Tobacco Products and Cigarette Papers and Tubes, 2009 Tax Increase and Floor Stocks Tax

DEPARTMENT OF THE TREASURY
ALCOHOL AND TOBACCO TAX AND TRADE BUREAU

Instructions for TTB F 5000.28T09
These instructions provide information regarding the floor stocks tax imposed on tobacco products (except large cigars)
and cigarette papers and tubes by the Children’s Health Insurance Program Reauthorization Act of 2009, (Public Law
111-3, Section 701).

A. Product definitions. In order to apply the definition, you should look at the package. The package should tell you
either the name of the product or its tax class. The tax class, if a product has one, is shown in the definition below.
Chewing Tobacco (Tax Class C). 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 cigarette set forth below).
Large Cigars. Cigars weighing more than three pounds per thousand.
Small Cigars (or Little Cigars). Cigars weighing three pounds or less per thousand
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 at (1) in this definition.
Large Cigarettes (Class A). Cigarettes weighing more than three pounds per thousand.
Small Cigarettes (Class B). Cigarettes weighing three pounds or less per thousand.
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.
Pipe Tobacco (Tax Class L). 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.
Roll-Your-Own Tobacco (or Cigarette Tobacco) (Tax Class J). 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.
Snuff (Tax Class M). Any finely cut, ground, or powdered tobacco that is not intended to be smoked.
Tobacco Products. Cigars, cigarettes, smokeless tobacco (that is, chewing tobacco and snuff), pipe tobacco, and
roll-your-own tobacco.
B. Floor stocks tax requirements in general. The floor stocks tax applies to cigarettes, small cigars (that is, cigars
weighing 3 pounds per 1,000 or less), snuff, chewing tobacco, pipe tobacco, roll-your-own tobacco, cigarette papers
and cigarette tubes that have been taxpaid or tax determined and are being held for sale on April 1, 2009. The tax
does not apply to tobacco products or cigarette papers or tubes that have not been removed from the manufacturer’s
premises subject to tax or have not been released from customs custody subject to tax. The following procedures
apply to floor stocks tax:
1. Take an inventory. Establish the quantity of tobacco products (except large cigars), cigarette papers and
cigarette tubes subject to the floor stocks tax held for sale at 12:01 a.m. on April 1, 2009 (the tax increase date).
2. Calculate tax amount. Calculate the amount of tax for the products identified in the inventory. Apply the tax
credit as described below.
3. File tax return. After you have computed the floor stocks tax, you must file a return and pay the tax due not later
than July 31, 2009.
4. Maintain records. Maintain all records used to determine the quantity of products on hand on the tax increase
date. You must also maintain a record of all computations used to determine the amount of tax owed.
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C. Taking an Inventory.
You may take a physical inventory or a record (book) inventory. You must take your inventory after March 25, 2009,
and before April 11, 2009, and if taken on any day other than April 1, 2009, it must be reconciled (adjusted) to reflect
the actual quantity of products held at the beginning of business on April 1, 2009.

Inventory methods

Product

Inventory method

Small cigarettes:

Count the number of cigarettes.

Large cigarettes, measuring 6 ½ ” or less in
length:

Count the number of large cigarettes.

Large cigarettes, measuring more than 6 ½ ”
in length:

Keep a separate count for each size of large cigarette. Count
each 2 ¾ “, or fraction thereof, as one small cigarette.

Small Cigars:

Count the number of small cigars.

Large Cigars:

Do not count large cigars for the floor stocks tax inventory.

Snuff

Count the number of packages at each weight, noting the weight
in pounds and ounces. Convert the ounces to pounds.

Chewing tobacco

Count the number of packages at each weight, noting the weight
in pounds and ounces. Convert the ounces to pounds.

Pipe tobacco

Count the number of packages at each weight, noting the weight
in pounds and ounces. Convert the ounces to pounds.

Roll-your-own

Count the number of packages at each weight, noting the weight
in pounds and ounces. Convert the ounces to pounds.

Cigarette papers 6 ½ ” or less in length

Count the number of cigarette papers, divide by 50, and round up
if there is any remainder.

Cigarette papers more than 6 ½ ” in length

Count the number for each size of cigarette paper. Count each
2 ¾ “, or fraction thereof, as one cigarette paper. Divide adjusted
total by 50 and round up if there is any remainder.

Cigarette tubes 6 ½ ” or less in length

Count the number of cigarette tubes, divide by 50, and round up if
there is any remainder.

