[Title 27 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2011 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
Title 27
Alcohol, Tobacco Products and Firearms
________________________
Parts 40 to 399
Revised as of April 1, 2011
Containing a codification of documents of general
applicability and future effect
As of April 1, 2011
Published by the Office of the Federal Register
National Archives and Records Administration as a
Special Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
Table of Contents
Page
Explanation................................................. v
Title 27:
Chapter I--Alcohol and Tobacco Tax and Trade Bureau,
Department of the Treasury (Continued) 3
Finding Aids:
Table of CFR Titles and Chapters........................ 409
Alphabetical List of Agencies Appearing in the CFR...... 429
List of CFR Sections Affected........................... 439
[[Page iv]]
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 27 CFR 40.1 refers
to title 27, part 40,
section 1.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
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Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
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[[Page vi]]
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[[Page vii]]
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Office of the Federal Register.
April 1, 2011.
[[Page ix]]
THIS TITLE
Title 27--Alcohol, Tobacco Products and Firearms is composed of
three volumes: Parts 1-39, parts 40-399, and part 400 to end. The
contents of these volumes represent all current regulations issued by
the Alcohol and Tobacco Tax and Trade Bureau, Department of the
Treasury, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives,
Department of Justice, as of April 1, 2011.
For this volume, Bonnie Fritts was Chief Editor. The Code of Federal
Regulations publication program is under the direction of Michael L.
White, assisted by Ann Worley.
[[Page 1]]
TITLE 27--ALCOHOL, TOBACCO PRODUCTS AND FIREARMS
(This book contains parts 40 to 399)
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Part
chapter i--Alcohol and Tobacco Tax and Trade Bureau,
Department of the Treasury (Continued).................... 40
Abbreviations Used in This Chapter:
ATF = Alcohol, Tobacco and Firearms. T.D. = Treasury Decision. TTB =
Alcohol and Tobacco Tax and Trade Bureau.
[[Page 3]]
CHAPTER I--ALCOHOL AND TOBACCO TAX AND TRADE BUREAU, DEPARTMENT OF THE
TREASURY (CONTINUED)
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Editorial Note: 1. Nomenclature changes to chapter I appear by T.D.
TTB-44, 71 FR 16920, Apr. 4, 2006.
SUBCHAPTER B--TOBACCO
Part Page
40 Manufacture of tobacco products, cigarette
papers and tubes, and processed tobacco. 5
41 Importation of tobacco products, cigarette
papers and tubes, and processed tobacco. 66
44 Exportation of tobacco products and
cigarette papers and tubes, without
payment of tax, or with drawback of tax. 108
45 Removal of tobacco products and cigarette
papers and tubes, without payment of
tax, for use of the United States....... 147
46 Miscellaneous regulations relating to
tobacco products and cigarette papers
and tubes............................... 155
SUBCHAPTER C--FIREARMS
53 Manufacturers excise taxes--firearms and
ammunition.............................. 181
SUBCHAPTERS D-E [RESERVED]
SUBCHAPTER F--PROCEDURES AND PRACTICES
70 Procedure and administration................ 244
71 Rules of practice in permit proceedings..... 374
72 Disposition of seized personal property..... 392
[[Page 4]]
73 Electronic signatures; electronic submission
of forms................................ 402
SUBCHAPTERS G-L [RESERVED]
SUBCHAPTER M--ALCOHOL, TOBACCO AND OTHER EXCISE TAXES
194-399 [Reserved]
[[Page 5]]
SUBCHAPTER B_TOBACCO
PART 40_MANUFACTURE OF TOBACCO PRODUCTS, CIGARETTE PAPERS AND TUBES, AND
PROCESSED TOBACCO--Table of Contents
Subpart A_Scope of Regulations
Sec.
40.1 Manufacture of tobacco products, cigarette papers and tubes, and
processed tobacco.
40.2 Territorial extent.
Subpart B_Definitions
40.11 Meaning of terms.
Subpart C_Taxes
40.21 Cigar tax rates.
40.22 Determination of sale price of large cigars.
40.23 Cigarette tax rates.
40.24 Classification of cigarettes.
40.25 Smokeless tobacco tax rates.
40.25a Pipe tobacco and roll-your-own tobacco tax rates and
classification.
40.26 Persons liable for tax.
40.27 Assessment.
Subpart Ca_Special (Occupational) Taxes
40.31 Liability for special tax.
40.32 Rates of special tax.
40.33 Cross reference.
40.34-40.36 [Reserved]
Subpart D_Administrative Provisions
40.41 Forms prescribed.
40.42 Authority of Appropriate TTB officers to enter premises.
40.43 Interference with administration.
40.44 Disposal of forfeited, condemned, and abandoned tobacco products.
40.45 Alternate methods or procedures.
40.46 Emergency variations from requirements.
40.47 Other businesses within factory.
40.48 Penalties and forfeitures.
40.49 Delegations of the Administrator.
Subpart E_Qualification Requirements for Manufacturers of Tobacco
Products
40.61 Qualification.
40.61a Transitional rule.
40.62 Application for permit.
40.63 Corporate documents.
40.64 Articles of partnership or association.
40.65 Trade name certificate.
40.66 Bond.
40.67 Blanket bond.
40.68 Power of attorney.
40.69 Factory premises.
40.70 Separation of and access to factory.
40.71 Factories established prior to October 1, 1961.
40.72 Use of factory premises.
40.73 Additional information.
40.74 Investigation of applicant.
40.75 Issuance of permit.
40.76 Retention of permit and supporting documents.
Subpart F_Changes After Original Qualification of Manufacturers of
Tobacco Products
Changes in Name
40.91 Change in individual name.
40.92 Change in trade name.
40.93 Change in corporate name.
Changes in Ownership and Control
40.101 Fiduciary successor.
40.102 Transfer of ownership.
40.103 Change in officers, directors, or stockholders of a corporation.
40.104 Change in control of a corporation.
Changes in Location of Factory
40.111 Change in location.
40.112 Change in address.
40.114 Extension or curtailment of factory.
Subpart G_Bonds and Extensions of Coverage of Bonds
40.131 Corporate surety.
40.132 Deposit of securities in lieu of corporate surety.
40.133 Amount of individual bond.
40.134 Amount of blanket bond.
40.135 Strengthening bond.
40.136 Superseding bond.
40.137 Extension of coverage of bond.
40.138 Approval of bond and extension of coverage of bond.
40.139 Termination of bond.
40.140 Release of pledged securities.
Subpart H_Operations by Manufacturers of Tobacco Products
Determination and Payment of Taxes on Tobacco Products
40.161 Determination of tax and method of payment.
40.162 Semimonthly tax return.
40.163 Semimonthly tax return periods.
40.164 Special rule for taxes due for the month of September.
40.165 Times for filing semimonthly return.
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40.165a Payment of tax by electronic fund transfer.
40.166 Default, prepayment of tax required.
40.167 Prepayment tax return.
40.168 Remittance with return.
40.169 Employer identification number.
40.170 Application for employer identification number.
40.171 Execution and filing of Form SS-4.
Records
40.181 General.
40.182 Record of processed tobacco.
40.183 Record of tobacco products.
40.184 Record of removals subject to tax.
40.185 Retention of records.
40.186 Record in support of transfers in bond.
40.187 Record of sales prices of large cigars.
Inventories and Reports
40.201 Inventories.
40.202 Reports.
Packages
40.211 Package.
40.212 Mark.
40.213 Tobacco products labeled for export.
40.214 Notice for cigars.
40.215 Notice for cigarettes.
40.216 Notice for smokeless tobacco.
40.216a Notice for pipe tobacco.
40.216b Notice for roll-your-own tobacco.
40.216c Package use-up rule.
40.217 Repackaging.
Exemption From Taxes on Tobacco Products
40.231 Consumption by employees.
40.232 Experimental purposes.
40.233 Transfer in bond.
40.234 Removal for use of the United States.
40.235 Removal for export purposes.
40.236 Release from customs custody.
Other Provisions Relating to Operations
40.251 Emergency storage.
40.252 Reduction of tobacco products to materials.
40.253 Destruction.
40.254 Receipt into factory.
40.255 Shortages and overages in inventory.
40.256 Minimum manufacturing and activity requirements.
40.257 Processed tobacco.
Subpart I_Claims by Manufacturers
General
40.281 Abatement of assessment.
40.282 Allowance of tax.
40.283 Credit or refund of tax.
40.284 Remission of tax liability.
40.285 [Reserved]
40.286 Refund of overpayment.
40.287 Remission of tax liability on shortage.
Tobacco Products Lost or Destroyed
40.301 Action by claimant.
Tobacco Products Withdrawn From the Market
40.311 Action by claimant.
40.312 Action by the appropriate TTB officer.
40.313 Disposition of tobacco products and schedule.
Subpart J_Suspension and Discontinuance of Operations by Manufacturers
40.331 Discontinuance of operations.
40.332 Suspension and revocation of permit.
Subpart K_Manufacture of Cigarette Papers and Tubes
Taxes
40.351 Cigarette papers.
40.352 Cigarette tubes.
40.353 Persons liable for tax.
40.354 Determination of tax and method of payment.
40.355 Return of manufacturer.
40.356 Adjustments in the return of manufacturer.
40.357 Payment of tax by electronic fund transfer.
40.358 Assessment.
40.359 Employer identification number.
40.360 Application for employer identification number.
40.361 Execution and filing of Form SS-4.
Special (Occupational) Taxes
40.371 Liability for special tax.
40.372 Rate of special tax.
40.373 Cross reference.
40.374-40.375 [Reserved]
General
40.382 Authority of TTB officers to enter premises.
40.383 Interference with administration.
40.384 Disposal of forfeited, condemned, and abandoned cigarette papers
and tubes.
40.385 Alternate methods or procedures.
40.386 Emergency variations from requirements.
40.387 Penalties and forfeitures.
Qualification Requirements for Manufacturers
Original Qualifications
40.391 Persons required to qualify.
40.392 Bond.
40.393 Power of attorney.
40.394 Notice of approval of bond.
[[Page 7]]
Changes After Original Qualification
40.395 Change in name.
40.396 Change in proprietorship.
40.397 Change in location.
Bonds and Extensions of Coverage of Bonds
40.401 Corporate surety.
40.402 Two or more corporate sureties.
40.403 Deposit of securities in lieu of corporate surety.
40.404 Amount of bond.
40.405 Strengthening bond.
40.406 Superseding bond.
40.407 Extension of coverage of bond.
40.408 Approval of bond and extension of coverage of bond.
40.409 Termination of liability of surety under bond.
40.410 Release of pledged securities.
Operations by Manufacturers
Records
40.421 General.
Reports
40.422 General.
40.423 Opening.
40.424 Monthly.
40.425 Special.
40.426 Closing.
Inventories
40.431 General.
40.432 Opening.
40.433 Special.
40.434 Closing.
Document Retention
40.435 General.
Packages
40.441 General.
Miscellaneous Operations
40.451 Transfer in bond.
40.452 Release from customs custody.
40.453 Use of the United States.
40.454 Removal for export purposes.
Permanent Discontinuance of Business
40.461 Discontinuance of operations.
Claims by Manufacturers
General
40.471 Abatement.
40.472 Allowance.
40.473 Credit or refund.
40.474 Remission.
Lost or Destroyed
40.475 Action by claimant.
Withdrawn From the Market
40.476 Action by claimant.
40.477 Action by the appropriate TTB officer.
40.478 Disposition of cigarette papers and tubes and schedule.
Subpart L_Manufacture of Processed Tobacco
Qualification Requirements for Manufacturers of Processed Tobacco
40.491 Persons required to qualify.
40.492 Application for permit.
40.493 Transitional rule.
40.494 Corporate documents.
40.495 Articles of partnership or association.
40.496 Trade name certificate.
40.497 Additional information.
40.498 Investigation of applicant.
40.499 Notice of contemplated disapproval.
40.500 Issuance of permit.
40.501 Retention of permit and supporting documents.
Changes After Qualification
40.511 Change in name.
40.512 Change in ownership or control.
40.513 Change in location or address of factory.
Operations by Manufacturers of Processed Tobacco
40.521 Record of processed tobacco.
40.522 Reports.
40.523 Inventories.
40.524 Retention of documents.
40.525 Discontinuance of operations.
40.526 Minimum manufacturing and activity requirements.
40.527 Authorization to package processed tobacco.
40.528 Suspension and revocation of permit.
Other Provisions Related to Manufacturers of Processed Tobacco
40.531 Alternate methods or procedures.
40.532 Emergency variations from requirements.
40.533 Penalties and forfeitures.
40.534 Power of attorney.
Authority: 26 U.S.C. 448, 5701, 5703-5705, 5711-5713, 5721-5723,
5731-5734, 5741, 5751, 5753, 5761-5763, 6061, 6065, 6109, 6151, 6301,
6302, 6311, 6313, 6402, 6404, 6423, 6676, 6806, 7011, 7212, 7325, 7342,
7502, 7503, 7606, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.
Effective Date Note: By T.D. TTB-89, 76 FR 3513, Jan. 20, 2011, the
authority citation was revised, effective Feb. 22, 2011 through Feb. 24,
2014.
Source: 26 FR 8174, Aug. 31, 1961, unless otherwise noted.
Redesignated at 40 FR 16835, Apr. 15, 1975; 54 FR 48839, Nov. 27, 1989,
and
[[Page 8]]
further redesignated by T.D. ATF-460, 66 FR 39093, July 27, 2001.
Editorial Note: Nomenclature changes to part 40 appear by T.D. ATF-
460, 66 FR 39094-39096, July 27, 2001; T.D. ATF-464, 66 FR 43479, Aug.
20, 2001; and T.D. TTB-91, 76 FR 5479, Feb. 1, 2011.
Subpart A_Scope of Regulations
Sec. 40.1 Manufacture of tobacco products, cigarette papers and tubes, and
processed tobacco.
This part contains regulations relating to the manufacture of
tobacco products, cigarette papers and tubes, and processed tobacco; the
payment by manufacturers of tobacco products and cigarette papers and
tubes of internal revenue taxes imposed by 26 U.S.C. chapter 52; and the
qualification of and operations by manufacturers of tobacco products,
cigarette papers and tubes, and processed tobacco.
Effective Date Note: By T.D. TTB-78, at 74 FR 29408, June 22, 2009,
Sec. 40.1 was revised, effective June 22, 2009 through June 22, 2012.
Sec. 40.2 Territorial extent.
The provisions of the regulations in this part shall apply in the
several States of the United States and the District of Columbia.
Subpart B_Definitions
Sec. 40.11 Meaning of terms.
When used in this part and in forms prescribed under this part, the
following terms shall have the meanings given in this section, unless
the context clearly indicates otherwise. Words in the plural form shall
include the singular, and vice versa, and words indicating the masculine
gender shall include the feminine. The terms ``includes'' and
``including'' do not exclude things not listed which are in the same
general class.
Administrator. The Administrator, Alcohol and Tobacco Tax and Trade
Bureau, Department of the Treasury, Washington, DC.
Appropriate TTB officer. An officer or employee of the Alcohol and
Tobacco Tax and Trade Bureau (TTB) authorized to perform any functions
relating to the administration or enforcement of this part by TTB Order
1135.40, Delegation of the Administrator's Authorities in 27 CFR Part
40, Manufacture of Tobacco Products and Cigarette Papers and Tubes.
Bank. Any commercial bank.
Banking day. Any day during which a bank is open to the public for
carrying on substantially all its banking functions.
CFR. The Code of Federal Regulations.
Chewing tobacco. Any leaf tobacco that is not intended to be smoked.
Cigar. Any roll of tobacco wrapped in leaf tobacco or in any
substance containing tobacco (other than any roll of tobacco which is a
cigarette within the meaning of paragraph (2) of the definition for
cigarette).
Cigarette. (1) Any roll of tobacco wrapped in paper or in any
substance not containing tobacco, and
(2) Any roll of tobacco wrapped in any substance containing tobacco
which, because of its appearance, the type of tobacco used in the
filler, or its packaging and labeling, is likely to be offered to, or
purchased by, consumers as a cigarette described in paragraph (1) of
this definition.
Cigarette paper. Paper, or any other material except tobacco,
prepared for use as a cigarette wrapper.
Cigarette tube. Cigarette paper made into a hollow cylinder for use
in making cigarettes.
Commercial bank. A bank, whether or not a member of the Federal
Reserve System, which has access to the Federal Reserve Communications
System (FRCS) or Fedwire. The ``FRCS'' or ``Fedwire'' is a
communications network that allows Federal Reserve System member banks
to effect a transfer of funds for their customers (or other commercial
banks) to the Treasury Account at the Federal Reserve Bank in New York.
Determine. To establish enough information about taxable products at
the time of removal to calculate the tax, specifically the quantity
(pounds or number) and kind (for example, cigarettes, snuff, paper
tubes). Where the tax rate depends on additional information (such as
number of cigarette papers to a set before January 1, 2000 or
[[Page 9]]
sale price of large cigars), that information must also be established
as part of tax determination.
Director of the service center. The Director, Internal Revenue
Service Center, in any of the Internal Revenue regions.
District director. A district director of internal revenue.
Electronic fund transfer or EFT. Any transfer of funds effected by a
manufacturer's commercial bank, either directly or through a
correspondent banking relationship, via the Federal Reserve
Communications System (FRCS) or Fedwire to the Treasury Account at the
Federal Reserve Bank of New York.
Export warehouse. A bonded internal revenue warehouse for the
storage of tobacco products or cigarette papers or tubes or any
processed tobacco, upon which the internal revenue tax has not been paid
for subsequent shipment to a foreign country, Puerto Rico, the Virgin
Islands, or a possession of the United States, or for consumption beyond
the jurisdiction of the internal revenue laws of the United States.
Export warehouse proprietor. Any person who operates an export
warehouse.
Factory. The premises of a manufacturer of tobacco products or
processed tobacco as described in his permit issued under 26 U.S.C.
chapter 52, or the premises of a manufacturer of cigarette papers and
tubes on which such business is conducted.
Fiscal year. The period which begins October 1 and ends on the
following September 30.
In bond. The status of tobacco products and cigarette papers and
tubes, which come within the coverage of a bond securing the payment of
internal revenue taxes imposed by 26 U.S.C. 5701 or 7652, and in respect
to which such taxes have not been determined as provided by regulations
in this chapter, including (a) such articles in a factory, (b) such
articles removed, transferred, or released, pursuant to 26 U.S.C. 5704,
and with respect to which relief from the tax liability has not
occurred, and (c) such articles on which the tax has been determined, or
with respect to which relief from the tax liability has occurred, which
have been returned to the coverage of a bond.
Large cigarettes. Cigarettes weighing more than three pounds per
thousand.
Large cigars. Cigars weighing more than three pounds per thousand.
Manufacturer of cigarette papers and tubes. Any person who
manufactures cigarette paper, or makes up cigarette paper into tubes,
except for his own personal use or consumption.
Manufacturer of processed tobacco. Any person who processes any
tobacco other than tobacco products.
Manufacturer of tobacco products. Any person who manufactures
cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own
tobacco but does not include:
(1) A person who produces tobacco products solely for that person's
own consumption or use; or
(2) A proprietor of a Customs bonded manufacturing warehouse with
respect to the operation of such warehouse.
Package. The immediate container in which tobacco products,
processed tobacco, or cigarette papers or tubes are put up by the
manufacturer and offered for sale or delivery to the ultimate consumer.
For purposes of this definition, a container of processed tobacco, the
contents of which weigh 10 pounds or less (including any added non-
tobacco ingredients or constituents), that is removed within the meaning
of this part, is deemed to be a package offered for sale or delivery to
the ultimate consumer.
Packaging. The act of placing processed tobacco or a tobacco product
in a package.
Permit number. The identifying number and/or letters that are
assigned to a TTB permit by the appropriate TTB officer.
Person. An individual, partnership, association, company,
corporation, estate, or trust.
Pipe tobacco. Any tobacco which, because of its appearance, type,
packaging, or labeling, is suitable for use and likely to be offered to,
or purchased by, consumers as tobacco to be smoked in a pipe.
Processed tobacco. Processed tobacco is any tobacco that has
undergone processing, but does not include tobacco products. For
purposes of this definition, the processing of tobacco
[[Page 10]]
does not include the farming or growing of tobacco or the handling of
tobacco solely for sale, shipment, or delivery to a manufacturer of
tobacco products or processed tobacco, nor does the processing of
tobacco include curing, baling, or packaging activities. For purposes of
this definition, the processing of tobacco includes, but is not limited
to, stemming (that is, removing the stem from the tobacco leaf),
fermenting, threshing, cutting, or flavoring the tobacco, or otherwise
combining the tobacco with non-tobacco ingredients.
Removal or remove. The removal of tobacco products or cigarette
papers or tubes, or any processed tobacco from the factory or release
from customs custody, including the smuggling of other unlawful
importation of such articles into the United States.
Roll-your-own tobacco. Any tobacco which, because of its appearance,
type, packaging, or labeling, is suitable for use and likely to be
offered to, or purchased by, consumers as tobacco for making cigarettes
or cigars, or for use as wrappers of cigars or cigarettes.
Sale price. The price for which large cigars are sold by the
manufacturer, determined in accordance with Sec. 40.22 and used for
computation of the tax.
Service center. An Internal Revenue Service Center in any of the
Internal Revenue regions.
Service center director. A director of an internal revenue service
center.
Sets. Any collection, grouping, or packaging of cigarette papers
made up by any person for delivery to the consumer as a unit.
Small cigarettes. Cigarettes weighing not more than three pounds per
thousand.
Small cigars. Cigars weighing not more than three pounds per
thousand.
Smokeless tobacco. Any snuff or chewing tobacco.
Snuff. Any finely cut, ground, or powdered tobacco that is not
intended to be smoked.
Special tax. The special (occupational) tax on manufacturers of
tobacco products, manufacturers of cigarette papers and tubes, and
export warehouse proprietors, imposed by 26 U.S.C. 5731.
This chapter. Title 27, Code of Federal Regulations, chapter I (27
CFR chapter I).
Tobacco products. Cigars, cigarettes, smokeless tobacco, pipe
tobacco, and roll-your-own tobacco.
Treasury Account. The Department of the Treasury's General Account
at the Federal Reserve Bank of New York.
TTB. The Alcohol and Tobacco Tax and Trade Bureau, Department of the
Treasury
U.S.C. The United States Code.
(26 U.S.C. 7805 (68A Stat. 917), 27 U.S.C. 205 (49 Stat. 981 as
amended), (82 Stat. 959), and Sec. 38, Arms Export Control Act (90 Stat.
744) Aug. 16, 1954, ch. 736, 68A Stat. 775, as amended (26 U.S.C. 6301);
June 29, 1956, ch. 462, 70 Stat. 391 (26 U.S.C. 6301))
[T.D. ATF-48, 43 FR 13553, Mar. 31, 1978]
Editorial Note: For Federal Register citations affecting Sec.
40.11, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.fdsys.gov.
Subpart C_Taxes
Sec. 40.21 Cigar tax rates.
(a) Cigars are taxed at the following rates under 26 U.S.C. 5701(a):
------------------------------------------------------------------------
Tax rate for removals during the
following periods:
Type and amount --------------------------------------
2002 to March 31, April 1, 2009 and
2009 after
------------------------------------------------------------------------
Small cigars per thousand........ $1.828............ $50.33
Large cigars*
percentage 20.719%........... 52.750%
of sale price.
but not to $48.75 per $0.4026 per
exceed--. thousand. cigar.
------------------------------------------------------------------------
* For large cigars: Until March 31, 2009, the percentage tax rate
applies when the sale price is $235.294 per thousand or less, and the
flat tax rate applies when the sale price is more than $235.294 per
thousand. On and after April 1, 2009, the percentage tax rate applies
when the sale price is $763.222 or less per thousand cigars, and the
flat tax rate applies when the sale price is more than $763.222 per
thousand cigars.
(b) See Sec. 40.22 of this part for rules concerning determination
of sale price of large cigars.
(c) Cigars not exempt from tax under 26 U.S.C. chapter 52 and the
provisions of this part which are removed but not intended for sale
shall be taxed at the same rate as similar cigars removed for sale.
[T.D. ATF-420, 64 FR 71939, Dec. 22, 1999, as amended by T.D. TTB-75, 74
FR 14481, Mar. 31, 2009]
[[Page 11]]
Sec. 40.22 Determination of sale price of large cigars.
(a) General rule. The tax imposed on large cigars is computed based
on the sale price (the price for which the large cigars are sold by the
manufacturer). In addition to money, goods or services exchanged for
cigars may be considered as part of the sale price.
(b) Special cases--(1) In general. If there is any question
concerning the applicable sale price for tax purposes, the appropriate
TTB officer will determine such price, applying rules similar to the
constructive sale price rules in 26 U.S.C. 4216(b) and the implementing
regulations in 26 CFR 48.4216(b)-1 through 48.4216(b)-4. These
constructive sale price rules apply to cigars sold by a manufacturer at
retail, sold on consignment, or sold (otherwise than through an arm's
length transaction) at less than the fair market price. Sales of cigars
between affiliated corporations may be analyzed under the constructive
sale price rules. The appropriate TTB officer may make this analysis on
his or her own initiative or upon the written request of a manufacturer.
If TTB decides it is necessary, we will publish constructive sale price
determinations in the TTB Bulletin in accordance with Sec. 70.701(d) of
this chapter.
(2) Adjustments in sale price--(i) Reasons for adjustment.
Adjustments to the sale price may occur as a result of a discount or
price increase by the manufacturer or as a result of a TTB determination
pursuant to paragraph (b)(1) above. In either case, the manufacturer
must make conforming changes to the tax that was computed on the sale
price before the adjustment.
(ii) Time of adjustment. If an adjustment is made before the end of
the same tax return period as the original determination of the tax, the
adjustment may be made on the same return. If the price is increased or
decreased retroactively (during a later return period), either by the
manufacturer or by TTB's determination, the manufacturer must make an
adjustment on the tax return for the current return period in which the
price change was determined.
(iii) Amount of adjustment. The taxpayer must compute the adjustment
to the tax as the difference between the tax that was paid and the tax
that should have been paid, based on the newly determined sale price,
together with interest thereon and any applicable penalties. The
interest must be computed from the time of payment of the original tax
until the time the adjustment was made. Upon request, the appropriate
TTB officer will provide information regarding interest rates applicable
to specific time periods and any applicable penalties.
(3) Pricing for different packaging. If different bona fide sale
prices are applicable to different types of packaging (e. g., boxes of
25 and boxes of 50), then the cigars in each type of packaging are taxed
on the basis of their respective sale prices.
(4) Pricing of seconds. If some of an otherwise identical cigar
brand and size:
(i) Are distinctive from other such cigars because of physical
imperfections, (ii) Are offered to the consumer through clear labeling
as ``imperfects'', ``seconds'', ``throw-outs'', or a comparable commonly
understood term, and
(iii) The manufacturer has a separate sale price for such cigars,
then they are taxed on the basis of this separate sale price.
(5) Combination packages. If a manufacturer has a sale price for a
combination package containing cigars of different sizes, the cigars are
taxed based on that combination sale price. If there is no sale price
for the combination, then the cigars are taxed based on their individual
sale prices.
(6) Removals for another person. If a manufacturer makes taxable
removals of a brand and size of cigar only for distribution by others
who establish the sale price, the tax is based on such sale price even
though the manufacturer who makes the removals does not establish the
price.
[T.D. ATF-420, 64 FR 71939, Dec. 22, 1999, as amended by T.D. TTB-91, 76
FR 5479, Feb. 1, 2011]
Sec. 40.23 Cigarette tax rates.
Cigarettes are taxed at the following rates under 26 U.S.C. 5701(b):
[[Page 12]]
------------------------------------------------------------------------
Tax rate per thousand for removals
during the following periods:
Product ---------------------------------------
2002 to March 31, April 1, 2009 and
2009 after
------------------------------------------------------------------------
Small cigarettes................ $19.50............. $50.33
Large cigarettes up to 6\1/ $40.95............. $105.69
2\[sec] long.
Large cigarettes over 6\1/ Taxed at the rate for small
2\[sec] long. cigarettes, counting each 2\3/4\ or fraction thereof of the
length of each as one cigarette.
------------------------------------------------------------------------
[T.D. TTB-75, 74 FR 14482, Mar. 31, 2009]
Sec. 40.24 Classification of cigarettes.
For tax purposes, small cigarettes are designated Class A and large
cigarettes are designated Class B.
(72 Stat. 1414; 26 U.S.C. 5701)
Sec. 40.25 Smokeless tobacco tax rates.
Smokeless tobacco products are taxed at the following rates under 26
U.S.C. 5701(e):
------------------------------------------------------------------------
Tax rate per pound* for removals
during the following periods:
Product ---------------------------------------
2002 to March 31, April 1, 2009 and
2009 after
------------------------------------------------------------------------
Snuff........................... $ 0.585............ $ 1.51
Chewing tobacco................. $ 0.195............ $ 0.5033
------------------------------------------------------------------------
* Prorate tax for fractions of a pound.
[T.D. TTB-75, 74 FR 14482, Mar. 31, 2009]
Sec. 40.25a Pipe tobacco and roll-your-own tobacco tax rates and
classification.
(a) Tax rates. Pipe tobacco and roll-your-own tobacco are taxed at
the following rates under 26 U.S.C. 5701(f) and (g), respectively:
------------------------------------------------------------------------
Tax rate per pound* for removals
during the following periods:
Product ---------------------------------------
2002 to March 31, April 1, 2009 and
2009 after
------------------------------------------------------------------------
Pipe tobacco.................... $ 1.0969........... $ 2.8311
Roll-your-own tobacco........... $ 1.0969........... $ 24.78
------------------------------------------------------------------------
* Prorate tax for fractions of a pound.
(b) Classification. (1) Pipe tobacco and roll-your-own tobacco,
before removal subject to tax, must be put up in packages that conform
to the requirements of Sec. Sec. 40.211 and 40.212, and of Sec.
40.216a or Sec. 40.216b as appropriate.
(2) Any tobacco that has been processed and that is removed in a
package, as that term is defined in Sec. 40.11, that does not bear the
notice for smokeless tobacco prescribed in Sec. 40.216 or the notice
for pipe tobacco prescribed in Sec. 40.216a is deemed to be roll-your-
own tobacco and subject to tax at the rate applicable to roll-your-own
tobacco.
(3) Subject to paragraph (b)(4) of this section, any tobacco that
has been processed and that is removed in a package, as that term is
defined in Sec. 40.11, is deemed to be roll-your-own tobacco and
subject to tax at the rate applicable to roll-your-own tobacco, even
though the package bears the notice required for pipe tobacco under
Sec. 40.216a, if:
(i) The package does not bear the declaration ``pipe tobacco'' in
direct conjunction with, parallel to, and in substantially the same
conspicuousness of type and background as the brand name each time the
brand name appears on the package; or
(ii) The package or accompanying materials bear any representation
that would suggest a use other than as pipe tobacco. (26 U.S.C. 5702 and
5723)
(4) During the period from June 22, 2009, through March 23, 2010,
manufacturers may continue to remove products as pipe tobacco in
packages that do not bear the declaration ``pipe tobacco'' in the manner
prescribed in paragraph (b)(3)(i) of this section.
