Recommend Our Site to Your Friends!

Print This Page

In order to raise revenues to offset some of the tax breaks in the Taxpayer Relief Act of 1997, Congress enacted increases in the excise taxes that apply to tobacco products.

New tax rates will apply to tobacco products and cigarette papers and tubes "removed" after December 31, 1999 and December 31, 2001.

A floor stocks tax will apply to retailers holding tobacco products and cigarette papers on the tax increase dates, January 1, 2000 and January 1, 2002. The floor stocks tax will be the difference of the tax determined under the old tax rate and the tax determined under the new tax rate.

A credit of $500 will be allowed against the amount of floor stocks tax imposed, but not more than the amount of tax for the tax increase date.

The tax is to be paid on or before April 1, following the tax increase dates, in a manner to be prescribed by the IRS.

I am not including the details of the excise tax because it may not apply to you. If you are a retailer that sells tobacco products and/or cigarette papers, you should note on your calendar to review your situation with your tax advisor on the tax increase dates to see if it does apply at those times.

For more articles and information about new tax developments, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.