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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 5. Inventories
Regulation 4022
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.