stamp or meter register settings are "received" to "ordered" and amended wording in last sentence to reflect that the board may require electronic funds transfer in payment of such purchases.

Regulation 4058. Application for Credit Purchases.

Reference: Sections 30142, 30162, 30167, and 30168, Revenue and Taxation Code.

Every distributor desiring to purchase tax stamps or meter register settings on the deferred payment basis shall request the board to set the maximum amount of such purchases the distributor may have unpaid at any time and the amount of the required security.

The board shall set the amounts and notify the distributor by mail of the maximum amount of deferred payment purchases that the distributor may have unpaid at any time and the amount of the required security. The maximum amount of tax stamps or meter register setting purchases for which the distributor may defer payment as determined by the board shall not exceed twice the distributor's average monthly tax liability, based on the distributor's previous six months' experience, or in the case of a distributor not previously authorized to make deferred payment purchases or a distributor the character of whose business has changed substantially, the maximum amount shall not exceed twice the estimated average monthly tax liability as determined by the board.

The distributor shall provide to the board a surety bond or deposit in lieu of security in an amount equal to not less than 70 percent of the maximum amount, or more than twice the amount, of deferred payment purchases the distributor may have unpaid at any time as determined by the board.

If the distributor elects, under Section 30168, to make payments on a twice-monthly basis, the distributor shall provide to the board a surety bond or deposit in lieu of security in an amount equal to not less than 50 percent of the maximum amount, or more than twice the amount, of deferred payment purchases the distributor may have unpaid at any time as determined by the board.

History—Adopted September 13, 1961.

Amended January 12, 1968.

Amended October 25, 1972, effective November 30, 1972.

Amended September 26, 2001, effective February 15, 2002. Changed "bond" to "security". In second paragraph, changed "send" to "notify", changed "form BT353 showing" to "by mail of", changed "indicia" to "tax stamps or meter register settings", changed "shall be set by the board at not to exceed one and one half times" to "as determined by the board shall not exceed twice", and changed "be set at one and one-half times" to "not exceed twice". In the third paragraph, deleted the first sentence and part of the second sentence, which addressed the form a distributor used to indicate the location where it intended to purchase stamps. Added "The distributor shall provide to the board", deleted "shall accompany the application and shall be" after "security", added "not less than" before "70 percent", replaced "total" with "maximum amount, or more than twice the amount of", and added "as determined by the board".

Amended November 15, 2005, effective March 9, 2006. Added unnumbered fourth paragraph to clarify requirements for distributors that may elect, under Section 30168, to make payments on a twice-monthly basis.

Regulation 4059. Authorization for Credit Purchases.

Reference: Sections 30162, 30167, and 30169, Revenue and Taxation Code.

(a) Upon approval of a distributor's request to purchase tax stamps or meter register settings on the deferred payment basis, and receipt of the required security, the board shall give written authorization to the distributor for the amount of deferred payment purchases the distributor may have unpaid at any time.

(b) Before making deferred payment purchases of tax stamps and meter register settings, the distributor shall file an application to register the person authorized to order cigarette tax stamps on behalf of the distributor on a form approved by the board. The distributor shall identify and authorize in writing on the form the individual who may order purchases of stamps or meter register settings for this distributor's account and include the signature of the individual authorized to submit the tax stamp orders. If a distributor wishes to allow multiple individuals to submit cigarette tax stamp orders, a separate application form must be submitted for each individual. The distributor's authorization of such individual(s) shall continue in effect until written notice of revocation of the authority is delivered to the board by registered or certified mail or until written acknowledgement of receipt of the revocation is given by the board.

History—Adopted September 13, 1961.

Amended January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. Replaced "bank branch office" with "designated location" throughout and removed gender-specific language. In subdivision (a), replaced "receipt of the completed application" with "approval of a distributor's request to purchase tax stamps or meter register settings on the deferred payment basis" and added "receipt of" before "the required security". In subdivision (b), replaced "indicia" with "stamps and meter register settings". In subdivision (c), replaced "digits to be set" with "settings".

Amended November 15, 2005, effective March 9, 2006. In subdivision (a), added "to the distributor" before "for the amount," and deleted "to the distributor and the designated location where such purchases are to be made" after "at any time." In subdivision (b), replaced "Cigarette Tax Signature Card" with "an application to register the person authorized to order cigarette stamps on behalf of the distributor on a form approved by the board." Deleted, "with each designated location where the distributor will make credit purchases" after "on a form approved by the board." Added new language to clarify "the distributor shall identify and authorize in writing on the form the individual who may order stamps or meter register settings for this distributor's account and include the signature of the individual authorized to submit the tax stamp orders. If a distributor wishes to allow multiple individuals to submit cigarette tax stamp orders, a separate application form must be submitted for each individual." Deleted "designated location" throughout. In subdivision (c), deleted "to the designated location" after "distributor."

Regulation 4060. Payment for Credit Purchases.

Reference: Sections 30162, 30167, and 30168, Revenue and Taxation Code.

Payment for all deferred payment purchases of tax stamps or meter register settings made during each calendar month must be made to the board or the board's designee by the 25th day of the calendar month following the month in which the purchases were made. Remittance for such purchases shall be made payable to "State Board of Equalization." The privilege of making deferred payment purchases shall be suspended as long as a delinquent balance is owing therefor.

History—Adopted September 13, 1961.

Amended January 12, 1968.

Amended October 10, 1968, effective November 13, 1968.

Amended September 26, 2001, effective February 15, 2002. Replaced "indicia" with "stamps or meter register settings" and "bank branch location" with "designated location".