[T.D. TTB-75, 74 FR 14482, Mar. 31, 2009, as amended by T.D. TTB-78, 74
FR 29408, June 22, 2009; T.D. TTB-81, 74 FR 48653, Sept. 24, 2009]
Effective Date Notes: 1. By T.D. TTB-78, 74 FR 29408, June 22, 2009,
Sec. 40.25a was amended by revising the section heading, designating
the existing text as paragraph (a), adding a heading to newly designated
paragraph (a), and adding a new paragraph (b), effective June 22, 2009
through June 22, 2012.
2. By T.D. TTB-81, 74 FR 48653, Sept. 24, 2009, Sec. 40.25a(b)(3)
was amended by removing the words ``Any tobacco'' and adding, in their
place, the words ``Subject to paragraph (b)(4) of this section, any
tobacco'', and a new paragraph (b)(4) was added, effective Sept. 24,
2009 through June 22, 2012.
Sec. 40.26 Persons liable for tax.
The manufacturer of tobacco products shall be liable for the taxes
imposed on tobacco products by 26 U.S.C. 5701: Provided, That when
tobacco products are transferred in bond pursuant to 26 U.S.C. 5704, to
the bonded premises of another such manufacturer or
[[Page 13]]
an export warehouse proprietor, the transferee shall become liable for
the tax upon receipt by him of such products and the transferor shall
thereupon be relieved of his liability for the tax. When tobacco
products are released in bond from customs custody for transfer to the
bonded premises of a manufacturer of tobacco products, the transferee
shall become liable for the tax on such products upon release from
customs custody. Any person who possesses tobacco products in violation
of 26 U.S.C. 5751(a)(1) or (2), shall be liable for a tax equal to the
tax on such products.
(Sec. 201, Pub. L. 85-859, 72 Stat 1415, as amended, 1424, as amended
(26 U.S.C. 5703, 5751))
[T.D. 6871, 31 FR 32, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55854, Sept. 28, 1979; T.D.
ATF-232, 51 FR 28080, Aug. 5, 1986; T.D. ATF-243, 52 FR 43194, Dec. 1,
1986]
Sec. 40.27 Assessment.
Whenever any person required by law to pay tax on tobacco products
fails to pay such tax, the tax shall be ascertained and assessed against
such person, subject to the limitations prescribed in 26 U.S.C. 6501.
The tax so assessed shall be in addition to the penalties imposed by law
for failure to pay such tax when required. Except in cases where delay
may jeopardize collection of the tax, or where the amount is nominal or
the result of an evident mathematical error, no such assessment shall be
made until and after notice has been afforded such person to show cause
against assessment. The person will be allowed 45 days from the date of
such notice to show cause, in writing, against such assessment.
(Sec. 201, Pub. L. 85-859, 72 Stat. 1415, as amended (26 U.S.C. 5703))
[T.D. 6871, 31 FR 32, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55854, Sept. 28, 1979; T.D.
ATF-232, 51 FR 28080, Aug. 5, 1986; T.D. ATF-243, 52 FR 43194, Dec. 1,
1986]
Subpart Ca_Special (Occupational) Taxes
Source: T.D. ATF-271, 53 FR 17560, May 17, 1988, unless otherwise
noted.
Sec. 40.31 Liability for special tax.
(a) Manufacturer of tobacco products. Every manufacturer of tobacco
products shall pay a special (occupational) tax at a rate specified by
Sec. 40.32 of the part. The tax shall be paid on or before the date of
commencing the business of manufacturing tobacco products, and
thereafter every year on or before July 1. On commencing business, the
tax shall be computed from the first day of the month in which liability
is incurred, through the following June 30. Thereafter, the tax shall be
computed for the entire year (July 1 through June 30).
(b) [Reserved]
(c) Each place of business taxable. A manufacturer of tobacco
products incurs special tax liability at each place of business in which
an occupation subject to special tax is conducted. A place of business
means the entire office, plant or area of the business in any one
location under the same proprietorship. Passageways, streets, highways,
rail crossings, waterways, or partitions dividing the premises are not
sufficient separation to require additional special tax, if the
divisions of the premises are otherwise contiguous.
(d) Payment of tax. Special tax must be paid by return. The
prescribed return is TTB Form 5630.5t, Special Tax Registration and
Return--Tobacco. Special tax returns, with payment of tax, must be filed
with TTB in accordance with the instructions on the form and the
requirements of subpart D of part 46 of this chapter.
(26 U.S.C. 5731, 5733)
[T.D. ATF-271, 53 FR 17560, May 17, 1988, as amended by T.D. TTB-79, 74
FR 37419, July 28, 2009]
Sec. 40.32 Rates of special tax.
(a) General. Title 26 U.S.C. 5731(a)(1) imposes a special tax of
$1,000 per year on every manufacturer of tobacco products.
(b) Reduced rate for small proprietors. Title 26 U.S.C. 5731(b)
provides for a reduced rate of $500 per year with respect to any
manufacturer of tobacco products whose gross receipts (for the most
recent taxable year ending before the first day of the taxable period to
which
[[Page 14]]
the special tax imposed by Sec. 40.31 relates) are less than $500,000.
The ``taxable year'' to be used for determining gross receipts is the
taxpayer's income tax year. All gross receipts of the taxpayer shall be
included, not just the gross receipts of the business subject to special
tax. Proprietors of new businesses that have not yet begun a taxable
year, as well as proprietors of existing businesses that have not yet
ended a taxable year, who commence a new activity subject to special
tax, qualify for the reduced special (occupational) tax rate, unless the
business is a member of a ``controlled group''; in that case, the rules
of paragraph (c) of this section shall apply.
(c) Controlled group. All persons treated as one taxpayer under 26
U.S.C. 5061(e)(3) shall be treated as one taxpayer for the purpose of
determining gross receipts under paragraph (b) of this section.
``Controlled group'' means a controlled group of corporations, as
defined in 26 U.S.C. 1563 and implementing regulations in 26 CFR 1.1563-
1 through 1.1563-4, except that the words ``at least 80 percent'' shall
be replaced by the words ``more than 50 percent'' in each place they
appear in subsection (a) of 26 U.S.C. 1563, as well as in the
implementing regulations. Also, the rules for a ``controlled group of
corporations'' apply in a similar fashion to groups which include
partnerships and/or sole proprietorships. If one entity maintains more
than 50% control over a group consisting of corporations and one, or
more, partnerships and/or sole proprietorships, all of the members of
the controlled group are one taxpayer for the purpose of this section.
(d) Short taxable year. Gross receipts for any taxable year of less
than 12 months shall be annualized by multiplying the gross receipts for
the short period by 12 and dividing the result by the number of months
in the short period as required by 26 U.S.C. 448(c)(3).
(e) Returns and allowances. Gross receipts for any taxable year
shall be reduced by returns and allowances made during such year under
26 U.S.C. 448(c)(3).
(26 U.S.C. 448, 5061, 5731)
Sec. 40.33 Cross reference.
For additional rules pertaining to liability for special tax, filing
special tax returns, issuance and examination of special (occupational)
tax stamps, and notification of changes to special tax stamps, see
subpart D of part 46 of this chapter.
[T.D. TTB-79, 74 FR 37419, July 28, 2009]
Sec. Sec. 40.34-40.36 [Reserved]
Subpart D_Administrative Provisions
Sec. 40.41 Forms prescribed.
(a) The appropriate TTB officer is authorized to prescribe all forms
required by this part. All of the information called for in each form
shall be furnished as indicated by the headings on the form and the
instructions on or pertaining to the form. In addition, information
called for in each form shall be furnished as required by this part.
When a return, form, claim, or other document called for under this part
is required by this part, or by the document itself, to be executed
under penalties of perjury, it shall be executed under penalties of
perjury.
(b) Forms prescribed by this part are available for printing through
the TTB Web site (http://www.ttb.gov) or by mailing a request to the
Alcohol and Tobacco Tax and Trade Bureau, National Revenue Center, 550
Main Street, Room 1516, Cincinnati, OH 45202.
(5 U.S.C. 552(a) (80 Stat. 383, as amended))
[T.D. ATF-92, 46 FR 46921, Sept. 23, 1981, as amended by T.D. ATF-232,
51 FR 28080, Aug. 5, 1986; T.D. ATF-243, 52 FR 43194, Dec. 1, 1986; T.D.
ATF-372, 61 FR 20725, May 8, 1996; T.D. TTB-44, 71 FR 16949, Apr. 4,
2006]
Sec. 40.42 Authority of Appropriate TTB officers to enter premises.
Any appropriate TTB officer may enter in the daytime any premises
where tobacco products are produced or kept, so far as it may be
necessary for the purpose of examining such products. When such premises
are open at night, any appropriate TTB officer may enter them, while so
open, in the performance of his official duties. The owner of such
premises, or person having the superintendence of the same,
[[Page 15]]
who refuses to admit any appropriate TTB officer or permit him to
examine such products shall be liable to the penalties prescribed by law
for the offense.
(68A Stat. 872, 903; 26 U.S.C. 7342, 7606)
[T.D. 6871, 31 FR 33, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975; T.D. ATF-232, 51 FR 28080, Aug. 5, 1986; T.D. ATF-243, 52 FR
43194, Dec. 1, 1986; T.D. TTB-91, 76 FR 5479, Feb. 1, 2011]
Sec. 40.43 Interference with administration.
Whoever, corruptly or by force or threats of force, endeavors to
hinder or obstruct the administration of this part, or endeavors to
intimidate or impede any TTB officer acting in his official capacity, or
forcibly rescues or attempts to rescue or causes to be rescued any
property, after it has been duly seized for forfeiture to the United
States in connection with a violation of the internal revenue laws,
shall be liable to the penalties prescribed by law.
(68A Stat. 855; 26 U.S.C. 7212)
Sec. 40.44 Disposal of forfeited, condemned, and abandoned tobacco products.
A Federal, State, or local officer shall not sell or cause to be
sold for consumption in the United States any forfeited, condemned, or
abandoned tobacco products in his custody upon which the Federal tax has
not been paid, if in his opinion the sale thereof will not bring a price
equal to the tax due and payable thereon and the expenses incident to
the sale thereof. Where the products are not sold the officer may
deliver them to a Federal or State hospital or institution (if they are
fit for consumption) or cause their destruction by burning completely or
by rendering them unfit for consumption. Where such products are sold
they shall be released by the officer having custody thereof only after
they are properly packaged and taxpaid. A receipt from the appropriate
TTB officer evidencing payment of tax on such products shall be
presented to the officer having custody of the products, which tax shall
be considered part of the sales price. Where tobacco products which have
been packaged under the provisions of part 44 or part 45 of this chapter
are to be released after payment of tax, the purchaser shall
appropriately mark each package ``Federal Tax Paid (date)'' before the
officer having custody of the products releases them:
Provided, That if the purchaser is a qualified manufacturer of tobacco
products, or for products packaged under part 44 a qualified export
warehouse proprietor, the products may be released without such marking
of the packages if the manufacturer or proprietor does not intend to
place such products on the domestic market for taxable products but will
dispose of them otherwise, such as by destruction or return to bond
through claim for refund, and files a written statement to that effect,
in original only, with the officer having custody of the products. In
the case of products forfeited under the internal revenue laws the sale
shall be subject to the provisions of part 172 of this chapter.
(68A Stat. 870, as amended, 72 Stat. 1425, as amended; 26 U.S.C. 7325,
5753)
[T.D. 6961, 33 FR 9488, June 28, 1968. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28080, Aug. 5, 1986; T.D.
ATF-243, 52 FR 43194, Dec. 1, 1986; T.D. ATF-251, 52 FR 19339, May 22,
1987; T.D. ATF-469, 66 FR 56758, Nov. 13, 2001]
Sec. 40.45 Alternate methods or procedures.
A manufacturer of tobacco products, on specific approval by the
appropriate TTB officer as provided in this section, may use an
alternate method or procedure in lieu of a method or procedure
specifically prescribed in this part. The appropriate TTB officer may
approve an alternate method or procedure, subject to stated conditions,
when he finds that--
(a) Good cause has been shown for the use of the alternate method or
procedure,
(b) The alternate method or procedure is within the purpose of, and
consistent with the effect intended by, the specifically prescribed
method or procedure, and affords equivalent security to the revenue, and
[[Page 16]]
(c) The alternate method or procedure will not be contrary to any
provision of law, and will not result in an increase in cost to the
Government or hinder the effective administration of this part.
No alternate method or procedure relating to the giving of any bond or
to the assessment, payment, or collection of tax, shall be authorized
under this section. Where a manufacturer desires to employ an alternate
method or procedure, he shall submit a written application to do so, in
triplicate, to the appropriate TTB officer. The application shall
specifically describe the proposed alternate method or procedure, and
shall set forth the reasons therefor. Alternate methods or procedures
shall not be employed until the application has been approved by the
appropriate TTB officer. The manufacturer shall, during the period of
authorization of an alternate method or procedure, comply with the terms
of the approved application. Authorization for any alternate method or
procedure may be withdrawn whenever in the judgment of the appropriate
TTB officer the revenue is jeopardized or the effective administration
of this part is hindered. The manufacturer shall retain, as part of his
records, any authorization of the appropriate TTB officer under this
section.
Sec. 40.46 Emergency variations from requirements.
The appropriate TTB officer may approve methods of operation other
than as specified in this part, where he finds that an emergency exists
and the proposed variations from the specified requirements are
necessary, and the proposed variations--
(a) Will afford the security and protection to the revenue intended
by the prescribed specifications.
(b) Will not hinder the effective administration of this part, and
(c) Will not be contrary to any provision of law.
Variations from requirements granted under this section are conditioned
on compliance with the procedures, conditions, and limitations set forth
in the approval of the application. Failure to comply in good faith with
such procedures, conditions, and limitations shall automatically
terminate the authority for such variations and the manufacturer
thereupon shall fully comply with the prescribed requirements of
regulations from which the variations were authorized. Authority for any
variations may be withdrawn whenever in the judgment of the appropriate
TTB officer the revenue is jeopardized or the effective administration
of this part is hindered by the continuation of such variation. Where a
manufacturer desires to employ such variation, he shall submit a written
application to do so, in triplicate, to the appropriate TTB officer. The
application shall describe the proposed variations and set forth the
reasons therefor. Variations shall not be employed until the application
has been approved. The manufacturer shall retain, as part of his
records, any authorization of the appropriate TTB officer under this
section.
Sec. 40.47 Other businesses within factory.
(a) General. The appropriate TTB officer may authorize such other
businesses within the factory of a manufacturer of tobacco products as
he finds will not jeopardize the revenue, will not hinder the effective
administration of this part, and will not be contrary to law. A
manufacturer of tobacco products who wishes to engage in another
business within the factory must submit a written application to do so
to the appropriate TTB officer. Except as otherwise provided in
paragraph (b) of this section, a manufacturer of tobacco products may
not engage in such other business until the application is approved by
the appropriate TTB officer. The manufacturer must retain as part of its
records any authorization provided under this section.
(b) Processed tobacco. A manufacturer of tobacco products who
removes processed tobacco for purposes other than destruction must apply
for and obtain TTB authorization to engage in another business within
the factory, in accordance with paragraph (a) of this section. Such
manufacturer who is engaged in the processing of tobacco on April 1,
2009, and who applies for authorization before June 30, 2009, may
[[Page 17]]
continue to engage in such activity pending TTB action on the
application.
Effective Date Note: By T.D. TTB-78, at 74 FR 29408, June 22, 2009,
Sec. 40.47 was revised, effective June 22, 2009 through June 22, 2012.
Sec. 40.48 Penalties and forfeitures.
Anyone who fails to comply with the provisions of this part becomes
liable to the civil and criminal penalties, and forfeitures, provided by
law.
(72 Stat. 1425, 1426; 26 U.S.C. 5761, 5762, 5763)
Sec. 40.49 Delegations of the Administrator.
Most of the regulatory authorities of the Administrator contained in
this part are delegated to appropriate TTB officers. These TTB officers
are specified in TTB Order 1135.40, Delegation of the Administrator's
Authorities in 27 CFR Part 40, Manufacture of Tobacco Products and
Cigarette Papers and Tubes. You may obtain a copy of this order by
accessing the TTB Web site (http://www.ttb.gov) or by mailing a request
to the Alcohol and Tobacco Tax and Trade Bureau, National Revenue
Center, 550 Main Street, Room 1516, Cincinnati, OH 45202.
[T.D. TTB-44, 71 FR 16949, Apr. 4, 2006]
Subpart E_Qualification Requirements for Manufacturers of Tobacco
Products
Sec. 40.61 Qualification.
(a) General. Except as otherwise provided in paragraph (b) of this
section, every person who manufactures tobacco products must qualify
for, and obtain, a permit as a manufacturer of tobacco products in
accordance with the provisions of this part.
(b) Exceptions. The following persons are not considered to be
engaged in the business of manufacturing tobacco products for purposes
of this part:
(1) A person who produces tobacco products solely for that person's
own consumption or use;
(2) A proprietor of a customs bonded manufacturing warehouse with
respect to the operation of such warehouse;
(3) A retailer of tobacco products, such as a tobacconist, who takes
taxpaid tobacco products out of the package, as that term is defined in
Sec. 40.11, in front of waiting customers and places the tobacco
products into a different container for immediate delivery to those
customers; or
(4) A person whose operations are limited to, and who holds a permit
as, a manufacturer of processed tobacco.
(c) Minimum manufacturing and activity requirements. A permit to
manufacture tobacco products will only be granted to those persons whose
principal business activity under such permit will be the manufacture of
tobacco products. A permit will not be granted to any person whose
principal business activity under such permit will be to receive or
transfer tobacco products in bond. As a minimum activity requirement, in
order to qualify for a permit, the quantity of tobacco products
manufactured under the permit must be equivalent to, or exceed, the
quantity to be transferred or received in bond under the permit. For the
purposes of this section, the activity of packaging processed tobacco
may be sufficient to qualify as a manufacturing activity.
Effective Date Note: By T.D. TTB-78, at 74 FR 29409, June 22, 2009,
Sec. 40.61 was revised, effective June 22, 2009 through June 22, 2012.
Sec. 40.61a Transitional rule.
Any person who:
(a) On August 5, 1997, was engaged in business as a manufacturer of
roll-your-own tobacco, and
(b) Before January 1, 2000, submits an application, as provided in
this part, to engage in such business, may, continue to engage in such
business pending final action on such application. Pending such final
action, all provisions of chapter 52 of the Internal Revenue Code of
1986 shall apply to such applicant in the same manner and to the same
extent as if such applicant were a holder of a permit to manufacture
roll-your-own tobacco under such chapter 52.
[T.D. ATF-424, 64 FR 71931, Dec. 22, 1999]
Sec. 40.62 Application for permit.
Every person, before commencing business as a manufacturer of
tobacco products as defined in Sec. 40.11, shall make application for,
and obtain, the
[[Page 18]]
permit provided in Sec. 40.75, covering operations at each proposed
factory. Such application shall be made on TTB F 5200.3, in duplicate,
to the appropriate TTB officer. All documents required under this part
to be furnished with such application shall be made a part thereof.
Where the applicant for a permit under this section holds a permit or
permits authorizing the production of any tobacco products at premises
to be covered by the permit applied for, the applicant shall surrender
such permit or permits for cancellation, upon the issuance of the permit
applied for.
(72 Stat. 1421; 26 U.S.C 5712)
Sec. 40.63 Corporate documents.
Every corporation, before commencing business as a manufacturer of
tobacco products, shall furnish with its application for permit,
required by Sec. 40.62, a true copy of the corporate charter or a
certificate of corporate existence or incorporation executed by the
appropriate officer of the State in which incorporated. The corporation
shall likewise furnish duly authenticated extracts of the stockholders'
meetings, bylaws, or directors' meetings, listing the offices the
incumbents of which are authorized to sign documents or otherwise act in
behalf of the corporation in matters relating to 26 U.S.C. chapter 52,
and regulations issued thereunder. The corporation shall also furnish
evidence, in duplicate, of the identity of the officers and directors
and each person who holds more than ten percent of the stock of such
corporation. Where any of the information required by this section has
previously been filed with the appropriate TTB officer and such
information is currently complete and accurate, a written statement to
that effect, in duplicate, will be sufficient for the purpose of this
section.
(Sec. 201, Pub. L. 85-859, 72 Stat. 1421, as amended (26 U.S.C. 5712))
[T.D. 6840, 30 FR 9310, July 27, 1965. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55854, Sept. 28, 1979]
Sec. 40.64 Articles of partnership or association.
Every partnership or association, before commencing business as a
manufacturer of tobacco products, shall furnish with its application for
permit, required by Sec. 40.62, a true copy of the articles of
partnership or association, if any, or certificate of partnership or
association where required to be filed by any State, county, or
municipality. Where a partnership or association has previously filed
such documents with the appropriate TTB officer and such documents are
currently complete and accurate, a written statement, in duplicate, to
that effect by the partnership or association will be sufficient for the
purpose of this section.
(72 Stat. 1421; 26 U.S.C. 5712)
Sec. 40.65 Trade name certificate.
Every person, before commencing business under a trade name as a
manufacturer of tobacco products, shall furnish with his application for
permit, required by Sec. 40.62, a true copy of the certificate or other
document, if any, issued by a State, county, or municipal authority in
connection with the transaction of business under such trade name. If no
such certificate or other document is so required, a written statement,
in duplicate, to that effect by such person will be sufficient for the
purpose of this section.
(72 Stat. 1421; 26 U.S.C. 5712)
Sec. 40.66 Bond.
Every person, before commencing business as a manufacturer of
tobacco products, shall file, in connection with his application for
permit, a bond on TTB F 5200.25 or 5200.26, in duplicate, in accordance
with the applicable provisions of subpart G of this part, conditioned
upon compliance with the provisions of chapter 52, I.R.C., and
regulations thereunder, including, but not limited to, the timely
payment of taxes imposed by such chapter and penalties and interest in
connection therewith for which he may become liable to the United
States: Provided, That any person who, on the effective date of this
part, October 1, 1961, has on file a valid and adequate bond, Form 2100,
``Bond--
[[Page 19]]
Manufacturer of Cigars and Cigarettes,'' may continue, under such bond,
the operations with respect to the permit to which that bond relates, in
accordance with the provisions of this part.
(72 Stat. 1421, as amended; 26 U.S.C. 5711)
[T.D. 6871, 31 FR 33, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975]
Sec. 40.67 Blanket bond.
Where a manufacturer of tobacco products operates more than one
factory he may, in lieu of filing separate bonds, file a blanket bond on
TTB F 5200.25 or 5200.26, in duplicate, in accordance with the
provisions of Sec. 40.134, for any or all of the factories. The total
amount of any blanket bond given under this section shall be available
for the satisfaction of any liability incurred at any factory covered by
the bond.
(72 Stat. 1421; 26 U.S.C. 5711)
[26 FR 8174, Aug. 31, 1961, unless otherwise noted. Redesignated at 40
FR 16835, Apr. 15, 1975; 54 FR 48839, Nov. 27, 1989, and further
redesignated by T.D. ATF-460, 66 FR 39093, July 27, 2001, as amended by
T.D. TTB-91, 76 FR 5480, Feb. 1, 2011]
Sec. 40.68 Power of attorney.
If the application for permit or any report, return, notice,
schedule, or other document required to be executed is to be signed by
an individual (including one of the partners for a partnership or one of
the members of an association) as an attorney in fact for any person, or
if an individual is to otherwise officially represent such person, power
of attorney on TTB F 5000.8 shall be furnished to the appropriate TTB
officer. (For power of attorney in connection with conference and
practice requirements see 26 CFR 601.501 through 601.527.) Such power of
attorney is not required for persons whose authority is furnished with
the corporate documents as required by Sec. 40.63. TTB F 5000.8 does
not have to be filed again with a appropriate TTB officer where such
form has previously been submitted to that appropriate TTB officer and
is still in effect.
[T.D. 6840, 30 FR 9310, July 27, 1965. Redesignated at 40 FR 16835, Apr.
15, 1975, as amended by T.D. TTB-91, 76 FR 5480, Feb. 1, 2011]
Sec. 40.69 Factory premises.
The premises to be used by a manufacturer of tobacco products as his
factory may consist of more than one building, or portions of buildings,
which need not be contiguous but must be located in the same city, town,
or village: Except that, where the appropriate TTB officer determines
that a building or portion of a building which is not within the city,
town, or village, is so conveniently and closely situated to the general
factory premises as to present no jeopardy to the revenue and as to
offer no hindrance to the administration of this part, he may authorize
the inclusion of such building or portion of building as part of the
factory. The buildings or portions of buildings shall be described in
the application for permit and the bond by number, street, and city,
town, or village, and State. If any of the following conditions exist a
diagram shall also be furnished, in duplicate, showing the information
indicated:
(a) Where the factory is in more than one building, and each
building is not identifiable by a separate street address--identify each
building by a letter, number, or similar designation;
(b) Where the factory consists of a portion of a building or where
portions of buildings are part of the factory--show the particular floor
or floors, or room or rooms, comprising the factory;
(c) Where there is an adjoining retail store operated by the
manufacturer tobacco products including any doors or other openings
between the premises.
(72 Stat. 1421; 26 U.S.C. 5712)
[T.D. 6840, 30 FR 9310, July 27, 1965, as amended by T.D. 6871, 31 FR
33, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr. 15, 1975, as amended
by T.D. ATF-232, 51 FR 28080, Aug. 5, 1986; T.D. ATF-243, 52 FR 43194,
Dec. 1, 1986]
Sec. 40.70 Separation of and access to factory.
Where the factory consists of a portion of a building, or where
portions of buildings are part of the factory, the factory shall be
completely separated by walls from adjoining portions of the building.
Such walls shall be securely constructed of substantial materials. The
appropriate TTB officer may, wherever he finds that the revenue will
[[Page 20]]
not be jeopardized, authorize openings and doors in such walls or means
of separation other than walls if such means adequately delineate the
factory. The factory shall be accessible directly from a street, yard,
common passageway, or other common means of entrance.
(72 Stat. 1421; 26 U.S.C. 5712)
Sec. 40.71 Factories established prior to October 1, 1961.
Factories established prior to the effective date of this part,
October 1, 1961, shall not be subject to the provisions of Sec. 40.70
if, in the opinion of the appropriate TTB officer, the existing premises
afford adequate protection to the revenue.
(72 Stat. 1421; 26 U.S.C. 5712)
[T.D. 6871, 31 FR 33, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975]
Sec. 40.72 Use of factory premises.
(a) General. Unless otherwise authorized by the appropriate TTB
officer as provided in Sec. 40.47, the premises used by a manufacturer
of tobacco products for his factory shall be used exclusively for the
purposes of manufacturing and storing tobacco products; storing
materials, equipment, and supplies related thereto or used or useful in
the conduct of the business; and carrying on activities in connection
with business of the manufacturer of tobacco products.
(b) Manufacturers who process tobacco. (1) A manufacturer of tobacco
products who processes tobacco on the factory premises solely for use in
the manufacture of tobacco products under that permit, who does not
remove processed tobacco from the factory premises for any purpose other
than destruction, and who maintains adequate records with respect to the
disposition of the processed tobacco in accordance with Sec. 40.182,
may engage in such operations under the authority of its existing permit
on the factory premises and without application for such authorization
from TTB. If any of these conditions is not met, the manufacturer must,
in order to engage in the processing of tobacco under the existing
permit, obtain authorization from TTB in accordance with Sec. 40.47,
and must keep records and submit reports as prescribed in Sec. Sec.
40.521 and 40.522.
(2) A manufacturer of tobacco products who removes processed tobacco
from the factory premises for any purpose other than destruction must
obtain authorization of that activity from TTB in accordance with Sec.
40.47 and must keep records and submit reports as prescribed in
Sec. Sec. 40.521 and 40.522.
Effective Date Note: By T.D. TTB-78, at 74 FR 29409, June 22, 2009,
Sec. 40.72 was revised, effective June 22, 2009 through June 22, 2012.
Sec. 40.73 Additional information.
The appropriate TTB officer may require such additional information
as he may deem necessary to determine whether the applicant is entitled
to a permit under the provisions of this part. The applicant shall, when
required by the appropriate TTB officer, furnish as a part of his
application for such permit such additional information as may be
necessary for the appropriate TTB officer to determine whether the
applicant is entitled to a permit.
Sec. 40.74 Investigation of applicant.
(a) Investigation. The appropriate TTB officer may cause inquiry or
investigation to be made to verify the information furnished in
connection with an application for permit and to ascertain whether the
applicant is eligible for a permit. Any of the following conditions may
be grounds for denial of a permit:
(1) The premises on which it is proposed to conduct the business are
not adequate to protect the revenue;
(2) The activity proposed to be carried out at such premises does
not meet the minimum manufacturing or activity requirements of Sec.
40.61(b); or
(3) The applicant (including, in the case of a corporation, any
officer, director, or principal stockholder and, in the case of a
partnership, a partner)--
(i) Is, by reason of his business experience, financial standing, or
trade connections or by reason of previous or current legal proceedings
involving a felony violation of any other provision of Federal criminal
law relating to tobacco products, processed tobacco, cigarette paper, or
cigarette tubes, not
[[Page 21]]
likely to maintain operations in compliance with this chapter;
(ii) Has been convicted of a felony violation of any provision of
Federal or State criminal law relating to tobacco products, processed
tobacco, cigarette paper, or cigarette tubes; or
(iii) Has failed to disclose any material information required or
made any material false statement in the application therefor.
(b) TTB action. The appropriate TTB officer, if there is reason to
believe that the applicant is not entitled to a permit, shall promptly
give the applicant notice of the contemplated disapproval of the
application and opportunity for hearing thereon in accordance with part
71 of this chapter, which part (including the provisions relating to the
recommended decision and to appeals) is applicable to such proceedings.
If, after such notice and opportunity for hearing, the appropriate TTB
officer finds that the applicant is not entitled to a permit, he shall,
by order stating the findings on which his decision is based, deny the
permit.
(26 U.S.C. 5712)
[T.D. TTB-75, 74 FR 14482, Mar. 31, 2009]
Sec. 40.75 Issuance of permit.
If the application for permit, together with the bond and supporting
documents, required under this part is approved by him, the appropriate
TTB officer shall issue a permit on TTB F 5200.10 to the applicant as a
manufacturer of tobacco products.
(72 Stat. 1421; 26 U.S.C. 5713)
[T.D. 6871, 31 FR 33, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975]
Sec. 40.76 Retention of permit and supporting documents.
The manufacturer shall retain his permit, together with the copy of
the application and supporting documents returned to him with the
permit, at the same place where the records required by this part are
kept and they shall be made available for inspection by any appropriate
TTB officer upon his request.
