This notice will discuss the method of applying for refund/credit of cigarette tax, the implementation of Tobacco Master Settlement Agreement as well as the revision of the following forms:

• Monthly Report for Distributors and/or Wholesalers of Cigarettes
• Requisition for West Virginia Cigarette Stamps
• Application for Refund/Credit of Cigarette Tax

DISCUSSION

Refund/Credit of Cigarette Tax - In addition to the present procedure for refund of cigarette tax prescribed pursuant to WV Code § 11-17-10 and §11-10-14, all Wholesalers/Distributors may choose a credit to be applied to cigarette stamp purchases in lieu of a refund check for reimbursement of cigarette tax for overpayment and/or returns of stamped cigarettes to the manufacturer.

The statutory discounts prescribed by WV Code § 11-17-9 shall be deducted from the gross face value of unused stamps on, mutilated, but identifiable stamps that any wholesaler or retail dealer may present for redemption on written verified requests made by the purchaser, his administrators, executors, successors or assigns.

The credit, once approved by the Tax Department and received by the Taxpayer, must be applied to the next Requisition for Cigarette Stamps submitted.

Advantage: Claims for credits are processed weekly. Currently refunds are processed monthly on the 24th day of each month. A check is issued the following month and mailed to the Taxpayer. This process takes approximately six weeks from the time an Application for Refund is received. The credit will allow the Wholesaler/Distributor to utilize the reimbursement in a more efficient and timely manner.

Implementation of Tobacco Master Settlement Agreement (WV Code § 16-9B-1) - (e) On November 23, 1998, leading US tobacco product manufacturers entered into a settlement agreement known as the "Master Settlement Agreement" with the State. The master settlement agreement obligates these manufacturers, in return for a release of past, present and certain future claims against them, to pay substantial sums to the State (tied in part to their volume of sales); to fund a national foundation devoted to the interests of public health and to make substantial changes in their advertising and marketing practices and corporate culture, with the intention of reducing underage smoking.

WV Code § 16-9B-1(f) states: It would be contrary to the policy of the State if tobacco product manufacturers who determine not to enter into such a settlement could use a resulting cost advantage to derive large, short-term profits in the years before liability may arise without ensuring that the State will have an eventual source of recovery from them if they are proven to have acted culpably. It is thus in the interest of the State to require that such manufacturers establish a reserve fund to guarantee a source of compensation and to prevent such manufacturers from deriving large, short-term profits and then becoming judgement-proof before liability may arise.

If the manufacturers elect not to participate in the Master Settlement Agreement, they are required to place a statutorily prescribed amount of money per "unit sold" in West Virginia (per cigarette or per defined unit of "roll your own" tobacco) into a qualified escrow fund.

The definition of "units sold" states in part, the number of individual cigarettes sold in the State by the applicable tobacco product manufacturer as measured by the excise taxes collected by the State. The statute requires the Tax Commissioner to propose legislative rules for implementation of the statute necessary to ascertain the amount of State excise tax paid on the cigarettes of each such tobacco manufacturer for each year. This means that the Tax Department must now track and identify sales by manufacturer.

A new Schedule 3, Sales of Stamped Cigarettes Into West Virginia, is now a required attachment to the Monthly Report for Distributors and/or Wholesalers of Cigarettes. See instructions below under "Schedule 3".

FORMS' REVISIONS

Monthly Report for Distributors and/or Wholesalers of Cigarettes (WV/CIG 7.09 (Rev. 3/99))

1. Because Taxpayers now have the option of applying for a credit of overpayments of cigarette tax and/or returns of stamped cigarettes to manufacturers, with credit to be applied to the Requisition for Cigarette Stamps, a section has been added to the monthly report to document requisition numbers and the credit numbers that were applied to each.
2. Meter Impressions in West Virginia have been eliminated, therefore the section for meter impressions on the current report has been omitted.
3. Cigarette Package Accountability for unstamped cigarettes and stamped WV cigarettes has been moved to the front of the report.
4. For In-State accounts which stamp for multiple states, the cigarette stamp inventory and cigarette package accountability has been moved to the back of the report with a section for the totals of all other states on the front.
5. Schedules for Receipts of Unstamped Cigarettes (currently DELT 7.09-1 (Rev.6-84)) and Receipts of Stamped WV Cigarettes (currently DELT 7.09-2 (Rev. 1-74)) have been revised to become Schedule 1 and Schedule 2 respectively and have been simplified for the Taxpayer.

Requisition for West Virginia Cigarette Stamps (WV/CIG 703 Rev. 5/98)

The Wholesaler/Distributor requesting stamps will now be required to sign and date the requisition in the top section and indicate whether or not the account is bonded. The requisition will now be pre-printed with the account identification number, name and shipping address.

1. Type of stamp and quantity available for packages of 20 cigarettes.
2. Quantity of stamps requested @ .17.
3. Type of stamp and quantity available for packages of 25 cigarettes.
4. Quantity of stamps requested @ .2125.
5. The bottom section represents the amount due, less 4% discount and any credit issued by the Tax Department.

Application for Refund/Credit of Cigarette Tax (CIG 7.22 (Rev. 5/98))

1. In the first section, the Taxpayer must indicate refund or credit. If one is not chosen, a credit will be issued.
2. This form will be pre-printed with the identification number, name and mailing address.

Sales of Stamped Cigarettes into West Virginia (Schedule 3 (Rev. 3/99))

Lines 1-19 - Manufacturers are listed on the schedule. The Wholesaler/Distributor will be required to list beside each applicable manufacturer (column B for "roll your own" containers, column C for packs of 20 and column D for packs of 25) the total of "roll your own" tobacco in ounces and packs of cigarettes sold into West Virginia. If the manufacturer is not listed, Taxpayer is required to enter the name of the manufacturer as well as the total sales on the blank lines provided. If additional space is required, Taxpayer is required to attach separate sheet.

Line 20 - Total ounces of "roll your own" tobacco sold.

Line 21 - Total of all packs of 20 cigarettes (column B). Total of all packs of 25 cigarettes (column C).

The first schedule must be filed with the March, 1999 report, due date April 15, 1999, to show sales from March 12, 1999 (the effective date for the statutory enactment) through the close of the month. An extension of time to file the March, 1999 reports has been granted until April 25, 1999. If the Wholesaler/Distributor has already submitted this report, it must be amended to include this schedule.

IMPORTANT CHANGES TO EACH FORM

A copy will no longer be provided of any of these forms. The Taxpayer will be required to keep a copy for their records.

All forms will be mailed annually, the first mailing scheduled for June 1999 and subsequent mailings in December of each year. Schedule 3, Sales of Stamped Cigarettes in West Virginia, will be mailed in April 1999 with enough forms to supply the Taxpayer until the June 1999 mailing.

 

Issued: July 16, 1999	Joseph M. Palmer Tax Commissioner West Virginia State Tax Department
State Tax Department Internal Auditing Division P.O. Box 2991 Charleston, WV 25330-2991	Operator on duty 8:30 am - 4:00 pm Monday through Friday Phone: (304) 558-8500 Fax: (304) 558-1990