Excise and Use Taxes (Article 20)
In New York, state excise and use taxes are imposed on tobacco and vapor products, at the following rates:
- Cigarettes and little cigars ($4.35/pack, plus $0.68 per additional five cigarettes/little cigars contained in the pack),
- Snuff ($2.00 per ounce)
- Vapor products, whether or not they contain nicotine (20 percent of sales receipt)
- All other tobacco products (e., consumable tobacco) (75 percent of wholesale price)
How are these state taxes collected?
Cigarette packages in New York State commerce, including those in transport, require proof of tax payment in the form of a New York State tax stamp attached to each pack. Accordingly, before entering New York commerce, cigarettes must go to a state-registered stamping agent. This is an agent who prepays the state tax, receives tax stamps in return, and then affixes them to the cigarette package. The stamping agent then ships the tax-compliant cigarettes to a state-registered distributor, who may ship them to a registered wholesaler or retailer.
For other tobacco products, including little cigars and snuff, the state-registered wholesaler may directly receive shipments from manufacturers, and these wholesalers are then liable for paying excise taxes to the state at the rates listed above. In addition to registration as a sales tax vendor, a New York State registration is required to distribute or re-sell tobacco products, or to sell tobacco products through vending machines, so that the New York State Department of Taxation and Finance can collect periodic returns and sales reports.
The bottom line is that state tax must have been paid at the time a tobacco product enters into New York commerce (e.g., leaves a stamping agent [cigarettes] or other registered wholesale dealer [non-cigarette tobacco products]). Tobacco sellers that sell tobacco products directly to consumers for which the excise tax has not been paid (e.g., purchased out state or otherwise outside of the typical distribution chain) are responsible for paying, within 24 hours, use taxes (equivalent to the excise tax).
State use tax is also due on significant quantities of cigarettes or other tobacco products brought into New York from outside the state, including from New York tribal reservations or other sovereign nations, which therefore bypassed state-registered tobacco dealers. After transporting product into the state, an individual has 24 hours to file a report and pay the use tax on amounts equal to or greater than:
- 400 cigarettes
- 250 cigars
- 36 ounces of roll-your-own tobacco
- 5 pounds of other tobacco
For vapor products, the state tax is imposed directly on the consumer at the time of purchase and collected by a state-registered vapor products dealer. Vapor products are unlike cigarettes and other tobacco products by virtue of the tax being due [only] upon purchase by a consumer and therefore permitted in New York commerce before tax is collected until the product is sold to a consumer.
Exceptions to Cigarette and Other Tobacco Product Taxes:
- There is no tax imposed on cigarette or other tobacco product sales by U.S. armed forces’ retail outlets that are governed by federal agencies
- There is no tax imposed on cigarette or other tobacco product sales to the United States, such as when a federal agency purchases a tobacco product for research purposes.
- There is no tax imposed on cigarette sales to enrolled members of the selling sovereign Indian nation when purchased for one’s own use and consumption.
State taxes are due on all sales of tobacco products in New York commerce. This includes sales by a sovereign nation located within New York’s boundaries to an individual who is not an enrolled member of that nation. Tax is likewise due on tobacco products sold to an enrolled tribal member when purchased off of the reservation of which they are a member. Finally, tax is due on sales by a nation to an enrolled member when the purchased tobacco products are not intended for that member’s personal consumption.
For cigarettes, wholesale dealers (including agents) are required to collect the cigarette excise tax and prepaid sales tax on all cigarettes sold for resale on an Indian reservation to non-Indians and non-members of an Indian nation or tribe. All packs of cigarettes sold by wholesale dealers to Indian nations and tribes and reservation cigarette sellers are required to have New York tax stamps affixed to them. Wholesale dealers may sell stamped packs of cigarettes to tax-exempt sovereigns for resale. Native American reservation cigarette sellers receive vouchers or prior approval from the New York State Department of Taxation and Finance for tax-exempt sales to enrolled tribal members.
Tax agreements made between the Indian nation or tribe and the state take precedence over the provisions of the New York Tax Law. New York and the Oneida Nation: Native American merchants agreeing to charge the equivalent of state and local taxes on reservation purchases may keep the resulting revenue so long as it is spent on health programs.
A wholesale dealer is a person or organization in the business of selling cigarettes or other tobacco products to registered tobacco retail dealers. A wholesale dealer must have a certificate of registration issued by the New York State Department of Taxation and Finance to conduct wholesale cigarettes or tobacco products business. The registration is not transferrable and it is effective until revoked or suspended for cause or surrendered. The tax commission has the discretion to require wholesale dealers to file new registration applications once every three years. A wholesale dealer applicant must meet requirements, including obtaining a surety bond and must publicly display its certificate of registration at its place of business. The fee to obtain a certificate of registration as a wholesale dealer can range from $1,000 to $1,500, depending on the applicant’s previous status with the tax commission.
