Tobacco Tax Overview
|Tobacco tax program:
|Tobacco tax program tip lines:
||503-947-2106 (Salem) |
||1-866-840-2740 (toll-free from an Oregon prefix)|
Oregon Department of Revenue
Tobacco Compliance Unit
955 Center Street NE
Salem OR 97301-2555
|The tobacco tax program |
Tobacco has been taxed in Oregon since 1966, but not everyone is paying the tax. The Department of Revenue (DOR) has a team of agents that contact retailers and distributors of cigarettes and other tobacco products. The agents:
- Inspect tobacco products and invoices;
- Ensure the proper tobacco taxes are being paid;
- Explain the state's tobacco tax laws; and
- Educate and assist retailers so they can comply with state tobacco tax laws.
Tobacco tax revenues fund programs for Oregonians
Cigarette and other tobacco taxes are used to fund many programs for Oregonians:
- Police and fire services;
- Parks and other public services;
- The Oregon Health Plan;
- Senior citizens transportation services; and
- Tobacco use reduction.
Cigarette and other tobacco tax distribution, 2007-2009
|Oregon Health Plan
|Tobacco use reduction act
|What is a cigarette? |
Cigarettes are defined by law (ORS 323.010).
- Contains nicotine;
- Is intended to be burned;
- Consists of any tobacco rolled or wrapped in paper or in anything other than tobacco; and
- Is offered or sold as a cigarette.
Who must pay cigarette tax?
Anyone—retailers, manufacturers, distributors, and consumers—who obtains a cigarette with the intent to distribute, sell, or purchase it for individual use in Oregon must pay tobacco tax to DOR.
How are cigarettes taxed?
Retailers of cigarettes in Oregon, by law, must possess and sell only Oregon-stamped cigarette packs. Always purchase cigarettes from a licensed distributor. The distributor must affix a tax stamp to each pack of cigarettes. The distributor purchases tax stamps directly from DOR.
Anyone who purchases cigarettes without Oregon tax stamps—over the internet or some other source—must pay cigarette tax to the state. They are required to file a monthly Cigarette Consumer Tax Return to report all purchases of unstamped cigarettes.
As a retailer, should I become a licensed distributor?
If you intend to buy untaxed cigarettes, you will need to first apply for and obtain a distributor's license. With a DOR-issued license, you can purchase Oregon tax stamps and affix them to every pack of cigarettes. To obtain an application packet, contact DOR by calling one of the phone numbers listed at the top of the page.
Retailers and distributors are mandated by law to keep specific cigarette-related records for a five-year period.
|State laws define "tobacco products." For a printed copy, call the tobacco tax program at one of the phone numbers listed at the top of the page. |
"Tobacco products" mean cigars, cheroots, stogies, periques, granulated, plug cut, crimp cut, ready rubbed and other smoking tobacco, snuff, snuff flour, moist snuff, cavendish, plug and twist tobacco; fine cut and other chewing tobaccos, shorts, refuse scraps, clippings, cuttings and sweepings of tobacco and other kinds and forms of tobacco, prepared in such manner as to be suitable for chewing or smoking in a pipe or otherwise, or both for chewing and smoking, but shall not include cigarettes as defined in ORS 323.010(1). (ORS 323.500)
Who must pay tobacco product tax?
Distributors, common carriers/sub-jobbers, retailers, and consumers must pay tax on tobacco products.
How are tobacco products taxed?
As a retailer, your responsibility is to purchase tobacco products from a licensed distributor. The distributor pays the Oregon tax.
Distributors must be licensed by DOR for each place of business where they, or sub-jobbers, distribute other tobacco products. The Oregon tobacco tax rate:
- Cigars – are taxed on 0.65 percent of the purchase price paid on untaxed cigars except that the maximum tax on cigars that cost $0.77 or more “each” is limited to $0.50 per cigar.
- Moist Snuff – the tax is $1.78 per ounce except that the minimum tax paid per retail unit is $2.14 per unit. This begins on January 1, 2010.
- All Other Tobacco Products - are taxed on 0.65 percent of the purchase price paid on untaxed tobacco products.
The tax is imposed when the distributor:
Consumers who buy other tobacco products—via the internet or some other source—must pay the Oregon tax if it was not previously paid. A quarterly tax report that identifies purchases of untaxed tobacco product must be filed with DOR. These forms may be obtained by calling one of the phone numbers at the top of the page.
- Brings (or has another company or individual bring) tobacco products for sale, storage, use, or consumption into Oregon;
- Makes, manufactures, or fabricates tobacco products in Oregon that will be sold, stored, used or consumed in Oregon; or
- Ships or transports tobacco products to retail dealers in this state, to be sold, stored, used, or consumed by those retail dealers.
State law requires every retail dealer and sub-jobber to keep invoices of other tobacco products for five years.
"Every retail dealer and subjobber shall procure itemized invoices of all tobacco products purchased. The invoices shall show the name and address of the seller and the date of purchase. The retail dealer and sub-jobber shall preserve a legible copy of each such invoice for five years from the date of purchase. Invoices shall be available for inspection by DOR or its authorized agents or employees at the retail dealer's or subjobber's place of business." (ORS 323.540)
DOR field agents conduct cigarette and other tobacco tax inspections at retail outlets. Agents seize cigarettes if they determine that the Oregon tax has not been paid on products. Agents will take an inventory of untaxed other tobacco products for the assessment and collection of tax due.
Upon entering a business, an agent will:
What will be seized
- Identify him/herself by presenting a business card.
- Ask to speak with the owner or manager (may be telephoned if necessary).
- Explain the purpose of the visit.
- Explain that cigarettes and other tobacco products behind the counter and in any backroom areas will be inspected (when possible, an employee of the business should be present when back rooms or offices are inspected).
- Ask to examine cigarettes to ensure the proper stamp is affixed.
- Ask to examine receipts and invoices for other tobacco products and cigarettes to verify that tax has been paid.
- Issue a Demand to Examine Books and Records in the event that receipts or invoices are not available. Based upon the particular situation, responses can be faxed, mailed, or reviewed in person during a follow-up field call at the inspecting agent's discretion.
Inspectors seize cigarettes if they find any of the following:
How to redeem seized cigarettes
- No tax stamp affixed;
- A tax stamp for a state other than Oregon affixed;
- A counterfeit tax stamp affixed;
- U.S. tax-exempt export-only cigarettes ("gray market");
- Single cigarettes (loose—not packaged with tax-paid indication).
If cigarettes are seized, the cigarettes may be redeemed within 60 days from the date of seizure by paying:
"Gray market" products (manufactured and packaged for export only) are not redeemable.
- The tax due;
- A penalty of 100 percent of the tax; and
- Administrative costs.
Paying the tax, penalty, and administrative costs does not relieve the tax evader from any fines or from imprisonment for violating the tax laws.