(72 Stat. 1421, 1423; 26 U.S.C. 5712, 5713, 5741)
Subpart F_Changes After Original Qualification of Manufacturers of
Tobacco Products
Changes in Name
Sec. 40.91 Change in individual name.
Where there is a change in the name of an individual operating as a
manufacturer of tobacco products he shall, within 30 days of such
change, make application on Form 2098 for an amended permit.
(72 Stat. 1421; 26 U.S.C. 5712)
[26 FR 8174, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975;
54 FR 48839, Nov. 27, 1989; and further redesignated by T.D. ATF-460, 66
FR 39093, July 27, 2001, as amended by T.D. TTB-91, 76 FR 5480, Feb. 1,
2011]
Sec. 40.92 Change in trade name.
Where there is a change in, or an addition or discontinuance of, a
trade name used by a manufacturer of tobacco products in connection with
operations authorized by his permit the manufacturer shall, within 30
days of such change, addition or discontinuance, make application on TTB
F 5200.16 for an amended permit to reflect such change. The manufacturer
shall also furnish a true copy of any new trade name certificate or
document issued to him, or statement in lieu thereof, required by Sec.
40.65.
(72 Stat. 1421; 26 U.S.C. 5712)
[T.D. 6840, 30 FR 9311, July 27, 1965. Redesignated at 40 FR 16835, Apr.
15, 1975]
Sec. 40.93 Change in corporate name.
Where there is a change in the name of a corporate manufacturer of
tobacco products, the manufacturer shall, within 30 days of such change,
make application on TTB F 5200.16 for an amended permit. The
manufacturer shall also furnish such documents as may be necessary to
establish that the corporate name has been changed.
(72 Stat. 1421; 26 U.S.C. 5712)
Changes in Ownership and Control
Sec. 40.101 Fiduciary successor.
If an administrator, executor, receiver, trustee, assignee, or other
fiduciary, is to take over the business of a
[[Page 22]]
manufacturer of tobacco products, as a continuing operation, such
fiduciary shall, before commencing operations, make application for
permit and file bond as required by subpart E, of this part, furnish
certified copies, in duplicate, of the order of the court, or other
pertinent documents, showing his appointment and qualification as such
fiduciary, and make a commencing inventory, in accordance with the
provisions of Sec. 40.201: Provided, That where a diagram has been
furnished by the predecessor, in accordance with the provisions of Sec.
40.69, the successor may adopt such diagram if it is currently complete
and accurate. However, where a fiduciary intends only to liquidate the
business, qualification as a manufacturer of tobacco products will not
be required if he promptly files with the appropriate TTB officer a
written statement to that effect, in duplicate, together with an
extension of coverage of the predecessor's bond, executed by the
fiduciary and the surety on such bond, in accordance with the provisions
of Sec. 40.137.
(72 Stat. 1421, 1422; 26 U.S.C. 5711, 5712, 5721)
Sec. 40.102 Transfer of ownership.
If a transfer is to be made in ownership of the business of a
manufacturer of tobacco products (including a change of any member of a
partnership or association), such manufacturer shall give notice, in
writing, to the appropriate TTB officer, naming the proposed successor
and the desired effective date of such transfer. The proposed successor
shall, before commencing operations, qualify as a manufacturer of
tobacco products, in accordance with the applicable provisions of
subpart E of this part: Provided, That where a diagram has been
furnished by the manufacturer in accordance with the provisions of Sec.
40.69, the proposed successor may adopt such diagram if it is currently
complete and accurate. The manufacturer shall give such notice of
transfer, and the proposed successor shall make application for permit
and file bond, as required, in ample time for examination and approval
thereof before the desired date of such change. The predecessor shall
make a concluding inventory and concluding report, in accordance with
the provisions of Sec. Sec. 40.201 and 40.202, respectively, and
surrender his permit with such inventory and report. The successor shall
make a commencing inventory and commencing report, in accordance with
the provisions of Sec. Sec. 40.201 and 40.202, respectively.
(72 Stat. 1421, 1422; 26 U.S.C. 5711, 5712, 5713, 5721, 5722)
Sec. 40.103 Change in officers, directors, or stockholders of a corporation.
Upon election or appointment (excluding successive reelection or
reappointment) of any officer or director of a corporation operating the
business of a manufacturer of tobacco products, or upon any occurrence
which results in a person acquiring ownership or control of more than
ten percent in aggregate of the outstanding stock of such corporation,
the manufacturer shall, within 30 days of such action, so notify the
appropriate TTB officer in writing, giving the identity of such person.
When there is any change in the authority furnished under Sec. 40.63
for officers to act in behalf of the corporation the manufacturer shall
immediately so notify the appropriate TTB officer in writing.
(72 Stat. 1421; 26 U.S.C. 5712)
[T.D. 6840, 30 FR 9311, July 27, 1965. Redesignated at 40 FR 16835, Apr.
15, 1975]
Sec. 40.104 Change in control of a corporation.
Where the issuance, sale, or transfer of the stock of a corporation,
operating as a manufacturer of tobacco products, results in a change in
the identity of the principal stockholders exercising actual or legal
control of the operations of the corporation, the corporate manufacturer
shall, within 30 days after the change occurs, make application on TTB F
5200.3 for a new permit. Otherwise, the present permit shall be
automatically terminated at the expiration of such 30-day period, and
the manufacturer shall dispose of all tobacco products on hand, in
accordance with this part, make a concluding inventory and concluding
report, in accordance with the provisions of Sec. Sec. 40.201 and
40.202, respectively, and surrender his permit with such inventory and
report. If the application for a
[[Page 23]]
new permit is timely made, the present permit shall continue in effect
pending final action with respect to such application.
(72 Stat. 1421, 1422; 26 U.S.C. 5712, 5713, 5721, 5722)
[T.D. 6871, 31 FR 33, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, as amended by T.D. ATF-232, 51 FR 28081, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Changes in Location of Factory
Sec. 40.111 Change in location.
Whenever a manufacturer of tobacco products intends to relocate its
factory, the manufacturer shall, before commencing operations at the new
location, make application on TTB F 5200.16 for, and obtain, an amended
permit. The application shall be supported by bond coverage in
accordance with the provisions of subpart G of this part.
[T.D. TTB-91, 76 FR 5479, Feb. 1, 2011]
Sec. 40.112 Change in address.
Whenever any change occurs in the address, but not the location, of
the factory of a manufacturer of tobacco products, as a result of action
of local authorities, the manufacturer shall, within 30 days of such
change, make application on TTB F 5200.16 for an amended permit.
(72 Stat. 1421; 26 U.S.C. 5712)
Sec. 40.114 Extension or curtailment of factory.
Where a tobacco products factory is to be changed to an extent which
will make inaccurate the description of the factory as set forth in the
last application by the manufacturer for permit, on the diagram, if any,
furnished with such application, the manufacturer shall first make an
application on TTB F 5200.16 for, and obtain, an amended permit. Such
application shall describe the proposed change in the factory and shall
be accompanied by a new diagram if required under the provisions of
Sec. 40.69.
(72 Stat. 1421; 26 U.S.C. 5711, 5712)
Subpart G_Bonds and Extensions of Coverage of Bonds
Sec. 40.131 Corporate surety.
(a) Surety bonds required under the provisions of this part may be
given only with corporate sureties holding certificates of authority
from the Secretary of the Treasury as acceptable sureties on Federal
bonds. Each bond and each extension of coverage of bond shall at the
time of filing be accompanied by a power of attorney authorizing the
agent or officer who executed the bond to so act on behalf of the
surety. The appropriate TTB officer who is authorized to approve the
bond may, whenever he deems it necessary, require additional evidence of
the authority of the agent or officer to execute the bond or extension
of coverage of bond. The power of attorney shall be prepared on a form
provided by the surety company and executed under the corporate seal of
the company. If the power of attorney submitted is other than a manually
signed document it shall be accompanied by a certificate of its
validity. Limitations concerning corporate sureties are prescribed by
the Secretary in Treasury Department Circular No. 570, as revised. The
surety shall have no interest whatever in the business covered by the
bond.
(b) Treasury Department Circular No. 570 (Companies Holding
Certificates of Authority as Acceptable Sureties on Federal Bonds and as
Acceptable Reinsuring Companies) is published in the Federal Register
annually as of the first workday in July. As they occur, interim
revisions of the circular are published in the Federal Register. Copies
may be obtained from the Audit Staff, Bureau of Government Financial
Operations, Department of the Treasury, Washington, DC 20226.
(61 Stat. 649, 72 Stat. 1421, as amended; 31 U.S.C. 9304, 9306; 26
U.S.C. 5711; 5 U.S.C. 552(a) (80 Stat. 383, as amended))
[T.D. 6961, 33 FR 9488, June 28, 1968. Redesignated at 40 FR 16835, Apr.
15, 1975 and amended by T.D. ATF-92, 46 FR 46921, Sept. 23, 1981]
Sec. 40.132 Deposit of securities in lieu of corporate surety.
In lieu of corporate surety the manufacturer of tobacco products may
[[Page 24]]
pledge and deposit, as security for his bond, securities which are
transferable and are guaranteed as to both interest and principal by the
United States, in accordance with the provisions of 31 CFR part 225.
(61 Stat. 650, 72 Stat. 1421; 6 U.S.C.9301, 9303; 26 U.S.C. 5711)
Sec. 40.133 Amount of individual bond.
The amount of the bond of a manufacturer of tobacco products shall
be not less than the total amount of tax liability on all tobacco
products manufactured in his factory, received in bond from other
factories and from export warehouses, and released to him in bond from
customs custody, during any calendar month. Where the amount of any bond
is no longer sufficient and the bond is in less than the maximum amount,
the manufacturer shall immediately file a strengthening or superseding
bond as required by this subpart. The amount of any such bond (or the
total amount including strengthening bonds, if any) need not exceed
$250,000 for a manufacturer producing or receiving cigarettes in bond;
need not exceed $150,000 for a manufacturer producing or receiving
cigars, smokeless tobacco, pipe tobacco, or roll-your-own tobacco in
bond; and need not exceed $250,000 for a manufacturer producing or
receiving any combination of tobacco products in bond. The bond of a
manufacturer of tobacco products shall in no case be less than $1,000.
[T.D. ATF-232, 51 FR 28080, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194,
Dec. 1, 1986, as amended by T.D. ATF-289, 54 FR 48839, Nov. 27, 1989;
T.D. ATF-424, 64 FR 71931, Dec. 22, 1999]
Sec. 40.134 Amount of blanket bond.
In the case of a blanket bond filed under the provisions of Sec.
40.67, where the total amount of individual bonds otherwise required for
the factories under Sec. 40.133 does not exceed $250,000, such blanket
bond shall be not less than the total amount of such individual bonds.
Where the total amount of such individual bonds required is in excess of
$250,000 but not in excess of $500,000, the amount of the blanket bond
shall be not less than $250,000 plus 50 percent of such total amount
which is in excess of $250,000. Where the total amount of such
individual bonds required is in excess of $500,000 the amount of the
blanket bond shall be not less than $375,000 plus 25 percent of such
total amount which is in excess of $500,000.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.135 Strengthening bond.
Where the amount of any bond is no longer sufficient under the
provisions of Sec. 40.133 or Sec. 40.134, the manufacturer shall
immediately file a strengthening bond in an appropriate amount with the
same surety as that on the bond already in effect, unless a superseding
bond is filed pursuant to Sec. 40.136. Strengthening bonds will not be
approved where any notation is made thereon which is intended, or which
may be construed, as a release of any former bond, or as limiting the
amount of either bond to less than its full amount.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.136 Superseding bond.
A manufacturer of tobacco products shall immediately file a new bond
to supersede his current bond when
(a) The corporate surety on the current bond becomes insolvent,
(b) The appropriate TTB officer approves a request from the surety
on the current bond to terminate his liability under the bond,
(c) Payment of any liability under a bond is made by the surety
thereon,
(d) The amount of the bond is no longer sufficient under the
provisions of Sec. 40.133 or Sec. 40.134 and a strengthening bond has
not been filed, or
(e) The appropriate TTB officer considers such a superseding bond
necessary for the protection of the revenue.
Where a bond is not filed as required under the provisions of this
section the manufacturer shall discontinue forthwith the operations to
which such bond relates.
(72 Stat. 1421: 26 U.S.C. 5711)
Sec. 40.137 Extension of coverage of bond.
An extension of coverage of bond shall be manifested on TTB F
5200.18 by the manufacturer of tobacco products
[[Page 25]]
and by the surety on the bond with the same formality and proof of
authority as required for the execution of the bond.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.138 Approval of bond and extension of coverage of bond.
No person shall commence operations under any bond, nor extend his
operations, until he receives from the appropriate TTB officer notice of
his approval of the bond or of an appropriate extension of coverage of
the bond required under this part.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.139 Termination of bond.
Any bond required by this part may be terminated by the appropriate
TTB officer as to liability for future operations (a) pursuant to
application by the surety as provided in the bond, (b) on approval of a
superseding bond, or (c) when operations by the manufacturer are
permanently discontinued in accordance with subpart J. After a bond is
terminated the surety shall remain bound with respect to any liability
for unpaid taxes, penalties, and interest, not in excess of the amount
of the bond, incurred by the manufacturer prior to the termination date.
(72 Stat. 1421; 26 U.S.C. 5711)
[T.D. 6840, 30 FR 9311, July 27, 1965. Redesignated at 40 FR 16835, Apr.
15, 1975]
Sec. 40.140 Release of pledged securities.
Securities of the United States pledged and deposited as provided in
Sec. 40.132 shall be released only in accordance with the provisions of
31 CFR part 225. Such securities will not be released by the appropriate
TTB officer until liability under the bond for which they were pledged
has been terminated. When the appropriate TTB officer is satisfied that
they may be released, he shall fix the date or dates on which a part or
all of such securities may be released. At any time prior to the release
of such securities, the appropriate TTB officer may extend the date of
release for such additional length of time as he deems necessary.
(61 Stat. 650, 72 Stat. 1421; 31 U.S.C. 9301, 9303, 26 U.S.C. 5711)
Subpart H_Operations by Manufacturers of Tobacco Products
Determination and Payment of Taxes on Tobacco Products
Sec. 40.161 Determination of tax and method of payment.
Except for removals in bond and transfers in bond, as authorized by
law, the taxes imposed on tobacco products by section 5701, I.R.C.,
shall be determined at the time of removal of such products and paid on
the basis of a return, in accordance with the provisions of this part.
(72 Stat. 1417; 26 U.S.C. 5703)
[T.D. 6929, 32 FR 13866, Oct. 5, 1967. Redesignated at 40 FR 16835, Apr.
15, 1975; T.D. ATF-232, 51 FR 28081, Aug. 5, 1986; T.D. ATF-243, 51 FR
43194, Dec. 1, 1986]
Sec. 40.162 Semimonthly tax return.
Every manufacturer of tobacco products shall file, for each of his
factories, a semimonthly tax return on Form 5000.24 for each return
period, including any period during which a manufacturer begins or
discontinues business. The return shall be filed with TTB in accordance
with the instructions on the form. The manufacturer shall file the
return at the time specified in Sec. 40.165 regardless of whether
tobacco products are removed or whether tax is due for that particular
return period. However, when the manufacturer requests by letter and the
appropriate TTB officer grants specific authorization, the manufacturer
need not during the term of such authorization file a tax return for
which tax is not due or payable.
[T.D. ATF-232, 51 FR 35353, Oct. 3, 1986; T.D. ATF-243, 51 FR 43194,
Dec. 1, 1986, as amended by T.D. ATF-251, 52 FR 19339, May 22, 1987]
Sec. 40.163 Semimonthly tax return periods.
Except as otherwise provided in Sec. 40.164, the periods to be
covered by semimonthly tax returns are from the 1st day of each month
through the 15th day of that month and from the 16th day of each month
through the last day of that month.
[T.D. TTB-89, 76 FR 3513, Jan. 20, 2011]
[[Page 26]]
Effective Date Note: By T.D. TTB-89, 76 FR 3513, Jan. 20, 2011,
Sec. 40.163 was revised, effective Feb. 22, 2011 through Feb. 24, 2014.
Sec. 40.164 Special rule for taxes due for the month of September.
(a) Division of second semimonthly period. (1) General. Except as
otherwise provided in paragraph (a)(2) of this section, the second
semimonthly period for the month of September is divided into two
payment periods, from the 16th day through the 26th day, and from the
27th day through the 30th day. The manufacturer shall file a return on
TTB F 5000.24, and make remittance, for the period September 16-26, no
later than September 29. The manufacturer shall file a return on TTB F
5000.24, and make remittance, for the period September 27-30, no later
than October 14.
(2) Taxpayment not by electronic fund transfer. In the case of taxes
for which remittance by electronic fund transfer (EFT) is not required
by Sec. 40.165a, the second semimonthly period of September is divided
into two payment periods, from the 16th day through the 25th day, and
from the 26th day through the 30th day. The manufacturer shall file a
return on TTB F 5000.24, and make remittance, for the period September
16-25, no later than September 28. The manufacturer shall file a return
on TTB F 5000.24, and make remittance, for the period September 26-30,
no later than October 14.
(b) Amount of payment--Safe harbor rule. (1) General. Taxpayers are
considered to have met the requirements of paragraph (a)(1) of this
section if the amount paid no later than September 29 is not less than
11/15ths (73.3 percent) of the tax liability incurred for the
semimonthly period beginning on September 1 and ending on September 15,
and if any underpayment of tax is paid by October 14.
(2) Taxpayment not by EFT. Taxpayers are considered to have met the
requirements of paragraph (a)(2) of this section if the amount paid no
later than September 28 is not less than 2/3rds (66.7 percent) of the
tax liability incurred for the semimonthly period beginning on September
1 and ending on September 15, and if any underpayment of tax is paid by
October 14.
(c) Weekends and holidays. If the required taxpayment due date for
the period September 16-25 or September 16-26, as applicable, falls on a
Saturday or legal holiday, the return and remittance are due on the
immediately preceding day. If the required due date falls on a Sunday,
the return and remittance are due on the immediately following day.
(d) Example: Payment of tax for the month of September. (1) Facts.
X, a manufacturer of tobacco products required to pay taxes by
electronic fund transfer, incurred tax liability in the amount of
$30,000 for the first semimonthly period of September. For the period
September 16-26, X incurred tax liability in the amount of $45,000, and
for the period September 27-30, X incurred tax liability in the amount
of $2,000.
(2) Payment requirement. X's payment of tax in the amount of $30,000
for the first semimonthly period of September is due no later than
September 29 (Sec. 40.165(a)). X's payment of tax for the period
September 16-26 is also due no later than September 29 (Sec.
40.164(a)(1)). X may use the safe harbor rule to determine the amount of
payment due for the period of September 16-26 (Sec. 40.164(b)). Under
the safe harbor rule, X's payment of tax must not be less than
$21,990.00, that is, 11/15ths of the tax liability incurred during the
first semimonthly period of September. Additionally, X must pay the tax
in the amount of $2,000 for the period September 27-30 no later than
October 14 (Sec. 40.164(a)(1)). X must also pay the underpayment of
tax, $23,010.00, for the period September 16-26, no later than October
14 (Sec. 40.164(b)).
[T.D. TTB-89, 76 FR 3513, Jan. 20, 2011]
Effective Date Note: By T.D. TTB-89, 76 FR 3513, Jan. 20, 2011,
Sec. 40.164 was revised, effective Feb. 22, 2011 through Feb. 24, 2014.
Sec. 40.165 Times for filing semimonthly return.
(a) General. Except as otherwise provided in Sec. 40.164 and in
paragraph (b) of this section, semimonthly returns on TTB F 5000.24 must
be filed, for each return period, not later than the 14th day after the
last day of the return period. If the due date falls on a Saturday,
Sunday, or legal holiday, the return and remittance are due on the
immediately preceding day that is not a
[[Page 27]]
Saturday, Sunday, or legal holiday, except as otherwise provided in
Sec. 40.164(c).
(b) Postmark. The official postmark of the U.S. Postal Service
stamped on the cover in which the return was mailed shall be considered
the date of delivery of the tax return and, if the return was
accompanied by a remittance, the date of delivery of the remittance.
When the postmark is illegible, the manufacturer shall prove when the
postmark was made. When the proprietor sends the tax return with or
without remittance by registered mail or by certified mail, the date of
registry or the date of the postmark on the sender's receipt of
certified mail, as the case may be, shall be treated as the date of
delivery of the tax return and, if accompanied, of the remittance.
(Approved by the Office of Management and Budget under control number
1512-0467)
[T.D. ATF-246, 52 FR 669, Jan. 8, 1987, as amended by T.D. ATF-251, 52
FR 19339, May 22, 1987; T.D. ATF-365, 60 FR 33675, June 28, 1995; T.D.
ATF-446, 66 FR 16602, Mar. 27, 2001; T.D. ATF-446a, 66 FR 19089, Apr.
13, 2001; T.D. TTB-89, 76 FR 3514, Jan. 20, 2011]
Effective Date Note: By T.D. TTB-89, 76 FR 3514, Jan. 20, 2011,
Sec. 40.165(a) was revised, effective Feb. 22, 2011 through Feb. 24,
2014.
Sec. 40.165a Payment of tax by electronic fund transfer.
(a) General. (1) Each taxpayer who was liable, during a calendar
year, for a gross amount equal to or exceeding five million dollars in
taxes on tobacco products, cigarette papers, and cigarette tubes
combining tax liabilities incurred under this part and part 41 of this
chapter, shall use a commercial bank in making payment by electronic
fund transfer (EFT) of taxes on tobacco products, cigarette papers, and
cigarette tubes during the succeeding calendar year. Payment of taxes on
tobacco products by cash, check, or money order, as described in Sec.
40.168, is not authorized for a taxpayer who is required, by this
section, to make remittances by EFT. For purposes of this section, the
dollar amount of tax liability is defined as the gross tax liability on
all taxable withdrawals and importations (including tobacco products,
cigarette papers, and cigarette tubes brought into the United States
from Puerto Rico or the Virgin Islands) during the calendar year,
without regard to any drawbacks, credits, or refunds, for all premises
from which such activities are conducted by the taxpayer. Overpayments
are not taken into account in summarizing the gross tax liability.
(2) For the purposes of this section, a taxpayer includes a
controlled group of corporations, as defined in 26 U.S.C. 1563, and
implementing regulations in 26 CFR 1.1563-1 through 1.1563-4, except
that the words ``at least 80 percent'' shall be replaced by the words
``more than 50 percent'' in each place it appears in subsection (a) of
26 U.S.C. 1563, as well as in the implementing regulations. Also, the
rules for a ``controlled group of corporations'' apply in a similar
fashion to groups which include partnerships and/or sole
proprietorships. If one entity maintains more than 50% control over a
group consisting of corporations and one, or more, partnerships and/or
sole proprietorships, all of the members of the controlled group are one
taxpayer for the purpose of determining who is required to make
remittances by EFT.
(3) A taxpayer who is required by this section to make remittances
by EFT, shall make a separate EFT remittance and file a separate return,
Form 5000.24, for each factory from which tobacco products are withdrawn
upon determination of tax.
(b) Requirements. (1) On or before January 10 of each calendar year,
except for a taxpayer already remitting the tax by EFT, each taxpayer
who was liable for a gross amount equal to or exceeding five million
dollars in taxes on tobacco products, cigarette papers, and cigarette
tubes combining tax liabilities incurred under this part and part 41 of
this chapter, during the previous calendar year, shall notify, in
writing, the appropriate TTB officer. The notice shall be an agreement
to make remittances by EFT.
(2) For each return filed in accordance with this part, the taxpayer
shall direct the taxpayer's bank to make an electronic fund transfer in
the amount of the tax payment to the Treasury Account as provided in
paragraph (e) of this section. The request shall be made to the bank
early enough for the transfer to be made to the Treasury Account
[[Page 28]]
by no later than the close of business on the last day for filing the
return, prescribed in Sec. 40.165 or Sec. 40.167. The request shall
take into account any time limit established by the bank.
(3) If a taxpayer was liable for less than five million dollars in
taxes on tobacco products, cigarette papers, and cigarette tubes
combining tax liabilities incurred under this part and part 41 of this
chapter during the preceding calendar year, the taxpayer may choose
either to continue remitting the tax as provided in this section or to
remit the tax with the return on as prescribed by Sec. 40.168. Upon
filing the first return which the taxpayer chooses to discontinue
remitting the tax by EFT and to begin remitting the tax with the tax
return, the taxpayer shall notify the appropriate TTB officer by
attaching a written notification to Form 5000.24, stating that no taxes
are due by EFT, because the tax liability during the preceding calendar
year was less than five million dollars, and that the remittance shall
be filed with the tax return.
(c) Remittance. (1) Each taxpayer shall show on the return, Form
5000.24, information about remitting the tax for that return period by
EFT and shall file the return with the TTB, in accordance with the
instructions on Form 5000.24.
(2) Remittances shall be considered as made when the taxpayment by
electronic fund transfer is received by the Treasury Account. For
purposes of this section, a taxpayment by electronic fund transfer shall
be considered as received by the Treasury Account when it is paid to a
Federal Reserve Bank.
(3) When the taxpayer directs the bank to effect an electronic fund
transfer message as required by paragraph (b)(2) of this section, any
transfer data record furnished to the taxpayer, through normal banking
procedures, will serve as the record of payment, and shall be retained
as part of required records.
(d) Failure to make a taxpayment by EFT. The taxpayer is subject to
a penalty imposed by 26 U.S.C. 5761, 6651, or 6656, as applicable, for
failure to make a tax payment by EFT on or before the close of business
on the prescribed last day for filing.
(e) Procedure. Upon the notification required under paragraph (b)(1)
of this section, the appropriate TTB officer will issue to the taxpayer
a TTB procedure entitled, Payment of Tax by Electronic Fund Transfer.
This publication outlines the procedure a taxpayer is to follow when
preparing returns and EFT remittances in accordance with this part. The
U.S. Customs Service will provide the taxpayer with instructions for
preparing EFT remittances for payments to be made to the U.S. Customs
Service.
(Approved by the Office of Management and Budget under control number
1512-0457)
(Act of August 16, 1954, 68A Stat. 775, as amended (26 U.S.C. 6302);
sec. 202, Pub. L. 85-859, 72 Stat. 1417, as amended (26 U.S.C. 5703))
[T.D. ATF-198, 49 FR 37582, Sept. 25, 1984]
Editorial Note: For Federal Register citations affecting Sec.
40.165a, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.fdsys.gov.
Sec. 40.166 Default, prepayment of tax required.
Where a check or money order tendered with any return, whether semi-
monthly or prepayment, for payment of tax on tobacco products is not
paid on presentment, where a manufacturer fails to remit with the return
the full amount of tax due thereunder, or where a manufacturer is
otherwise in default in payment of tax on tobacco products under the
internal revenue laws or this chapter, during the period of such default
and until the appropriate TTB officer finds that the revenue will not be
jeopardized by the deferred payment of tax pursuant to the provisions of
this part, no tobacco products shall be removed subject to tax until the
tax thereon has first been paid as provided in Sec. 40.167. Any
remittance made during the period of a default shall be in cash, or in
the form of a certified, cashier's, or treasurer's check drawn on any
bank or trust company incorporated under the laws of the United States,
or under the laws of any State, Territory, or possession of the United
States, or in the form of a U.S. postal money order or other money
order, and defined in Sec. 70.61 of this chapter (payment by check or
money order), or shall be delivered in
[[Page 29]]
the form of an electronic fund transfer message as provided in Sec.
40.165a.
(68A Stat. 777, 72 Stat. 1417; 26 U.S.C. 6311, 5703; Aug. 16, 1954, ch.
736, 68A Stat. 707 (26 U.S.C. 5703); Aug. 16, 1954, ch. 736, 68A Stat.
777 (26 U.S.C. 6311))
[T.D. 6871, 31 FR 34, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55855, Sept. 28, 1979; T.D.
ATF-77, 46 FR 3008, Jan. 13, 1981; T.D. ATF-232, 51 FR 28081, Aug. 5,
1986; T.D. ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-301, 55 FR
47658, Nov. 14, 1990]
Sec. 40.167 Prepayment tax return.
(a) To prepay the tax on tobacco products a manufacturer shall file
a prepayment tax return on Form 5000.24 showing the tax to be paid on
the tobacco products prior to removal. The return shall be executed and
filed, prior to the removal of such products, with TTB, in accordance
with the instructions on the form. A manufacturer prepaying the taxes on
tobacco products under the provisions of this section shall continue to
file semimonthly returns as required by Sec. 40.162.
(b) However, if a manufacturer is required by Sec. 40.165a to pay
the tax by electronic fund transfer, the manufacturer shall prepay the
tax before any tobacco products can be removed for consumption or sale
by completing the return and filing it with TTB, in accordance with the
instructions on the form. At the same time, the manufacturer shall
direct his bank to effect an EFT.
(Sec. 202, Pub. L. 85-859, 68A Stat. 1417 (26 U.S.C. 5703); sec. 202,
Pub. L. 85-859, 72 Stat. 1423, as amended (26 U.S.C. 5741); (Aug. 16,
1954, ch. 736, 68A Stat. 775, as amended (26 U.S.C. 6302)); 26 U.S.C.
7805 (68A Stat. 917, as amended))
[T.D. 6871, 31 FR 34, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-77, 46 FR 3008, Jan. 13, 1981; T.D.
ATF-219, 50 FR 51390, Dec. 17, 1985; T.D. ATF-232, 51 FR 28081, Aug. 5,
1986; T.D. ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-251, 52 FR
19340, May 22, 1987]
Sec. 40.168 Remittance with return.
Except when an electronic fund transfer has been made under Sec.
40.165a for the full amount of tax due, the tax on tobacco products
shown to be due and payable on any return shall be paid by remittance in
full with the tax return. The remittance may be in the form which the
appropriate TTB officer is authorized to accept under Sec. 70.61 of
this chapter (Payment by check or money order) and which is acceptable
to him, except as otherwise specified in Sec. 40.166. Checks and money
orders shall be made payable to the ``Alcohol and Tobacco Tax and Trade
Bureau''. In paying the tax, a fractional part of a cent shall be
disregarded unless it amounts to one-half cent or more, in which case it
shall be increased to one cent.
(68A Stat. 778, 72 Stat. 1417; 26 U.S.C. 6313, 5703; Aug. 16, 1954, ch.
736, 68A Stat. 707, as amended (26 U.S.C. 5703))
[T.D. 6871, 31 FR 35, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55855, Sept. 28, 1979; T.D.
ATF-77, 46 FR 3009, Jan. 13, 1981; T.D. ATF-232, 51 FR 28081, Aug. 5,
1986; T.D. ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-301, 55 FR
47658, Nov. 14, 1990]
Sec. 40.169 Employer identification number.
The employer identification number (defined at 26 CFR 301.7701-12)
of a manufacturer of tobacco products who has been assigned such a
number shall be shown on each tax return, Form 5000.24. Failure of the
manufacturer to include his employer identification number on Form
5000.24 may result in assertion and collection of the penalty specified
in Sec. 70.113 of this chapter.