Amended November 15, 2005, effective March 9, 2006. Replaced "at the designated location where the purchases were made, and must be made" with "to the board or the board's designee."

Article 11. Refunds for Stamps and Meter Impressions

Regulation 4061. Unused Stamps.

Reference: Sections 30162 and 30176, Revenue and Taxation Code.

(a) The Department will refund or credit to a distributor the denominated value, less the purchase discount, of any identifiable unused stamps which are returned to the Department.

The distributor must file a claim for refund or credit with the Department. The claim must be signed by the claimant or the claimant’s representative and include the following information:

(1) The distributor’s name, account number, address, and telephone number;

(2) The date of the claim;

(3) The specific grounds upon which the claim is based;

(4) The date, district office, number, and type of unused stamps being claimed for refund;

(5) The amount of claim for each type of unused stamp being claimed for refund;

(6) The total amount of the claim less the discount allowed under Revenue and Taxation Code section 30166; and

(7) Documentation required to support the claim.

The Department will verify the amount of unused stamps being claimed for refund and provide a certification to the distributor of the amount of unused stamps that have been verified by the Department. A claim shall only be granted with respect to the verified amount of unused stamps included in the claim.

"Unused stamp" means a cigarette tax stamp on a tax stamp roll that has not been affixed to a package of cigarettes. If the stamp is of a design generated by a technology capable of being read by a scanning or similar device, a majority of the stamp must be present and should be able to be read by a scanning or similar device in accordance with Revenue and Taxation Code section 30162.

(c) Upon verification that the refund or credit is due, the tax stamp roll containing the unused stamps shall be returned to the Department for destruction.

History—Adopted June 24, 1959.

Amended August 3, 1960.

Amended September 13, 1961.

Amended January 12, 1968.

Amended August 1, 2001, effective June 12, 2002. Added reference to Form BOE-1024 and subdivisions (b), (c) and (d).

Amended November 15, 2005, effective March 9, 2006. Added new language in subdivision (b), "If the stamp is of a design generated by a technology capable of being read by a scanning or similar device, a majority of the stamp must be present and should be able to be read by a scanning or similar device in accordance with Section 30162. Alternatively, as evidence of unused stamps, a distributor may return damaged stamps in such a form that a board representative is otherwise able to verify authenticity and that the stamps have not been used," to define and describe the criteria for when the new tax stamp, designed in accordance with Revenue and Taxation Code section 30162, will qualify as an unused stamp.

"and Unused Meter Settings" from the end of the regulation’s title; revised subdivision (a) to replace "board" with "Department" in two places in the first paragraph and replace the second paragraph, which provided, "The board will refund or credit to a distributor the denominated value, less the purchase discount, of any verifiable meter setting remaining on a meter when the meter is returned to the bank for cancellation of the meter setting. A claim for refund or credit must be made on Board of Equalization Form BOE-1024 entitled ‘Claim For Refund For California Cigarette Tax Stamps’ and filed with the board, providing the following information: distributor’s name, account number, address, telephone number, date, district office, number and type of cigarette tax stamps being claimed for refund, amount of claim for each type of cigarette tax stamp being claimed for refund, total amount of claim discount of .0085, and reason for claim. The form further requires acknowledgement by a board representative and his or her supervisor of receipt of the cigarette tax stamps being claimed for refund and certification by a board representative of the receipt and destruction of the cigarette tax stamps being claimed for refund"; revised subdivision (b) to insert "cigarette" and replace "or on a package of cigarettes which is not yet distributed and includes only those stamps on which 4 of the 5 characters of the stamp’s serial number can be identified" with "that has not been affixed to a package of cigarettes" in the first sentence, delete the second and third sentences, which provided, "If fewer than 4 characters in the stamp’s serial number can be identified, the distributor shall provide evidence concerning the remainder of the tax stamp to show that the remainder of the stamp is not affixed to a package of cigarettes that has been distributed. Such proof may include, but is not limited to, the paper from the stamp roll or package of cigarettes to which the remainder of the stamp is affixed," replace "Section" with "Revenue and Taxation Code section," and delete the last sentence, which provided, "Alternatively, as evidence of unused stamps, a distributor may return damaged stamps in such a form that a board representative is otherwise able to verify authenticity and that the stamps have not been used"; delete subdivision (c), which provided, "If the refund or credit is for tax stamps that are affixed to packages of cigarettes, an authorized board employee, upon verification that the refund or credit is due, shall ensure that the distributor obliterated the stamp with the use of a permanent marker"; renumbered old subdivision (d) as subdivision (c); revised renumbered subdivision (c) to replace "If the refund or credit is for tax stamps remaining on a roll, upon" with "Upon," add "tax stamp" and "containing the unused stamps," and replace "board" with "Department"; and added references to Government Code sections 15570.22 and 15570.24 to the regulation’s authority note.

Regulation 4062. Destroyed Stamps and Meters.

Reference: Section 30176, Revenue and Taxation Code.

The board will refund or credit to a distributor the denominated value, less the purchase discount, of any stamps, or unused meter register settings, when the stamps or the meter have been destroyed by fire, flood or other casualty prior to the affixation of the tax stamps or meter impressions to packages of cigarettes. The distributor must establish by clear and convincing evidence that the stamps or meter were destroyed by fire, flood or other casualty and the denominated value of the stamps or remaining meter register balance. Theft or mysterous disappearance of unaffixed stamps or of a meter shall not constitute a casualty for which refund or credit will be given.

History—Adopted January 12, 1968.

Former Regulation 4062 amended and renumered 4065 January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. Changed "meter register settings remaining on a meter" to "unused meter register settings" and changed "indicia" to "stamps or meter impressions".

