The Georgia House and Senate have both approved a new law that would change nonparticipating manufacturers’ (non-signatories to the 1998 tobacco Master Settlement Agreement) responsibilities for making escrow payments for cigarette sales in the state.  The bill awaits the Governor’s signature.

Most notably, the law would change the definition of “units sold” for purposes of calculating nonparticipating manufacturers’ escrow payment obligations.  Under current law, nonparticipating manufacturers make escrow payments for cigarettes on which state excise taxes have been paid and which bear the state excise tax stamp.  Under the proposed change, nonparticipating manufacturers would be required to pay escrow for all cigarettes sold in the state “on packs required to bear a tax stamp.”  In other words, unless the cigarettes are exempt from state taxation (for example, under federal statutes or the U.S. Constitution), escrow is due.  Nonparticipating manufacturers would thus even be required to pay escrow for contraband cigarettes illegally trafficked into the state.

The bill would also require the following:

  • Nonparticipating manufacturers must ensure that the principal balance in their escrow accounts “must always be maintained so that both the face value and the cost basis of the account are each equal to or greater than the accumulated principal deposits.”
  • Require importers to bear joint and several liability for escrow obligations.
  • Require quarterly escrow payments.
  • Nonparticipating manufacturers must post a bond in an amount greater than $50,000, or the highest amount of escrow owed in Georgia by the manufacturer during last 12 quarters.

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