[T.D. ATF-219, 50 FR 51390, Dec. 17, 1985, as amended by T.D. ATF-301,
55 FR 47658, Nov. 14, 1990]
Sec. 40.170 Application for employer identification number.
Every manufacturer of tobacco products who has neither secured an
employer identification number nor made application therefor shall file
an application on Form SS-4. Form SS-4 may be obtained from any service
center director or from any district director. Such application shall be
filed on or before the seventh day after the date on which any tax
return under this part is filed. Each manufacturer shall
[[Page 30]]
make application for and shall be assigned only one employer
identification number for all internal revenue tax purposes.
(75 Stat. 828; 26 U.S.C. 6109)
[T.D. 7055, 35 FR 13515, Aug. 25, 1970. Redesignated at 40 FR 16835,
Apr. 15, 1975]
Sec. 40.171 Execution and filing of Form SS-4.
The application on Form SS-4, together with any supplementary
statement, shall be prepared in accordance with the form, instructions,
and regulations applicable thereto, and shall set forth fully and
clearly the data therein called for. The application shall be filed with
the service center director serving any internal revenue district where
the applicant is required to file returns under this part, except that
hand-carried applications may be filed with the district director of any
such district as provided for in 26 CFR 301.6091-1. The application
shall be signed by (a) the individual if the person is an individual;
(b) the president, vice president, or other principal officer if the
person is a corporation; (c) a responsible and duly authorized member or
officer having knowledge of its affairs if the person is a partnership
or other unincorporated organization; or (d) the fiduciary if the person
is a trust or estate.
(75 Stat. 828; 26 U.S.C. 6109)
[T.D. 7055, 35 FR 13515, Aug. 25, 1970. Redesignated at 40 FR 16835,
Apr. 15, 1975, and amended by T.D. ATF-48, 44 FR 55855, Sept. 28, 1979]
Records
Sec. 40.181 General.
Every manufacturer of tobacco products must keep records of his
operations and transactions which shall reflect, for each day, the
information specified in Sec. Sec. 40.182 and 40.183. For this purpose
day shall mean calendar day, except that the appropriate TTB officer
may, upon application of the manufacturer by letter, in duplicate,
authorize as such day for a factory a 24-hour cycle of operation other
than the calendar day. A day once so established as other than the
calendar day may be changed only by another application approved by the
appropriate TTB officer. No specific form is required. The manufacturer
may use commercial records from which the required information may be
readily ascertained for this purpose. The manufacturer shall keep the
auxiliary and supplemental records from which such records are compiled
and shall keep supporting records, as specified in Sec. Sec. 40.184 and
40.186, of tobacco products removed subject to tax and transferred in
bond. Except as provided in Sec. Sec. 40.184 and 40.186, the entries in
the commercial records so maintained or kept shall be made not later
than the close of the next business day following the day on which the
transaction(s) occurred. As used in this section the term business day
shall mean any day other than Saturday, Sunday, a legal holiday in the
District of Columbia, or a statewide legal holiday in the State wherein
the factory to which the records relate is located.
(72 Stat. 1423, as amended; 26 U.S.C. 5741)
[T.D. ATF-424, 64 FR 71931, Dec. 22, 1999]
Sec. 40.182 Record of processed tobacco.
(a) A manufacturer of tobacco products who processes tobacco on the
factory premises solely for use in the manufacture of tobacco products
under that permit, and who does not remove processed tobacco from the
factory premises for any purpose other than destruction, must maintain a
daily record that shows the total quantity in pounds of all processed
tobacco:
(1) On hand;
(2) Received, together with the name and address of the person from
whom received;
(3) Used in the manufacture of tobacco products;
(4) Lost, together with the circumstances of the loss; and
(5) Destroyed, together with the circumstances of the destruction.
(b) In addition to the recordkeeping and reporting requirements set
forth elsewhere in this part, a manufacturer
[[Page 31]]
of tobacco products who removes processed tobacco from the factory
premises for any purpose other than for destruction must keep records
and submit reports as prescribed in Sec. Sec. 40.521 and 40.522.
(Approved by the Office of Management and Budget under control number
1513-0068)
Effective Date Note: By T.D. TTB-78, at 74 FR 29409, June 22, 2009,
Sec. 40.182 was revised, effective June 22, 2009 through June 22, 2012.
Sec. 40.183 Record of tobacco products.
The record of a manufacturer of tobacco products shall show the date
and total quantities of all tobacco products, by kind (small cigars-
large cigars; small cigarettes-large cigarettes; chewing tobacco-snuff;
pipe tobacco; roll-your-own tobacco):
(a) Manufactured;
(b) Received in bond by--
(1) Transfer from other factories,
(2) Release from customs custody,
(3) Transfer from export warehouses, and
(4) Transfer from foreign trade zone;
(c) Received by return to bond;
(d) Disclosed as an overage by inventory;
(e) Removed subject to tax (itemize large cigars by sale price in
accordance with Sec. 40.22, except that before April 1, 2009, cigars
that cost more than $235.294 may optionally be shown as if the price
were $236 per thousand, and on and after April 1, 2009, cigars that cost
more than $763.222 may optionally be shown as if the price were $764 per
thousand);
(f) Removed, in bond, for--
(1) Export,
(2) Transfer to export warehouses,
(3) Transfer to other factories,
(4) Transfer to a foreign trade zone
(5) Use of the United States, and
(6) Experimental purposes off factory premises;
(g) Otherwise disposed of, without determination of tax, by--
(1) Consumption by employees on factory premises,
(2) Consumption by employees off factory premises, together with the
number of employees to whom furnished,
(3) Use for experimental purposes on factory premises,
(4) Loss,
(5) Destruction, and
(6) Reduction to materials;
(h) Disclosed as a shortage by inventory; and
(i) On which the tax has been determined and which are--
(1) Received, and
(2) Disposed of.
(Approved by the Office of Management and Budget under control number
1512-0358)
[T.D. ATF-421, 64 FR 71923, Dec. 22, 1999, as amended by T.D. ATF-424,
64 FR 71931, Dec. 22, 1999; T.D. ATF-420, 64 FR 71940, Dec. 22, 1999;
T.D. TTB-75, 74 FR 14482, Mar. 31, 2009]
Sec. 40.184 Record of removals subject to tax.
(a) Requirement. Every manufacturer of tobacco products must keep a
record of tobacco products removed from the factory subject to tax. The
manufacturer must make entries in this record at the time of removal.
The record for each removal must show:
(1) The date of removal,
(2) The name and address of the person to whom shipped or delivered,
(3) The kind and quantity of tobacco products removed, and
(4) For large cigars, show the sale price (if the sale price is more
than $235.294 per thousand before April 1, 2009, or more than $763.222
per thousand on and after April 1, 2009, you may place a note to that
effect in the record instead of the actual price).
(b) Exceptions. (1) The record of removal may consist of the
manufacturer's commercial documents, such as copies of invoices, rather
than records prepared expressly to meet the requirements of this
section. If commercial documents are used, they must be kept at the
factory, contain all the details required by this section, and be clear
and accurate. Commercial documents that do not show specifically the tax
classification of tobacco products (including sale price of large
cigars) are still acceptable if they contain adequate information for an
appropriate TTB officer to readily ascertain the applicable tax.
(2) Where tobacco products are delivered within the factory directly
to the
[[Page 32]]
consumer, the record need not show the name and address of the consumer.
(Sec. 2128(c), Pub. L. 94-455, 90 Stat. 1921 (26 U.S.C. 5741))
[T.D. ATF-420, 64 FR 71941, Dec. 22, 1999, as amended by T.D. TTB-75, 74
FR 14483, Mar. 31, 2009]
Sec. 40.185 Retention of records.
All records required to be kept under this part, including copies of
authorizations, claims, inventories, notices, reports, returns and
schedules, shall be retained by the manufacturer for three years
following the close of the calendar year in which filed or made, or in
the case of an authorization, for three years following the close of the
calendar year in which the operation under such authorization is
concluded. Such records shall be kept in the factory or a place
convenient thereto, and shall be made available for inspection by any
appropriate TTB officer upon his request.
(72 Stat. 1423; 26 U.S.C. 5741)
Sec. 40.186 Record in support of transfers in bond.
Every manufacturer of tobacco products shall keep a supporting
record of tobacco products transferred in bond to or received in bond
from other factories, and shall make the entries therein at the time of
each receipt or removal of such products. Such supporting records shall
show the date of receipt or removal, the name of the manufacturer and
address of the factory from which received or to which removed or the
permit number of such factory, and the kind and quantity of tobacco
products. Where the manufacturer keeps, at the factory, copies of
invoices or other commercial records containing the information required
as to each receipt and removal, in such orderly manner that the
information may be readily ascertained therefrom, such copies will be
considered the supporting record required by this section.
(Approved by the Office of Management and Budget under control number
1512-0358)
(72 Stat. 1423, as amended; 26 U.S.C. 5741)
[T.D. 6871, 31 FR 35, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-172, 49 FR 14943, Apr. 16, 1984; T.D.
ATF-232, 51 FR 28081, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194, Dec. 1,
1986]
Sec. 40.187 Record of sales prices of large cigars.
Every manufacturer of tobacco products who removes large cigars from
the factory shall keep such records as are necessary to establish and
verify the price for which the cigars are sold, in accordance with Sec.
40.22. The record shall be a continuing one of each brand and size of
cigar so that the sale price on which the tax is based may be readily
ascertained.
[ T.D. ATF-307, 55 FR 52743, Dec. 21, 1990. Redesignated and amended by
T.D. ATF-420, 64 FR 71941, Dec. 22, 1999; T.D. ATF-420, 65 FR 1676, Jan.
11, 2000]
Inventories and Reports
Sec. 40.201 Inventories.
Every manufacturer of tobacco products shall make true and accurate
inventories on Form 5210.9, which inventories shall include all tobacco
products and processed tobacco on hand required to be accounted for in
the records kept under this part. The manufacturer shall make such an
inventory at the time of commencing business, which shall be the
effective date of the permit issued upon original qualification under
this part; at the time of transferring ownership; at the time of
changing the location of his factory; at the time of concluding
business; and at such other time as any appropriate TTB officer may
require. Each inventory shall be prepared in duplicate, and shall be
subject to verification by an appropriate TTB officer. The original of
each such inventory shall be submitted to the appropriate TTB officer,
[[Page 33]]
and the duplicate shall be retained by the manufacturer.
(Approved by the Office of Management and Budget under control number
1512-0358)
(72 Stat. 1422, 1423, as amended; 26 U.S.C. 5721, 5741)
[T.D. 6871, 31 FR 35, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-172, 49 FR 14943, Apr. 16, 1984; T.D.
ATF-232, 51 FR 28081, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194, Dec. 1,
1986; T.D. ATF-424, 64 FR 71931, Dec. 22, 1999; T.D. TTB-91, 76 FR 5480,
Feb. 1, 2011]
Effective Date Note: By T.D. TTB-78, at 74 FR 29409, June 22, 2009,
Sec. 40.201 was amended by adding after the words ``all tobacco
products and'' the word ``processed'', effective June 22, 2009 through
June 22, 2012.
Sec. 40.202 Reports.
(a) Monthly report. Every manufacturer of tobacco products shall
make a report on Form 5210.5, in duplicate, for each month and for any
portion of a month during which he engages in such business. Such report
shall be made regardless of whether any operations or transactions
occurred during the month or portion of a month covered therein. The
report for a month or portion of a month in which business is commenced
or is concluded shall be conspicuously marked ``Commencing Report'' or
``Concluding Report,'' respectively. The original of the report shall be
submitted to the appropriate TTB officer not later than the 20th day of
the month succeeding the month covered therein, and the duplicate shall
be retained by the manufacturer. Each report shall show, for the period
covered, the total quantity of tobacco products:
(1) Manufactured,
(2) Received in bond,
(3) Received by return to bond,
(4) Disclosed by inventory as an overage,
(5) Removed subject to tax,
(6) Removed in bond,
(7) Otherwise disposed of without determination of tax,
(8) Disclosed by inventory as a shortage, and
(9) On hand, in bond, beginning of and end of month.
(b) Report of processed tobacco removed. In addition to the
recordkeeping and reporting requirements set forth elsewhere in this
part, a manufacturer of tobacco products who removes processed tobacco
from the factory premises for any purpose other than destruction must
record and report those removals in accordance with Sec. 40.522 of this
part.
(Approved by the Office of Management and Budget under Control No. 1513-
0033)
(Sec. 202, Pub. L. 85-859, 72 Stat. 1422 (26 U.S.C. 5722))
[T.D. 6871, 31 FR 36, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-40, 42 FR 5001, Jan. 26, 1977; T.D.
ATF-232, 51 FR 28081, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194, Dec. 1,
1986; T.D. ATF-307, 55 FR 52743, Dec. 21, 1990; T.D. ATF-424, 64 FR
71931, Dec. 22, 1999]
Effective Date Note: By T.D. TTB-78, at 74 FR 29409, June 22, 2009,
Sec. 40.202 was amended by revising paragraph (b) and the Office of
Management and Budget control number reference, effective June 22, 2009
through June 22, 2012.
Packages
Sec. 40.211 Package.
All tobacco products shall, before removal subject to tax, be put up
by the manufacturer in packages which shall be of such construction as
will securely contain the products therein and maintain the mark and the
notice thereon as required by this part. No package of tobacco products
shall have contained therein, attached thereto, or stamped, marked,
written, or printed thereon (a) any certificate, coupon, or other device
purporting to be or to represent a ticket, chance, share, or an interest
in, or dependent on, the event of a lottery, (b) any indecent or immoral
picture, print, or representation, or (c) any statement or indication
that United States tax has been paid. No person may purchase, receive,
possess (except for personal consumption), offer for sale, or sell or
otherwise dispose of, after removal, any tobacco products that are not
put up in packages bearing the marks, labels, and notices, as required
under this part.
(26 U.S.C. 5723 and 5751)
[T.D. 6871, 31 FR 36, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28081, Aug. 5, 1986 T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
[[Page 34]]
Effective Date Note: By T.D. TTB-78, at 74 FR 29409, June 22, 2009,
Sec. 40.211 was amended by adding a sentence at the end of the section
and by revising the statutory citations, effective June 22, 2009 through
June 22, 2012.
Sec. 40.212 Mark.
Every package of tobacco products packaged in a domestic factory
shall, before removal subject to tax, have adequately imprinted thereon,
or on a label securely affixed thereto, a mark as specified in this
section. The mark may consist of the name of the manufacturer removing
the product subject to tax and the location (by city and State) of the
factory from which the products are to be so removed, or may consist of
the permit number of the factory from which the products are to be so
removed. (Any trade name of the manufacturer approved as provided in
Sec. 40.65 may be used in the mark as the name of the manufacturer.) As
an alternative, where tobacco products are packaged and removed subject
to tax by the same manufacturer, either at the same or different
factories, the mark may consist of the name of such manufacturer if the
factory where packaged is identified on or in the package by a means
approved by the appropriate TTB officer. Before using the alternative,
the manufacturer shall notify the appropriate TTB officer in writing of
the name to be used as the name of the manufacturer and the means to be
used for identifying the factory where packaged. If approved by him the
appropriate TTB officer shall return approved copies of the notice to
the manufacturer. A copy of the approved notice shall be retained as
part of the factory records at each of the factories operated by the
manufacturer.
(72 Stat. 1422; 26 U.S.C. 5723)
[T.D. 6871, 31 FR 36, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975; T.D. ATF-232, 51 FR 28081, Aug. 5, 1986; T.D. ATF-243, 52 FR
43194, Dec. 1, 1986]
Sec. 40.213 Tobacco products labeled for export.
Tobacco products labeled for export are ineligible for removal from
the factory and distribution into the domestic U.S. market. Such
products may only be sold, transferred or delivered onto the domestic
U.S. market by a manufacturer of tobacco products after repackaging of
the product. For the purposes of this section, ``repackaging'' shall
mean the removal of the tobacco product from its original package
bearing the export marks and placement of the product in a new package.
The new packages, marks and notices must conform to the requirements of
this subpart.
[T.D. ATF-421, 64 FR 71924, Dec. 22, 1999]
Sec. 40.214 Notice for cigars.
Before removal subject to tax, every package of cigars shall have
adequately imprinted on it, or on a label securely affixed to it--
(a) The designation ``cigars'';
(b) The quantity of cigars contained in the package; and
(c) For small cigars, the classification of the product for tax
purposes (i.e., either ``small'' or ``little'').
(Sec. 202, Pub. L. 85-859, 72 Stat. 1422 (26 U.S.C. 5723))
[T.D. ATF-80, 46 FR 18310, Mar. 24, 1981]
Sec. 40.215 Notice for cigarettes.
Every package of cigarettes shall, before removal subject to tax,
have adequately imprinted thereon, or on a label securely affixed
thereto, the designation ``cigarettes'', the quantity of such product
contained therein, and the classification for tax purposes, i.e., for
small cigarettes, either ``small'' or ``Class A'', and for large
cigarettes, either ``large'' or ``Class B''.
(72 Stat. 1422; 26 U.S.C. 5723)
Sec. 40.216 Notice for smokeless tobacco.
(a) Product designation. Every package of chewing tobacco or snuff
shall, before removal subject to tax, have adequately imprinted thereon,
or on a label securely affixed thereto, the designation ``chewing
tobacco'' or ``snuff.'' As an alternative, packages of chewing tobacco
may be designated ``Tax Class C'', and packages of snuff may be
designated ``Tax Class M''.
(b) Product weight. Every package of chewing tobacco or snuff shall,
before removal subject to tax, have adequately imprinted thereon, or on
a label securely affixed thereto, a clear
[[Page 35]]
statement of the actual pounds and ounces of the product contained
therein. As an alternative, the shipping cases containing packages of
chewing tobacco or snuff may, before removal, have adequately imprinted
thereon, or on a label securely affixed thereto, a clear statement, in
pounds and ounces, of the total weight of the product, the tax class of
the product, and the total number of the packages of product contained
therein.
(Approved by the Office of Management and Budget under control number
1512-0502)
(Sec. 202, Pub. L. 85-859, 72 Stat. 1422 (26 U.S.C. 5723))
[T.D. ATF-243, 51 FR 43194, Dec. 1, 1986, as amended by T.D. ATF-446, 66
FR 16602, Mar. 27, 2001]
Sec. 40.216a Notice for pipe tobacco.
(a) Product designation. Every package of pipe tobacco shall, before
removal subject to tax, have adequately imprinted thereon, or on a label
securely affixed thereto, the designation ``pipe tobacco.''
(b) Product weight. Every package of pipe tobacco shall, before
removal subject to tax, have adequately imprinted thereon, or on a label
securely affixed thereto, a clear statement of the actual pounds and
ounces of the product contained therein.
[T.D. ATF-289, 54 FR 48840, Nov. 27, 1989. Redesignated at T.D. ATF-424,
64 FR 71931, Dec. 22, 1999]
Effective Date Note: By T.D. TTB-78, at 74 FR 29410, June 22, 2009,
Sec. 40.216a was amended by removing the last sentence of paragraph
(a), effective June 22, 2009 through June 22, 2012.
Sec. 40.216b Notice for roll-your-own tobacco.
(a) Product designation. Every package of roll-your-own tobacco,
before removal subject to tax, must have adequately imprinted on it, or
on a label securely affixed to it, the applicable designation ``roll-
your-own tobacco'', ``cigarette tobacco'', ``cigar tobacco'',
``cigarette wrapper'', or ``cigar wrapper''.
(b) Product weight. Before removal subject to tax, roll-your-own
tobacco must have a clear statement of the actual weight in pounds and
ounces of the product in the package. This statement must be adequately
imprinted on, or on a label securely affixed to, the package.
(Approved by the Office of Management and Budget under control number
1513-0091)
[T.D. ATF-429, 65 FR 57547, Sept. 25, 2000]
Effective Date Note: By T.D. TTB-78, at 74 FR 29410, June 22, 2009,
Sec. 40.216b was amended by revising paragraph (a) and the Office of
Management and Budget control number reference, effective June 22, 2009
through June 22, 2012.
Sec. 40.216c Package use-up rule.
(a) During the period from June 22, 2009, through March 23, 2010, a
manufacturer of tobacco products may remove packages of pipe tobacco or
roll-your-own tobacco that do not meet the requirements of Sec.
40.216a(a) or Sec. 40.216b(a), provided that such packages bear the
designation ``Tax Class L'' (to designate pipe tobacco) or ``Tax Class
J'' (to designate roll-your-own tobacco) and were in use prior to June
22, 2009.
(b) During the period from June 22, 2009, through March 23, 2010, a
manufacturer may remove roll-your-own tobacco for which the applicable
designation is ``cigar tobacco,'' ``cigarette wrapper,'' or ``cigar
wrapper'' even if the packages of such products do not meet the
requirements of Sec. 40.216b.
[T.D. TTB-81, 74 FR 48654, Sept. 24, 2009]
Effective Date Note: By T.D. TTB-81, 74 FR 48654, Sept. 24, 2009,
Sec. 40.216c was revised, effective Sept. 24, 2009 through June 22,
2012.
Sec. 40.217 Repackaging.
Where a manufacturer of tobacco products desires to repackage,
outside the factory, tobacco products on which the tax has been
determined or which were removed for a tax-exempt purpose or transferred
in bond to an export warehouse, or to repackage tax determined tobacco
products in the factory, he shall make application for authorization to
do so, in duplicate, to the appropriate TTB officer. The application
shall set forth the location and the number of packages, a description
of the contents, the tax status of the tobacco products the reason for
wanting to repackage the products (e.g., packages soiled, damaged, or
otherwise in a condition making the product
[[Page 36]]
unsalable), and a description of the package to be used for repackaging.
The packages to be used must comply with the package, mark, and notice
provisions of this chapter applicable to the tobacco products being
repackaged. The operations authorized under this section are limited
solely to repackaging for good cause by a manufacturer, pursuant to an
approved application, of the specified tobacco products in the described
packages, and do not include any manufacturing processes. If the
appropriate TTB officer approves the application, he may assign an
appropriate TTB officer to supervise the repackaging or he may authorize
the manufacturer to repackage the products without supervision by so
stating on a copy of the application returned to the manufacturer. Where
the manufacturer is authorized to repackage he shall record the date of
repackaging on the approved application and retain it as part of his
records.
(72 Stat. 1422; 26 U.S.C. 5723)
[T.D. 6871, 31 FR 36, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Exemption From Taxes on Tobacco Products
Sec. 40.231 Consumption by employees.
A manufacturer of tobacco products may gratuitously furnish tobacco
products, without determination and payment of tax, for personal
consumption by employees in the factory in such quantities as desired.
Each employee may also be gratuitously furnished by the manufacturer,
for off-factory personal consumption, not more than 5 large cigars or
cigarettes, 20 small cigars or cigarettes, or one retail package of
chewing tobacco, snuff, pipe tobacco or roll-your-own tobacco, or a
proportionate quantity of each, without determination and payment of
tax, on each day the employee is at work. For the purposes of this
section, the term ``employee'' shall mean those persons whose duties
require their presence in the factory or whose duties relate to the
manufacture, distribution, or sale of tobacco products and who receive
compensation from the manufacturer, or a parent, subsidiary, or
auxiliary company or corporation of the manufacturer. Such product
furnished for off-factory consumption shall be furnished to the employee
within the factory and taken from the factory by the employee on the day
for which furnished. Employees shall not sell, offer for sale, or give
away products so furnished.
[T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194,
Dec. 1, 1986, as amended by T.D. ATF-289, 54 FR 48840, Nov. 27, 1989;
T.D. ATF-424, 64 FR 71931, Dec. 22, 1999; T.D. TTB-91, 76 FR 5480, Feb.
1, 2011]
Sec. 40.232 Experimental purposes.
A manufacturer of tobacco products may use tobacco products for
experimental purposes without determination and payment of tax as set
forth in this section.
(a) What are experimental purposes? Experimental purposes are
operations or tests carried out under controlled conditions to discover
an unknown scientific principle or fact, to gather or confirm data about
a known scientific principle or fact, or to test manufacturing,
packaging, or other such equipment. Examples of uses for experimental
purposes are:
(1) Use by manufacturers to determine scientific facts relating to
tobacco products, such as their chemical content;
(2) Use by producers of packaging machines to test the operation of
such machines; and
(3) Use by laboratories, hospitals, medical centers, institutes,
colleges, or universities, for scientific, technical, or medical
research.
(b) What purposes are not experimental? The uses of tobacco products
outside the factory premises for advertising or consumer testing or as
salespersons' or customers' samples are not experimental purposes.
(c) Use in factory. A manufacturer of tobacco products may use
tobacco products without determination and payment of tax for
experimental purposes in a factory.
(d) Use outside factory. A manufacturer may remove tobacco products
in bond for experimental purposes outside a factory. When tobacco
products are
[[Page 37]]
shipped for experimental purposes outside the factory, the proprietor of
the factory remains liable for the taxes imposed by 26 U.S.C. 5701 until
the occurrence of one of the following events:
(1) The tobacco products are returned to the premises of the factory
from which they were shipped; or
(2) The tobacco products are destroyed during or after their use for
experimental purposes.
(e) Record of use. In addition to the records prescribed by Sec.
40.183, a manufacturer who removes tobacco products in bond for
experimental purposes outside a factory must prepare and maintain a
record containing the following information:
(1) Name and address of the consignee;
(2) Kind and quantity of tobacco products removed;
(3) Description of packaging, if any, of the tobacco products
removed;
(4) Description of how and when the consignee will use the tobacco
products; and
(5) Disposition of any remaining tobacco products after the
consignee's use.
(Approved by the Office of Management and Budget under Control Number
1512-0562)
(72 Stat. 1418, as amended; 26 U.S.C. 5704)
[T.D. ATF-478, 67 FR 19333, Apr. 19, 2002]
Sec. 40.233 Transfer in bond.
A manufacturer of tobacco products may transfer tobacco products in
bond, to the factory of any manufacturer of tobacco products. The
transfer of tobacco products in bond to the premises of an export
warehouse proprietor shall be in accordance with the provisions of part
44 of this chapter. Tobacco products are not eligible for transfer in
bond to a manufacturer of tobacco products or to an export warehouse
unless they bear all required marks, labels, or notices.
(72 Stat. 1418, as amended; 26 U.S.C. 5704)
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-421, 64 FR 71924, Dec. 22,
1999]
Sec. 40.234 Removal for use of the United States.
The removal of tobacco products in bond, for use of the United
States, shall be in accordance with the provisions of part 45 of this
chapter.
(72 Stat. 1418, as amended; 26 U.S.C. 5704)
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975; T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D. ATF-243, 51 FR
43194, Dec. 1, 1986; T.D. ATF-469, 66 FR 56758, Nov. 13, 2001]
Sec. 40.235 Removal for export purposes.
The removal of tobacco products in bond, for shipment to a foreign
country, Puerto Rico, the Virgin Islands, or a possession of the United
States, or for consumption beyond the jurisdiction of the internal
revenue laws of the United States, shall be in accordance with the
provisions of part 44 of this chapter.
(72 Stat. 1418, as amended; 26 U.S.C. 5704)
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Sec. 40.236 Release from customs custody.
The release of tobacco products from customs custody, in bond, for
transfer to the premises of a tobacco products factory, shall be in
accordance with the provisions of part 41 of this chapter.
(72 Stat. 1418, as amended; 26 U.S.C. 5704)
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. TTB-16, 69 FR 52423, Aug. 26,
2004]
Other Provisions Relating to Operations
Sec. 40.251 Emergency storage.
In cases of emergency, the appropriate TTB officer may authorize,
for a stated period, the temporary storage of tobacco products at a
place outside the factory without the application for amended permit
required under Sec. 40.114, where such action will not hinder the
effective administration of this part, is
[[Page 38]]
not contrary to law, and will not jeopardize the revenue. Application
for authorization to so store tobacco products shall be submitted to the
appropriate TTB officer by letter, in duplicate. All tobacco products so
stored outside the factory shall be accounted for in the records and
reports required under Sec. Sec. 40.183 and 40.202 the same as products
within the factory.
(72 Stat. 1422, 1423, as amended; 26 U.S.C. 5722, 5741)
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975; T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D. ATF-243, 51 FR
43194, Dec. 1, 1986]
Sec. 40.252 Reduction of tobacco products to materials.
A manufacturer may reduce tobacco products to materials without
supervision. If the tobacco products have been entered in the factory
record as manufactured or received, an entry shall be made in such
record of the quantity of pipe tobacco or roll-your-own tobacco and the
kind and quantity of cigars, cigarettes, and smokeless tobacco reduced
to materials and of the quantity of tobacco resulting from the
reduction. Where the manufacturer intends to file claims for credit
allowance, or refund of tax on such tobacco products, he shall comply
with the provisions of Sec. Sec. 40.311 and 40.313.
[T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194,
Dec. 1, 1986, as amended by T.D. ATF-289, 54 FR 48840, Nov. 27, 1989;
T.D. ATF-424, 64 FR 71931, Dec. 22, 1999]
Sec. 40.253 Destruction.
When a manufacturer of tobacco products desires to destroy tobacco
products which have been entered in the factory record as manufactured
or received, without salvaging the tobacco, he shall notify the
appropriate TTB officer by letter, in duplicate, of the kind and
quantity of tobacco products to be destroyed, the intended method of
destruction, and the date on which he desires to destroy such products.
The appropriate TTB officer may assign an appropriate TTB officer to
supervise destruction of the tobacco products or he may authorize the
manufacturer to destroy such products without supervision by so stating
on a copy of the manufacturer's notice returned to the manufacturer.
When so authorized by the appropriate TTB officer, the manufacturer
shall destroy the tobacco products by burning completely or by rendering
them unfit for consumption. Upon completion of the destruction, the
manufacturer shall make an entry of such destruction in his factory
record, and where destruction without supervision is authorized, shall
record the date and method of destruction on the notice returned to him
by the appropriate TTB officer, which notice the manufacturer shall
retain. Where the manufacturer intends to file claim for credit,
allowance, or refund of tax on such products he shall comply with the
provisions of Sec. Sec. 40.311 and 40.313.
(72 Stat. 1423, as amended; 26 U.S.C. 5741)
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Sec. 40.254 Receipt into factory.
A manufacturer of tobacco products may receive in bond into his
factory tobacco products and may also receive into his factory tobacco
products on which the tax has been determined (including products on
which the tax has been paid). Cigars and cigarettes on which the tax has
been determined which are so received shall be segregated and identified
as products on which the tax has been determined. If tax determined
products received into the factory are so handled that they cannot be
identified both physically and in the records as tax determined products
they shall be accounted for as returned to bond and upon subsequent
removal shall be tax determined. Where returned tax determined tobacco
products are to be repackaged without being returned to bond the
manufacturer shall make application for authorization to do so to the
appropriate TTB officer in accordance with
[[Page 39]]
Sec. 40.217. Where the manufacturer intends to file claim for credit,
allowance, or refund of tax on tax determined products he shall comply
with the provisions of Sec. Sec. 40.311 and 40.313.