Regulation 4063. Destroyed Cigarettes.

Reference: Section 30177, Revenue and Taxation Code.

The board will refund or credit to a distributor the denominated value, less the purchase discount, of stamps or meter impressions affixed to packages of cigarettes which have been destroyed by fire, flood or other casualty, prior to distribution. The distributor must establish by clear and convincing evidence that the cigarettes were destroyed by fire, flood or other casualty prior to distribution and the denominated value of the affixed tax stamps or meter impressions. The theft or mysterious disappearance of packages of cigarettes shall not constitute a casualty for which refund or credit will be given.

History—Adopted June 24, 1959.

Amended August 3, 1960.

Amended September 13, 1961.

Amended January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. Changed "indicia" to "tax stamps or meter impressions".

Regulation 4063.5. Exported Tax-Paid Tobacco Products.

Reference: Sections 30176.1, 30178.1, 30178.2, and 30179.1, Revenue and Taxation Code.

The board will refund or credit to a distributor the tax paid on tobacco products which are:

(a) Shipped to a point outside this state, pursuant to a contract of sale, by delivery by the distributor to such point by means of:

(1) facilities operated by the distributor;

(2) delivery by the distributor to a carrier for shipment to a consignee at such point, or

(3) delivery by the distributor to a customs broker or forwarding agent for shipment outside this state.

(b) Sold to a foreign purchaser for shipment abroad and delivered to a ship, airplane, or other conveyance furnished by the purchaser for the purpose of carrying the cigarettes or tobacco products abroad and actually carried to a foreign destination.

(c) Sold for use solely outside this state and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States.

The distributor must file the claim for refund on Board of Equalization Form BOE-1024-T entitled "Claim for Refund—Exported Tax-Paid Tobacco Products" and provide copies of documentation to support payment of taxes, as well as bills of lading or other documentary evidence of the delivery of the tobacco products to a carrier, customs broker or forwarding agent for shipments outside this state. The original documents must be retained by the distributor for inspection by employees of the board. In the case of tobacco products for foreign export, copies of United States Customs shipper's export declarations filed with the Collector for Customs or other documentary evidence of export must be obtained and retained. No refund or credit will be given if the tobacco products are diverted in transit or for any reason are not actually delivered outside the state pursuant to the contract of sale or are not shipped abroad by a foreign purchaser. Any application for refund or credit based upon the exportation of tax-paid tobacco products from this state shall be filed with the board within three months after the close of the calendar month in which the tobacco products are exported.

History—Adopted September 26, 2001, effective February 15, 2002.

Regulation 4064. Claim Forms.

Reference: Sections 30176, 30176.1, and 30177, Revenue and Taxation Code.

A claim for refund or credit made pursuant to Regulations 4061, 4062, 4063 or 4063.5 must be made on a form prescribed by and filed with the board.

History—Adopted January 12, 1968.

Former Regulation 4064 renumbered 4067 January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. Added "or 4063.5".

Regulation 4065. Unsalable Cigarettes.

Reference: Section 30177, Revenue and Taxation Code.

(a) The Department will refund or credit to a distributor the denominated value, less the purchase discount, of identifiable cigarette tax stamps affixed to packages of cigarettes which have become unfit for use or unsalable before distribution, or after distribution if the cigarettes have been returned for credit or have been replaced and proof is submitted to the Department showing that the cigarettes have not been used for smoking in California. The distributor must file a claim for refund or credit with the Department. If the distributor is claiming refunds or credits for cigarette tax stamps affixed to packages of cigarettes from different manufacturers, the distributor must file separate claims by manufacturer. A claim must be signed by the claimant or the claimant’s representative and contain the following information:

(1) The date of the claim;

(2) The specific grounds upon which the claim is based;

(3) Documentation to support the claim;

(4) The distributor’s name, account number, address, and telephone number;

(5) The number and type of cigarette tax stamps being claimed for refund;

(6) The name of the manufacturer of the packages of cigarettes to which the cigarette tax stamps are affixed; and

(7) The total amount of the claim, less the discount allowed under Revenue and Taxation Code section 30166.

(b) An authorized Department employee, upon verification of the affixed cigarette tax stamps, shall ensure that the distributor has used a permanent marker or another method authorized by the Department to darken each affixed cigarette tax stamp so that it is no longer recognizable. Once this has been verified, the Department employee will provide a certification to the distributor with the number of affixed cigarette tax stamps that have been verified by the Department. A claim shall only be granted with respect to the verified amount of affixed cigarette tax stamps included in the claim.

(c) Before a claim is granted, the distributor shall provide a copy of the credit memorandum or affidavit from the manufacturer certifying that the distributor returned the packages of unfit or unsalable cigarettes and indicating the number of cigarette tax stamps that were affixed to the packages of cigarettes.

(d) If the packages of unfit or unsalable cigarettes affixed with cigarette tax stamps were not returned to the manufacturer, the distributor shall provide proof that the cigarettes in the packages with the tax stamps affixed were destroyed in the presence of a Department employee authorized to witness their destruction.

History—Adopted June 24, 1959.

Formerly Regulation 4062 amended and renumbered 4065 January 12, 1968.

Amended September 26, 2001, effective February 15, 2002. Changed "indicia" to "stamps or meter impressions".

