As many are aware, I have been writing a number of blogs and articles recently discussing the Department of Business and Professional Regulation here in Florida and its potentially unfair audit tactics. Many of you have seen cigar wrappers, or the more scientifically described “blunt wraps”, at convenience stores and gas stations throughout the state and country. Are those items tobacco products subject to Florida’s other tobacco products tax? On the surface it seems questionable, but after digging into the law and writing about this issue for some time now, the law seems to make it clear.
This was exactly the issue in a recent case,New Image Global Inc – Complaint.pdf. In short, the case was filed by New Image Global for a massive other tobacco tax assessment. The tax, penalty, and interest amounted to $1,082,494 at the time of the Complaint. The Assessment has since been reduced, but the argument still remains the same. The case addresses whether or not cigar wrappers, or their more informal title, blunt wraps, are subject to Florida’s other tobacco tax (“OTP”).
In the Complaint, New Image, a Florida tobacco distributor, shipped the blunt wraps from its Jacksonville warehouse to various locations in Florida. In November 2010, DBPR assessed other tobacco products tax on the blunt wraps claiming the items are “tobacco products” under Florida law. The Assessment was timely challenged by the Taxpayer. In addition, the Taxpayer was unsure of its rights moving forward and sought declaratory relief in order to ascertain whether or not the items are “tobacco products.”
The Complaint did an excellent job hammering home the well-known cannon of statutory construction that states taxing laws, if ambiguous, must be construed heavily against the agency and in favor of the Taxpayer. With that in mind, the Taxpayer essentially asserted the same argument I have been making that the blunt wraps at issue do not fall within the purview of the OTP tax.
Similarly, section 201.25, F.S., defines a tobacco product as
loose tobacco suitable for smoking; snuff; snuff flour; cavendish; plug and twist tobacco; fine cuts and other chewing tobaccos; shorts; refuse scraps; clippings, cuttings, and sweepings of tobacco, and other kinds and forms of tobacco prepared in such manner as to be suitable for chewing; but “tobacco products” does not include cigarettes, as defined by s. 210.01(1), or cigars.
With the cannon of construction in mind, if the blunt wraps/cigar wrappers are not clearly:
1. loose tobacco suitable for smoking;
2. snuff;
3. snuff flour;
4. cavendish;
5. plug and twist tobacco;
6. fine cuts and other chewing tobaccos;
7. shorts;
8. refuse scraps;
9. clippings,
10. cuttings,
11. and sweepings of tobacco,
12. and other kinds and forms of tobacco prepared in such manner as to be suitable for chewing;
…then it is not taxable. While the items do contain about 40% tobacco, which one of those descriptions does it clearly fit under? It seems the Taxpayer has a great argument that none of the categories apply and the item is not taxable.
It also is clear that Florida DBPR AB&T is treating these items throughout the state as taxable. If you or your client is a tobacco distributor or manufacturer, then the item should be challenged in my view. If nothing else, the manufacturers and distributors throughout the state should be seeking a declaratory judgment to determine whether or not these items are taxable. Even further, if a Florida tobacco distributor or manufacturer has paid tax on these items in the last 3 years, then there is little to lose by filing for a refund.
If this situation may apply to your or your client, or if you have any questions about taxes imposed by Florida’s Division of Alcohol, Beverages, and Tobacco or the Florida Department of Revenue, then please contact our office for a free initial consultation. If any agency in Florida threatens you or your business’s Florida professional license or Florida business license, then please contact a competent Florida attorney to fight back. If you don’t already have an attorney, then contact our offices today to help keep your business doors open.
About the author: Jerry Donnini is a multi-state sales and use tax attorney and an associate in the law firm Moffa, Gainor, & Sutton, PA, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, native American taxation, federal estate planning, and Florida probate. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email JerryDonnini@Floridasalestax.com or phone at 954-642-9390.