[T.D. 6871, 31 FR 37, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D.
ATF-243, 52 FR 43194, Dec. 1, 1986]
Sec. 40.255 Shortages and overages in inventory.
Whenever a manufacturer of tobacco products makes a physical
inventory of packaged tobacco products in bond, either as part of normal
operations or when required by an appropriate TTB officer, and such
inventory discloses a shortage or overage in such products by kind as
recorded and reported (i.e., small cigars, large cigars, chewing
tobacco, snuff, pipe tobacco, or roll-your-own tobacco), the
manufacturer shall enter such shortage or overage in the records
required by Sec. 40.183. Shortages or overages in inventories made at
different times may not be used to offset each other, but shall be
recorded and reported separately. Unless the manufacturer establishes
that a shortage was not caused by a removal subject to the tax the
manufacturer shall determine the tax on any shortage, make an adjustment
in Schedule A of his next semimonthly tax return and pay the tax
thereon. If, after paying the tax on a shortage, the manufacturer
satisfactorily establishes that the shortage was not caused by a removal
subject to tax, then such payment would be an overpayment of tax which
the manufacturer may recover as provided in Sec. 40.286. Where the
manufacturer can establish prior to paying the tax on a shortage, that
the shortage was not the result of a removal subject to tax he shall
submit an explanation of such shortage with his report for the month in
which the shortage was disclosed and, if appropriate, he may file claim
for remission of tax liability as provided in Sec. 40.287. When an
overage is disclosed which the manufacturer can explain, he shall
include such explanation in his monthly report and refund of any
overpayment may be recovered as provided in Sec. 40.286. Whenever a
physical inventory discloses a shortage or overage of tobacco products
which have not been packaged the manufacturer shall appropriately enter
such shortage or overage in his records and shall, at the time required
by the appropriate TTB officer, furnish an explanation in the form of a
claim for remission of tax liability as provided in Sec. 40.287. The
manufacturer shall pay the tax on any shortage or portion thereof for
which he is unable to furnish an explanation acceptable to the
appropriate TTB officer.
[T.D. ATF-232, 51 FR 28082, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194,
Dec. 1, 1986, as amended by T.D. ATF-289, 54 FR 48840, Nov. 27, 1989;
T.D. ATF-424, 64 FR 71931, Dec. 22, 1999]
Sec. 40.256 Minimum manufacturing and activity requirements.
The minimum manufacturing and activity requirement prescribed in
Sec. 40.61(b) of this part is a continuing condition of a
manufacturer's permit, that is, a permit to manufacture tobacco products
is conditioned upon a person's principal business activity being the
manufacture of tobacco products. A permit may be suspended, and
subsequently revoked, if the person's principal business activity under
such permit is to receive or transfer tobacco products in bond, or if
the person has no activity under such permit for a period of one year.
As a minimum activity requirement, the quantity of tobacco products
manufactured under the permit must be equivalent to, or exceed, the
quantity transferred or received in bond under the permit.
Effective Date Notes: 1. By T.D. TTB-78, at 74 FR 29410, June 22,
2009, Sec. 40.256 was added, effective June 22, 2009 through June 22,
2012.
2. By T.D. TTB-80, at 74 FR 37552, July 29, 2009, Sec. 40.256 was
amended in the last sentence by removing the word ``exceed'' and adding
in its place the words ``be equivalent to, or exceed,'', effective July
29, 2009 through June 22, 2012.
Sec. 40.257 Processed tobacco.
A manufacturer of tobacco products may be required to obtain
authorization from the appropriate TTB officer with regard to the
activities involving processed tobacco. See Sec. 40.72. Such
manufacturers also must maintain records and may be required to submit
[[Page 40]]
reports regarding such activities. See Sec. Sec. 40.182 and 40.202.
Effective Date Note: By T.D. TTB-78, at 74 FR 29410, June 22, 2009,
Sec. 40.257 was added, effective June 22, 2009 through June 22, 2012.
Subpart I_Claims by Manufacturers
General
Sec. 40.281 Abatement of assessment.
A claim for abatement of the unpaid portion of the assessment of any
tax on tobacco products or any liability in respect thereof, may be
allowed to the extent that such assessment is excessive in amount, is
assessed after expiration of the applicable period of limitation, or is
erroneously or illegally assessed. Any claim under this section shall be
prepared on TTB F 5620.8, in duplicate, and shall set forth the
particulars under which the claim is filed. The original of the claim,
accompanied by such evidence as is necessary to establish to the
satisfaction of the appropriate TTB officer that the claim is valid,
shall be filed with the appropriate TTB officer, and the duplicate of
the claim shall be retained by the manufacturer.
(68A Stat. 792; 26 U.S.C. 6404)
[T.D. 6871, 31 FR 38, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-251, 52 FR 19340, May 22,
1987]
Sec. 40.282 Allowance of tax.
Relief from the payment of tax on tobacco products may be extended
to a manufacturer by allowance of the tax where the tobacco products
after removal from the factory upon determination of tax and prior to
the payment of such tax, are lost (otherwise than by theft) or
destroyed, by fire, casualty, or act of God, while in the possession or
ownership of the manufacturer who removed such products, or are
withdrawn by him from the market. Any claim for allowance under this
section shall be filed on TTB F 5620.8, in duplicate, with the
appropriate TTB officer, and shall show the date the tobacco products
were removed from the factory. A claim relating to products lost or
destroyed shall be supported as prescribed in Sec. 40.301. In the case
of a claim relating to tobacco products withdrawn from the market the
schedule prescribed in Sec. 40.311 shall be filed with the appropriate
TTB officer. The manufacturer may not anticipate allowance of his claim
by making the adjusting entry in a tax return pending consideration and
action on the claim. Tobacco products to which such a claim relates must
be shown as removed on determination of tax in the return covering the
period during which such products were so removed. Upon action on the
claim by the appropriate TTB officer he will return the copy of TTB F
5620.8 to the manufacturer as notice of such action, which copy, with
the copy of any verified supporting schedules, shall be retained by the
manufacturer. When such notification of allowance of the claim or any
part thereof is received prior to the time the return covering the tax
on the tobacco products to which the claim relates is to be filed, the
manufacturer may make an adjusting entry and explanatory statement in
that tax return. Where the notice of allowance is received after the
filing of the return and taxpayment of the tobacco products to which the
claim relates, the manufacturer may make an adjusting entry and
explanatory statement in the next tax return(s) to the extent necessary
to take credit in the amount of the allowance.
(72 Stat. 1419, as amended; 26 U.S.C. 5705)
[T.D. 6961, 33 FR 9488, June 28, 1968. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Sec. 40.283 Credit or refund of tax.
The taxes paid on tobacco products may be credited or refunded
(without interest) to a manufacturer on proof satisfactory to the
appropriate TTB officer that the claimant manufacturer paid the tax on
tobacco products lost (otherwise than by theft) or destroyed, by fire,
casualty, or act of God, while in the possession or ownership of such
manufacturer, or withdrawn by him from the market. Any claim for credit
or refund under this section shall be prepared on TTB F 5620.8, in
duplicate.
[[Page 41]]
Claims shall include a statement that the tax imposed on tobacco
products by 26 U.S.C. 7652 or chapter 52, was paid in respect to the
tobacco products covered by the claim, and that the products were lost,
destroyed, or withdrawn from the market within 6 months preceding the
date the claim is filed. A claim for credit or refund relating to
products lost or destroyed shall be supported as prescribed in Sec.
40.301, and a claim relating to products withdrawn from the market shall
be accompanied by a schedule prepared and verified as prescribed in
Sec. Sec. 40.311 and 40.313. The original and one copy of TTB F 5620.8,
claim for credit, or the original of TTB F 5620.8, claim for refund,
shall be filed with the appropriate TTB officer. Upon action by the
appropriate TTB officer on a claim for credit he will return the copy of
TTB F 5620.8 to the manufacturer as notification of allowance or
disallowance of the claim or any part thereof, which copy, with the copy
of any verified supporting schedules, shall be retained by the
manufacturer. When the manufacturer is notified of allowance of the
claim for credit or any part thereof he shall make an adjusting entry
and explanatory statement in the next tax return(s) to the extent
necessary to take credit in the amount of the allowance. Prior to
consideration and action on his claim the manufacturer may not
anticipate allowance of his claim by taking credit in his tax return.
The duplicate of a claim for refund, with the copy of any verified
supporting schedules, shall be retained by the manufacturer.
(Sec. 201, Pub. L. 85-859, 72 Stat. 1419)
[T.D. 6961, 33 FR 9489, June 28, 1968. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55855, Sept. 28, 1979; T.D.
ATF-219, 50 FR 51389, Dec. 17, 1985; T.D. ATF-232, 51 FR 28083, Aug. 5,
1986; T.D. ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-251, 52 FR
19340, May 22, 1987]
Sec. 40.284 Remission of tax liability.
Remission of the tax liability on tobacco products may be extended
to the manufacturer liable for the tax where tobacco products in bond
are lost (otherwise than by theft) or destroyed, by fire, casualty, or
act of God, while in the possession or ownership of such manufacturer.
Where tobacco products are so lost or destroyed the manufacturer shall
report promptly such fact, and the circumstances, to the appropriate TTB
officer. If the manufacturer wishes to be relieved of the tax liability
thereon he shall also prepare a claim on TTB F 5620.8, in duplicate,
setting forth the nature, date, place, and extent of the loss or
destruction. Both copies of the claim, accompanied by such evidence as
is necessary to establish to the satisfaction of the appropriate TTB
officer that the claim is valid, shall be filed with the appropriate TTB
officer. Upon action on the claim by the appropriate TTB officer he will
return the copy of TTB F 5620.8 to the manufacturer as notice of such
action, which copy shall be retained by the manufacturer.
(72 Stat. 1419, as amended; 26 U.S.C. 5705)
[T.D. 6961, 33 FR 9489, June 28, 1968. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Sec. 40.285 [Reserved]
Sec. 40.286 Refund of overpayment.
Where an error in computation of the quantity of tobacco products or
in computation of the amount of tax due results in an overpayment and
such error is specifically identified and supported by records, the
manufacturer may file claim for refund or may make an adjustment in his
semimonthly tax return as provided in Sec. 40.164. (Section 6511, 26
U.S.C., provides that, in most cases, any adjustment of claim for refund
of an overpayment of tax on tobacco products must be made or filed
within three years after the tax is paid.) If the manufacturer elects to
file a claim for refund of an overpayment resulting from such a
computational error, he shall do so on TTB F 5620.8, in duplicate. The
original shall be filed with the appropriate TTB officer, and the
duplicate retained by the manufacturer. Where an overpayment of tax on
tobacco products results from other than a computational error any claim
[[Page 42]]
for refund or credit shall be made in accordance with subpart A of part
46 of this chapter.
(68A Stat. 791, 72 Stat. 9; 26 U.S.C. 6402, 6423)
[T.D. 6871, 31 FR 39, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-48, 44 FR 55855, Sept. 28, 1979; T.D.
ATF-232, 51 FR 28083, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194, Dec. 1,
1986; T.D. ATF-251, 52 FR 19340, May 22, 1987; T.D. ATF-457, 66 FR
32220, June 14, 2001]
Sec. 40.287 Remission of tax liability on shortage.
Whenever a manufacturer of tobacco products desires to submit a
claim for remission of tax liability on shortages of tobacco products in
bond, disclosed by physical inventory as set forth in Sec. 40.255, he
shall prepare such claim on TTB F 5620.8, in duplicate. Both copies of
the claim shall be filed with the appropriate TTB officer. The claim
shall specify the quantities of tobacco products on which claim is made
and the tax liability in respect thereof, and shall set forth the
circumstances surrounding the shortage and the reason the manufacturer
believes tax is not due or payable. The appropriate TTB officer will,
after such investigation as he deems appropriate, allow the claim to the
extent he is satisfied the shortage was due to operating losses such as
damage during grading, sorting, or packaging, and was not caused by
theft or other unlawful or improper removal. Upon action on the claim by
the appropriate TTB officer he will return the copy of TTB F 5620.8 to
the manufacturer as notice of such action, which copy shall be retained
by the manufacturer.
(72 Stat. 1414, as amended, 1417, 1419, as amended; 26 U.S.C. 5701,
5703, 5705)
[T.D. 6961, 33 FR 9489, June 28, 1968. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Tobacco Products Lost or Destroyed
Sec. 40.301 Action by claimant.
Where tobacco products are lost (otherwise than by theft) or
destroyed, by fire, casualty, or act of God, and the manufacturer
desires to file a claim for the tax on such products under the
provisions of Sec. 40.282 or Sec. 40.283, he shall indicate on the
claim the nature, date, place, and extent of such loss or destruction.
The claim shall be accompanied by such evidence as is necessary to
establish to the satisfaction of the appropriate TTB officer that the
claim is valid.
(72 Stat. 1419, as amended; 26 U.S.C. 5705)
[T.D. 6871, 31 FR 39, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 52 FR 43194, Dec. 1, 1986]
Tobacco Products Withdrawn From the Market
Sec. 40.311 Action by claimant.
(a) General. Where tobacco products are withdrawn from the market
and the manufacturer desires to file claim under the provisions of Sec.
40.282 or Sec. 40.283, he shall assemble the products in or adjacent to
a factory if they are to be returned to bond or at any suitable place if
they are to be destroyed or reduced to materials. The manufacturer shall
group the products according to the rates of tax applicable to the
products, and shall prepare a schedule of the products, on TTB Form
5200.7, in triplicate. All copies of the schedule shall be forwarded to
the appropriate TTB officer.
(b) Large cigars. Refund or credit of tax on large cigars withdrawn
from the market is limited to the lowest tax paid on that brand and size
of cigar during the required record retention period (see Sec. 40.185),
except where the manufacturer establishes that a greater amount was
actually paid. For each claim involving large cigars withdrawn from the
market, the manufacturer must include a certification on either Form
5200.7 or TTB F 5620.8 to read as follows:
The amounts claimed relating to large cigars are based on the lowest
sale price applicable to the cigars during the required record retention
period, except where specific documentation is submitted with the
[[Page 43]]
claim to establish that any greater amount of tax claimed was actually
paid.
(See 26 U.S.C. 5705)
[T.D. ATF-80, 46 FR 18310, Mar. 24, 1981, as amended by T.D. ATF-232, 51
FR 28083, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194, Dec. 1, 1986; T.D.
ATF-251, 52 FR 19340, May 22, 1987; T.D. ATF-307, 55 FR 52743, Dec. 21,
1990; T.D. ATF-424, 64 FR 71932, Dec. 22, 1999; T.D. ATF-420, 64 FR
71941, Dec. 22, 1999]
Sec. 40.312 Action by the appropriate TTB officer.
Upon receipt of a schedule of tobacco products withdrawn from the
market, the appropriate TTB officer may assign a TTB officer to verify
the schedule and supervise disposition of the tobacco products (and
destruction of the stamps, if any), or he may authorize the manufacturer
to dispose of the products (and destroy the stamps, if any) without
supervision by so stating on the original and one copy of the schedule
returned to the manufacturer.
[T.D. 6871, 31 FR 39, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, as amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Sec. 40.313 Disposition of tobacco products and schedule.
When so authorized, as evidenced by the appropriate TTB officer's
statement on the schedule, the manufacturer shall dispose of the tobacco
products (and destroy the stamps, if any) as specified in the schedule.
After the manufacturer has disposed of the products (and destroyed the
stamps, if any), he shall execute a certificate on both copies of the
schedule returned to him by the appropriate TTB officer, to show the
disposition and the date of disposition of the products (and stamps, if
any). In connection with a claim for allowance the manufacturer then
shall return the original of the schedule to the appropriate TTB officer
who authorized such disposition, who will cause such schedule to be
associated with the claim, TTB F 5620.8, filed under Sec. 40.282. In
connection with a claim for credit or refund the manufacturer shall
attach the original of the schedule to his claim for credit, TTB F
5620.8, or claim for refund, TTB F 5620.8, filed under Sec. 40.283.
When an appropriate TTB officer is assigned to verify the schedule and
supervise disposition of the tobacco products, such officer shall, upon
completion of his assignment, execute a certificate on all copies of the
schedule to show the disposition and the date of disposition of the
products. In connection with a claim for allowance the officer shall
return one copy of the schedule to be included in the manufacturers
records, and in connection with a claim for credit or refund, the
officer shall return the original and one copy of the schedule to the
manufacturer, the original of which the manufacturer shall attach to the
claim, TTB F 5620.8, filed under Sec. 40.283.
(72 Stat. 1419, as amended; 26 U.S.C. 5705)
[T.D. 6871, 31 FR 39, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-251, 52 FR 19340, May 22,
1987]
Subpart J_Suspension and Discontinuance of Operations by Manufacturers
Sec. 40.331 Discontinuance of operations.
Every manufacturer of tobacco products who desires to discontinue
operations under this part shall dispose of all tobacco products on
hand, in accordance with this part, and make a concluding inventory and
concluding report in accordance with the provisions of Sec. 40.201 and
Sec. 40.202, respectively. The manufacturer shall surrender his permit,
with such inventory and report, to the appropriate TTB officer as notice
of such discontinuance. The appropriate TTB officer may then terminate
the liability of the surety on the bond of the manufacturer.
(72 Stat. 1422; 26 U.S.C. 5721, 5722)
[T.D. 6871, 37 FR 40, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28083, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986]
Sec. 40.332 Suspension and revocation of permit.
Where the appropriate TTB officer has reason to believe that a
manufacturer of tobacco products has not in good faith complied with the
provisions of 26 U.S.C. chapter 52, and regulations
[[Page 44]]
thereunder, or with any other provision of 26 U.S.C. with intent to
defraud, or has violated any condition of his permit, or has failed to
disclose any material information required or made any material false
statement in the application for the permit, or has failed to maintain
his premises in such manner as to protect the revenue, or is, by reason
of previous or current legal proceedings involving a felony violation of
any other provision of Federal criminal law relating to tobacco
products, processed tobacco, cigarette paper, or cigarette tubes, not
likely to maintain operations in compliance with 26 U.S.C. chapter 52,
or has been convicted of a felony violation of any provision of Federal
or State criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, the appropriate TTB officer shall
issue an order, stating the facts charged, citing such person to show
cause why his permit should not be suspended or revoked. Such citation
shall be issued and opportunity for hearing afforded in accordance with
part 71 of this chapter, which part is applicable to such proceedings.
If, after hearing, the hearing examiner, or on appeal, the
Administrator, finds that such person has not shown cause why his permit
should not be suspended or revoked, such permit shall be suspended for
such period as the appropriate TTB officer deems proper or shall be
revoked.
(72 Stat 1421, as amended; 26 U.S.C. 5713)
[T.D. TTB-75, 74 FR 14483, Mar. 31, 2009]
Subpart K_Manufacture of Cigarette Papers and Tubes
Source: T.D. ATF-384, 61 FR 54085, Oct. 17, 1996, unless otherwise
noted.
Taxes
Sec. 40.351 Cigarette papers.
Cigarette papers are taxed at the following rates under 26 U.S.C.
5701(c):
------------------------------------------------------------------------
Tax rate for each 50 papers* for
removals during the following periods:
Product ---------------------------------------
2002 to March 31, April 1, 2009 and
2009 after
------------------------------------------------------------------------
Cigarette papers up to 6\1/2\ long.
Cigarette papers over 6\1/2\ long. inches, or fraction thereof, of the
length of each as one cigarette
paper.
------------------------------------------------------------------------
* Tax rate for less than 50 papers is the same. The tax is not prorated.
(72 Stat. 1414; 26 U.S.C. 5701)
[T.D. TTB-75, 74 FR 14483, Mar. 31, 2009]
Sec. 40.352 Cigarette tubes.
Cigarette tubes are taxed at the following rates under 26 U.S.C.
5701(d):
------------------------------------------------------------------------
Tax rate for each 50 tubes* for
removals during the years:
Product ---------------------------------------
2002 to March 31, April 1, 2009 and
2009 after
------------------------------------------------------------------------
Cigarette tubes up to 6\1/2\'' $ 0.0244........... $ 0.0630
long.
Cigarette tubes over 6\1/2\'' Use rates above, but count each 2\3/4\
long. inches, or fraction thereof, of the
length of each as one cigarette tube.
------------------------------------------------------------------------
* Tax rate for less than 50 tubes is the same. The tax is not prorated.
(72 Stat. 1414; 26 U.S.C. 5701)
[T.D. TTB-75, 74 FR 14483, Mar. 31, 2009]
Sec. 40.353 Persons liable for tax.
The manufacturer of cigarette papers and tubes shall be liable for
the taxes imposed on such articles by 26 U.S.C. 5701. When a
manufacturer of cigarette papers and tubes transfers such papers and
tubes without payment of tax, pursuant to 26 U.S.C. 5704 to the bonded
premises of another such manufacturer, a manufacturer of tobacco
products, or an export warehouse proprietor, the transferee shall become
liable for the tax upon receipt of such papers and tubes and the
transferor shall thereupon be relieved of liability for the tax. When
cigarette papers and tubes are released in bond from customs custody for
transfer to the bonded premises of a manufacturer of such papers and
tubes or a manufacturer of tobacco products, the transferee shall become
liable for the tax on the papers and tubes upon release from customs
custody. Any person who possesses cigarette papers and tubes in
violation of
[[Page 45]]
26 U.S.C. 5751(a) (1) or (2), shall be liable for a tax equal to the
rate of tax applicable to such articles.
(72 Stat. 1417, 1424; 26 U.S.C. 5703, 5751)
Sec. 40.354 Determination of tax and method of payment.
Except for removals without payment of tax and transfers in bond, as
authorized by law, no cigarette papers and tubes shall be removed until
the taxes imposed by section 5701, I.R.C., have been determined. The
payment of taxes on cigarette papers and tubes which are removed on
determination of tax shall be made by return in accordance with the
provisions of this subpart.
(72 Stat. 1417; 26 U.S.C. 5703)
Sec. 40.355 Return of manufacturer.
(a) Requirement for filing. A manufacturer of cigarette papers and
tubes shall file, for each factory, a semimonthly tax return on TTB Form
5000.24. A return shall be filed for each semimonthly return period
regardless of whether cigarette papers and tubes were removed subject to
tax or whether tax is due for that particular return period.
(b) Waiver from filing. The manufacturer need not file a return for
each semimonthly return period if cigarette papers and tubes were not
removed subject to tax during the period and the appropriate TTB officer
has granted a waiver from filing in response to a written request from
the manufacturer.
(c) Semimonthly return periods. Except as otherwise provided in
paragraph (g) of this section, semimonthly return periods run from the
1st day of the month through the 15th day of that month, and from the
16th day of the month through the last day of that month.
(d) Preparation and filing. The return shall be executed and filed
with TTB in accordance with the instructions on the form.
(e) Remittance of tax. Except as provided in Sec. 40.357,
remittance of the tax, if any, shall accompany the return.
(f) Time for filing. Except as otherwise provided in paragraph (g)
of this section, for each semimonthly return period, the return shall be
filed not later than the 14th day after the last day of the return
period. If the due date falls on a Saturday, Sunday, or legal holiday,
the return and remittance are due on the immediately preceding day that
is not a Saturday, Sunday or legal holiday.
(g) Special rule for taxes due for the month of September. (1)
Division of second semimonthly period. (i) General. Except as otherwise
provided in paragraph (g)(1)(ii) of this section, the second semimonthly
period for the month of September is divided into two payment periods,
from the 16th day through the 26th day, and from the 27th day through
the 30th day. The manufacturer shall file a return on TTB F 5000.24, and
make remittance, for the period September 16-26, no later than September
29. The manufacturer shall file a return on TTB F 5000.24, and make
remittance, for the period September 27-30, no later than October 14.
(ii) Taxpayment not by electronic fund transfer. In the case of
taxes for which remittance by electronic fund transfer (EFT) is not
required by Sec. 40.357, the second semimonthly period of September is
divided into two payment periods, from the 16th day through the 25th
day, and from the 26th day through the 30th day. The manufacturer shall
file a return on TTB F 5000.24, and make remittance, for the period
September 16-25, no later than September 28. The manufacturer shall file
a return on TTB F 5000.24, and make remittance, for the period September
26-30, no later than October 14.
(2) Amount of payment--Safe harbor rule. (i) General. Taxpayers are
considered to have met the requirements of paragraph (g)(1)(i) of this
section if the amount paid no later than September 29 is not less than
11/15ths (73.3 percent) of the tax liability incurred for the
semimonthly period beginning on September 1 and ending on September
15th, and if any underpayment of tax is paid by October 14th.
(ii) Taxpayment not by EFT. Taxpayers are considered to have met the
requirements of paragraph (g)(1)(ii) of this section if the amount paid
no later than September 28 is not less than 2/3rds (66.7 percent) of the
tax liability incurred for the semimonthly period beginning on September
1 and ending
[[Page 46]]
on September 15, and if any underpayment of tax is paid by October 14.
(3) Weekends and holidays. If the required taxpayment due date for
the period September 16-25 or September 16-26, as applicable, falls on a
Saturday, or legal holiday, the return and remittance are due on the
immediately preceding day. If the required due date falls on a Sunday,
the return and remittance are due on the immediately following day.
(Approved by the Office of Management and Budget under Control Number
1512-0467)
Effective Date Note: By T.D. TTB-89, 76 FR 3514, Jan. 20, 2011,
Sec. 40.355(b), (c), (f), and (g) were revised, effective Feb. 22, 2011
through Feb. 24, 2014.
Sec. 40.356 Adjustments in the return of manufacturer.
Adjustments may be made in Schedules A and B of the manufacturer's
semimonthly tax return, TTB Form 5000.24, as provided in this section.
Schedule A of the return will be used where an unintentional error in a
previous return resulted in an underpayment of tax. Schedule B of the
return will be used where an unintentional error in a previous return
resulted in an overpayment of tax, or where notice has been received
from the appropriate TTB officer that a claim for allowance of tax has
been approved. In the case of an overpayment, the manufacturer shall
have the option of filing a claim on TTB TTB F 5620.8 for refund or
taking credit in Schedule B of the return, both subject to the period of
limitations prescribed in 26 U.S.C. 6511. Any adjustment made in a
return must be fully explained in the appropriate schedule or in a
statement attached to and made a part of the return in which such
adjustment is made.
(72 Stat. 1417, 68A Stat. 791; 26 U.S.C. 5703, 6402)
Sec. 40.357 Payment of tax by electronic fund transfer.
(a) General. (1) Each taxpayer who was liable, during a calendar
year, for a gross amount equal to or exceeding five million dollars in
taxes on tobacco products, cigarette papers, and cigarette tubes
combining tax liabilities incurred under this part and part 41 of this
chapter, shall use a commercial bank in making payment by electronic
fund transfer (EFT) of taxes on tobacco products, cigarette papers, and
cigarette tubes during the succeeding calendar year. Payment of taxes on
tobacco products, cigarette papers, and cigarette tubes in any other
form of remittance, as authorized in Sec. 40.355, is not authorized for
a taxpayer who is required, by this section, to make remittances by EFT.
For purposes of this section, the dollar amount of tax liability is
defined as the gross tax liability on all taxable withdrawals and
importations (including tobacco products, cigarette papers, and
cigarette tubes brought into the United States from Puerto Rico or the
Virgin Islands) during the calendar year, without regard to any
drawbacks, credits, or refunds, for all premises from which such
activities are conducted by the taxpayer. Overpayments are not taken
into account in summarizing the gross tax liability.
(2) For the purposes of this section, a taxpayer includes a
controlled group of corporations, as defined in 26 U.S.C. 1563, and
implementing regulations in 26 CFR Sec. Sec. 1.563-1 through 1.1563-4.
Also, the rules for a ``controlled group of corporations'' apply in a
similar fashion to groups which include partnerships and/or sole
proprietorships. If one entity maintains more than 50% control over a
group consisting of corporations and one, or more, partnerships and/or
sole proprietorships, all of the members of the controlled group are one
taxpayer for the purpose of determining who is required to make
remittances by EFT.
(3) A taxpayer who is required by this section to make remittances
by EFT shall make a separate EFT remittance and file a separate return,
TTB Form 5000.24, for each factory from which cigarette papers or
cigarette tubes are withdrawn upon determination of tax.
(b) Requirements. (1) On or before January 10 of each calendar year,
except for a taxpayer already remitting the tax by EFT, each taxpayer
who was liable for a gross amount equal to or exceeding five million
dollars in taxes on tobacco products, cigarette papers, and cigarette
tubes combining tax liabilities incurred under this part and part 41 of
this chapter during the previous calendar year, shall notify, in
writing,
[[Page 47]]
the appropriate TTB officer. The notice shall be an agreement to make
remittances by EFT.
(2) For each return filed in accordance with this part, the taxpayer
shall direct the taxpayer's bank to make an electronic fund transfer in
the amount of the taxpayment to the Department of the Treasury's General
Account or the Federal Reserve Bank of New York as provided in paragraph
(e) of this section. The request shall be made to the bank early enough
for the transfer to be made to the Treasury Account by no later than the
close of business on the last day for filing the return, prescribed in
Sec. 40.355. The request shall take into account any time limit
established by the bank.
(3) If a taxpayer was liable for less than five million dollars in
taxes on tobacco products, cigarette papers, and cigarette tubes
combining tax liabilities incurred under this part and part 41 of this
chapter during the preceding calendar year, the taxpayer may choose
either to continue remitting the tax as provided in this section or to
remit the tax with the return as prescribed by Sec. 40.355. Upon filing
the first return on which the taxpayer chooses to discontinue remitting
the tax by EFT and to begin remitting the tax with the tax return, the
taxpayer shall notify the appropriate TTB officer by attaching a written
notification to TTB Form 5000.24, stating that no taxes are due by EFT,
because the tax liability during the preceding calendar year was less
than five million dollars, and that the remittance shall be filed with
the tax return.
(c) Remittance. (1) Each taxpayer shall show on the return, TTB Form
5000.24, information about remitting the tax for that return period by
EFT and shall file the return with TTB, in accordance with the
instructions of TTB Form 5000.24.
(2) Remittances shall be considered as made when the taxpayment by
EFT is received by the Treasury Account. For purposes of this section, a
taxpayment by EFT shall be considered as received by the Treasury
Account when it is paid to a Federal Reserve Bank.
(3) When the taxpayer directs the bank to effect an EFT message as
required by paragraph (b)(2) of this section, any transfer data record
furnished to the taxpayer, through normal banking procedures, will serve
as the record of payment, and shall be retained as part of required
records.
(d) Failure to make a taxpayment by EFT. The taxpayer is subject to
a penalty imposed by 26 U.S.C. 5761, 6651, or 6656, as applicable, for
failure to make a taxpayment by EFT on or before the close of business
on the prescribed last day for filing.
(e) Procedure. Upon the notification required under paragraph (b)(1)
of this section, the appropriate TTB officer will issue to the taxpayer
an TTB Procedure entitled Payment of Tax by Electronic Fund Transfer.