Amended December 27, 2021, effective December 27, 2021. The amendments reformatted the regulation’s text as subdivision (a); revised the first sentence in reformatted subdivision (a) to replace "board" with "Department" in two places, add "cigarette tax" after "identifiable," and delete "or meter impressions" from before "affixed"; revised the second sentence in reformatted subdivision (a) to replace "Claim" with "The distributor must file a" and replace "must be made on a form prescribed by the board and shall be accompanied by a properly executed receipt and a copy of the credit memorandum of the manufacturer for returned stock, or by proof of destruction of the cigarettes with the tax stamps or meter impressions thereon in the presence of an employee of the board authorized to witness the destruction" with "with the Department"; added a new third sentence to subdivision (a) and new subdivisions (b), (c), and (d); and added references to Government Code sections 15570.22 and 15570.24 to the regulation’s authority note.

Regulation 4066. Stolen Indicia.

Reference: Sections 30176 and 30177, Revenue and Taxation Code.

Refund or credit will not be given for unaffixed stamps or any packages of cigarettes to which stamps have been affixed, which are lost through theft or unexplained disappearance. If identifiable stamps, which have been lost through theft or unexplained disappearance, are later recovered, credit or refund may be given under Regulations 4061 or 4065.

History—Adopted January 12, 1968.

Amended December 27, 2021, effective December 27, 2021. The amendments added "unaffixed," deleted ", meter settings or meter impressions which are lost through theft or mysterious disappearance of any unaffixed stamps, any meter," from before "or any" and "or meter impressions" from after "which stamps," added ", which are lost through theft or unexplained disappearance," deleted "meter settings or meter impressions" from before "which have," replaced "mysterious" with "unexplained" before and added a comma after "disappearance"; added references to Government Code sections 15570.22 and 15570.24 to the regulation’s authority note; and added references to Revenue and Taxation Code sections 30176 and 30177 to the regulation’s reference note.

Regulation 4067. Provisions Limited to Distributors.

[Repealed September 26, 2001, effective February 15, 2002.]

Article 13. Particular Transactions

Regulation 4076. Sales by Manufacturers.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4076. Wholesale Cost of Tobacco Products

Reference: Sections 30008, 30010, 30011, 30017, 30121, 30123, 30126, 30131.1, 30131.2, and 30131.5, Revenue and Taxation Code.

(a) Definitions.

(1) Arm's-length transaction. An "arm's-length" transaction means 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.

(2) 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.

(3) 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 such devices or delivery systems heat to create the aerosol or vapor are commonly referred to as "e-liquid" and "e-juice." 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.

(4) 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.

(5) Sold in combination with. A device or delivery system that can be used to deliver nicotine in aerosol or vapor form to a person and any component, part, or accessory of such a device or delivery system is "sold in combination with" a liquid or substance containing nicotine when any of the items are sold with 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.

(6) Tobacco Products. Effective April 1, 2017, the definition of "tobacco products" 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.

(b) Wholesale cost.

(1) 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 the amount paid for the tobacco product, including any federal excise tax, but excluding any transportation charges for shipment originating within the United States. Discounts and trade allowances must be added back when determining "wholesale cost."

(2) If a manufacturer or an importer is also the distributor, the wholesale cost of tobacco includes all manufacturing costs, 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, and any federal excise and U.S. Customs taxes paid.

Manufacturing costs include all overhead expenses that are directly or indirectly attributable to the production of finished tobacco products. These costs can include, but are not limited to, production and administrative salaries, depreciation, repairs and maintenance, rent and utilities for the production facilities, and equipment. Manufacturing costs must be allocated to each product unit by a reasonable and consistent pro-rata accounting method. Manufacturing costs 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.

Wholesale cost also includes all freight or transportation charges for shipment of materials and unfinished product from a supplier to a manufacturer concurrently licensed as a distributor, but excludes domestic freight or transportation charges for shipment of finished tobacco products as defined in subdivision (a)(4).

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 methods provided in subdivision (c).

(3) If tobacco product costs include express, implicit, or unstated discounts or trade allowances, the correct wholesale costs to be reported by the distributor may be determined using any of the methods provided in subdivision (c).

(4) If tobacco products are not purchased in an arm's-length transaction, the correct wholesale costs to be reported by the distributor may be determined using any of the methods provided in subdivision (c).

The following resources or methods may be used.

(1) 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.

(2) 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:

(A) Evidence reasonably indicative of the typical costs of the same or similar tobacco products for similarly situated distributors, with appropriate adjustments to such costs as indicated by all the facts and circumstances.

(B) 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.

(C) 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.

(D) 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.

(E) Additional methods not mentioned above, with California Department of Tax and Fee Administration approval.

(d) Sales not made at arm's-length.

(1) Presumption. 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: 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.

(2) Rebuttal of presumption. If the California Department of Tax and Fee Administration determines 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.

(e) Examples of estimating or calculating the wholesale cost of tobacco:

(1) Example 1: Distributor B produces handmade cigars. . Since B makes the cigars, B is a manufacturer in addition to a distributor. Therefore, to compute the wholesale cost of B’s tobacco products, B would include the costs described in subdivision (b)(2).

(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, the California Department of Tax and Fee Administration presumes that the sale and purchase were not at arm's-length, and the presumption is not rebutted by C. In the absence of an arm's-length transaction, the methods discussed in subdivision (c) may be used to determine the correct wholesale cost.

(3) Example 3: Distributor D acquires tobacco product free of charge and reports no wholesale cost for the product on its Tobacco Products Distributor Tax Return. However, D acquired such tobacco product at a 100 percent discount or trade allowance. In the absence of an arm's-length transaction, the methods discussed in subdivision (c) may be used to determine the correct wholesale cost.

(4) Example 4: Distributor E, with a tobacco products importers license, acquires tobacco products or finished tobacco products from a supplier outside the United States. E's tobacco product 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 E with respect to such tobacco products.

