N.Y. Comp. Codes R. & Regs. tit. 20 § 74.3 : DEPARTMENT OF TAXATION AND FINANCE — Franchise and Certain Business Taxes — Cigarette Tax, Cigarette Marketing Standards And Tobacco Products Tax — Cigarette Tax — Imposition Of Cigarette Taxes — Affixation and cancellation of cigarette stamps

Tax Law, §§ 471, 472(1), 473, 475 and 481(2)

(a)

(1) In general, unstamped packages of cigarettes are introduced into New York State primarily by manufacturers of cigarettes and by dealers having exclusive distribution privileges. While the mere possession of cigarettes to be sold within the State brings with it a presumption of a taxable event, persons who introduce cigarettes into the New York State market, for sale therein, may do so without subjecting themselves to such presumption and without violating any provision of the Tax Law or this Title, provided the cigarettes are:

(i) transported in the State by way of common carrier only;

(ii) stored, if necessary, in bonded or public warehouses; and

(iii) sold exclusively to licensed cigarette agents who shall affix and cancel the cigarette tax stamps.

Dealers and manufacturers, other than agents, in possession of unstamped packages of cigarettes, except as provided herein or elsewhere in this Title, may be held liable for the cigarette tax and for violation of the Tax Law and this Title.

(2) Licensed cigarette agents may possess unstamped packages of cigarettes for taxable sales in the State until such time as the cigarettes at issue are first offered for sale. Every licensed cigarette agent must affix to each package of cigarettes, cigarette tax stamps evidencing the payment of the cigarette tax and must cancel such stamps prior to the time such cigarettes are offered for sale or otherwise disposed of, unless proper stamps have been affixed to such packages and cancelled prior to the time when the agent received them or unless such cigarettes are exempt from tax as provided for in this Title.

(i) Stamps must be affixed to each individual package of cigarettes, as distinguished from cartons or large containers, in an aggregate denomination not less than the amount of tax upon the contents therein. Stamps must be affixed to the bottoms of such packages in such a manner as to be clearly visible to subsequent purchasers. Other than the design of the package itself or the cancellation required herein, no other stamp, label, decal, mark or sign shall be affixed to or displayed on the bottom of a package of cigarettes without prior written approval from the Department of Taxation and Finance. Such approval will be given only to licensed cigarette agents who agree to purchase such indicia from persons who manufacture cigarette tax stamps pursuant to contracts entered into under the provisions of section 74.2 of this Part and provided such indicia is acceptable to the department as to color and design. All cigarette tax stamps must be cancelled in ink with identification numbers assigned to each licensed agent and such stamps may be cancelled prior to the time when they are affixed to individual packages. In no event shall anything displayed anywhere on a package of cigarettes, other than the cigarette tax stamps themselves, resemble the cigarette tax stamps prescribed by the Commissioner of Taxation and Finance.

(ii) The Department of Taxation and Finance may prescribe the machinery, equipment or other means by which cigarette tax stamps are affixed and cancelled. Further, the department reserves the right to allow for the affixation and cancellation of such stamps by way of metering machines, subject to such stipulations as it may prescribe.

(3) Custom stamping. In general, the department does not allow the practice of custom stamping; that is, the affixing of cigarette tax stamps by one agent for or on behalf of any other agent. Accordingly, in addition to affixing stamps on packages of cigarettes owned by another agent, custom stamping also includes the sale of stamped packages of cigarettes by one agent to another agent. However, with prior written authorization, the department may permit interagent sales of stamped packages of cigarettes in limited circumstances. For example, an unforeseen depletion in stock of a given brand of cigarettes or the limited availability of an off-brand of cigarettes might necessitate interagent sales. While such authorization will not be unreasonably withheld by the department, the extent of such interagent sales may affect agent-status for purposes of the Cigarette Marketing Standards Act (see section 82.1 of this Title).

(b)

(1) As compensation for an agent's services and expenses in affixing stamps showing payment of tax in the amount of $4.35 for each 20 cigarettes, or fraction thereof, plus for packages in excess of 20 cigarettes, $1.0875 for each additional five cigarettes or fraction thereof, each agent is allowed commissions computed on the par value thereof. In the case of stamps representing payment of State tax only, and in the case of joint stamps showing payment of both State tax and New York City tax, the par value for purposes of this paragraph shall be deemed to mean the face value of such stamps representing payment of State cigarette tax only at the rate imposed by law. The rates of such commissions are as follows:

(i) on the par value of stamps evidencing payment of the State tax (including joint stamps) not exceeding $5,611,200 purchased during each calendar year, a commission of .3696 percent with reference to so much thereof as represents the par value of separate stamps showing payment of the State tax only and .4071 percent with reference to so much thereof as represents the par value of joint stamps; and

(ii) on the par value of stamps evidencing payment of the State tax (including joint stamps) in excess of $5,611,200 purchased during each calendar year, a commission of .2625 percent with reference to so much thereof as represents the par value of separate stamps showing payment of the State tax only and .2893 percent with reference to so much thereof as represents the par value of joint stamps.

(2) Such commissions shall be deducted and retained by the licensed cigarette agent from the purchase price of the stamps at the time payment is made therefor.

(3) For the applicable rates of commissions allowed by the City of New York as computed on the city par values and the city rate threshold, see chapter 13 of title 11 of the New York City Administrative Code and the city regulations adopted pursuant thereto.

(c)

(1) Every wholesale and retail dealer of cigarettes, other than an agent, must immediately upon receipt of any cigarettes at such dealer's place of business mark, in ink, on each unopened box, carton or other container of cigarettes the word "received" and indicate thereon the year, month, day and hour. The dealer shall also sign such dealer's name in verification of the date and time of receipt.

(2) Additionally, every retail dealer, other than an agent, must open each box, carton or container of cigarettes (other than individual packages) within 24 hours after their receipt, as evidenced by the date and time subscribed pursuant to paragraph (1) of this subdivision, and, prior to offering for sale or selling such cigarettes, the retail dealer must examine each individual package contained therein for the purpose of ascertaining whether or not each package has affixed thereon a proper cigarette tax stamp. Unless specifically provided for otherwise in this Title, if unstamped or improperly stamped packages of cigarettes are discovered, the retail dealer must immediately notify the dealer from whom the cigarettes were purchased. Such dealer, upon notification, shall retrieve the unstamped or improperly stamped packages in question and replace such packages with packages upon which stamps have been properly affixed. Any wholesale dealer which retrieves unstamped or improperly stamped packages shall in turn, notify its supplier and shall be given the same consideration by its supplier as that afforded the retail dealer.

(3) Whenever any cigarettes are found in the place of business of a wholesale or retail dealer, other than an agent or other than as provided for in this Title, without cigarette tax stamps being affixed and cancelled on individual packages or without being marked as having been received within the preceding 24 hours, it shall be presumed that such cigarettes are kept there in violation of the provisions of article 20 of the Tax Law and this Title.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 74.3