This publication outlines the procedure a taxpayer is to follow when
preparing returns and EFT remittances in accordance with this part. The
U.S. Customs Service will provide the taxpayer with instructions for
preparing EFT remittances for payments to be made to the U.S. Customs
Service.
(Approved by the Office of Management and Budget under control number
1512-0457)
(Act of August 16, 1954, 68A Stat. 775, as amended (26 U.S.C. 6302);
sec. 202, Pub. L. 85-859, 72 Stat. 1417, as amended (26 U.S.C. 5703))
[T.D. ATF-384, 61 FR 54085, Oct. 17, 1996, as amended by T.D. TTB-16, 69
FR 52423, Aug. 26, 2004; T.D. TTB-91, 76 FR 5480, Feb. 1, 2011]
Sec. 40.358 Assessment.
Whenever any person required by law to pay tax on cigarette papers
and tubes fails to pay such tax, the tax shall be ascertained and
assessed against such person, subject to the limitations prescribed in
26 U.S.C. 6501. The tax so assessed shall be in addition to the
penalties imposed by law for failure to pay such tax when required.
Except in cases where delay may jeopardize collection of the tax, or
where the amount is nominal or the result of an evident mathematical
error, no such assessment shall be made until and after notice has been
afforded such person to show cause against assessment. The person will
be allowed 45 days from the date of such notice to show cause, in
writing, against such assessment.
(72 Stat. 1417; 26 U.S.C. 5703)
[[Page 48]]
Sec. 40.359 Employer identification number.
The employer identification number (EIN) (defined at 26 CFR
301.7701-12) of a manufacturer of cigarette papers and/or tubes who has
been assigned such a number shall be shown on each semimonthly tax
return, TTB Form 5000.24, and special tax return (including amended
returns), TTB Form 5630.5, filed under this subpart. Failure of the
taxpayer to include the EIN on TTB Form 5000.24 may result in assertion
and collection of the penalty specified in Sec. 70.113 of this chapter.
Failure of the taxpayer to include the EIN on TTB Form 5630.5 may result
in the imposition of the penalty specified in 27 CFR 70.113 of this
chapter.
(75 Stat. 828; 26 U.S.C. 6109, 6676)
Sec. 40.360 Application for employer identification number.
Each manufacturer of cigarette papers and tubes who has neither
secured an EIN nor made application therefor shall file an application
on IRS Form SS-4. IRS Form SS-4 may be obtained from any service center
director or from any district director. Such application shall be filed
on or before the seventh day after the date on which any tax return
under this subpart is filed. Each manufacturer shall make application
for and shall be assigned only one EIN for all internal revenue
purposes.
(75 Stat. 828; 26 U.S.C. 6109)
Sec. 40.361 Execution and filing of Form SS-4.
The application on IRS form SS-4, together with any supplementary
statement, shall be prepared in accordance with the applicable form,
instructions, and regulations, and the data called for shall be set
forth fully and clearly. The application shall be filed with the service
center director serving the internal revenue district where the
applicant is required to file returns under this subpart, except that
hand-carried applications may be filed with the district director of any
such district as provided for in 26 CFR Sec. 301.6091-1. The
application shall be signed by:
(a) The individual if the person is an individual;
(b) The president, vice president, or other principal officer if the
person is a corporation;
(c) A responsible and duly authorized member or officer having
knowledge of its affairs if the person is a partnership or other
unincorporated organization; or
(d) The fiduciary if the person is a trust or estate.
(75 Stat. 828; 26 U.S.C. 6109)
Special (Occupational) Taxes
Sec. 40.371 Liability for special tax.
(a) Manufacturer of cigarette papers and tubes. Every manufacturer
of cigarette papers and tubes shall pay a special (occupational) tax at
a rate specified by Sec. 40.372 of this part. The tax shall be paid on
or before July 1. On commencing business, the tax shall be computed from
the first day of the month in which liability is incurred, through the
following June 30. Thereafter, the tax shall be computed for the entire
year (July 1 through June 30).
(b) Each place of business taxable. A manufacturer of cigarette
papers and tubes incurs special tax liability at each place of business
in which an occupation subject to special tax is conducted. A place of
business means the entire office, plant or area of the business in any
one location under the same proprietorship. Passageways, streets,
highways, rail crossings, waterways, or partitions dividing the premises
are not sufficient separation to require additional special tax, if the
divisions of the premises are otherwise contiguous.
(c) Payment of tax. Special tax must be paid by return. The
prescribed return is TTB Form 5630.5t, Special Tax Registration and
Return--Tobacco. Special tax returns, with payment of tax, must be filed
with TTB in accordance with the instructions on the form and the
requirements of subpart D of part 46 of this chapter.
(26 U.S.C. 5731, 5733)
[T.D. ATF-384, 61 FR 54085, Oct. 17, 1996, as amended by T.D. TTB-79, 74
FR 37419, July 28, 2009]
[[Page 49]]
Sec. 40.372 Rate of special tax.
(a) General. Title 26 U.S.C. 5731(a)(2) imposes a special tax of
$1,000 per year on every manufacturer of cigarette papers and tubes.
(b) Reduced rate for small proprietors. Title 26 U.S.C. 5731(b)
provides for a reduced rate of $500 per year with respect to any
manufacturer of cigarette papers and tubes whose gross receipts (for the
most recent taxable year ending before the first day of the taxable
period to which the special tax imposed by Sec. 40.371 relates) are
less than $500,000. The ``taxable year'' to be used for determining
gross receipts is the taxpayer's income tax year. All gross receipts of
the taxpayer shall be included, not just the gross receipts of the
business subject to special tax. Proprietors of new businesses that have
not yet begun a taxable year, as well as proprietors of existing
businesses that have not yet ended a taxable year, who commence a new
activity subject to special tax, qualify for the reduced special
(occupational) tax rate, unless the business is a member of a
``controlled group''; in that case the rules of paragraph (c) of this
section shall apply.
(c) Controlled group. All persons treated as one taxpayer under 26
U.S.C. 5061(e)(3) shall be treated as one taxpayer for the purpose of
determining gross receipts under paragraph (b) of this section.
``Controlled group'' means a controlled group of corporations, as
defined in 26 U.S.C. 1563 and implementing regulations in 26 CFR 1.1563-
1 through 1.1563-4. Also, the rules for a ``controlled group of
corporations'' apply in a similar fashion to groups which include
partnerships and/or sole proprietorships. If one entity maintains more
than 50% control over a group consisting of corporations and one, or
more, partnerships and/or sole proprietorships, all of the members of
the controlled group are one taxpayer for the purpose of this section.
(d) Short taxable year. Gross receipts for any taxable year of less
than 12 months shall be annualized by multiplying the gross receipts for
the short period by 12 and dividing the result by the number of months
in the short period as required by 26 U.S.C. 448(c)(3).
(e) Returns and allowances. Gross receipts for any taxable year
shall be reduced by returns and allowances made during such year under
26 U.S.C. 448(c)(3).
(26 U.S.C. 448, 5061, 5731)
Sec. 40.373 Cross reference.
For additional rules pertaining to liability for special tax, filing
special tax returns, issuance and examination of special tax stamps, and
notification of changes to special tax stamps, see subpart D of part 46
of this chapter.
[T.D. TTB-79, 74 FR 37419, July 28, 2009]
Sec. Sec. 40.374-40.375 [Reserved]
General
Sec. 40.382 Authority of TTB officers to enter premises.
The appropriate TTB officer may enter in the daytime any premises
where cigarette papers and tubes are produced or kept, so far as it may
be necessary for the purpose of examining such articles. When such
premises are open at night, the appropriate TTB officer may enter them,
while so open, in the performance of his or her official duties. The
owner of such premises, or person having the superintendence of the
same, who refuses to admit the appropriate TTB officer or permit the
appropriate TTB officer to examine such cigarette papers and tubes shall
be liable to the penalties prescribed by law for the offense.
(68A Stat. 872; 903 26 U.S.C. 7342, 7606)
Sec. 40.383 Interference with administration.
Whoever, corruptly or by force or threats of force, endeavors to
hinder or obstruct the administration of this subpart, or endeavors to
intimidate or impede any TTB officer acting in an official capacity, or
forcibly rescues or attempts to rescue or causes to be rescued any
property, after it has been duly seized for forfeiture to the United
States in connection with a violation or intended violation of this
subpart, shall be liable to the penalties prescribed by law.
(68A Stat. 855; 26 U.S.C. 7212)
[[Page 50]]
Sec. 40.384 Disposal of forfeited, condemned, and abandoned cigarette papers
and tubes.
Forfeited, condemned, or abandoned cigarette papers or tubes in the
custody of a Federal, State, or local officer upon which the Federal tax
has not been paid shall not be sold or caused to be sold for consumption
in the United States if, in the opinion of the officer, the sale of such
papers and tubes will not bring a price equal to the tax due and
payable, and the expenses incident to the sale. Where the cigarette
papers or tubes are not sold the officer may deliver them to a Federal
or State institution (if they are fit for consumption) or cause their
destruction by burning completely or by rendering them unfit for
consumption. Where such papers or tubes are sold, release by the officer
having custody shall be made only after such papers and tubes are
properly packaged and taxpaid. A receipt from the appropriate TTB
officer evidencing payment of tax on such papers or tubes shall be
presented to the officer having custody of the articles, which tax shall
be considered part of the sales price. Where cigarette papers or tubes
which have been packaged under the provisions of part 45 of this chapter
are to be released after payment of tax, the purchaser shall
appropriately mark each package ``Federal Tax Paid (date)'' before the
officer having custody of the papers or tubes releases them. However,
the articles may be released without such marking of the packages if the
purchaser is a qualified manufacturer of cigarette papers and tubes and
does not intend to place such papers or tubes on the domestic market for
taxable articles but will otherwise dispose of them. A written statement
of notification of disposal by destruction or return to bond through
claim for refund, shall be filed, in original only, with the officer
having custody of the articles. In the case of cigarette papers and
tubes forfeited under the internal revenue laws, the sale shall be
subject to the provisions of part 72 of this chapter.
(68A Stat. 870, as amended, 72 Stat. 1425, as amended; 26 U.S.C. 7325,
5753)
[26 FR 8174, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975,
and further redesignated at 54 FR 48839, Nov. 27, 1989, and further
redesignated by T.D. ATF-460, 66 FR 39093, July 27, 2001, as amended by
T.D. ATF-469, 66 FR 56758, Nov. 13, 2001]
Sec. 40.385 Alternate methods or procedures.
A manufacturer of cigarette papers and tubes, on specific approval
by the appropriate TTB officer as provided in this section, may use an
alternate method or procedure in lieu of a method or procedure
specifically prescribed in this subpart. The appropriate TTB officer may
approve an alternate method or procedure, subject to stated conditions,
when the appropriate TTB officer finds that--
(a) Good cause has been shown for the use of the alternate method or
procedure,
(b) The alternate method or procedure is within the purpose of, and
consistent with the effect intended by, the specifically prescribed
method or procedure, and affords equivalent security to the revenue, and
(c) The alternate method or procedure will not be contrary to any
provision of law, and will not result in an increase in cost to the
Government or hinder the effective administration of this subpart.
No alternate method or procedure relating to the giving of any bond
or to the assessment, payment, or collection of tax, shall be authorized
under this section. A manufacturer who desires to employ an alternate
method or procedure shall submit a written application, in triplicate,
to the appropriate TTB officer. The application shall specifically
describe the proposed alternate method or procedure, and shall set forth
the reasons therefor. Alternate methods or procedures shall not be
employed until the application has been approved by the appropriate TTB
officer. The manufacturer shall, during the period of authorization of
an alternate method or procedure, comply with the terms of the approved
application. Authorization for any alternate method
[[Page 51]]
or procedure may be withdrawn whenever, in the judgment of the
appropriate TTB officer, the revenue is jeopardized or the effective
administration of this part is hindered. Any authorization of the
appropriate TTB officer under this section shall be retained as part of
the manufacturer's record in accordance with this subpart.
Sec. 40.386 Emergency variations from requirements.
The appropriate TTB officer may approve methods of operation other
than as specified in this subpart, where it is determined that an
emergency exists and the proposed variations from the specified
requirements are necessary, and the proposed variations--
(a) Will afford the security and protection to the revenue intended
by the prescribed specifications;
(b) Will not hinder the effective administration of this subpart;
and
(c) Will not be contrary to any provision of law. Variations from
requirements granted under this section are conditioned on compliance
with the procedures, conditions, and limitations set forth in the
approval of the application. Failure to comply in good faith with such
procedures, conditions and limitations shall automatically terminate the
authority for such variations and the manufacturer thereupon shall fully
comply with the prescribed requirements of regulations from which the
variations were authorized. Authority for any variation may be withdrawn
whenever in the judgment of the appropriate TTB officer the revenue is
jeopardized or the effective administration of this subpart is hindered
by the continuation of such variation. Where a manufacturer desires to
employ such variation, the manufacturer shall submit a written
application to do so (in triplicate) to the appropriate TTB officer. The
application shall describe the proposed variations and set forth the
reasons therefor. Variations shall not be employed until the application
has been approved. In accordance with this subpart, any authorization of
the appropriate TTB officer under this section shall be retained as part
of the manufacturer's records.
Sec. 40.387 Penalties and forfeitures.
Anyone who fails to comply with the provisions of this subpart
becomes liable to the civil and criminal penalties, and forfeitures,
provided by law.
(72 Stat. 1425, 1426; 26 U.S.C. 5761, 5762, 5763)
Qualification Requirements for Manufacturers
Original Qualifications
Sec. 40.391 Persons required to qualify.
Every person who manufactures cigarette paper, or makes up cigarette
paper into tubes, except for his own personal use or consumption, must
first qualify as a manufacturer of cigarette papers and tubes in
accordance with the provisions of this subpart.
[ATF-467, 66 FR 49532, Sept. 28, 2001]
Sec. 40.392 Bond.
Every person, before commencing business as a manufacturer of
cigarette papers and tubes, shall file a bond on TTB F 5200.25 or
5200.26. Such bond shall be filed in accordance with the applicable
provisions of Sec. Sec. 40.401 through 40.410 and conditioned upon
compliance with the provisions of 26 U.S.C. Chapter 52, and regulations
thereunder, including, but not limited to, the timely payment of taxes
imposed by such chapter and penalties and interest in connection
therewith for which the manufacturer may become liable to the United
States.
(72 Stat. 1421; 26 U.S.C. 5711)
[T.D. ATF-384, 61 FR 54085, Oct. 17, 1996, as amended by T.D. TTB-91, 76
FR 5480, Feb. 1, 2011]
Sec. 40.393 Power of attorney.
If the bond or any other document required under this part is signed
by an attorney in fact for an individual, partnership, association,
company, or corporation, by one of the partners for a partnership, or by
one of the members of an association, a power of attorney on TTB F
5000.8 shall be furnished to the appropriate TTB officer. If such bond
or other document is signed on behalf of a corporation by an officer
thereof, it must be supported by duly
[[Page 52]]
authenticated extracts of the stockholders' meeting, by-laws, or
directors' meeting authorizing such officer to execute such document for
the corporation. TTB F 5000.8 or support of authority does not have to
be filed again with a appropriate TTB officer where such form or support
has previously been submitted to that appropriate TTB officer and is
still in effect.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.394 Notice of approval of bond.
If the bond required under this subpart is approved by the
appropriate TTB officer, a number will be assigned to the factory of the
manufacturer of cigarette papers and tubes for internal revenue
purposes. The appropriate TTB officer will immediately notify the
manufacturer, in writing, of the bond approval, in order that the
manufacturer may commence operations.
(72 Stat. 1421; 26 U.S.C. 5711)
Changes after Original Qualifications
Sec. 40.395 Change in name.
Where there is a change in the individual, trade, or corporate name
of a manufacturer of cigarette papers and tubes, the manufacturer shall,
within 30 days of the change, furnish the appropriate TTB officer a
written notice of such change.
(72 Stat. 1422; 26 U.S.C. 5722)
Sec. 40.396 Change in proprietorship.
Where there is to be any change in proprietorship (including a
change in the identity of the members of a partnership or association,
but excluding any change in stock ownership in a corporation) of the
business of a manufacturer of cigarette papers and tubes, the proposed
successor shall, before commencing operations, qualify as a manufacturer
of cigarette papers and tubes, in accordance with this part. If such
manufacturer promptly files the required documentation with the
appropriate TTB officer, an administrator, executor, receiver, trustee,
assignee, or other fiduciary successor may liquidate the business
without qualifying as a manufacturer. The manufacturer must promptly
file with the appropriate TTB officer a statement of the intent to
liquidate and furnish a certified copy of the order of the court, or
other pertinent documents. These documents must show the appointment and
qualification of any administrator, executor, receiver, trustee,
assignee, or other fiduciary, together with an extension of coverage of
the predecessor's bond executed by the administrator, executor,
receiver, trustee, assignee, or other fiduciary and the surety, in
accordance with the provisions of Sec. 40.407. The predecessor shall
make a closing inventory and closing report in accordance with the
provisions of Sec. Sec. 40.434 and 40.426, respectively, and the
successor shall make an opening inventory and opening report, in
accordance with the provision of Sec. Sec. 40.432 and 40.423,
respectively.
(72 Stat. 1421, 1422; 26 U.S.C. 5711, 5721, and 5722)
Sec. 40.397 Change in location.
Whenever a manufacturer of cigarette papers and tubes contemplates a
change in location of a factory within the same region, the manufacturer
shall, before commencing operations at the new location, file an
extension of coverage of bond in accordance with the provisions of Sec.
40.407. Whenever a manufacturer of cigarette papers and tubes
contemplates changing the location of a factory to another region, the
manufacturer shall, before commencing operations at the new location,
qualify as a manufacturer in the new region, in accordance with the
applicable provisions of this subpart, and make a closing inventory and
closing report, in accordance with the provisions of Sec. Sec. 40.434
and 40.426, respectively.
(72 Stat. 1421, 1422; 26 U.S.C. 5711, 5721, and 5722)
Bonds and Extensions of Coverage of Bonds
Sec. 40.401 Corporate surety.
(a) Surety bonds required by this subpart may be given only with
corporate sureties holding certificates of authority from, and subject
to any limitations prescribed by the Secretary of the Treasury as set
forth in the current
[[Page 53]]
revision of Treasury Department Circular No. 570 (Companies Holding
Certificates of Authority as Acceptable Sureties on Federal Bonds and as
Acceptable Reinsuring Companies). The surety shall have no interest
whatever in the business covered by the bond.
(b) Each bond and each extension of coverage of bond shall at the
time of filing be accompanied by a power of attorney authorizing the
agent or officer who executed the bond to so act on behalf of the
surety. The appropriate TTB officer who is authorized to approve the
bond may, whenever deemed necessary, require additional evidence of the
authority of the agent or officer to execute the bond or extension of
coverage of bond. The power of attorney shall be prepared on a form
provided by the surety company and executed under the corporate seal of
the company. If the power of attorney submitted is other than a manually
signed document, it shall be accompanied by a certificate of its
validity.
(c) Treasury Department Circular No. 570 is published in the Federal
Register annually as of the first workday in July. As they occur,
interim revisions of the circular are published in the Federal Register.
Copies may be obtained from the Surety Bond Branch, Financial Management
Service, Department of the Treasury, Washington, D.C. 20220.
(July 30, 1947, ch. 390, 61 Stat. 648, as amended (31 U.S.C. 9304,
9306); sec. 202. Pub. L. 85-859, 72 Stat. 1421, as amended (26 U.S.C.
5711))
Sec. 40.402 Two or more corporate sureties.
A bond executed by two or more corporate sureties shall be the joint
and several liability of the principal and the sureties. However, each
corporate surety may limit its liability in terms upon the face of the
bond in a definite, specific amount, which amount shall not exceed the
limitations prescribed for such corporate surety by the Secretary, as
set forth in the current revision of Treasury Department Circular 570
(Companies Holding Certificates of Authority as Acceptable Sureties on
Federal Bonds and as Acceptable Reinsuring Companies). (See Sec.
40.401(c)) When the sureties so limit their liability, the aggregate of
such limited liabilities must equal the required amount of the bond.
(July 30, 1947, ch. 390, 61 Stat. 648, as amended (31 U.S.C. 9304,
9306); sec. 202. Pub. L. 85-859, 72 Stat. 1421, as amended (26 U.S.C.
5711))
Sec. 40.403 Deposit of securities in lieu of corporate surety.
In lieu of corporate surety, the manufacturer of cigarette papers
and tubes may pledge and deposit, as security for the bond, securities
which are transferable and are guaranteed as to both interest and
principal by the United States, in accordance with the provisions of 31
CFR Part 225--Acceptance of Bonds, Notes or Other Obligations Issued or
Guaranteed by the United States as Security in Lieu of Surety or
Sureties on Penal Bonds.
(61 Stat. 650, 72 Stat. 1421, 31 U.S.C. 9301, 9303, 26 U.S.C. 5711, 5
U.S.C. 552(a) (80 Stat. 383, as amended))
Sec. 40.404 Amount of bond.
The amount of the bond of a manufacturer of cigarette papers and
tubes shall be not less than the maximum amount of the tax liability on
the cigarette papers and tubes manufactured in the factory, received
without payment of tax from other factories, and released without
payment of tax from customs custody as provided in Sec. 40.452, during
any month. In the case of a manufacturer commencing business, the
production, receipts from other factories, and releases from customs
custody, without payment of tax, shall be estimated for the purpose of
this section. The amount of any such bond (or the total amount where
strengthening bonds are filed) shall not exceed $20,000, nor be less
than $1,000.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.405 Strengthening bond.
Where the appropriate TTB officer determines that the amount of the
bond, under which a manufacturer of cigarette papers and tubes is
currently carrying on such business, no longer adequately protects the
revenue, the appropriate TTB officer may require the manufacturer to
file a strengthening bond in an appropriate amount with the same surety
as that on the
[[Page 54]]
bond already in effect, in lieu of a superseding bond to cover the full
liability on the basis of Sec. 40.404. The appropriate TTB officer
shall refuse to approve any strengthening bond where any notation is
made thereon which is intended or which may be construed as a release of
any former bond, or as limiting the amount of either bond to less than
its full amount.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.406 Superseding bond.
A manufacturer of cigarette papers and tubes shall file a new bond
to supersede the current bond immediately when:
(a) The corporate surety on the current bond becomes insolvent,
(b) The appropriate TTB officer approves a request from the surety
of the current bond to terminate liability under the bond,
(c) Payment of any liability under a bond is made by the surety
thereon, or
(d) The appropriate TTB officer considers such a superseding bond
necessary for the protection of the revenue.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.407 Extension of coverage of bond.
An extension of the coverage of bond filed under this subpart shall
be manifested on TTB F 5000.18, Extension of Coverage of Bond, by the
manufacturer of cigarette papers and tubes and by the surety on the bond
with the same formality and proof of authority as required for the
execution of the bond.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.408 Approval of bond and extension of coverage of bond.
No person shall commence operations under any bond, nor extend
operations, until such person receives from the appropriate TTB officer
notice of approval of the bond or an appropriate extension of coverage
of the bond required under this subpart. Upon receipt of an approved
bond or extension of coverage of bond from the appropriate TTB officer,
such bond or extension of coverage of bond shall be retained by the
manufacturer of cigarette papers and tubes in factory and shall be made
available for inspection by any TTB officer upon request.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.409 Termination of liability of surety under bond.
The liability of a surety on any bond required by this subpart shall
be terminated only as to operations on and after the effective date of a
superseding bond, or the date of approval of the discontinuance of
operations by the manufacturer of cigarette papers and tubes, or
otherwise in accordance with the termination provisions of the bond. The
surety shall remain bound in respect of any liability for unpaid taxes,
penalties and interest, not in excess of the amount of the bond,
incurred by the manufacturer while the bond is in force.
(72 Stat. 1421; 26 U.S.C. 5711)
Sec. 40.410 Release of pledged securities.
Securities of the United States pledged and deposited as provided in
Sec. 40.403 shall be released only in accordance with the provisions of
31 CFR part 225. Such securities will not be released by the appropriate
TTB officer until liability under the bond for which they were pledged
has been terminated. When the appropriate TTB officer is satisfied that
they may be released, the appropriate TTB officer shall fix the date or
dates on which a part or all of such securities may be released. At any
time prior to the release of such securities, the appropriate TTB
officer may extend the date of release for such additional length of
time as is deemed necessary.
(61 Stat. 650, 72 Stat. 1421; 31 U.S.C. 9301, 9303; 26 U.S.C. 5711)
Operations By Manufacturers
Records
Sec. 40.421 General.
(a) Every manufacturer of cigarette papers and tubes must keep
records of daily operations and transactions. Records maintained must
reflect the date and number of cigarette papers and the date and number
of cigarette tubes:
(1) Manufactured;
[[Page 55]]
(2) Received, without payment of tax from another factory, an export
warehouse, customs custody, or by withdrawal from the market;
(3) Removed, subject to tax;
(4) Removed, without payment of tax, for export purposes, use of the
United States or transfer in bond pursuant to Sec. 40.451; or
(5) Lost or destroyed.
(b) The entries for each day in the records maintained or kept under
this subpart must be made by the close of the business day following
that on which the operations or transactions occur. No particular form
of records is prescribed, but the information required must be readily
ascertainable from the records kept.
(c) Records maintained under this section prior to January 1, 2000,
must reflect the date and number of books or sets of cigarette papers of
each different numerical content and the date and number of cigarette
tubes.
(26 U.S.C. 5741.)
[T.D. ATF-240, 64 FR 71941, Dec. 22, 1999]
Reports
Sec. 40.422 General.
Every manufacturer of cigarette papers and tubes must prepare a
report on TTB Form 5230.3 in accordance with instructions for the form.
The report must be prepared at the times specified in this subpart and
must be prepared whether or not any operations or transactions occurred
during the period covered by the report. The manufacturer must retain a
copy of each report in accordance with the provisions of this subpart.
(a) Reports for periods on or after January 1, 2000. Reports
submitted must reflect the total number of cigarette papers and
cigarette tubes manufactured, received and lost or destroyed.
(b) Reports for periods prior to January 1, 2000. Reports submitted
must reflect the number of books or sets of cigarette papers of each
different numerical content and the number of cigarette tubes
manufactured, received, removed and lost or destroyed.
(26 U.S.C. 5722)
[T.D. ATF-240, 64 FR 71942, Dec. 22, 1999]
Sec. 40.423 Opening.
An opening report, covering the period from the date of the opening
inventory to the end of the month, shall be made on or before the 10th
day following the end of the month in which the business was commenced.
(72 Stat. 1422; 26 U.S.C. 5722)
Sec. 40.424 Monthly.
A report for each calendar month shall be made on or before the 20th
day of the next succeeding month.
(72 Stat. 1422; 26 U.S.C. 5722)
Sec. 40.425 Special.
A special report, covering the unreported period to the day
preceding the date of any special inventory required by an appropriate
TTB officer, shall be made with such inventory. Another report, covering
the period from the date of the special inventory to the end of the
month, shall be made on or before the 14th day following the end of the
month in which the inventory was made.
(72 Stat. 1422; 26 U.S.C. 5722)
Sec. 40.426 Closing.
A closing report, covering the period from the first of the month to
the date of the closing inventory, shall be made with such inventory.
(72 Stat. 1422; 26 U.S.C. 5722)
Inventories
Sec. 40.431 General.
Every manufacturer of cigarette papers and tubes must provide a true
and accurate inventory on TTB Form 5230.2 in accordance with
instructions for the form. Such inventory is subject to verification by
the appropriate TTB officer. The manufacturer must retain a copy of each
inventory completed on TTB Form 5230.2 in accordance with this subpart.
(a) Reports of inventory for periods on or after January 1, 2000.
Reports of inventory submitted must reflect the total number of
cigarette papers and cigarette tubes held at the times specified in the
subpart.
[[Page 56]]
(b) Reports of inventory for periods prior to January 1, 2000.
Reports of inventory submitted must reflect the number of books or sets
of cigarette papers of each different numerical content and the number
of cigarette tubes held at the times specified in this subpart.
(26 U.S.C. 5721)
[T.D. ATF-240, 64 FR 71942, Dec. 22, 1999]
Sec. 40.432 Opening.
An opening inventory shall be made by the manufacturer of cigarette
papers and tubes at the time of first commencing business.
(72 Stat. 1422; 26 U.S.C. 5721)
Sec. 40.433 Special.
A special inventory shall be made by the manufacturer of cigarette
papers and tubes when required by the appropriate TTB officer.
(72 Stat. 1422; 26 U.S.C. 5721)
Sec. 40.434 Closing.
A closing inventory shall be made by the manufacturer of cigarette
papers and tubes when a change in proprietorship occurs, or when the
manufacturer changes location of the factory to another region, or
concludes business. Where a change in proprietorship occurs, the closing
inventory shall be made as of the day preceding the date of the opening
inventory of the successor.
(72 Stat. 1422; 26 U.S.C. 5721)
Document Retention
Sec. 40.435 General.
All records and reports required to be kept or maintained under this
subpart, including copies of authorizations, inventories, reports,
returns, and claims filed with verified supporting schedules, shall be
retained by the manufacturer for three years following the close of the
calendar year in which filed or made, or in the case of an
authorization, for three years following the close of the calendar year
in which the operation under such authorization is concluded. Such
records shall be made available for inspection by the appropriate TTB
officer upon request.
(72 Stat. 1423; 26 U.S.C. 5741)
Packages
Sec. 40.441 General.
All cigarette papers and tubes shall, before removal subject to tax,
be put up by the manufacturer in packages which shall be of such
construction as will securely contain the papers or tubes therein. No
package of cigarette papers or tubes shall have contained therein,
attached thereto, or stamped, marked, written, or printed thereon:
(a) Any certificate, coupon, or other device purporting to be or to
represent a ticket, chance, share, or an interest in, or dependent on,
the event of a lottery,
(b) Any indecent or immoral picture, print, or representation, or
(c) Any statement or indication that United States tax has been
paid.
(72 Stat. 1422; 26 U.S.C. 5723)
Miscellaneous Operations
Sec. 40.451 Transfer in bond.
A manufacturer of cigarette papers and tubes may transfer such
papers and tubes, under bond, without payment of tax, to the bonded
premises of any manufacturer of cigarette papers and tubes, or to the
bonded premises of a manufacturer of tobacco products solely for use in
the manufacture of cigarettes. The transfer of cigarette papers and
tubes, without payment of tax, to the bonded premises of an export
warehouse proprietor shall be in accordance with the provisions of part
44 of this chapter.
(72 Stat. 1418, as amended; 26 U.S.C. 5704)
Sec. 40.452 Release from customs custody.
Cigarette papers and tubes which were made in the United States,
exported, and subsequently returned to the United States, may be removed
from customs custody for transfer to the premises of a manufacturer
without payment of the internal revenue
[[Page 57]]
tax, upon compliance with part 41 of this chapter.