(5) 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.

(6) 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 in subdivision (c).

(7) 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.

(f) In addition to the examples in subdivision (e), the following are examples of items that are and are not tobacco products effective April 1, 2017, and examples of estimating or calculating the wholesale cost of tobacco products:

(1) 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 in subdivision (b)(2).

(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.

(3) 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.

(4) 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.

(5) 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.

(6) 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.

(7) 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.

(8) 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.

(g) Rate Setting. The California Department of Tax and Fee Administration’s annual determination of the tax rate that applies to other tobacco products shall be made based on the wholesale cost of tobacco products as of March 1 of the current calendar year and shall be effective during the next fiscal year, beginning July 1.

History—Adopted May 24, 2016, effective October1, 2016.

Amendments filed with the Secretary of State April 6, 2021, and effective April 6, 2021. The amendments added new subdivisions (a)(3), (5), and (6), renumbered old subdivision (a)(3) as subdivision (a)(4), and deleted "first" from before "distribution" in renumbered subdivision (a)(4); deleted "the" from before "finished," replaced "product" with "products," deleted ", any direct (including freight-in) and indirect overhead costs" from after "labor," and replaced "and/or" with "and" before "U.S." in the first paragraph in subdivision (b)(2); added new second and fourth paragraphs to subdivision (b)(2), reformatted he second paragraph as the third paragraph, replaced "cost includes all freight or transportation charges for shipment of materials and/or unfinished product from the supplier to the manufacturer" with "cost also includes all freight or transportation charges for shipment of materials and unfinished product from a supplier to a manufacturer" in the third paragraph, and replaced the reference to subdivision "(a)(3)" with a reference to renumbered subdivision "(a)(4)" in the third paragraph; replaced "Board" with "California Department of Tax and Fee Administration" in subdivisions (c)(2)(E), (d)(2), and (e)(2); entirely replaced the second and third sentences in subdivision (e)(1), which provided that "B’s tobacco product costs include: all manufacturing costs, the cost of raw materials (including waste materials not incorporated into the final product), the cost of labor, any direct and indirect overhead costs, and any federal excise and/or U.S. Customs taxes paid. The cost does not include freight or transportation charges for shipment from the supplier to the distributor"; replaced "2" with "two" in subdivision (e)(6); added new subdivision (f) and reformatted old subdivision (f) as subdivision (g); and replaced "Board’s annual determination of the rate of tax" with "California Department of Tax and Fee Administration’s annual determination of the tax rate" in renumbered subdivision (g).

Regulation 4077. Sales to the United States.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4077. Tobacco Product Manufacturer

Reference: Section 30451, Revenue and Taxation Code. Reference: Sections 22971 and 22974, Business and Professions Code; Sections 30103, 30121, 30131.1, Revenue and Taxation Code.

(a) A 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.

The term tobacco product manufacturer includes 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.

(b) A retailer who mixes, blends, or combines a tobacco product that is not in a form suitable for human consumption, such as liquid nicotine, and other ingredients or components to make a tobacco product that is suitable for human consumption is a tobacco product manufacturer. A retailer is not a manufacturer solely because the retailer packages liquid nicotine with other items as one unit or allows its customers to mix, blend, or combine liquid nicotine and other components after a sale has been made, or both.

(c) A retailer is not a manufacturer solely because the retailer packages finished tobacco products, such as cigars, together as one unit or because the retailer mixes, blends, or combines finished tobacco products, such as pipe tobacco.

(d) A retailer who is not a licensed manufacturer, importer, or distributor must purchase its tobacco products from a licensed tobacco products distributor or wholesaler.

History—New regulation filed with the Secretary of State April 6, 2021, and effective April 6, 2021.

Regulation 4078. Sales to the State.

[Repealed May 4, 1982, effective August 19, 1982.

Regulation 4079. In Bond Federal Tax-Free.

[Repealed September 26, 2001, effective February 15, 2002.]

Regulation 4080. Interstate and Foreign Commerce.

Reference: Section 30008, Revenue and Taxation Code.

The tax does not apply to sales of cigarettes or tobacco products which are:

(a) Shipped to a point outside this State, pursuant to a contract of sale, by delivery by the seller to such point by means of:

(1) facilities operated by the seller;

(2) delivery by the seller to a carrier for shipment to a consignee at such point, or

(3) delivery by the seller to a customs broker or forwarding agent for shipment outside this State.

(c) Sold for use solely outside this State and delivered to a forwarding agent, export packer, or other person engaged in the business of preparing goods for export or arranging for their exportation, and actually delivered to a port outside the continental limits of the United States.

Bills of lading or other documentary evidence of the delivery of the cigarettes or tobacco products to a carrier, customs broker or forwarding agent for shipments outside the State must be retained by the distributor for inspection by employees of the board. 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. The tax applies to the transaction if the cigarettes or tobacco products are diverted in transit or for any reason are not actually delivered outside the State pursuant to the contract of sale or are not shipped abroad by a foreign purchaser, regardless of documentary evidence held by the distributor.

History—Adopted June 24, 1959.

Amended September 26, 2001, effective February 15, 2002. Added references to tobacco products.

Regulation 4081. Sample Cigarettes and Tobacco Products.

Reference: Sections 30005, 30005.5, 30008, and 30009, Revenue and Taxation Code.

The giving away in this state of untaxed cigarettes or tobacco products as samples is a taxable distribution.