Cigarette tubes more than 6 ½ ” in length:

Count the number for each size of cigarette tube. Count each
2 ¾ “, or fraction thereof, as one cigarette tube. Divide adjusted
total by 50 and round up if there is any remainder.

1. Physical inventory requirements.
Your physical inventory must yield a written record of:
(a) The quantity and type of products, recorded in sufficient detail to determine the tax rate.
(b) The date and time the inventory was taken.
(c) The name of individual(s) conducting the inventory and the name of the person for whom the inventory was
taken.
(d) The street address, city, and State where the inventory was taken.
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2. Record (book) inventory requirements.
You may use a record (book) inventory if you have source records that show:
(a) The quantity and date of receipts and dispositions of all products.
(b) The name and address of the consignor and consignee (unless sales are over-the-counter at retail).
(c) The actual type and quantities of products on hand as if a physical inventory had taken place at 12:01 a.m. on
April 1, 2009.
(d) The brand name of each product.
You may not use ratios, averages, or estimates to determine the quantity of inventory held subject to tax. Your
backup documentation must support your inventory results.
3. Products in transit.
Products in transit must be included in your inventory if you hold title to the products. If you have transferred the
title, your records must document the title transfer.
You may use the following guidelines to establish who holds title to products in transit:
(a) If State law mandates the change in title, no agreement or contract between seller and buyer can alter it.
(b) In the absence of State law, the Uniform Commercial Code allows the seller and buyer to agree when title
passes. If there is no State law or agreement, the Uniform Commercial Code states that title transfer
depends on how the seller ships the products.
(1) Free on board (F.O.B.) destination. The title transfer occurs when the seller completes the
performance of the physical delivery of the products.
(2) Free on board (F.O.B.) shipping point. The title transfer occurs when the seller transfers the title at the
time and place of shipment, which is generally by common carrier.
4. Products in a foreign-trade zone.
You are liable for the floor stocks tax and must take an inventory of taxable goods held in a foreign-trade zone if:
(a) Internal revenue taxes have been determined or customs duties liquidated pursuant to the first proviso of
section 3(a) of the Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a et seq.), or (b) the taxable goods are held by
a Customs and Border Protection officer pursuant to the second proviso of section 3(a) of the Act of June 18,
1934 (48 Stat. 998, 19 U.S.C. 81a et seq.).
5. Products held in bond.
If you are a manufacturer or export warehouse proprietor and hold products in TTB bond on the tax increase date,
the floor stocks tax does not apply to those items. Likewise, if you have products held in a customs bonded
warehouse, the floor stocks tax does not apply to those items.
6. Unmerchantable products.
If you hold any products on April 1, 2009, for return to a supplier because of some defect or damage, you are not
required to pay the floor stocks tax on those products; however, you must physically segregate any such
unmerchantable products and include them in a separate section of your inventory record. If, for any reason, the
tobacco products or cigarette papers or tubes that were determined to be unmerchantable are not subsequently
returned or destroyed, you must file an additional floor stocks tax return and pay tax on such products.
7. Products in vending machines.
You must inventory products held in vending machines for retail sale, and include them in your final inventory.
Products in vending machines are subject to the floor stocks tax.

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8. Products marked "not for sale" or "complimentary."
Products marked "not for sale" or "complimentary" that are part of a sale (for example, buy two and get one free)
are subject to this tax and must be included in the inventory.
D. Calculating the tax amount.
After you have taken your inventory, calculate the tax as instructed In Section II, lines 5 through 14, on the 2009 Floor
Stocks Tax Return – TTB F 5000.28T09. The tax rate table below illustrates the old and new rates of tax and the floor
stocks tax rates.

Product

Small Cigarettes

Tax Rate Effective
March 31, 2009

Tax Rate Effective
April 1, 2009

2009 Floor Stocks
Tax Rate
(difference between the rates)

$19.50 per 1,000

$50.33 per 1,000

$30.83 per 1,000

$40.95 per 1,000

$105.69 per 1,000

$64.74 per 1,000

$19.50 per 1,000 2 ¾ “units

$50.33 per 1,000 2 ¾ “units

$30.83 per 1,000 2 ¾ “units

Small Cigars

$1.828 per 1,000

$50.33 per 1,000

$48.502 per 1,000

Large Cigars

20.719% of sales price but
not to exceed $48.75 per
1,000

52.75% of sales price but
not to exceed $0.4026 per
cigar

Not subject to floor
stocks tax

Chewing Tobacco **

$0.195 per pound

$0.5033 per pound

$0.3083 per pound

Snuff **

$0.585 per pound

$1.51 per pound

$0.925 per pound

Pipe Tobacco **

$1.0969 per pound

$2.8311 per pound

$1.7342 per pound

Roll-Your-Own Tobacco **

$1.0969 per pound

$24.78 per pound

$23.6831 per pound

Cigarette Papers ***

$0.0122 per 50
or fraction of 50

$0.0315 per 50
or fraction of 50

$0.0193 per 50
or fraction of 50

Cigarette Tubes ***

$0.0244 per 50
or fraction of 50

$0.0630 per 50
or fraction of 50

$0.0386 per 50
or fraction of 50

Large Cigarettes
(6 ½ “ or less long)