(72 Stat. 1418; 26 U.S.C. 5704)
[T.D. ATF-384, 61 FR 54085, Oct. 17, 1996, as amended by T.D. TTB-16, 69
FR 52423, Aug. 26, 2004]
Sec. 40.453 Use of the United States.
A manufacturer of cigarette papers and tubes may remove cigarette
papers and tubes covered under bond, without payment of tax, for use of
the United States. Such removal shall be in accordance with the
provisions of part 45 of this chapter.
(72 Stat. 1418; 26 U.S.C. 5704)
[26 FR 8174, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975,
and further redesignated at 54 FR 48839, Nov. 27, 1989, and further
redesignated by T.D. ATF-460, 66 FR 39093, July 27, 2001, as amended by
T.D. ATF-469, 66 FR 56758, Nov. 13, 2001]
Sec. 40.454 Removal for export purposes.
The removal of cigarette papers and tubes, without payment of tax,
for shipment to a foreign country, Puerto Rico, the Virgin Islands, or a
possession of the United States, or for consumption beyond the
jurisdiction of the internal revenue laws of the United States, shall be
in accordance with the provisions of part 44 of this chapter.
(72 Stat. 1418; 26 U.S.C. 5704)
Permanent Discontinuance of Business
Sec. 40.461 Discontinuance of operations.
Every manufacturer of cigarette papers and tubes who desires to
discontinue operations and close out a factory shall dispose of all
cigarette papers and tubes on hand, in accordance with this subpart, and
make a closing inventory and closing report, in accordance with the
provisions of Sec. Sec. 40.434 and 40.426, respectively.
(72 Stat. 1422; 26 U.S.C. 5721, 5722)
Claims By Manufacturers
General
Sec. 40.471 Abatement.
A claim for abatement of the unpaid portion of the assessment of any
tax on cigarette papers and tubes, or any liability in respect thereof,
may be allowed to the extent that such assessment is excessive in
amount, is assessed after the expiration of the applicable period of
limitation, or is erroneously or illegally assessed. Any claim under
this section shall be prepared on TTB F 5620.8, in duplicate, and shall
set forth the particulars under which the claim is filed. The original
of the claim, accompanied by such evidence as is necessary to establish
to the satisfaction of the appropriate TTB officer that the claim is
valid, shall be filed with the appropriate TTB officer.
(68A Stat. 792, 6404)
Sec. 40.472 Allowance.
Relief from the payment of tax on cigarette papers and tubes may be
extended to a manufacturer by allowance of the tax where the cigarette
papers and tubes, after removal from the factory upon determination of
tax and prior to the payment of such tax, are lost (otherwise than by
theft) or destroyed by fire, casualty, or act of God, while in the
possession or ownership of the manufacturer who removed such articles,
or are withdrawn by the manufacturer from the market. Any claim for
allowance under this section shall be filed on TTB F 5620.8 with the
appropriate TTB officer, shall be executed under penalties and perjury
and shall show the date the cigarette papers and tubes were removed from
the factory. A claim relating to articles lost or destroyed shall be
supported as prescribed in Sec. 40.475. In the case of a claim relating
to cigarette papers or tubes withdrawn from the market the schedule
prescribed in Sec. 40.476 shall be filed with the appropriate TTB
officer. The manufacturer may not anticipate allowance of a claim by
making the adjusting entry in a tax return pending consideration and
action on the claim. Cigarette papers and tubes to which such a claim
relates must be shown as removed on determination of tax in the return
covering the period during which such articles were so removed. Upon
action on the claim by the appropriate TTB officer a copy of TTB F
5620.8 will be returned to the manufacturer as notice of such action.
This copy of TTB F 5620.8, with the copy of any verified supporting
schedules, shall
[[Page 58]]
be retained by the manufacturer. When such notification of allowance of
the claim or any part thereof is received prior to the time the return
covering the tax on the cigarette papers or tubes to which the claim
relates is to be filed, the manufacturer may make an adjusting entry and
explanatory statement in that tax return. Where the notice of allowance
is received after the filing of the return and taxpayment of the
cigarette papers or tubes to which the claim relates, the manufacturer
may make an adjusting entry and explanatory statement in the next tax
return(s) to the extent necessary to take credit in the amount of the
allowance.
(72 Stat. 1419, as amended, 26 U.S.C. 5705)
Sec. 40.473 Credit or refund.
The taxes paid on cigarette papers and tubes may be credited or
refunded (without interest) to a manufacturer on proof satisfactory to
the appropriate TTB officer that the claimant manufacturer paid the tax
on cigarette papers and tubes lost (otherwise than by theft) or
destroyed, by fire, casualty, or act of God, while in the possession or
ownership of such manufacturer, or withdrawn by the manufacturer from
the market. Any claim for credit or refund under this section shall be
prepared on TTB F 5620.8, in duplicate. Claims shall include a statement
that the tax imposed on cigarette papers and tubes by 26 U.S.C. 7652 or
Chapter 52, was paid in respect to the cigarette papers or tubes covered
by the claim, and that the articles were lost, destroyed, or withdrawn
from the market within 6 months preceding the date the claim is filed. A
claim for credit or refund relating to articles lost or destroyed shall
be supported as prescribed in Sec. 40.475, and a claim relating to
articles withdrawn from the market shall be accompanied by a schedule
prepared and verified as prescribed in Sec. Sec. 40.476, and 40.477.
The original and one copy of TTB F 5620.8, shall be filed with the
appropriate TTB officer. Upon action by the appropriate TTB officer on a
claim for credit, a copy of TTB F 5620.8 will be returned to the
manufacturer as notification of allowance or disallowance of the claim
or any part thereof. This copy, with the copy of any verified supporting
schedules, shall be retained by the manufacturer. When the manufacturer
is notified of allowance of the claim for credit or any part thereof,
the manufacturer shall make an adjusting entry and explanatory statement
in the next tax return(s) to the extent necessary to take credit in the
amount of the allowance. The manufacturer may not anticipate allowance
of a claim by taking credit on a tax return prior to consideration and
action on such claim. The duplicate of a claim for refund or credit,
with a copy of any verified supporting schedules, shall be retained by
the manufacturer.
(72 Stat. 1419, as amended, 26 U.S.C. 5705)
Sec. 40.474 Remission.
Remission of the tax liability on cigarette papers and tubes may be
extended to the manufacturer liable for the tax where cigarette papers
and tubes in bond are lost (other than by theft) or destroyed, by fire,
casualty, or act of God, while in the possession or ownership of such
manufacturer. Where cigarette papers and tubes are so lost or destroyed
the manufacturer shall report promptly such fact, and the circumstances,
to the appropriate TTB officer. If the manufacturer wishes to be
relieved of the tax liability, a claim on TTB F 5620.8, in duplicate,
shall also be prepared, setting forth the nature, date, place, and
extent of the loss or destruction. The original and one copy of the
claim, accompanied by such evidence as is necessary to establish to the
satisfaction of the appropriate TTB officer that the claim is valid,
shall be filed with the appropriate TTB officer. Upon action on the
claim by the appropriate TTB officer, the copy of TTB F 5620.8 will be
returned to the manufacturer as notice of such action, which copy shall
be retained by the manufacturer.
(72 Stat. 1419, as amended, 26 U.S.C. 5707)
Lost or Destroyed
Sec. 40.475 Action by claimant.
Where cigarette papers and tubes are lost (other than by theft) or
destroyed, by fire, casualty, or act of God, and the manufacturer
desires to file claim under the provisions of Sec. 40.472 or
[[Page 59]]
Sec. 40.473, the manufacturer shall indicate on the claim the nature,
date, and extent of such loss or destruction. The claim shall be
accompanied by such evidence as necessary to establish to the
satisfaction of the appropriate TTB officer that the claim is valid.
(72 Stat. 1419; 26 U.S.C. 5705)
Withdrawn From the Market.
Sec. 40.476 Action by claimant.
Where cigarette papers and tubes are withdrawn from the market and
the manufacturer desires to file claim under the provisions of Sec.
40.472 or Sec. 40.473, the manufacturer shall assemble the articles in
or adjacent to a factory if they are to be retained in or received into
such factory, or at any suitable place if they are to be destroyed. The
manufacturer shall group the articles according to the rate of tax
applicable thereto, and shall prepare and submit a schedule of the
articles, on TTB Form 5200.7 in accordance with the instructions, on the
form. All copies of the schedule shall be forwarded to the appropriate
TTB officer.
(72 Stat. 1419; 26 U.S.C. 5705)
[T.D. ATF-384, 61 FR 54085, Oct. 17, 1996, as amended by T.D. ATF-424,
64 FR 71932, Dec. 22, 1999]
Sec. 40.477 Action by the appropriate TTB officer.
Upon receipt of a schedule of cigarette papers and tubes withdrawn
from the market, the appropriate TTB officer may assign a TTB officer to
verify the schedule and supervise disposition of the cigarette papers
and tubes, or may authorize the manufacturer to dispose of the articles
without supervision by so stating on the original and one copy of the
schedule returned to the manufacturer.
(72 Stat. 1419; 26 U.S.C. 5705)
Sec. 40.478 Disposition of cigarette papers and tubes and schedule.
When so authorized, as evidenced by the appropriate TTB officer's
statement on the schedule, the manufacturer shall dispose of the
cigarette papers and tubes as specified in the schedule. After the
articles are disposed of, the manufacturer shall execute a certificate
on both copies of the schedule received from the appropriate TTB
officer, to show the disposition and the date of disposition of the
articles. In connection with a claim for credit or refund, the
manufacturer shall attach the original of the schedule to the claim for
credit or refund, TTB F 5620.8, filed under Sec. 40.473. When an
appropriate TTB officer is assigned to verify the schedule and supervise
disposition of the cigarette papers and tubes, such officer shall, upon
completion of the assignment, execute a certificate on all copies of the
schedule to show the disposition and the date of disposition of the
articles. In connection with a claim for allowance, the officer shall
return one copy of the schedule to the manufacturer for the record, and
in connection with a claim for credit or refund, the officer shall
return the original and one copy of the schedule to the manufacturer,
the original of which the manufacturer shall attach to the claim filed
under Sec. 40.473.
(72 Stat. 1419, as amended; 26 U.S.C. 26 U.S.C. 5705)
Subpart L_Manufacture of Processed Tobacco
Effective Date Note: By T.D. TTB-78, at 74 FR 29410, June 22, 2009,
subpart L was added, effective June 22, 2009 through June 22, 2012.
Qualification Requirements for Manufacturers of Processed Tobacco
Sec. 40.491 Persons required to qualify.
(a) General. Except as otherwise provided in paragraph (b) of this
section, every person who engages in the processing of tobacco must
first qualify for and receive a permit as a manufacturer of processed
tobacco in accordance with the provisions of this subpart.
(b) Exceptions. (1) A person who engages in the processing of
tobacco solely for his own personal use or consumption and not for sale
or transfer to another person is not engaged in the manufacture of
processed tobacco for purposes of this part and, accordingly, is not
required to qualify as a manufacturer of processed tobacco.
[[Page 60]]
(2) Any person who holds a TTB permit for the manufacture of tobacco
products is thereby authorized to process tobacco solely for use in the
manufacture of tobacco products under that permit, so long as the
processed tobacco is not removed from the factory for any purpose other
than destruction. Such a manufacturer is not required to qualify under
this subpart as a manufacturer of processed tobacco.
(3) Any person who holds a TTB permit for the manufacture of tobacco
products who removes processed tobacco from the factory for any purpose
other than destruction must apply for authorization from TTB to engage
in that activity, in accordance with Sec. 40.47, under the
manufacturer's existing permit.
Sec. 40.492 Application for permit.
The application for a permit as a manufacturer of processed tobacco
must be made on TTB F 5200.3, according to the instructions on the form.
All documents required under this subpart to be furnished with the
application must be included with the application.
Sec. 40.493 Transitional rule.
(a) Any person who:
(1) On April 1, 2009, is engaged in business as a manufacturer of
processed tobacco; and
(2) On or before June 30, 2009, submits an application for a permit
or authorization as provided in this part to engage in such business,
may continue to engage in that business pending final action on the
application.
(b) Pending final action on an application or request for
authorization submitted under paragraph (a) of this section, all
provisions of chapter 52 of the Internal Revenue Code of 1986 shall
apply to the applicant in the same manner and to the same extent as if
the applicant were a holder of a permit to manufacture processed tobacco
under chapter 52.
(c) Upon receipt of an application, the appropriate TTB officer will
provide the applicant with a written acknowledgement that may be used
for a limited period as confirmation of TTB authorization to engage in
the business of a manufacturer of processed tobacco.
Effective Date Note: By T.D. TTB-80, at 74 FR 37552, July 29, 2009,
Sec. 40.493 was amended in paragraph (a)(2) by removing the word
``Before'' and adding in its place the words ``On or before'', effective
July 29, 2009 through June 22, 2012.
Sec. 40.494 Corporate documents.
Every corporation that files an application for a permit as a
manufacturer of processed tobacco must furnish with its application for
the permit required by Sec. 40.492 a true copy of the corporate charter
or a certificate of corporate existence or incorporation executed by the
appropriate officer of the State in which incorporated. The corporation
must likewise furnish duly authenticated extracts of the stockholders'
meetings, bylaws, or directors' meetings, listing the offices the
incumbents of which are authorized to sign documents or otherwise act in
behalf of the corporation in matters relating to 26 U.S.C. chapter 52,
and regulations issued thereunder. The corporation must also furnish
evidence, in duplicate, of the identity of the officers and directors
and each person who holds more than ten percent of the stock of such
corporation. Where any of the information required by this section has
previously been filed with the appropriate TTB officer and such
information is currently complete and accurate, a written statement to
that effect, in duplicate, will be sufficient for the purpose of this
section.
Sec. 40.495 Articles of partnership or association.
Every partnership or association that files an application for a
permit as a manufacturer of processed tobacco must furnish with its
application for the permit required by Sec. 40.492 a true copy of the
articles of partnership or association, if any, or certificate of
partnership or association where required to be filed by any State,
county, or municipality. Where a partnership or association has
previously filed such documents with the appropriate TTB officer and
such documents are currently complete and accurate, a written statement,
in duplicate, to that effect by the partnership or association will be
sufficient for the purpose of this section.
[[Page 61]]
Sec. 40.496 Trade name certificate.
Every person that files an application for a permit as a
manufacturer of processed tobacco operating under a trade name must
furnish with the application for the permit required by Sec. 40.492 a
true copy of the certificate or other document, if any, issued by a
State, county, or municipal authority in connection with the transaction
of business under such trade name. If no such certificate or other
document is so required, a written statement, in duplicate, to that
effect by such person will be sufficient for the purpose of this
section.
Effective Date Note: By T.D. TTB-80, at 74 FR 37552, July 29, 2009,
Sec. 40.496 was amended in the first sentence by after the words
``manufacturer of processed tobacco'', adding the words ``operating
under a trade name'', effective July 29, 2009 through June 22, 2012.
Sec. 40.497 Additional information.
The appropriate TTB officer may require such additional information
as deemed necessary to determine whether the applicant is entitled to a
permit under this subpart. The applicant shall, when required by the
appropriate TTB officer, furnish as a part of the application for the
permit such additional information as may be necessary for the
appropriate TTB officer to determine whether the applicant is entitled
to a permit.
Sec. 40.498 Investigation of applicant.
Appropriate TTB officers may inquire or investigate to verify the
information in connection with an application for a permit. The
investigation will ascertain whether the applicant is eligible for a
permit. A permit may be denied if the applicant (including, in the case
of a corporation, any officer, director, or principal stockholder and,
in the case of a partnership, a partner)--
(a) Is, by reason of his business experience, financial standing, or
trade connections or by reason of previous or current legal proceedings
involving a felony violation of any other provision of Federal criminal
law relating to tobacco products, processed tobacco, cigarette paper, or
cigarette tubes, not likely to maintain operations in compliance with
this chapter;
(b) Has been convicted of a felony violation of any provision of
Federal or State criminal law relating to tobacco products, processed
tobacco, cigarette paper, or cigarette tubes; or
(c) Has failed to disclose any material information required or made
any material false statement in the application therefor.
Sec. 40.499 Notice of contemplated disapproval.
If the appropriate TTB officer has reason to believe that the
applicant is not entitled to a permit, the appropriate TTB officer will
promptly give to the applicant notice of the contemplated disapproval of
the application and opportunity for hearing thereon in accordance with
part 71 of this chapter. If, after such notice and opportunity for
hearing, the appropriate TTB officer finds that the applicant is not
entitled to a permit, an order will be prepared stating the findings on
which the permit request is denied.
Sec. 40.500 Issuance of permit.
If the application for permit, together with the supporting
documents, required under this part is approved, the appropriate TTB
officer will issue a permit on TTB F 5200.28 to the applicant as a
manufacturer of processed tobacco.
Sec. 40.501 Retention of permit and supporting documents.
The manufacturer must retain the permit, together with the copy of
the application and supporting documents returned with the permit, at
the same place where the records required by this subpart are kept. The
permit and supporting documents must be made available for inspection by
any appropriate TTB officer upon request.
Changes After Qualification
Sec. 40.511 Change in name.
(a) Change in individual name. When there is a change in the name of
an individual operating under a permit as a manufacturer of processed
tobacco, the manufacturer must, within 30 days of such change, make
application on TTB F 5200.16 for an amended permit.
[[Page 62]]
(b) Change in trade name. When there is a change in a trade name
used by a manufacturer of processed tobacco in connection with
operations authorized by the permit, the manufacturer must, within 30
days of such change, make application on TTB F 5200.16 for an amended
permit to reflect such change. This requirement also applies to the
addition or discontinuance of a trade name. The manufacturer must also
furnish a true copy of any new trade name certificate or document issued
to the manufacturer, or statement in lieu thereof, required by Sec.
40.496.
(c) Change in corporate name. When there is a change in the
corporate name of a manufacturer of processed tobacco, the manufacturer
must, within 30 days of such change, make application on TTB F 5200.16
for an amended permit. The manufacturer must also furnish such documents
as may be necessary to establish that the corporate name has been
changed.
Sec. 40.512 Change in ownership or control.
(a) Fiduciary successor. If an administrator, executor, receiver,
trustee, assignee, or other fiduciary is to take over the business of a
manufacturer of processed tobacco as a continuing operation, such
fiduciary shall, before commencing operations, make application for a
permit in accordance with this subpart, furnish certified copies, in
duplicate, of the order of the court, or other pertinent documents,
showing his appointment and qualification as such fiduciary, and make a
commencing inventory in accordance with Sec. 40.523. However, where a
fiduciary intends only to liquidate the business, qualification as a
manufacturer of processed tobacco will not be required if such fiduciary
promptly files with the appropriate TTB officer a written statement to
that effect, in duplicate.
(b) Transfer of ownership. If a transfer in ownership of the
business of a manufacturer of processed tobacco (including a change of
any member of a partnership or association) is to be made, such
manufacturer shall give notice, in writing, to the appropriate TTB
officer, naming the proposed successor and the desired effective date of
the transfer. The proposed successor shall, before commencing
operations, qualify as a manufacturer of processed tobacco in accordance
with this subpart. The manufacturer shall give notice of the transfer,
and the proposed successor shall make application for permit, in ample
time for examination and approval thereof before the desired date of
such change. The predecessor shall make a concluding inventory and
concluding report, in accordance with Sec. Sec. 40.523 and 40.522,
respectively, and surrender the permit with such inventory and report.
The successor shall make a commencing inventory and first report, in
accordance with Sec. Sec. 40.523 and 40.522, respectively.
(c) Change in officers, directors, or stockholders of a corporation.
Upon election or appointment (excluding successive reelection or
reappointment) of any officer or director of a corporation operating the
business of a manufacturer of processed tobacco, or upon any occurrence
that results in a person acquiring ownership or control of more than ten
percent in aggregate of the outstanding stock of such corporation, the
manufacturer shall, within 30 days of such action, so notify the
appropriate TTB officer in writing, giving the identity of such person.
When there is any change in the authority furnished under Sec. 40.494
for officers to act in behalf of the corporation, the manufacturer shall
immediately so notify the appropriate TTB officer in writing.
(d) Change in control of corporation. When the issuance, sale, or
transfer of the stock of a corporation operating as a manufacturer of
processed tobacco results in a change in the identity of the principal
stockholders exercising actual or legal control of the operations of the
corporation, the corporate manufacturer shall, within 30 days after the
change occurs, make application on TTB F 5200.3 for a new permit.
Otherwise, the present permit shall be automatically terminated at the
expiration of such 30-day period, and the manufacturer shall dispose of
all processed tobacco on hand, make a concluding inventory and
concluding report, in accordance with the provisions of Sec. Sec.
40.523 and 40.522, respectively, and surrender the permit with such
inventory and report. If the application for a new permit is timely
made,
[[Page 63]]
the present permit shall continue in effect pending final action with
respect to such application.
Sec. 40.513 Change in location or address of factory.
Whenever a manufacturer of processed tobacco intends to relocate its
factory, the manufacturer shall, before commencing operations at the new
location, make application on TTB F 5200.16 for, and obtain, an amended
permit. Whenever any change occurs in the address, but not the location,
of the factory of a manufacturer of processed tobacco as a result of
action of local authorities, the manufacturer shall, within 30 days of
such change, make application on TTB F 5200.16 for an amended permit.
Effective Date Note: By T.D. TTB-80, at 74 FR 37552, July 29, 2009,
Sec. 40.513 was amended in the first sentence by after the phrase
``make application on TTB F 5200.16 for'' adding the phrase ``, and
obtain,'', effective July 29, 2009 through June 22, 2012.
Operations by Manufacturers of Processed Tobacco
Sec. 40.521 Record of processed tobacco.
(a) Every manufacturer of processed tobacco and every manufacturer
of tobacco products who removes processed tobacco from the factory for
any purpose other than destruction must keep records of daily operations
and transactions that show total quantity of processed tobacco:
(1) On hand;
(2) Used in the manufacture of tobacco products;
(3) Processed;
(4) Received, together with the name and address of the person from
which it was received;
(5) Removed from the factory for shipment to a person holding a TTB
permit as a manufacturer of processed tobacco, a manufacturer of tobacco
products, or an export warehouse proprietor, together with the name and
address of the person to whom shipped or delivered;
(6) Removed from the factory for shipment to a person not holding a
TTB permit as a manufacturer of processed tobacco, a manufacturer of
tobacco products, or an export warehouse proprietor;
(7) Removed from the factory for export;
(8) Removed for any purpose other than described in paragraphs
(a)(5), (6), and (7) of this section;
(9) Lost, together with the circumstances of the loss; and
(10) Destroyed, together with the circumstances of the destruction.
(b) The records of any manufacturer of processed tobacco who removes
processed tobacco from the factory for shipment to a person who does not
hold a TTB permit as a manufacturer of processed tobacco, as a
manufacturer of tobacco products, or as an export warehouse proprietor
must include dated, commercial records that show the following
information about each removal under this paragraph:
(1) The full name and address (including city and State) of the
purchaser (or recipient, if there is no purchaser);
(2) The full name, address (including city and State), and driver's
license number of the person picking up the processed tobacco for
delivery;
(3) The license number of the vehicle in which the processed tobacco
is removed from the manufacturer's premises;
(4) The street address of the destination of the processed tobacco;
(5) The quantity of processed tobacco in the shipment;
(6) A declaration by the purchaser (or recipient, if no purchaser)
of the specific purpose of the purchase or receipt (for example,
delivery to another, resale); and
(7) A declaration by the purchaser (or recipient, if no purchaser)
of the name and address of his or her principal when acting as an agent.
(c) The entries in the records of removals required under this
section must be made for each day by the close of the business day
following the day on which the removal occurs. Although no particular
format for the records in this section is prescribed, the required
information must be readily ascertainable from the records kept.
(26 U.S.C. 5741)
[[Page 64]]
Sec. 40.522 Reports.
(a) General. Every manufacturer of processed tobacco must prepare a
monthly report on TTB F 5250.1 in accordance with the instructions for
the form. The report must be prepared at the times specified in this
section and must be prepared whether or not any operations or
transactions occurred during the period covered by the report. The
manufacturer must retain a copy of each report in accordance with the
provisions of this subpart.
(b) First report(s). The first monthly report must be submitted by
the 20th day of the month following the month in which the permit or
authorization is issued. If the manufacturer is operating as a
manufacturer of processed tobacco under the transitional rule set forth
in Sec. 40.493, the manufacturer must submit the first report by the
20th day of the month following the month in which TTB provides written
acknowledgement of the receipt of the application filed under Sec.
40.492. In the transitional case, the manufacturer must also submit
reports for all previous months back to April 2009. For example, a
manufacturer who receives an acknowledgement, dated July 17, 2009, must
submit by August 20, 2009, a total of four reports, one each for April,
May, June, and July 2009.
(c) Reports of no activity. Reports with the notation ``No
Activity'' must be made for those months in which no activity occurs.
(d) Reports of removals. A manufacturer who removes processed
tobacco for shipment to someone other than a person holding a TTB permit
as a manufacturer of processed tobacco, a manufacturer of tobacco
products, or an export warehouse proprietor must report such removal on
TTB F 5250.2 by the close of the business day on the day following the
removal, in accordance with the instructions on the form. A manufacturer
operating under the transitional rule set forth in Sec. 40.493 must
also comply with the requirements of this paragraph.
(e) Concluding report. A concluding report, covering the period from
the first of the month to the date of the concluding inventory, shall be
made with such inventory.
(26 U.S.C. 5722)
Effective Date Note: By T.D. TTB-80, at 74 FR 37552, July 29, 2009,
Sec. 40.522 was amended in the last sentence of paragraph (b) by
revising the date ``August 15, 2009'' to read ``August 20, 2009'',
effective July 29, 2009 through June 22, 2012.
Sec. 40.523 Inventories.
Every manufacturer of processed tobacco must provide a true and
accurate inventory on TTB F 5210.9 in accordance with instructions for
the form. The manufacturer must make such an inventory at the time of
commencing business, at the time of transferring ownership, at the time
of changing location of the factory, at the time of concluding business,
and at such other time as any appropriate TTB officer may require. In
the case of a manufacturer operating under the transitional rule set
forth in Sec. 40.493, that manufacturer must make an inventory within
10 days of the date of TTB's written acknowledgement of the receipt of
the application filed under Sec. 40.492. Each such inventory is subject
to verification by the appropriate TTB officer.
(26 U.S.C. 5721)
Sec. 40.524 Retention of documents.
Every manufacturer of processed tobacco must retain all records and
reports required under this subpart, including copies of permits,
authorizations, inventories, and reports, for three years following the
close of the calendar year in which filed or made, or in the case of an
authorization, for three years following the close of the calendar year
in which the operation under such authorization is concluded. Such
records shall be made available for inspection by the appropriate TTB
officer upon request.
(26 U.S.C. 5741)
Sec. 40.525 Discontinuance of operations.
Every manufacturer of processed tobacco who desires to discontinue
operations and close a factory must dispose of all processed tobacco on
hand, make a concluding inventory and concluding
[[Page 65]]
report, in accordance with the provisions of Sec. Sec. 40.523 and
40.522, respectively, and surrender the permit to the appropriate TTB
officer.
(26 U.S.C. 5721, 5722)
Sec. 40.526 Minimum manufacturing and activity requirements.
A permit to manufacture processed tobacco will only be granted to
those persons engaged in the processing of tobacco. A permit may be
suspended, and subsequently revoked, if the person has no activity under
such permit for a period of one year. A person whose permit as a
manufacturer of processed tobacco has been revoked for non-use, who
wishes to engage in such business, must re-apply for such permit.
(26 U.S.C. 5712)
Sec. 40.527 Authorization to package processed tobacco.
A permit to manufacture processed tobacco does not authorize
packaging of processed tobacco. Packaging of processed tobacco may only
occur on the bonded premises of a manufacturer of tobacco products.
Sec. 40.528 Suspension and revocation of permit.
Where the appropriate TTB officer has reason to believe that a
manufacturer of processed tobacco has not in good faith complied with
the provisions of 26 U.S.C. chapter 52, and regulations thereunder, or
with any other provision of 26 U.S.C. with intent to defraud, or has
violated any condition of his permit, or has failed to disclose any
material information required or made any material false statement in
the application for the permit, or is, by reason of previous or current
legal proceedings involving a felony violation of any other provision of
Federal criminal law relating to tobacco products, processed tobacco,
cigarette paper, or cigarette tubes, not likely to maintain operations
in compliance with 26 U.S.C. chapter 52, or has been convicted of a
felony violation of any provision of Federal or State criminal law
relating to tobacco products, processed tobacco, cigarette paper, or
cigarette tubes, the appropriate TTB officer shall issue an order,
stating the facts charged, citing such person to show cause why his
permit should not be suspended or revoked. Such citation shall be issued
and opportunity for hearing afforded in accordance with part 71 of this
chapter, which part is applicable to such proceedings. If, after
hearing, the hearing examiner, or on appeal, the Administrator, finds
that such person has not shown cause why his permit should not be
suspended or revoked, such permit shall be suspended for such period as
the appropriate TTB officer deems proper or shall be revoked.
Effective Date Note: By T.D. TTB-80, at 74 FR 37552, July 29, 2009,
Sec. 40.528 was amended in the first sentence by removing the phrase
``manufacturer of tobacco products'' and adding in its place the phrase
``manufacturer of processed tobacco'', effective July 29, 2009 through
June 22, 2012.
Other Provisions Relating to Manufacturers of Processed Tobacco
Sec. 40.531 Alternate methods or procedures.
(a) General. A manufacturer of processed tobacco, on specific
approval by the appropriate TTB officer as provided in this section, may
use an alternate method or procedure in lieu of a method or procedure
specifically prescribed in this subpart. The appropriate TTB officer may
approve an alternate method or procedure, subject to stated conditions,
when the appropriate TTB officer finds that--
(1) Good cause has been shown for the use of the alternate method or
procedure;
(2) The alternate method or procedure is within the purpose of, and
consistent with the effect intended by, the specifically prescribed
method or procedure, and
(3) The alternate method or procedure will not be contrary to any
provision of law, and will not result in an increase in cost to the
Government or hinder the effective administration of this subpart.
(b) Application. A manufacturer of processed tobacco who desires to
employ an alternate method or procedure must submit a written
application to the appropriate TTB officer. The application shall
specifically describe the proposed alternate method or procedure, and
shall set forth the reasons
[[Page 66]]
therefor. An alternate method or procedure shall not be employed until
the application has been approved by the appropriate TTB officer. The
manufacturer shall, during the period of authorization of an alternate
method or procedure, comply with the terms of the approved application.
Authorization for any alternate method or procedure may be withdrawn
whenever, in the judgment of the appropriate TTB officer, the effective
administration of this part is hindered. Any authorization of the
appropriate TTB officer under this section shall be retained as part of
the manufacturer's records in accordance with this subpart.
Sec. 40.532 Emergency variations from requirements.