Manufacturers' agents or representatives may for advertising purposes, as permitted by state law and the terms of the November 23, 1998 Master Settlement Agreements with the state which are applicable to the signatories to those Agreements, distribute to consumers packages of cigarettes without stamps or meter impressions affixed to the packages or untaxed tobacco products. However, the manufacturer giving away such sample cigarettes or tobacco products must report the distribution on its monthly report or return and pay the tax due. Each package of such samples shall have imprinted on it: "Not for Sale. Applicable state tax has been paid." and each package of sample tobacco products shall be clearly marked as a sample.

Cigarette manufacturers shall notify the board in writing in advance of the sampling, giving information as to the approximate date or dates, location or locations, brand, and method of distribution.

History—Adopted September 13, 1961.

Amended January 12, 1968.

Amended April 11, 1972, effective May 14, 1972.

Amended September 26, 2001, effective February 15, 2002. Added references to tobacco products. In second paragraph, added "as permitted by state law … those Agreements," added "or return" after "report", and added "and each package of sample tobacco products … sample." In the third paragraph, added "Cigarette" before "manufacturers" and deleted "volume" after "brand".

Regulation 4082. Cigarettes for Hospitalized Veterans.

[Repealed September 26, 2001, effective February 15, 2002.]

Article 15. Vending Machines

Regulation 4089. Statement of Operator.

A statement in substantially the following form must be affixed by the operator thereof upon each cigarette vending machine in a conspicuous place:

"This vending machine is operated by

Name of Operator

Place of Business of Operator

who holds Permit No. ____, issued pursuant to the Sales and Use Tax Law"

History—Adopted June 24, 1959.

Article 16. Payment by Consumer or User

Regulation 4091. Payment by Consumer.

Reference: Sections 30005, 30005.5, 30106, 30107, 30108 and 30187, Revenue and Taxation Code.

(a) Each consumer or user of cigarettes or tobacco products subject to the cigarette and tobacco products taxes is liable for the taxes, resulting from the consumer having:

(1) Purchased cigarettes or tobacco products in any quantity, when such cigarettes or tobacco products are shipped to the consumer from out of state;

(2) Personally transported or brought into the state untaxed tobacco products in any quantity or untaxed cigarettes in quantities of more than 400 cigarettes in a single lot; or

(3) Obtained more than 400 untaxed cigarettes at one time from a federal instrumentality listed in Revenue and Taxation Code section 30102.

(b) A consumer must pay the cigarette and tobacco products taxes either to the licensed or registered distributor under the Cigarette and Tobacco Products Tax Law from whom the cigarettes or tobacco products were purchased, or directly to the Department if the person from whom the cigarettes or tobacco products were purchased is not a licensed or registered distributor. A person who pays the taxes directly to the Department must file a return with the Department that contains the following information regarding each purchase:

(1) The brand name of each product purchased;

(2) The type of each product purchased (i.e., cigarettes, cigars, pipe tobacco, e-cigarettes or e-liquid containing nicotine);

(3) Seller’s name, and email address or phone number;

(4) Invoice date for the purchase;

(5) Total number of cigarette sticks purchased and;

(6) Cost of tobacco products purchased.

(c) A consumers or user will be liable for payment of the cigarette and tobacco products taxes to the Department, unless a receipt is obtained for payment of the taxes to the licensed or registered distributor from whom the cigarettes or tobacco products were purchased that satisfies the requirements of Regulation 4092.

History—Adopted June 24, 1959.

Amended September 13, 1961.

Amended October 10, 1968, effective November 13, 1968.

Amended November 5, 1970, effective December 10, 1970.

Amended September 26, 2001, effective February 15, 2002. Added references to tobacco products and removed gender-specific language. Divided regulation into subdivisions (a), (a)(1), (a)(2), (a)(3) and (b). In subdivision (a)(1), replace "which" with "when such", in subdivision (a)(2), changed "his having himself transported" to "personally transported", and in subdivision (a)(3), removed "having" before "obtained", and added "A person who pays the … and cost of tobacco products received". Deleted references to (a) and (b) at end of subdivision (a) and added "either" before "to the licensed or registered distributor".

Amended December 27, 2021, effective December 27, 2021. The amendments added a period after "30102," reformatted the rest of subdivision (a)(3) and the second sentence in subdivision (a) as subdivision (b), and renumbered old subdivision (b) as subdivision (c); replaced "tax" and the comma after tax with "cigarette and tobacco products taxes is liable for the taxes" in subdivision (a); replaced "p" with "P" in "purchased" and replaced a comma with a semi-colon in subdivision (a)(1); added "untaxed tobacco products in any quantity or" to and deleted "for his or her own use or consumption” from after "lot,” replaced "p" with "P" in "personally," and replaced the comma with a semi-colon in subdivision (a)(2); replaced "o" with "O" in "obtained" in subdivision (a)(3); revised renumbered subdivision (b) to add "A consumer" and "cigarette and tobacco products," replace "tax" with "taxes" in two places, replace "board" with "Department" in two places, replace "certified Board of Equalization Form BOE-501-CI entitled ‘Cigarette and Tobacco Products Excise Tax Return,’" with "return … purchase:," and replace "and report the brand name, seller’s name, seller’s internet address or phone number, date received, and number of cartons or type and cost of tobacco products received" with new subdivisions (b)(1) through (6); revised renumbered subdivision (c) to replace "Consumers" with "A consumer," the first "tax" with "cigarette and tobacco products taxes," "board" with "Department," "receipts as provided by Regulation 4902 are" with "a receipt is," and the second "tax" with "taxes," delete "s" from the end of "users," and add "licensed or registered" and "from … 4092"; added references to Government Code sections 15570.22 and 15570.24 to the regulation’s authority note; and added a reference to Revenue and Taxation Code section 30187 to the regulation’s reference note.