Large Cigarettes *
(More than 6 ½ “ long)

* If more than 6 ½ inches in length, large cigarettes are taxable at the rate prescribed for small cigarettes, counting each 2 ¾ inches,
or fraction thereof, as one small cigarette.
** The tax rate is set forth per pound and a prorated tax at the same rate applies to all fractions of a pound.
*** If more than 6 ½ inches in length, the cigarette papers or cigarette tubes shall be taxable at the rate prescribed for that product,
counting each 2 ¾ inches, or fraction thereof, as one cigarette paper or cigarette tube, as appropriate.

You are allowed a credit against your total floor stocks tax of up to $500. However, controlled groups are eligible for
only one credit for the entire group. The credit may be divided equally among the members or apportioned in any
other manner agreeable to the members.
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E. Filing the tax return
1. You may obtain TTB Form 5000.28T09, 2009 FLOOR STOCKS TAX RETURN - Tobacco Products and Cigarette
Papers and Tubes, from the TTB web site, by e-mail, or by calling us (see below). A return must be filed even if
your net tax due is zero.
2. Your 2009 Floor Stocks Tax Return must be postmarked and the taxes paid no later than July 31, 2009.
Your payment must be in the form of a check or money order and sent with TTB Form 5000.28T09, unless you
are required to file Federal tobacco excise taxes by electronic funds transfer (as may be required for
manufacturers or importers – see regulations in 27 CFR Parts 40 and 41). You may elect to pay this tax by
electronic funds transfer even if not required to do so. See www.ttb.gov or contact us (see below) for instructions
for payment by electronic funds transfer.
Send your tax return and payment (made payable to ALCOHOL AND TOBACCO TAX AND TRADE BUREAU)
to:
Alcohol and Tobacco Tax and Trade Bureau
2009 Floor Stocks Tax
P. O. Box 790208
St. Louis, MO 63179-0208
3. You may file a consolidated return if all locations (including places of business, stores, and warehouses) have the
same employer identification number. If you file one consolidated return, attach a list of the additional locations to
your return. Provide in the list, the name and address of the other locations, and the portion of the $500 tax credit
allotted to each location. You also have the option of filing a separate return for each location.
4. If you are a member of a controlled group, and you have your own employer identification number, you must file a
separate tax return. A “controlled group” is any group of corporations or non-incorporated businesses that have
common ownership interests. Generally, a business is considered to be part of a controlled group if more than
50 percent of the business is either owned by, or in common with, another business. You may take the tax credit,
if all or part of the credit is apportioned to you as a member of the controlled group.
F. Maintaining records
1. You must keep your records in support of the return for 3 years from the date that you file the return, or until
July 31, 2012, whichever date is later. The required records include: (a) a copy of your inventory, (b) your tax
computations, (c) names, addresses, and employer identification number of all controlled group members, if
applicable, (d) a copy of your floor stocks tax return, (e) a list of locations covered by the tax return, and, if
applicable, (f) a copy of any approved alternate method or procedure. Keep your inventory records at your
principal place of business.
2. If your inventory records or tax calculation records contain an error that resulted in an overpayment of tax, you
can file a claim for refund. If your inventory or tax calculation records contain an error that resulted in an
underpayment of tax, you must file an additional tax return on which you show and pay the additional tax, interest,
and any applicable penalties. Claim forms and instructions are available from our web site, by e-mail or by calling
us (see below).
G. Contact TTB for more information
The above instructions supplement the instructions provided on TTB Form 5000.28T09 – 2009 Floor Stocks Tax
Return. Regulations in 27 CFR Part 46 will provide the specific rules for persons affected by the floor stocks tax
requirements. Should you have questions please access the TTB web site (www.TTB.gov) and look for floor stocks
tax information; write to us via e-mail at [email protected]; or call or write the TTB National Revenue Center,
550 Main Street, Room 8002, Cincinnati, Ohio 45202 - 5215, telephone toll free (877) 882-3277 or (513) 684-3334.

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