Kentucky Legislative News

(Letter received from Commissioner William M. Cox, Sr - Department of Revenue on April 24, 2008)

Finance and Administration Cabinet
Department of Revenue
501 High Street, Frankfort, Kentucky  40620
Phone (502) 564-3226
Fax (502) 564-3875

RE: Kentucky Cigarette Tax Stamp Retail Inspection Procedures

Dear Mr. Glockner:

The Department of Revenue (DOR) appreciates the thoughtful attention you and your Association have committed to our joint endeavor to guarantee revenues due the Commonwealth and ensure compliance efforts reflect the concerns and realities of your industry. DOR's understanding of the summation you presented in your April 8, 2008 correspondence as augmented by our April 16th meeting discussions follows (final agreed position shown in parentheses).

Cigarette Tax Stamp Retail Inspections

1) Minimum of 100 packs will be inspected during DOR cigarette tax stamp retail inspections. (All parties concurred.)

2) If it is obvious that a good faith effort has been made to properly stamp the cigarettes DOR will abide by the following guidelines:

  1. If less than 13% of the inspected cigarettes have stamps that all five numbers cannot be read, the packs will be left at the retail location. (All parties agreed that 13% is an acceptable place to start on packs where all five numbers cannot be read. There was additional agreement that the percentage will be reviewed and may be adjusted up or down based on actual findings after 90 days.)
  2. If 13% to 30% of the inspected cigarettes have stamps that all five numbers cannot be read, the packs will be left at the store and a bill will be sent to the offending wholesaler for the 30 cents times the number of packs found to be deficient. (All parties agreed with this process. Issues concerning sales by sub-jobbers and cigarettes sold by a wholesaler that were stamped by another wholesaler were discussed. It was determined that DOR would visit the sub-jobber and obtain the wholesaler information and wholesalers will take up deficiencies from previously stamped product with the stamping wholesaler.)
  3. If over 30% of the inspected cigarettes have stamps that all five numbers cannot be read, the stamping wholesaler will be called and given sufficient time (up to 4 hours) to arrive at the store with a certified check to pay for the stamps or have the cigarettes confiscated. (DOR will not require a certified check; a company check will be acceptable. The stamps need to be affixed on site. DOR staff will have stamps in their possession or the wholesaler may bring stamps with them when they come to the retail location. All parties concurred.)
  4. A wholesaler will be given 3 chances in any calendar year to be called to correct over 30% inspections. After 3 chances, administrative steps will be pursued to revoke their stamping license. (DOR felt the possibility existed that the requirement was too harsh and suggested that 4 occurrences a calendar year, one per quarter, would be allowed. However, should a wholesaler have two occurrences in a calendar quarter the wholesaler will need to submit a written explanation to the Director of Miscellaneous Taxes detailing the corrective actions taken. The Director will then make a recommendation to the Commissioner. The Commissioner then may or may not convene a show-cause hearing on the wholesaler's license. All parties concurred.)

To reiterate, DOR appreciates your involvement and looks forward to working with you and your association as we go forward with the cigarette/other tobacco product tax statutes. If you have any questions prior to our next meeting, please contact me at the address or telephone number listed above or you may contact Jim Oliver at (502) 564-2935

Very truly yours,

William M. Cox, Sr.
Department of Revenue

The Kentucky Tobacco & Candy Association
7014 Hughes Avenue, Crestwood, KY 40014

Phone: ((502) 243-9280 - Fax: (502) 243-9398


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