Regulation 4092. Receipts for Tax Paid to Distributors.

Reference: Section 30108, Revenue and Taxation Code.

1. Every distributor required to collect the tax under Revenue and Taxation Code Section 30108 must give a receipt to each purchaser for the amount of tax collected. The receipt need not be in any particular form but must show the following:

(a) the name and place of business of the distributor making the sale or accepting the order for cigarettes or tobacco products;

(b) the license number or registration number of the distributor;

(d) the number of cigarettes or type, quantity, and wholesale cost of all tobacco products purchased;

(e) the date the cigarettes or tobacco products were purchased; and

(f) the amount of tax collected by the distributor or statement indicating that the tobacco products tax has been paid.

A sales invoice containing the data required above, together with evidence of payment thereof, will constitute a receipt.

History—Adopted June 24, 1959.

Amended September 26, 2001, effective February 15, 2002. Added references to tobacco products, added "Revenue and Taxation Code" after "under", deleted "of Cigarette Tax Law" following "Section 30108", added "or type, quantity … products" to subdivision (d), and added "or statement indicating … paid" to subdivision (f).

Article 18. Miscellaneous

Regulation 4098. Relief from Liability.

Reference: Section 30284, Revenue and Taxation Code.

(a) In General. A person may be relieved from the liability for the payment of cigarette and tobacco products taxes, including any penalties and interest added to those taxes, when that liability resulted from the failure to make a timely return or a payment and such failure was found by the board to be due to reasonable reliance on:

(1) Written advice given by the board under the conditions set forth in subdivision (b) below; or

(2) Written advice in the form of an annotation or legal ruling of counsel under the conditions set forth in subdivision (d) below; or

(3) Written advice given by the board in a prior audit of that person under the conditions set forth in subdivision (c) below. As used in this regulation, the term "prior audit" means any audit conducted prior to the current examination where the issue in question was examined.

Written advice from the board may only be relied upon by the person to whom it was originally issued or a legal or statutory successor to that person. Written advice from the board which was received during a prior audit of the person under the conditions set forth in subdivision (c) below, may be relied upon by the person audited or by a legal or statutory successor to that person.

The term "written advice" includes advice that was incorrect at the time it was issued as well as advice that was correct at the time it was issued, but, subsequent to issuance, was invalidated by a change in statutory or constitutional law, by a change in board regulations, or by a final decision of a court of competent jurisdiction. Prior written advice may not be relied upon subsequent to: (1) the effective date of a change in statutory or constitutional law and board regulations or the date of final decision of a court of competent jurisdiction regardless that the board did not provide notice of such action; or (2) the person receiving a subsequent writing notifying the person that the advice was not valid at the time it was issued or was subsequently rendered invalid. As generally used in this regulation, the term "written advice" includes both written advice provided in a written communication under subdivision (b) below and written advice provided in a prior audit of the person under subdivision (c) below.

(b) Advice Provided in a Written Communication. Advice from the board provided to the person in a written communication must have been in response to a specific written inquiry from the person seeking relief from liability, or from his or her representative. To be considered a specific written inquiry for purposes of this regulation, representatives must identify the specific person for whom the advice is requested. Such inquiry must have set forth and fully described the facts and circumstances of the activity or transactions for which the advice was requested.

(c) Written Advice Provided in a Prior Audit. Presentation of the person's books and records for examination by an auditor shall be deemed to be written request for the audit report. If a prior audit report of the person requesting relief contains written evidence which demonstrates that the issue in question was examined, either in a sample or census (actual) review, such evidence will be considered "written advice from the board" for purposes of this regulation. A census (actual) review, as opposed to a sample review, involves examination of 100% of the person's transactions pertaining to the issue in question. For written advice contained in a prior audit of the person to apply to the person's activity or transaction in question, the facts and conditions relating to the activity or transaction must not have changed from those which occurred during the period of operation in the prior audit. Audit comments, schedules, and other writings prepared by the board that become part of the audit work papers which reflect that the activity or transaction in question was properly reported and no amount was due are sufficient for a finding for relief from liability, unless it can be shown that the person seeking relief knew such advice was erroneous.

(d) Annotations and Legal Rulings of Counsel. Advice from the board provided to the person in the form of an annotation or legal ruling of counsel shall constitute written advice only if:

(1) The underlying legal ruling of counsel involving the fact pattern at issue is addressed to the person or to his or her representative under the conditions set forth in subdivision (b) above; or

(2) The annotation or legal ruling of counsel is provided to the person or his or her representative by the board within the body of a written communication and involves the same fact pattern as that presented in the subject annotation or legal ruling of counsel.

(e) Trade or Industry Associations. A trade or industry association requesting advice on behalf of its member(s) must identify and include the specific member names(s) for whom the advice is requested for relief from liability under this regulation.

History—Adopted September 26, 2001, effective February 15, 2002.

Regulation 4099. Affixing of Stamps or Meter Impressions Out-of-State.

Any person who maintains a place of business in the United States and distributes cigarettes in this State may obtain a Distributor's License and, when authorized in writing, may affix stamps or meter impressions to packages of cigarettes at such place of business before the cigarettes are brought into this State.

History—Adopted June 24, 1959.

Regulation 4100. Purchases of Cigarettes by a Retailer.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4101. Cigarette Transporter's Permit.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4102. Application Form.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4103. Invoices, Bills of Lading or Delivery Tickets.

[Repealed May 4, 1982, effective August 19, 1982.]

Regulation 4105. Relief from Liability.

