The Indiana legislature has drafted specific laws to govern tobacco sales within Indiana. There is a specific section of the Indiana Code exclusively devoted to cigarettes (which expressly excepts cigars). Additionally, there is another area of the code which is devoted to all other “tobacco products” which encompasses: cigars, pipe tobacco, snuff, etc. This article focuses on the laws governing taxation and sales of “tobacco products”.
Under Indiana law there are two types of classifications of merchants for selling tobacco products. The first is a retailer. Retailers sell to ultimate consumers, that is, for example, the average joe or armchair aficionado looking to purchase and smoke a cigar for leisure.
To lawfully sell tobacco products to ultimate consumers a business and/or person needs to obtain a proper certification from the State of Indiana. Retailers are responsible for collecting a sales tax from ultimate consumers.
The second type of tobacco merchant classification is called a distributor. Under the code distributors are persons and/or businesses that perform any of the following actions:
Manufacture, sell, barter, exchange, or distribute tobacco products (cigars) in Indiana to retail dealers for the purpose of resale;
Purchase tobacco products (cigars) directly from a manufacturer of tobacco products (cigars); or
Purchase for resale tobacco products (cigars) from a wholesaler, jobber, or distributor outside of Indiana who is not a distributor holding a license issued under this chapter.
To lawfully perform any of the foregoing, a business and/or person needs to obtain proper licensing from the State of Indiana. Additionally, a distributor of tobacco products, including a person who sells tobacco products through an Internet web site, is liable for” a 24% tax on the wholesale value of the tobacco product if they do any of the following:
Bring or cause tobacco products to be brought into Indiana for distribution;
Manufacture tobacco products in Indiana for distribution; or
Transport tobacco products to retail dealers in Indiana for resale by those retail dealers
A distributor is responsible for filing monthly tax returns pertaining to their sales with the Indiana Department of Revenue. Upon each filing they are likely eligible for various tax deductions and credits on their sales.
It is incumbent upon the distributor to register with the State of Indiana and follow the laws and regulations pertaining to taxation and sales of tobacco products. Violation of Indiana tobacco laws carries with it misdemeanor and even felony charges. Accordingly, it is vitally important for businesses and/or individual retailers and distributors to limit their exposure and liability by ensuring they are in compliance with Indiana Law regarding proper licensing, certification, and taxation procedures.
While this article is not intended in anyway to provide any specific legal advice, Attorney Nicholas A. Podlaski of Beers, Mallers, Backs, & Salin LLP 110 W. Berry Street, Suite 1100 Fort Wayne, IN 46802 can provide legal assistance to you if you believe you have a legal question or issue pertaining to tobacco sales in Indiana, tobacco taxation in Indiana, and/or any business law issue. Attorney Podlaski can also provide legal assistance in procuring and/or maintaining any of the aforementioned certifications and/or licensing.