California imposes a Cigarette and Tobacco Products Surtax on every distributor of tobacco products in the state. The tax is based on the wholesale cost of the products, at a rate determined annually by the State Board of Equalization (“BOE”). “Wholesale cost” means the cost of tobacco products to the distributor prior to any discounts or trade allowances and includes all manufacturing costs, the cost of raw materials, the cost of labor, any direct and indirect overhead costs, the wholesale markup, and any federal excise and U.S. Custom’s taxes paid.
The tobacco products tax rate is determined annually by the State Board of Equalization (“BOE”) and is equivalent to the combined rate of the taxes applied to cigarettes. The current tax on other tobacco products, as of July 1, 2016, is 27.30% of the wholesale cost.
Each distributor of tobacco products must file a Tobacco Products Distributor Tax Return (Form BOE-501-CT) with the BOE on or before the 25th day of each month, along with payment for taxes due. Everyone who purchases untaxed tobacco products must file a Cigarette and Tobacco Products Excise Tax Return (Form BOE-501-CI) on or before the last day of the month following the quarter in which the product was received, along with payment for taxes due.
Tobacco products manufacturers or imports must file a Tobacco Products Manufacturer/Importer Return of Taxable Distribution of Samples in California (Form BOE-501-TIM) on or before the 25th day of the month following the month during which samples were distributed, along with payment for taxes due. Manufacturer or importer of tobacco products must attach to their return a Manufacturer/Importer Report of Tobacco Products Delivered or Shipped into California (Form BOE-501-MIT).
“Tobacco products” includes all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other articles or products made of, or containing at least 50 percent, tobacco, but does not include cigarettes.
“Smokeless tobacco” means: a loose or flat, compressed cake form of tobacco that may be chewed or held in the mouth; or a shredded, powdered, or pulverized form of tobacco that may be inhaled through the nostrils, chewed, or held in the mouth.
An “untaxed tobacco product” is either of the following:
Any tobacco product that has not yet been distributed in a manner that results in a tax liability
Any tobacco product that was distributed in a manner that resulted in a tax liability under this part, but that was returned to the distributor after the tax was paid and for which the distributor has either claimed a deduction, a refund, or a credit
A “retailer” is a person who engages in California in the sale of cigarettes or tobacco products directly to the public from a retail location, including a person who operates vending machines from which cigarettes or tobacco products are sold.