What is and is not a cigarette has become increasingly difficult as states attempt to subject more and more cigars to their generally higher cigarette tax rate.  To clarify these issues, in November, the Tennessee Department of Revenue has recently issued a guidance document (“Notice #11-15”)[1]  to assist wholesalers and manufacturers in ensuring that tobacco products, particularly little cigars, are taxed correctly.

While Notice #11-15 is tailored to “little cigars,” it provides useful guidance detailing the types of cigar products (i) that  meet the definition of “cigarette” under the Tobacco Tax Law and, therefore, are taxed at the higher cigarette tax rate and (ii) those that do not meet the definition of “cigarette” and, therefore, are subject to the 6.6% tax on other tobacco products.  As stated in Notice #11-15, “[r]olled, shredded, or cut tobacco that is wrapped in homogenized tobacco wrapper…only meets the definition of ‘cigarette’ for Tobacco Tax purposes if it is both within customary cigarette sizes and it is marketed in cigarette type packages.”

The Department of Revenue considers a number of factors in determining whether a particular tobacco product is marketed in a cigarette type package.  Factors which indicate that a tobacco product is marketed in cigarette type packages include, but are not limited to, the following:

  • Product is sold in soft packs, hard packs, flip-top boxes, or other cigarette-type boxes;
  • Carton is lined in foil;
  • Product is sold in packs containing 20 or 25 sticks;
  • Sticks are arranged in three rows; and
  • The product is marketed or advertised to consumers as a cigarette.  Id.

On the other hand, factors which indicate that a tobacco product is not marketed in cigarette type packages include, but are not limited to, the following:

  • Sticks are individually wrapped;
  • Sticks are individually banded;
  • Carton contains less than 20 sticks per box;
  • The product is packaged in a container other than a soft pack, hard pack, flip-top box, or other cigarette-type box.  Id.

Troutman Sanders has extensive experience in each state’s tobacco laws and in assisting clients with determining the rate of tax applicable to all classes of tobacco products.

Contributor: Paige Fitzgerald

For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.

[1] Notice #11-15 is available on the Tennessee Department of Revenue’s website at http://www.tn.gov/revenue/notices/tobacco/11-15.pdf .