Code Section 5702
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 5702(d) | 7/6/2012 | Moving Ahead for Progress in the 21st Century Act | Expand the definition of a tobacco manufacturer to include businesses making available roll-your-own cigarette machines for consumer use | 94 |
| 5702, 5712, 5713, 5721, 5722, 5723, and 5741 |
2/4/2009 | Children’s Health Insurance Program Reauthorization Act of 2009 | Permit, Inventory, Reporting, Recordkeeping Requirements for Manufacturers and Importers of Processed Tobacco | negligible |
Expand the definition of a tobacco manufacturer to include businesses making available roll-your-own cigarette machines for consumer use
Explanation of Provision
The Act amends the definition of manufacturer of tobacco products to include any person who for commercial purposes makes available machines capable of making tobacco products for consumer use. This includes making a machine available for consumers to produce tobacco products for personal consumption or use. The addition of this provision is not intended to change the treatment of such machines under present law. A person who sells a machine directly to a consumer at retail for the consumer’s personal home use is not a manufacturer of tobacco products under the provision if the machine is not used at a retail establishment and is designed to produce only personal use quantities. For purposes of imposing the tax liability, the person making the machine available for consumer use is deemed to be the person making the removal with respect to any tobacco products manufactured by the machine.
Permit, Inventory, Reporting, Recordkeeping Requirements for Manufacturers and Importers of Processed Tobacco
Explanation of Provision
The provision creates a new category of manufacturers and importers who are subject to regulation but not to Federal excise tax. Under the provision, manufacturers and importers of “processed tobacco” are subject to the present-law permit, inventory, reporting, packaging, and recordkeeping requirements. Processed tobacco is any tobacco other than tobacco products.15
A manufacturer of processed tobacco is any person who processes any tobacco other than tobacco products, and an importer includes an importer of processed tobacco. However, the processing of tobacco does not include the farming or growing of tobacco or the handling of whole tobacco leaf solely for sale, shipment, or delivery to a manufacturer of tobacco products or processed tobacco. For example, under the provision an importer of “cut rag” tobacco or a leaf processor that manufactures such tobacco is subject to the general permit, inventory, reporting, and recordkeeping requirements of the Code but is not subject to Federal excise tax (unless it also imports or manufactures tobacco products or cigarette papers or tubes).
Under the provision, any person who is engaged in business as a manufacturer or importer of processed tobacco on April 1, 2009 and who submits a permit application within 90 days of the effective date of this provision may continue to engage in such business pending action on their permit application. Such persons will be subject to the requirements of this provision to the same extent as if the person was a permit holder while final action on the permit application is pending.
15-Sec. 5702(c) defines tobacco products as cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco.
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