Registered cigarette stamping agents and distributors may not sell cigarettes or other tobacco products to a wholesale dealer or retail dealer that lacks a valid state registration or whose registration was suspended or revoked.
The tax commission has broad discretion relating to issuing, suspending, or revoking wholesale dealer registrations. If the tax commission has revoked or suspended a registration for cause, the wholesale dealer has the right to a hearing to challenge the commission’s determination.
A tobacco retail dealer must register with the New York State Department of Taxation and Finance in order to sell cigarettes or other tobacco products directly to consumers. Registration certificates are valid for one year and are not transferrable. The annual tobacco retail dealer registration fee is $300.
A tobacco retail dealer must publicly display a state-issued registration certificate at its place of business. Likewise, vending machines must display an affixed registration certificate. A retail dealer that does not have a retail store must place its certificate on its carts, stands, or any other devices used to sell cigarettes or other tobacco products.
Failure to publicly display a valid certificate of registration at a tobacco retail dealer’s place of business may result in civil fines up to $35,000, and failure to publicly display a valid registration certificate on any vending machine may result in civil fines up to $6,000. A retail dealer selling cigarettes without the required tax stamp or with counterfeit tax stamps can lead to its registration being suspended for up to five years.
If a retail dealer’s registration has been suspended or revoked, it has the right to seek a review by the tax commission to bring evidence or arguments challenging the commission’s decision. If the commission does not find substantial proof that the retail dealer sold improperly stamped cigarettes, then the suspension or revocation will be lifted.
New York vendors intending to sell vapor products must register as a vapor product dealer with the New York State Department of Taxation and Finance. New York State requires separate tobacco product dealer and vapor product dealer registrations. Certificates of registration are valid for one year, and are not transferrable. The fee for the vapor products dealer registration is also $300.
Tobacco product manufacturers in the business of selling roll-your-own (“RYO”) tobacco for consumption in New York must annually certify they are compliant with New York State’s Public Health Laws. Manufacturers must send their certifications, along with a list of their RYO brands available in New York, to state officials and distributors, and distributors must keep the certifications on file for five years. Otherwise, the distributor is prohibited from selling the manufacturer’s tobacco products.
Failure to pay tax or to timely file the necessary tax returns is a violation subject to penalty. The penalty amount is based on the total amount of tax due. The tax commission may determine an alternative appropriate penalty upon a finding of reasonable cause for the failure or delay.
Crimes and Other Offenses, Seizures, and Forfeitures
It is a felony to willfully attempt to evade New York cigarette and tobacco product tax laws repeatedly or involving large volumes. It is also a crime to possess, transport, or attempt to sell in large volumes or multiple times cigarettes lacking the necessary tax stamp or using counterfeit tax stamps. The crime may range from a misdemeanor for first-time offenders to a felony for repeat offenders or those who sell more than 10,000 unstamped or unlawfully stamped cigarettes.
It is a felony to knowingly and willfully produce counterfeit tax stamps. Counterfeiting tax stamps may include a broad range of conduct, including making, altering, purchasing, or tendering as true any counterfeit stamps. It is also a felony to knowingly and willfully purchase or receive devices used to produce counterfeit tax stamps.
It is a misdemeanor for a dealer to knowingly move, possess, or otherwise control cigarettes or tobacco products without having paid the appropriate tax and without the tax commission’s permission. Further, a tobacco retail dealer may not conduct business without an authentic registration certificate or to fraudulently make, alter, or counterfeit their registration certificate.
It is a misdemeanor for anyone other than a registered tobacco product distributor to import into New York State more than 50 cigars or 100 pounds of tobacco or, in a ninety day period, one thousand or more cigars or five hundred pounds or more of tobacco. A misdemeanor is punishable by a fine of no more than $5,000 or thirty days imprisonment. The conviction will be upgraded to a felony on all future violations if the individual has previously violated this provision twice, regardless of the amount of tobacco products involved in the future violation.
A police officer may seize cigarettes—and the machines used to sell them—found to be in violation of state law (for example, unstamped cigarette packs). Likewise, a police officer may seize tobacco products in excess of 500 cigars or 10 pounds of tobacco discovered and imported into the state through an unauthorized distributor. The property, other than cash, seized by the officer will be turned over to the tax commission and forfeited to New York State.
The seized property can be destroyed or sold by the tax commission. The tax commission may allow the owner to recover the seized cigarettes or tobacco products provided that the owner pays the total tax due, plus any penalties, interest accrued on the outstanding tax liability, and administrative costs incurred by the State. The seizure and subsequent sale of cigarettes or other tobacco products does not relieve the owner from being further fined or imprisoned under the provisions of applicable state laws.