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Florida ABT Pushes to Amend Florida Wholesale Tobacco Tax Law

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Florida ABT Pushes to Amend Florida Wholesale Tobacco Tax Law

Taxpayers throughout the state of Florida have been in a never ending battle with Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco ("ABT) for several years. The primary issue is a simple one. Should Florida wholesalers be forced to pay an 85% tax on tobacco based on the invoice price, or should the tobacco tax only apply to the tobacco itself? In 2012, a case called Micjo took this issue head on. Ultimately, Micjo was a case that determined that Florida wholesale tobacco tax should not apply to the full invoice and it should only apply to the tobacco while. In other words, charges and items such as federal excise tax and shipping should not be included in the taxable base. To date, there are at least 8 pending cases throughout Florida being litigated on this issue. In addition, there are at least two more cases in which the taxpayer has argued that blunt wraps, or cigar wraps, are not tobacco, by definition, are therefore, not taxable. In Brandy's, a taxpayer received a favorable ALJ opinion spelling out the same.

To combat what have been taxpayer victories, ABT recently decided to fight back. In 2015, ABT has attempted to change Florida law. Specifically in Senate Bill 7074, ABT is attempting to legislate away the Micjo case and amend the law to include the full invoice price as the taxable base. In other words charges for non-tobacco items, such as the federal excise tax and shipping reimbursement charges would be subject to tax under the state's proposal. The amended law will read as follows:

"Wholesale sales price" means the sum of paragraphs (a) and (b): (a) The full price paid by the distributor to acquire the tobacco products, including charges by the seller for the cost of materials, cost of labor and service, charge for transportation and delivery, the federal excise tax, and any other charges, even if the charge is listed as a separate item on the invoice paid by the established price for which a manufacturer sells a tobacco product to a distributor, exclusive of any diminution by volume or other discounts, including discount provided to a distributor by an affiliate. (b) The federal excise tax paid by the distributor on the tobacco products, if the tax is not included in the full price under paragraph (a).

On the blunt wraps front, the state is considering an amendment of the definition of a tobacco product to include 'wraps' made in whole or in part from tobacco.

As we have been heavily involved in the litigation, it almost seems as though the state is targeting our victories. The state is also slanting its proposal to combat a tax loss by the state. I am not sure how a tax loss could result from something that was never taxable to begin with but that is the state's spin on the world. There are several wholesale tobacco distributors that are attempting to fight the proposed change. If you or your client are against the proposal then it is worthwhile to reach out to your representative. While it will unquestionably increase the taxes and costs for consumers in Florida, a legislative change rather than a war in court seems like the appropriate forum for change. In the past, ABT in Florida has been incredibly litigious rather than turning to the Legislature for change. We will certainly keep our eyes on the law and it is unclear whether the amendment will pass.

Fort Lauderdale Sales Tax Attorney; Fort Lauderdale Sales Tax Audit; Miami Sales Tax Attorney; Miami Sales Tax Audit; Florida Sales Tax Attorney; Florida Sales Tax Audit

About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Donnini's primary practice areas are Florida sales and use tax and multi-state sales and use tax. Mr. Donnini also practices in the areas of alcohol, cigarette & tobacco wholesale tax, Florida motor fuel tax, and Native American taxation. Mr. Donnini earned his LL.M. in Taxation at NYU. or phone at 954-642-9390