The appropriate TTB officer may approve methods of operation other
than as specified in this subpart, where it is determined that an
emergency exists and the proposed variations from the specified
requirements are necessary, and provided that the proposed variations
will not hinder the effective administration of this subpart and will
not be contrary to any provision of law. Variations from requirements
granted under this section are conditioned on compliance with the
procedures, conditions, and limitations set forth in the approval of the
application. Failure to comply in good faith with such procedures,
conditions, and limitations will automatically terminate the authority
for such variations, and the manufacturer of processed tobacco thereupon
must fully comply with the prescribed requirements of the regulations
from which the variations were authorized. Authority for any variation
may be withdrawn whenever in the judgment of the appropriate TTB officer
the effective administration of this subpart is hindered by the
continuation of such variation. Where a manufacturer desires to employ
such variation, the manufacturer must submit a written application to do
so to the appropriate TTB officer. The application must describe the
proposed variations and set forth the reasons therefor. Variations may
not be employed until the application has been approved. Any
authorization of the appropriate TTB officer under this section shall be
retained as part of the manufacturer's records, in accordance with this
subpart.
Sec. 40.533 Penalties and forfeitures.
Anyone who fails to comply with the provisions of this subpart may
be liable to the civil and criminal penalties, and forfeitures, provided
by law.
Sec. 40.534 Power of attorney.
If the application for permit or any report or other document
required to be executed under this subpart is to be signed by an
individual (including one of the partners for a partnership or one of
the members of an association) as an attorney in fact for any person, or
if an individual is to otherwise officially represent such person, power
of attorney on TTB F 5000.8 shall be furnished to the appropriate TTB
officer. Such power of attorney is not required for persons whose
authority is furnished with the corporate documents as required by Sec.
40.494. TTB F 5000.8 does not have to be filed again with the
appropriate TTB officer where such form has previously been submitted to
that appropriate TTB officer and is still in effect.
PART 41_IMPORTATION OF TOBACCO PRODUCTS, CIGARETTE PAPERS AND TUBES, AND
PROCESSED TOBACCO--Table of Contents
Subpart A_Scope of Regulations
Sec.
41.1 Importation of tobacco products, cigarette papers and tubes, and
processed tobacco.
Subpart B_Definitions
41.11 Meaning of terms.
Subpart C_General
41.21 Forms prescribed.
41.22 Retention of records.
41.23 Authority of TTB officers to enter premises.
41.24 Interference with administration.
41.25 Disposal of forfeited, condemned, and abandoned tobacco products
and cigarette papers and tubes.
41.26 Alternate methods or procedures.
41.27 Emergency variations from requirements.
41.28 Penalties and forfeitures.
[[Page 67]]
41.29 Delegations of the Administrator.
Subpart D_Taxes
Tax Rates
41.30 Pipe tobacco and roll-your-own tobacco tax rates.
41.31 Cigar tax rates.
41.32 Cigarette tax rates.
41.33 Smokeless tobacco tax rates.
41.34 Cigarette papers.
41.35 Cigarette tubes.
Classification of Large Cigars and Cigarettes
41.37 [Reserved]
41.38 Cigarettes.
41.39 Determination of sale price of large cigars.
Liability for and Payment of Taxes
41.40 Persons liable for tax.
41.41 Determination and payment of tax.
Exemptions from Taxes and Permits
41.50 Exemptions.
Assessment of Taxes
41.60 Assessment.
Customs' Collection of Taxes
41.62 Customs' collection of internal revenue taxes on tobacco products
and cigarette papers and tubes, imported or brought into the
United States.
41.63 Payment of tax by electronic fund transfer.
Subpart E_Packages
41.71 Package.
41.72 Notice for smokeless tobacco.
41.72a Notice for pipe tobacco.
41.72b Notice for roll-your-own tobacco.
41.72c Package use-up rule.
41.73 Notice for cigars.
41.74 Notice for cigarettes.
41.75 Exemptions.
Subpart F_Tobacco Products and Cigarette Papers and Tubes, Imported Into
or Returned to the United States
41.81 Taxpayment.
Release From Customs Custody of Tobacco Products and Cigarette Papers
and Tubes Without Payment of Tax or Certain Duty
41.82 Restrictions on tobacco products labeled for export.
41.83 Penalties and forfeiture for products labeled or shipped for
export.
41.85 Release from customs custody of imported tobacco articles.
41.85a Release from customs custody of returned articles.
41.86 Procedure for release.
Subpart G_Puerto Rican Tobacco Products and Cigarette Papers and Tubes,
Brought Into the United States
41.101 General.
Prepayment of Tax in Puerto Rico on Tobacco Products and Cigarette
Papers and Tubes
41.105 Prepayment of tax.
41.106 Record of shipment by taxpayer.
41.107-41.108 [Reserved]
Deferred Payment of Tax in Puerto Rico on Tobacco Products
41.109 Bond required for deferred taxpayment.
41.110 Record of tax computation and shipment by bonded manufacturer
under deferred taxpayment.
41.111 Verification of bond and agreement to pay tax.
41.112 Tax return.
41.113 Return periods.
41.114 Time for filing.
41.114a Qualification for extended deferral.
41.115 Remittance with return.
41.115a Payment of tax by electronic fund transfer.
41.116 Default.
41.117-41.118 [Reserved]
41.119 Corporate surety.
41.120 Deposit of securities in lieu of corporate surety.
41.121 Amount and account of bond.
41.122 Strengthening bond.
41.123 Superseding bond.
41.124 Extension of coverage of bond.
41.125 Approval of bond and extension of coverage of bond.
41.126 Termination of bond.
41.127 Application of surety for relief from bond.
41.128 Relief of surety from bond.
41.129 Release of pledged securities.
41.135-41.138 [Reserved]
41.139 Records.
41.140 Taxpayment in the United States.
41.141 Reports.
Subpart H [Reserved]
41.151-41.153 [Reserved]
Subpart I_Claims
General
41.161 Abatement of assessment.
41.162 Losses caused by disaster occurring after September 2, 1958.
41.163 Refund of tax.
[[Page 68]]
Tobacco Products, and Cigarette Papers and Tubes Lost or Destroyed
41.165 Action by taxpayer.
Tobacco Products and Cigarette Papers and Tubes Withdrawn From the
Market
41.170 Reduction of tobacco products to materials; TTB action.
41.171 Reduction of tobacco products to materials, action by appropriate
TTB officer.
41.172 Return to nontaxpaid status; action by taxpayer.
41.173 Return to nontaxpaid status; action by appropriate TTB officer.
41.174 Disposition of tobacco products and cigarette papers and tubes,
and schedule.
Subpart J_Records and Reports
41.181 Records of large cigars.
41.182 Availability of records.
41.183 [Reserved]
Subpart K_Tobacco Products Importers
41.190 Persons required to qualify.
41.191 Application for permit.
41.192 [Reserved]
41.193 Corporate documents.
41.194 Articles of partnership or association.
41.195 Trade name certificate.
41.196 Power of attorney.
41.197 Additional information.
41.198 Investigation of applicant.
41.199 Notice of contemplated disapproval.
41.200 Issuance of permit.
41.201 Duration of permit.
41.202 Renewal of permit.
41.203 Retention of permit and supporting documents.
Required Records and Reports
41.204 General.
41.205 [Reserved]
Filing and Retention of Records and Reports
41.206 Reports.
41.207 [Reserved]
41.208 Maintenance and retention of records and reports.
Subpart L_Changes After Original Qualification of Importers
Changes in Name
41.220 Change in individual name.
41.221 Change in trade name.
41.222 Change in corporate name.
Changes in Ownership and Control
41.223 Fiduciary successor.
41.224 Transfer of ownership.
41.225 Change in officers, directors, or stockholders of a corporation.
41.226 Change in control of a corporation.
Changes in Location or Address
41.227 Change in location.
41.228 Change in address.
Subpart M_Importation of Processed Tobacco
Qualification Requirements for Importers of Processed Tobacco
41.231 Persons required to qualify.
41.232 Application for permit or amendment of existing permit.
41.233 Transitional rule.
41.234 Corporate documents.
41.235 Articles of partnership or association.
41.236 Trade name certificate.
41.237 Additional information.
41.238 Investigation of applicant.
41.239 Notice of contemplated disapproval.
41.240 Issuance of permit.
41.241 Duration of permit.
41.242 Renewal of permit.
41.243 Retention of permit and supporting documents.
Changes After Original Qualification
41.251 Change in name.
41.252 Change in ownership or control.
41.253 Change in location or address.
Operations of Importers of Processed Tobacco
41.261 Records.
41.262 Reports.
41.263 Maintenance of records and reports.
Other Provisions Applicable to Importers of Processed Tobacco
41.271 Power of attorney.
41.272 Cross reference.
41.273 Suspension and revocation of permit.
Authority: 26 U.S.C. 5701-5705, 5708, 5712, 5713, 5721-5723, 5741,
5754, 5761-5763, 6301, 6302, 6313, 6402, 6404, 7101, 7212, 7342, 7606,
7651, 7652, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.
Effective Date Note: By T.D. TTB-78, at 74 FR 29414, June 22, 2009,
the authority citation to part 41 was revised, effective June 22, 2009
through June 22, 2012.
Source: Redesignated by T.D. TTB-16, 69 FR 52424, Aug. 26, 2004,
unless otherwise noted.
Editorial Note: Nomenclature changes to part 41 (formerly part 275)
appear at T.D. ATF-460, 66 FR 39093, July 27, 2001.
[[Page 69]]
Subpart A_Scope of Regulations
Sec. 41.1 Importation of tobacco products, cigarette papers and tubes, and
processed tobacco.
This part contains regulations relating to tobacco products,
cigarette papers and tubes, and processed tobacco imported into the
United States from a foreign country or brought into the United States
from Puerto Rico, the Virgin Islands, or a possession of the United
States; the removal of tobacco products from a customs bonded
manufacturing warehouse, class 6; restrictions on the importation of
previously exported tobacco products and cigarette papers and tubes; and
the release of tobacco products and cigarette papers and tubes from
customs custody, without payment of internal revenue tax or customs duty
attributable to the internal revenue tax.
[T.D. ATF-421, 64 FR 71924, Dec. 22, 1999]
Effective Date Note: By T.D. TTB-78, at 74 FR 29414, June 22, 2009,
Sec. 41.1 was amended by removing the words ``and cigarette papers and
tubes'' where they first appear in the text and adding in their place,
the words ``, cigarette papers and tubes, and processed tobacco'',
effective June 22, 2009 through June 22, 2012.
Subpart B_Definitions
Sec. 41.11 Meaning of terms.
When used in this part and in forms prescribed under this part, the
following terms shall have the meanings given in this section, unless
the context clearly indicates otherwise. Words in the plural form shall
include the singular, and vice versa, and words indicating the masculine
gender shall include the feminine. The terms ``includes'' and
``including'' do not exclude things not listed which are in the same
general class.
Administrator. The Administrator, Alcohol and Tobacco Tax and Trade
Bureau, Department of the Treasury, Washington, DC.
Appropriate TTB officer. An officer or employee of the Alcohol and
Tobacco Tax and Trade Bureau (TTB) authorized to perform any functions
relating to the administration or enforcement of this part by TTB Order
1135.41, Delegation of the Administrator's Authorities in 27 CFR Part
41, Importation of Tobacco Products and Cigarette Papers and Tubes.
Bank. Any commercial bank.
Banking day. Any day during which a bank is open to the public for
carrying on substantially all its banking functions.
Business day. Any day, other than a Saturday, Sunday, or a legal
holiday. (The term legal holiday includes all holidays in the District
of Columbia and, in the case of bonded manufacturers in Puerto Rico, all
legal holidays in the Commonwealth of Puerto Rico.)
Bonded manufacturer. A manufacturer of tobacco products in Puerto
Rico who has an approved bond, in accordance with the provisions of this
part, authorizing him to defer the payment in Puerto Rico on the
internal revenue tax imposed on such products by 26 U.S.C. 7652(a) as
provided in this part.
CFR. The Code of Federal Regulations.
Chewing Tobacco. Any leaf tobacco that is not intended to be smoked.
Cigar. Any roll of tobacco wrapped in leaf tobacco or in any
substance containing tobacco (other than any roll of tobacco which is a
cigarette within the meaning of paragraph (2) of the definition for
cigarette).
Cigarette. (1) Any roll of tobacco wrapped in paper or in any
substance not containing tobacco, and
(2) Any roll of tobacco wrapped in any substance containing tobacco
which, because of its appearance, the type of tobacco used in the
filler, or its packaging and labeling, is likely to be offered to, or
purchased by, consumers as a cigarette described in paragraph (1) of
this definition.
Cigarette paper. Paper, or any other material except tobacco,
prepared for use as a cigarette wrapper.
Cigarette tube. Cigarette paper made into a hollow cylinder for use
in making cigarettes.
Commercial bank. A bank, whether or not a member of the Federal
Reserve System, which has access to the Federal Reserve Communications
System (FRCS) or Fedwire. The ``FRCS'' or ``Fedwire'' is a
communications network that allows Federal Reserve System member banks
to effect a transfer of funds for their customers (or other
[[Page 70]]
commercial banks) to the Treasury Account at the Federal Reserve Bank in
New York.
Computation or computed. When used with respect to the tax on
tobacco products of Puerto Rican manufacture, computation or computed
shall mean that the bonded manufacturer has ascertained the quantity and
kind (small cigars, large cigars, small cigarettes, large cigarettes,
chewing tobacco, snuff, pipe tobacco, or roll-your-own tobacco) of
tobacco products and the sale price of large cigars being shipped to the
United States; that adequate bond has been posted to cover the payment,
in Puerto Rico, of the tax on such products to be deferred under subpart
G of this part; that the tax imposed on such products by 26 U.S.C.
7652(a) has been calculated; that the bonded manufacturer has executed
an agreement to pay the internal revenue tax which will become due with
respect to such products, as provided in this part; and that a TTB
officer has verified and executed a certification of such calculation.
Customs officer. Any officer of the Customs Service or any
commissioned, warrant, or petty officer of the Coast Guard, or any agent
or other person authorized by law or designated by the Secretary of the
Treasury to perform any duties of an officer of the Customs Service.
Determine. To establish enough information about taxable products at
the time of removal to calculate the tax, specifically the quantity
(pounds or number) and kind (for example, cigarettes, snuff, paper
tubes). Where the tax rate depends on additional information (such as
number of cigarette papers to a set before 1/1/2000 or sale price of
large cigars), that information must also be established as part of tax
determination.
Electronic fund transfer or EFT. Any transfer of funds effected by a
bonded manufacturer's commercial bank, either directly or through a
correspondent banking relationship, via the Federal Reserve
Communications System (FRCS) or Fedwire to the Treasury Account at the
Federal Reserve Bank of New York.
Export warehouse. A bonded internal revenue warehouse for the
storage of tobacco products and cigarette papers and tubes, upon which
the internal revenue tax has not been paid or for the storage of
processed tobacco, for subsequent shipment to a foreign country, Puerto
Rico, the Virgin Islands, or a possession of the United States, or for
consumption beyond the jurisdiction of the internal revenue laws of the
United States.
Export warehouse proprietor. Any person who operates an export
warehouse.
Factory. The premises of a manufacturer of tobacco products,
cigarette papers or tubes, or processed tobacco in which he carries on
such business.
Fiscal year. The period which begins October 1 and ends on the
following September 30.
HTS. The Harmonized Tariff Schedule of the United States, as
published by the United States International Trade Commission.
Importer. Any person in the United States to whom non-taxpaid
tobacco products or cigarette papers or tubes, or any processed tobacco
manufactured in a foreign country, Puerto Rico, the Virgin Islands, or a
possession of the United States are shipped or consigned; any person who
removes cigars for sale or consumption in the United States from a
Customs bonded manufacturing warehouse; and any person who smuggles or
otherwise unlawfully brings tobacco products or cigarette papers or
tubes, or any processed tobacco into the United States.
Large cigarettes. Cigarettes weighing more than three pounds per
thousand.
Large cigars. Cigars weighing more than three pounds per thousand.
Manufacturer of cigarette papers and tubes. Any person who
manufactures cigarette paper, or makes up cigarette paper into tubes,
except for his own personal use or consumption.
Manufacturer of processed tobacco. Any person who processes any
tobacco other than tobacco products.
Manufacturer of tobacco products. Any person who manufactures
cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own
tobacco but does not include:
(1) A person who produces tobacco products solely for that person's
own consumption or use; or
[[Page 71]]
(2) A proprietor of a Customs bonded manufacturing warehouse with
respect to the operation of such warehouse.
Package. The immediate container in which tobacco products,
processed tobacco, or cigarette papers or tubes are put up by the
manufacturer or the importer (prior to release from customs custody) and
offered for sale or delivery to the ultimate consumer. For purposes of
this definition, a container of processed tobacco, the contents of which
weigh 10 pounds or less (including any added non-tobacco ingredients or
constituents), that is removed within the meaning of this part is deemed
to be a package offered for sale or delivery to the ultimate consumer.
Packaging. The act of placing processed tobacco or a tobacco product
in a package.
Person. An individual, partnership, association, company,
corporation, estate, or trust.
Pipe tobacco. Any tobacco which because of its appearance, type,
packaging, or labeling, is suitable for use and likely to be offered to,
or purchased by, consumers as tobacco to be smoked in a pipe.
Port Director of Customs. The director of any port or port of entry
as defined in 19 CFR 101.1. A list of ports is set forth in 19 CFR
101.3.
Processed tobacco. Processed tobacco is any tobacco that has
undergone processing, but does not include tobacco products. For
purposes of this definition, the processing of tobacco does not include
the farming or growing of tobacco or the handling of tobacco solely for
sale, shipment, or delivery to a manufacturer of tobacco products or
processed tobacco, nor does the processing of tobacco include curing,
baling, or packaging activities. For purposes of this definition, the
processing of tobacco includes, but is not limited to, stemming (that
is, removing the stem from the tobacco leaf), fermenting, threshing,
cutting, or flavoring the tobacco, or otherwise combining the tobacco
with non-tobacco ingredients.
Records. Statements, declarations, books, papers, correspondence,
accounts, technical data, automated record storage devices (e.g.,
magnetic discs and tapes), computer programs necessary to retrieve
information in a usable form, and other documents that:
(1) Pertain to any importation of tobacco products or cigarette
papers or tubes, or to the information contained in the documents
required by law or regulation under the Tariff Act of 1930, as amended,
in connection with the importation or shipment into the United states
from Puerto Rico of merchandise; and
(2) Are of the type normally kept in the ordinary course of
business; and
(3) Are sufficiently detailed to:
(i) Establish the right to make the importation or shipment into the
United States from Puerto Rico;
(ii) Establish the correctness of any importation or shipment into
the United States from Puerto Rico;
(iii) Determine the liability of any person for duties and taxes
due, or which may be due, to the United States;
(iv) Determine the liability of any person for fines, penalties, and
forfeitures; and
(v) Determine whether the person has complied with the laws and
regulations administered by TTB and the Customs Service, and any other
documents required under laws or regulations administered by TTB and the
Customs Service.
Relanding. Any tobacco products, cigarette papers or tubes, which
have been labeled or shipped for exportation (including to Puerto Rico)
as prescribed in this chapter, previously exported and returned within
the jurisdiction of the United States.
Removal or Remove. The removal of tobacco products or cigarette
papers or tubes, or any processed tobacco from the factory or release
from internal revenue bond under 26 U.S.C. 5704, or release from customs
custody, including conditional release in accordance with 19 CFR
141.0a(i), and shall also include the smuggling or other unlawful
importation of such articles into the United States.
Roll-your-own tobacco. Any tobacco which, because of its appearance,
type, packaging, or labeling, is suitable for use and likely to be
offered to, or purchased by, consumers as tobacco for making cigarettes
or cigars, or for use as wrappers thereof.
[[Page 72]]
Sale price. The price for which large cigars are sold by the
importer or United States manufacturer, determined in accordance with
Sec. 41.39 and used for computation of the excise tax.
Small cigarettes. Cigarettes weighing not more than three pounds per
thousand.
Small cigars. Cigars weighing not more than three pounds per
thousand.
Smokeless tobacco. Any chewing tobacco or snuff.
Snuff. Any finely cut, ground, or powdered tobacco that is not
intended to be smoked.
This chapter. Chapter I, title 27, Code of Federal Regulations.
Tobacco products. Cigars, cigarettes, smokeless tobacco, pipe
tobacco, and roll-your-own tobacco.
Treasury Account. The Department of the Treasury's General Account
at the Federal Reserve Bank of New York.
United States. When used in a geographical sense shall include only
the States and the District of Columbia.
U.S.C. The United States Code.
(Aug. 16, 1954, ch. 736, 68A Stat. 775, as amended (26 U.S.C. 6301);
June 29, 1956, ch. 462, 70 Stat. 391 (26 U.S.C. 6301))
[T.D. ATF-48, 43 FR 13554, Mar. 31, 1978]
Editorial Note: For Federal Register citations affecting Sec.
41.11, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.fdsys.gov.
Effective Date Note: By T.D. TTB-78, at 74 FR 29414, June 22, 2009,
Sec. 41.11 was amended as follows, effective June 22, 2009 through June
22, 2012.
a. The definition of ``Export warehouse'' is amended by adding the
words ``or for the storage of processed tobacco,'' after ``paid,'';
b. The definition of ``Factory'' is amended by removing the words
``tobacco products or cigarette papers or tubes'' and adding, in their
place, the words ``tobacco products, cigarette papers or tubes, or
processed tobacco'';
c. The definition of ``Importer'' is amended by adding, after the
words ``tobacco products or cigarette papers or tubes'', each time they
appear, the words ``, or any processed tobacco,''
d. The definition of ``Removal or remove'' is amended by adding
after the words ``tobacco products or cigarette papers or tubes'' the
words ``, or any processed tobacco'';
e. The definition of ``Roll-your-own tobacco'' is amended by adding
at the end before the period the words ``or cigars, or for use as
wrappers thereof.''
f. New definitions of ``Manufacturer of processed tobacco'',
``Processed tobacco'' and ``Packaging'' are added in appropriate
alphabetical order;
g. The definition of ``Package'' is revised; and
h. The definition of ``Sale price'' is amended by adding, after the
words ``importer or'', the word ``United States''.
Subpart C_General
Sec. 41.21 Forms prescribed.
(a) The Administrator is authorized to prescribe all forms required
by this part. All of the information called for in each form shall be
furnished as indicated by the headings on the form and the instructions
on or pertaining to the form. In addition, information called for in
each form shall be furnished as required by this part. When a return,
form, claim, or other document called for under this part is required by
this part, or by the document itself, to be executed under penalties of
perjury, it shall be executed under penalties of perjury.
(b) Forms prescribed by this part are available for printing through
the TTB Web site (http://www.ttb.gov) or by mailing a request to the
Alcohol and Tobacco Tax and Trade Bureau, National Revenue Center, 550
Main Street, Room 1516, Cincinnati, OH 45202.
(5 U.S.C. 552(a) (80 Stat. 383, as amended)
[T.D. ATF-92, 46 FR 46922, Sept. 23, 1981, as amended by T.D. ATF-232,
51 FR 28084, Aug. 5, 1986; T.D. ATF-243, 51 FR 43194, Dec. 1, 1986; T.D.
ATF-372, 61 FR 20725, May 8, 1996; T.D. TTB-16, 69 FR 52424, Aug. 26,
2004]
Sec. 41.22 Retention of records.
All records required to be kept under this part, including copies of
claims and schedules, authorizations, notices of release, reports, and
returns, shall be retained for three years following the close of the
year in which filed or made, or in the case of an authorization, for
three years following the close of the calendar year in which the
operation under such authorization is concluded. Such records shall be
made
[[Page 73]]
available for inspection by any appropriate TTB officer upon his
request.
(72 Stat. 1423; 26 U.S.C. 5741)
[26 FR 8189, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975,
and further redesignated and amended by T.D. TTB-16, 69 FR 52424, Aug.
26, 2004]
Sec. 41.23 Authority of TTB officers to enter premises.
Any appropriate TTB officer may enter in the daytime any premises
where tobacco products or cigarette papers or tubes are produced or kept
so far as it may be necessary for the purpose of examining such
articles. When such premises are open at night, any appropriate TTB
officer may enter them, while so open, in the performance of his
official duties. The owner of such premises, or person having the
superintendence of the same, who refuses to admit any appropriate TTB
officer or permit him to examine such articles shall be liable to the
penalties prescribed by law for the offense.
(68A Stat. 872, 903; 26 U.S.C. 7342, 7606)
[T.D. 6871, 31 FR 40, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28084, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986. Redesignated and amended by T.D.
TTB-16, 69 FR 52424, Aug. 26, 2004]
Sec. 41.24 Interference with administration.
Whoever, corruptly or by force or threats of force, endeavors to
hinder or obstruct the administration of this part, or endeavors to
intimidate or impede any appropriate TTB officer acting in his official
capacity, or forcibly rescues or attempts to rescue or causes to be
rescued any property, after it has been duly seized for forfeiture to
the United States in connection with a violation of the internal revenue
laws, shall be liable to the penalties prescribed by law.
(68A Stat. 855; 26 U.S.C. 7212)
[26 FR 8189, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975,
and further redesignated and amended by T.D. TTB-16, 69 FR 52424, Aug.
26, 2004]
Sec. 41.25 Disposal of forfeited, condemned, and abandoned tobacco products
and cigarette papers and tubes.
When any Federal, State, or local officer having custody of
forfeited, condemned, or abandoned tobacco products or cigarette papers
or tubes, upon which the Federal tax has not been paid, is of the
opinion that the sale thereof will not bring a price equal to the tax
due and payable thereon, and the expenses incident to the sale thereof,
he shall not sell, nor cause to be sold, such articles for consumption
in the United States. Where the articles are not sold, the officer may
deliver them to a Federal or State hospital or institution (if they are
fit for consumption) or cause their destruction by burning completely or
by rendering them unfit for consumption. Where such articles are sold,
they shall not be released by the officer having custody thereof until
they are properly packaged and taxpaid, which tax shall be considered as
a portion of the sales price. Except where the tax is to be paid to the
Port Directors of Customs or other authorized customs officer in
accordance with Customs regulations (19 CFR part 127) on sales of
articles by customs officers, the payment of tax on such articles must
be evidenced by presentation, to the officer having custody of the
articles, of a receipt from the appropriate TTB officer showing such
payment. In the case of such articles held by or for the Federal
Government, the sale thereof shall be subject to the applicable
provisions of the Regulations of the General Services Administration,
Title 1, Personal Property Management.
(68A Stat. 872, 903; 26 U.S.C. 7342, 7606)
[T.D. 6871, 31 FR 40, Jan. 4, 1966. Redesignated at 40 FR 16835, Apr.
15, 1975, and amended by T.D. ATF-232, 51 FR 28084, Aug. 5, 1986; T.D.
ATF-243, 51 FR 43194, Dec. 1, 1986; T.D. ATF-422, 64 FR 71948, Dec. 22,
1999. Redesignated and amended by T.D. TTB-16, 69 FR 52424, Aug. 26,
2004]
Sec. 41.26 Alternate methods or procedures.
An importer, on specific approval by the appropriate TTB officer as
provided in this section, may use an alternate
[[Page 74]]
method or procedure in lieu of a method or procedure specifically
prescribed in this part. The appropriate TTB officer may approve an
alternate method or procedure, subject to stated conditions, when he
finds that--
(a) Good cause has been shown for the use of the alternate method or
procedure,
(b) The alternate method or procedure is within the purpose of, and
consistent with the effect intended by, the specifically prescribed
method or procedure, and affords equivalent security to the revenue, and
(c) The alternate method of procedure will not be contrary to any
provision of law, and will not result in an increase in cost to the
Government or hinder the effective administration of this part.
No alternate method or procedure relating to the giving of any bond or
to the assessment, payment, or collection of tax, shall be authorized
under this section. When an importer desires to employ an alternate
method or procedure, he shall submit a written application to do so, in
triplicate, to the appropriate TTB officer. The application shall
specifically describe the proposed alternate method or procedure, and
shall set forth the reasons therefor. Alternate methods or procedures
shall not be employed until the application has been approved by the
appropriate TTB officer. The importer shall, during the period of
authorization of an alternate method or procedure, comply with the terms
of the approved application. Authorization for any alternate method or
procedure may be withdrawn whenever in the judgment of the appropriate
TTB officer the revenue is jeopardized or the effective administration
of this part is hindered. The importer shall retain, as part of his
records, any authorization of the appropriate TTB officer under this
section.
[26 FR 8190, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975,
and further redesignated and amended by T.D. TTB-16, 69 FR 52424, Aug.
26, 2004]
Sec. 41.27 Emergency variations from requirements.
The appropriate TTB officer may approve methods of operation other
than as specified in this part, where he finds that an emergency exists
and the proposed variations from the specified requirements are
necessary, and the proposed variations--
(a) Will afford the security and protection to the revenue intended
by the prescribed specifications,
(b) Will not hinder the effective administration of this part, and
(c) Will not be contrary to any provision of law.
Variations from requirements granted under this section are conditioned
on compliance with the procedures, conditions, and limitations set forth
in the approval of the application. Failure to comply in good faith and
with such procedures, conditions, and limitations shall automatically
terminate the authority for such variations and the importer thereupon
shall fully comply with the prescribed requirements of regulations from
which the variations were authorized. Authority for any variations may
be withdrawn whenever in the judgment of the appropriate TTB officer the
revenue is jeopardized or the effective administration of this part is
hindered by the continuation of such variation. Where an importer
desires to employ such variation, he shall submit a written application
to do so, in triplicate, to the appropriate TTB officer. The application
shall describe the proposed variations and set forth the reasons
therefor. Variations shall not be employed until the application has
been approved. The importer shall retain, as part of his records, any
authorization of the appropriate TTB officer under this section.
[26 FR 8190, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975,
and further redesignated and amended by T.D. TTB-16, 69 FR 52424, Aug.
26, 2004]
Sec. 41.28 Penalties and forfeitures.
Anyone who fails to comply with the provisions of this part becomes
liable to the civil and criminal penalties, and forfeitures, provided by
law.
(72 Stat. 1425, 1426; 26 U.S.C. 5761, 5762, 5763)
[26 FR 8190, Aug. 31, 1961. Redesignated at 40 FR 16835, Apr. 15, 1975]
[[Page 75]]
Sec. 41.29 Delegations of the Administrator.
The regulatory authorities of the Administrator contained in this
part are delegated to appropriate TTB officers. These TTB officers are
specified in TTB Order 1135.41, Delegation of the Administrator's
Authorities in 27 CFR Part 41, Importation of Tobacco Products and
Cigarette Papers and Tubes. You may obtain a copy of this order by
accessing the TTB Web site (http://www.ttb.gov) or by mailing a request
to the Alcohol and Tobacco Tax and Trade Bureau, National Revenue
Center, 550 Main Street, Room 1516, Cincinnati, OH 45202.
[T.D. TTB-16, 69 FR 52424, Aug. 26, 2004]
Subpart D_Taxes
Tax Rates