Virginia Enacts Tobacco Products Tax Law Applicable to Remote Retail Sales of Cigars and Pipe Tobacco | Troutman pepper
Virginia’s new law addresses excise duties and other requirements regarding the distance retail sale of cigars and pipe tobacco to Commonwealth consumers.
On April 27, 2022, the Virginia General Assembly passed House Bill 1199 and Senate Bill 748 regarding the application of the Commonwealth Tobacco Products Tax to “distance retail sales” of cigars and pipe tobacco and related requirements.
The General Assembly had previously passed the bills; however, on April 11, the governor recommended several changes. The General Assembly accepted the Governor’s recommendations in full on April 27, signing the bills into law in accordance with Article V, § 6 (b) (iii) of the Constitution of Virginia. The laws will come into force on July 1, 2022.
With regard to the imposition of the tax on tobacco products, the law does not modify the current tax rates, but provides that:
- for “cigars and pipe tobacco products sold by distance retail vendors”, the Tobacco Products Tax rates apply either (a) “[t]e real cost; or (b)”[i]if the actual cost is not available, the average of the actual cost over the 12 calendar months preceding 1 January of the year in which the sale takes place; »
- “‘Actual Cost’ means the actual price paid by a Remote Retail Seller for each individual Stock Keeping Unit or SKU;”
- the tax will be imposed only once, “at the time the distance retail seller located inside or outside the Commonwealth makes a distance retail sale to a consumer within the Commonwealth”, and “the seller remote retail [will] be liable for tax. »
To lawfully make distance retail sales of cigars or pipe tobacco to Commonwealth consumers, the law requires that the distance retailer:
- “complete[e] a candidacy for and be has obtained a remote retailer license; »
- “determine[e] whether the economic nexus activity thresholds have been met to register for a reseller certificate under the Retail Sales and Use Tax Act, as described in 58.1-612(C), which require dealer registration if the dealer:
- “1. Maintains or owns within this Commonwealth, directly or through an agent or subsidiary, any office, warehouse or establishment of any kind;
- Solicits business in this Commonwealth through employees, independent contractors, agents or other representatives;
- Advertisements in newspapers or other periodicals printed and published in this Commonwealth, on billboards or posters located in this Commonwealth, or through documents distributed in this Commonwealth by means other than United States mail United ;
- Makes regular deliveries of tangible personal property within this Commonwealth by means other than the common carrier. A person shall be deemed to make regular deliveries hereunder if vehicles other than those operated by a common carrier enter this Commonwealth more than 12 times in a calendar year to deliver goods sold by him;
- Solicits business in this Commonwealth on a continuous, regular, seasonal or systematic basis by means of advertisements broadcast or relayed from a transmitter in this Commonwealth or distributed from a location in this Commonwealth;
- Soliciting for business in this Commonwealth by post, if the solicitations are continuous, regular, seasonal or systematic and if the dealer benefits from any banking, financing, debt collection or marketing activity taking place in this Commonwealth or benefits from the the location in this Commonwealth of authorized installation, service or repair facilities;
- Is owned or controlled by the same interests that own or control a business located in that Commonwealth;
- To a franchisee or licensee operating under the same trade name in this Commonwealth if the franchisee or licensee is required to obtain a certificate of registration under § 58.1-613;
- Owns tangible personal property which is for sale located in that Commonwealth, or which is rented or leased to a consumer in that Commonwealth, or offers tangible personal property, on approval, to consumers in that Commonwealth;
- Receives more than $100,000 in gross revenue, or such other minimum amount as required by federal law, from Commonwealth retail sales in the preceding or current calendar year, provided that, in determining the amount of gross revenue of a dealership, sales made by all persons under common control as defined in subsection D must be aggregated; Where
- Engages in 200 or more separate retail transactions, or such other minimum amount as required by federal law, in the Commonwealth during the preceding or current calendar year, provided that, in determining the total number of dealer’s retail transactions, sales made by all persons under common control as defined in Subsection D shall be aggregated. »
- “provide[e] for age verification through an independent third-party age verification service that compares information available from a commercially available database, or set of databases, which is routinely used by government agencies and businesses for age and identity verification purposes to the personal information entered by the individual during the ordering process that establishes that the individual is of legal age; ” and
- “if the economic link thresholds are reached”:
- “collect and put back excise tax under subsection A of § 1-1021.02; ” and
- if “excise tax is remitted using the actual cost list method of calculating excise tax, provided[e] the list of actual costs certified by the distance retailer to the Ministry [of Taxation] for each SKU to be offered for remote retail during the following calendar year. The list of actual costs should be updated quarterly as new SKUs are added to a remote retailer’s inventory. New SKUs will be added using the actual cost originally paid for the SKU.
The law also adds relevant statutory definitions of “cigar”, “consumer”, “pipe tobacco”, “remote retailer”, “remote retailer”, and “SKU”; imposes record keeping and reporting requirements for remote retail sellers; and extends existing tobacco product tax requirements to remote retail sellers. There are also additional requirements if the remote retailer cannot produce the required billing information and uses the actual cost list method to calculate excise taxes.
The law further provides that tax on tobacco products is otherwise imposed”on tobacco products (i) at the time of retail sale by a retailer or distributor; (ii) at the time the distributor manufactures, manufactures or manufactures tobacco products in the Commonwealth for sale in the Commonwealth; or (iii) at the time the distributor dispatches or transports tobacco products to retailers in the Commonwealth for sale by those retailers. (New language underlined.)
As stated earlier on this Blog, the General Assembly extended the Commonwealth Tobacco Product Tax to distance sellers from 1 January 2021, through revisions to the Budget Bill. The new legislation reflects the fact that the taxation and regulation of distance sellers continues to be an area of interest for the General Assembly. In recent years, this has also been an area of focus for other state legislatures (enacting or amending their own delivery sales laws) and Congress (extending the Jenkins Act to electronic delivery systems). nicotine). Whether and how congressional and state legislatures will continue to pass or amend laws regarding door-to-door sales of tobacco products will, of course, continue to be important questions for door-to-door sellers to follow. .
We will monitor further developments.