Tax Type
Cigarette Tax
Description
Stamping of cigarettes used by manufacturers for research, display or promotional purposes
Topic
Basis of Tax
Date Issued
10-03-1985
October 3, 1985
Re: Stamping of Cigarettes
Dear ****
This will acknowledge your letter of July 25, 1985, in which you request clarification on the procedures which you should follow when stamping cigarettes used by manufacturers for packaging research, display or promotional purposes.
In your letter you state that manufacturers have you stamp cigarettes which you have not purchased. These cigarettes are owned by the manufacturers and are returned to the manufacturers for their use.
Code of Virginia, Section 58.1-1009 states that no one other than the Department may sell revenue stamps not affixed to cigarettes sold and delivered by them. In your situation, the cigarettes you are stamping cannot be sold by you since they belong to the manufacturers. Therefore, you may not stamp cigarettes that you do not own since it will be interpreted as the sale of stamps and not the product to which the stamp is attached.
In Section 630-25-1011 of the Virginia Cigarette Tax Regulations, Example 4 sets forth the prohibition of a qualified wholesale dealer stamping cigarettes owned by a retailer. The same principle prohibiting the sale of Virginia cigarette stamps by a wholesaler to a retailer applies to the sale by a wholesaler to a manufacturer.
Historically, manufacturers have stamped certain promotional items with such words as "Applicable tax paid". The manufacturers in turn here remitted the applicable tax directly to the Department of Taxation. This direct payment process remains in effect for all promotional, give-a-way, or display cigarettes used by manufacturers.
The direct payment process does not resolve the problems related to packaging research and the manufacturer's need to have such packages tested on stamping equipment. In this specific type of transaction, your company should purchase the same cigarettes used in packaging research and prepare an invoice to record the purchase of the cigarettes from the manufacturer. Your company, in turn, will stamp its purchased product, sell and invoice the manufacturer for the sale of the stamped product. This procedure will meet the statutory requirements relating to the sale of stamps and the regulatory prohibition of stamping cigarettes belonging to someone else.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner