Home Business Taxes Tax Information for Tobacco Taxpayers Tax Information for Tobacco Taxpayers The Processing Control Unit of the Revenue Administration Division is responsible for processing tobacco tax returns and related payments. In coordination with the Assistant Attorney General, the Unit reviews and compiles reported activity by licensed tobacco wholesalers as required by the Master Settlement Agreement (MSA), as well as prepares deposits for incoming revenue related to tobacco tax. The Regulatory and Licensing Section (RLS) of the Field Enforcement Bureau is responsible for the issuance of licenses and permits and promotes fair trade practices in accordance with the law. RLS also provides online verification of licenses and permits. Tobacco Tax Forms Industry FAQ's about Tobacco Who pays the cigarette excise tax? It is paid by wholesalers when they purchase tax stamps. What is meant by the "Master Settlement Agreement"? The Master Settlement Agreement (MSA) is an agreement that signed in November 1998, by attorneys general in 46 states and five U.S. territories and the tobacco industry. The agreement resolved lawsuits filed by the attorney general against the tobacco industry and provided the states funding intended for tobacco prevention and control. Under the MSA, Maryland was awarded $1 billion over 10 years, beginning July 1, 2000. The Maryland legislature enacted Senate Bill 896/House Bill 1425 in April 2000, which created the Cigarette Restitution Fund Program (CRFP). The CRFP oversees the use of MSA funds which are currently being used to fund activities and projects. What does OTP stand for? Other Tobacco Products (other than cigarettes). When was the OTP tax created? July 1, 2000. Who reports and pays the OTP tax? And how often are reports filed? Whoever reports the tax, should remit the tax, be it the wholesaler, retailer or consumer. If the wholesaler remits the tax, they should provide the retailer with a letter saying the tax was paid on their behalf. A wholesaler must report monthly. A retailer or consumer must report quarterly the date the product was purchased. Ultimately, the wholesaler has the primary responsibility to pay the tax. On what amount does a tobacco manufacturer pay the OTP tax? The tobacco manufacturer pays the tax on the amount it costs to make the OTP product, not the invoice amount. Does an out-of-state manufacturer have to register as a wholesaler to pay the OTP tax? Yes, if the OTP is sold to Maryland by the manufacturer. Anyone who holds a cigarette license is obligated to submit the OTP tax. Can a wholesaler remit OTP tax for their sub-wholesaler and the sub-wholesaler file a return for the same period showing no tax due? No, the "wholesaler" for the purpose of this tax, means a person located in or out of the state who sells to a retailer in Maryland. The tax shall be paid by the wholesaler who sells the OTP to a retailer in Maryland. Sub-wholesalers are responsible for remitting the OTP tax on sales to Maryland retailers for the report month. Is documentation needed with the submission of the OTP tax report? No. However, keep supporting documentation for audits, should they occur. Can a wholesaler remit OTP tax by calculating the OTP tax of the selling price rather than the OTP tax of the cost? No. the tax rate is calculated on the wholesale price. The wholesale price is defined as “the price for which a wholesaler buys other tobacco products”. The tax must be calculated on the cost of the OTP sold during the report month. Tax rates are as follows: Premium Cigars at 15% Non-Premium Cigars at 70% Other OTP at 30% I am a Tobacco Vending Machine Operator. How do I get a tobacco vending machine sticker? Contact the Field Enforcement Bureau at 410-260-7388. Agents do not apply the stickers. The stickers will be mailed to the Vending Machine Operator, providing the following information: name, company name (if applicable), and address. What is the difference between a regulation and a statute? The legislature enacts statutes. The Comptroller adopts, amends and repeals regulations under the authority granted by statutes, following the procedures in the Administrative Procedure Act. I need a letter stating that all state taxes have been paid. Who do I contact? Contact the General Accounting Division at 410-260-7813. I cannot renew my license due to tax liabilities with the Comptroller's Office. Who do I contact? Business liability: 410-767-1908 Personal liability: 410-649-0633 (usually an income tax issue) Personal property tax: Clerk of the Circuit Court (in the respective county) Who do I contact at IRS with federal tax questions? IRS individual tax questions: 1-800-829-1040 IRS business tax questions: 1-800-829-4933 Web site: www.irs.gov Cigarette Sales Below Cost Act The Cigarette Sales Below Cost Act prohibits retailers and wholesalers from selling cigarettes at prices below cost to lessen competition. The calculators below can be used to calculate either the minimum price set by law or an alternate price that meets legal requirements. The lowest approved minimum markup is 0.42%, effective May 1, 2022 until April 30, 2023, or until a lower percentage is approved, whichever is earlier. Cigarette Price Calculators Wholesaler Minimum Price Calculator Wholesaler Alternate Price Calculator Retailer to Consumer Cigarette Minimum Price Calculation Multiply the wholesaler to retailer purchase price from your invoice by the 8% retailer cost of doing business minimum markup. A fractional part of a cent equal to one-tenth of a cent or more in the result of step 1 must be rounded off to the next highest cent. Add the result from step 1 to the wholesaler to retailer purchase price. The result of step 3 is the minimum price that you may sell to consumers. Example: $ 34.15 Purchase price per carton X .08 Cost of Doing Business markup (8%)* $ 2.73 $ 34.15 Purchase price per carton + 2.73 Result from step 1 $ 36.88 Minimum retailer to consumer selling price per carton *Per the Annotated Code of Maryland, Trade Regulation, Sec's. 11-501 (d)(1) and 11-503 (b)(1). Wholesaler's Cigarette Cost of Doing Business Title 11 of the Commercial Law Article of the Annotated Code of Maryland provides that, in the absence of a satisfactory proof of a lesser cost, the cost of doing business is presumed to be 5% of the basic cost of cigarettes to that wholesaler. COMAR Regulation .03.02.03.07 (see COMAR Online) provides a mechanism for a cigarette wholesaler to prove a cost of doing business that is less than 5%. The regulation further provides that the lowest approved percentage becomes the statewide benchmark for all licensed wholesalers until when and if a different percentage is approved based on the regulation. Below is the current approved cost of doing business percentage: Effective Date: May 1, 2022 Percentage: 0.42% Cigarette wholesalers are strongly encouraged to use the automatic calculator below to calculate their minimum selling price. The cost of doing business percent and tax rate are automatically included in this calculator. Wholesalers may incorporate other legitimate discounts in their calculation. It is highly recommended that wholesalers using this calculator print out a copy of their completed calculation which could later be used as evidence to prove a selling cost consistent with the statute and regulation. Cigarette Wholesaler to Retailer Minimum Price Calculator Subwholesaler to Retailer Cigarette Minimum Price Calculation Multiply the wholesaler to subwholesaler purchase price from your invoice by the current approved cost of doing business percentage. A fractional part of a cent equal to one-tenth of a cent or more in the result of step 1 must be rounded off to the next highest cent. Add the result from step 1 to the wholesaler to subwholesaler purchase price. The result of step 3 is the minimum price that you may sell to your licensed retailers. Example: $ 34.00 Purchase price per carton x 0.0042 Cost of Doing Business percentage $ 0.1428 (14%) $34.00 Purchase price per carton + .14 Result from step 1 (14%) $34.14 Minimum subwholesaler to retailer selling price per carton Reports and Statistics Regarding Tobacco Tax For a full listing of monthly and annual tobacco reports, see Alcohol and Tobacco Tax Reports. Contact Information for Tobacco Taxpayers If you would like to be added to our mailing list, please send an e-mail containing your name, company name, and e-mail address to the e-mail address shown below. Phone: (410) 260-7980 Fax: (410) 974-5808 E-mail: email@example.com Comptroller of Maryland Revenue Administration Division Licensing and Regulation P.O. Box 2999 Annapolis, Maryland 21411-0299 Online Services for Tobacco Taxpayers Application Description Alcohol and Tobacco Tax Direct Debit Payments Application Make tobacco tax payments electronically License and Permit Information System Search tobacco licenses and permits Credit Control Reporting System Report unpaid credit sales owed to wholesalers Calculators Cigarette Wholesaler to Retailer Minimum Price Calculator Cigarette Wholesaler to Retailer Alternate Price Calculator Tobacco Tax License Refund Information Tobacco tax licensees due a refund: may file a claim with Form ATT-603 within six months of the date that stamps were misapplied, cancelled, etc. must furnish information as required to verify the claim. in the case of tax stamps or taxes paid on products that were lost or destroyed by disaster, may file a claim within six months of the date the products were lost or destroyed, but only if the claim exceeds $250.00 and is not due to theft. Payment Information If a tax payment is due with a tobacco tax return, a check or money order may accompany the return, or payment can be submitted electronically using the Web site below. If submitting payment electronically, please pay on or before the due date. Alcohol and Tobacco Tax Direct Debit Payments Application Returns and applications for licenses and permits, along with payment, can be mailed to: Comptroller of Maryland Revenue Administration Division P.O. Box 2999 Annapolis, MD 21404-2999 Consumer FAQ's about Tobacco What is the minimum age to buy or possess cigarettes? 21 years of age. See Criminal Law, 10-107. Is there an age limit for selling cigarettes? No, provided that proper work permits are in place Why can't I smoke in my workplace, a public building, or at a restaurant? Contact the Maryland Department of Occupational Safety and Health at 410-767-2215. How many cigarettes can be imported into Maryland? Five cartons per person. Importing more than five cartons is a felony if transported. See Tax General TG 12-104 and TG 13-1015. Who enforces Maryland's cigarette and tobacco tax laws? The Maryland Comptroller's Field Enforcement Bureau handles the enforcement of state laws governing cigarettes and tobacco. How can I report a store that's selling cigarettes to minors? Contact your local jurisdiction's law enforcement agency. What is the current Maryland excise tax on cigarettes? The current tax rate is $2.00 per pack of 20. July 1, 1999 – Tax rate increased from $.36 to $.66 per pack of 20. June 1, 2002 - Tax rate increased from $.66 to $1.00 per pack of 20. Effective January 1, 2008, the rate increased from $1.00 to $2.00 per pack of 20. Can I order cigarettes over the Internet? No. It is illegal to purchase cigarettes over the Internet. What are fire safe cigarettes? All cigarettes manufactured or sold in Maryland must be tested and marked as Fire Safe Cigarettes. See also Business Regulation BR 16-602.