Reference: Section 30284, Revenue and Taxation Code.

A person may be relieved from the liability for the payment of the Cigarette and Tobacco Products Tax, including any penalties and interest added to the tax, when that liability resulted from the failure to make a timely return or a payment and such failure was found by the board to be due to reasonable reliance on written advice given by the board as described in California Code of Regulations, Title 18, Section 4902.

History—Adopted February 5, 2003, effective May 28, 2003. The underscored citation indicates an electronic hyperlink to the cite. Common administrative provisions for special taxes programs have been consolidated in Chapter 9.9 Special Taxes Administration. Requirements for relief from liability can be found at the referenced cite.

Regulation 4106. Innocent Spouse or Registered Domestic Partner Relief from Liability.

Authority cited: Section 30451, Revenue and Taxation Code. Reference: Section 30285, Revenue and Taxation Code; Sections 297, 297.5, and 308, Family Code.

A spouse or registered domestic partner claiming relief from liability for the cigarette and tobacco products tax, interest, penalties, and other amounts shall be relieved from such liability where all the requirements set forth in California Code of Regulations, title 18, section 35055 are met.

History—Adopted March 23, 2010, effective June 17, 2010.

Amendments filed March 19, 2018, as an emergency; effective and operative March 19, 2018. Amendments refiled September 17, 2018, as an emergency; effective and operative September 17, 2018. Amendments refiled December 17, 2018, as an emergency; effective and operative December 17, 2018. Certificate of Compliance transmitted to OAL on February 20, 2019, and filed March 19, 2019. The amendments replaced the reference to Regulation "4903" with a reference to Regulation "35055" in the regulation's text and replaced the reference to "Sections 30285 and 30361-30384" with a reference to "Section 30285" in the reference note.

Laws, Regulations and Annotations

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Business Taxes Law Guide—Revision 2024

Cigarette and Tobacco Products Tax Regulations

Title 18. Public Revenues Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9) Chapter 9. Cigarette and Tobacco Products Tax Law Regulations

Article 1. General Provisions

Article 2. Use of Stamps or Meter Impressions

Article 3. Distributor's and Wholesaler's License

Article 4. Distributor's Bond

Article 5. Inventories

Article 6. Records

Article 7. Tax Reports

Article 8. Other Reports

Article 9. Stamps

Article 10. Metering Machines and Impressions

Article 10.5. Purchase of Tax Indicia

Article 11. Refunds for Stamps and Meter Impressions

Article 13. Particular Transactions

Article 15. Vending Machines

Article 16. Payment by Consumer or User

Article 18. Miscellaneous

Article 1. General Provisions

Regulation 4001. Cigarette.

Regulation 4002. Distribution.

Regulation 4003. Package.

Article 2. Use of Stamps or Meter Impressions

Regulation 4007. Requirement Beginning September 1, 1959.

Article 3. Distributor's and Wholesaler's License

Regulation 4001. Retail Stock.

Regulation 4011. Requirement for Distributor's License.

Regulation 4011. Distributors Not Engaged in Business in this State.

Regulation 4012. License Application.

Regulation 4013. Passenger Carriers and Authorized Sellers.

Regulation 4014. Registration of Unlicensed Distributors.

Regulation 4015. Wholesaler's License Application.

Article 4. Distributor's Bond

Regulation 4016. Bond of Distributor.

Regulation 4017. Deposits in Lieu of Surety Bonds.

Regulation 4018. Amount of Security.

Article 5. Inventories

Regulation 4021. Opening Inventory.

Regulation 4022. Inventories of Cigarettes.

Regulation 4023. Inventories of Stamps and Meter Units.

Article 6. Records

Regulation 4026. Records.

Regulation 4027. Cigarette Manufacturer and Tobacco Products Manufacturer or Importer Monthly Return and Schedules.

Regulation 4028. Period for Which Records to Be Kept.

Regulation 4029. Failure to Keep Records.

Regulation 4030. Wholesaler's Records.

Article 7. Tax Reports

Regulation 4031. Distributor's and Wholesaler's Report.

Regulation 4031.1. Payment by Electronic Funds Transfer.

Regulation 4032. Passenger Common Carrier Report.

Regulation 4033. Consumer's or User's Report.

Regulation 4034. Report of Shipments to Consumers.

Regulation 4035. Tax Remittances.

Article 8. Other Reports

Regulation 4041. Common Carrier Delivery Reports.

Article 9. Stamps

Regulation 4047. Transfer of Stamps.

Regulation 4048. Manner of Affixing Stamps.

Regulation 4049. Adherence of Stamps.

Article 10. Metering Machines and Impressions

Regulation 4051. Metering Machines.

Regulation 4052. Metering Machine Requirements.

Regulation 4053. Revocation of Permission.

Regulation 4054. Manner of Affixing Meter Impressions.

Article 10.5. Purchase of Tax Indicia

Regulation 4055. Where Purchased; Distributors' Discount.

Regulation 4056. Units of Sale; Minimum Sales.

Regulation 4057. Cash Sales of Tax Stamps or Meter Register Settings.

Regulation 4058. Application for Credit Purchases.

Regulation 4059. Authorization for Credit Purchases.

Regulation 4060. Payment for Credit Purchases.

Article 11. Refunds for Stamps and Meter Impressions

Regulation 4061. Unused Stamps.

Regulation 4062. Destroyed Stamps and Meters.

Regulation 4063. Destroyed Cigarettes.

Regulation 4063.5. Exported Tax-Paid Tobacco Products.

Regulation 4064. Claim Forms.

Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 9. Cigarette and Tobacco Products Tax Law Regulations