Tax Guide for
Cigarettes and Tobacco Products

Tax Guide for Cigarettes and Tobacco Products

New Information – We are incorporating the Federation of Tax Administrators' (FTA) uniformity reporting standards into cigarette tax reporting. Tobacco products uniformity standards will follow at a later date.

Beginning June 1, 2020

  • Cigarette uniformity reporting standards will be incorporated into our online services system.
  • Cigarette manufacturers, importers, distributors, and wholesalers will be required to report using uniform reporting standards beginning with the May 2020 reporting period, which is due June 25, 2020.

Webpage Updates – We will update our Cigarette and Tobacco Products Online Filing webpages with the new uniformity reporting resources as it becomes available – please check back periodically for updates.

Helping your business succeed is important to us.

Understanding the tax and fee issues specific to cigarette and tobacco products businesses can be time-consuming and complicated, so it is important that you get the information you need in a timely and understandable way, helping you focus on starting and growing your business.

This guide will help you better understand the tax and licensing obligations for retailers, distributors, wholesalers, manufacturers, importers, and consumers of cigarettes and tobacco products.

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Under the California Cigarette and Tobacco Products Tax Law (Revenue and Taxation Code section 30003), "cigarette" is defined as a rolled product for smoking of any size or shape that:

  • Is made of any tobacco, flavored or not, and
  • Has a wrapper made of paper or another material.

Exception: Flavored cigarettes are banned in the United States (see the Industry Topics section for more information). Products wrapped in tobacco or with a cover made mostly of tobacco (for example, cigars) are not cigarettes when they weigh more than three pounds per thousand sticks. Instead, these products are considered tobacco products.

The "tobacco products" definition was amended (Proposition 56, November 2016) under the California Cigarette and Tobacco Products Tax Law (Revenue and Taxation Code section 30121) to include additional tobacco products (identified as "New!" below). Beginning April 1, 2017, the distribution of these newly classified tobacco products are subject to the tobacco products tax. Tobacco products include, but are not limited to:

  • Smoking or pipe tobacco (including shisha)
  • Chewing tobacco
  • Snuff
  • Cigars
  • Little cigars (little cigars were previously considered cigarettes for taxation purposes and required a cigarette tax stamp prior to the passage of Proposition 56; however, as of April 1, 2017, little cigars are taxed as a tobacco product) New!
  • Any product containing, made of, or derived from any amount of tobacco that is intended for human consumption (prior to the passage of Proposition 56, tobacco products, other than cigars, smoking or chewing tobacco, or snuff, had to contain at least 50 percent tobacco) New!
  • Any product containing, made of, or derived from any amount of nicotine that is intended for human consumption and sold with (for a single price) or without a delivery device or system New!
  • Electronic cigarettes or any device or delivery system sold in combination with nicotine (for a single price) New!
  • Any component, part, or accessory of an electronic cigarette that is used during the operation of the device when sold in combination (for a single price) with nicotine (for example, a battery used in the operation of the device sold with nicotine for a single price) New!

Notes

  1. Tobacco products do not include cigarettes. Tobacco products do not include any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes (for example, nicotine patches) when that product is marketed and sold solely for such approved use.
  2. Nicotine does not include any food products as defined in Revenue and Taxation Code section 6359.
  3. Electronic cigarettes do not include delivery devices (for example, eCigarettes or vape pens) sold individually or with a liquid or substance containing 0mg nicotine and are not considered tobacco products for taxation purposes; however, they are subject to retail licensing (see "Expanded Definition of Tobacco Products").

As of June 9, 2016, state law expanded the definition of tobacco products, for cigarette and tobacco products retail licensing purposes, to include:

  • Any product containing, made of, or derived from tobacco or nicotine that is intended for human consumption.
  • Any electronic smoking or vaping device1 that delivers nicotine or other vaporized liquids.
  • Any component, part, or accessory of a tobacco product, whether or not sold separately.

Examples include, but are not limited to, electronic cigarettes, atomizers, vaping tanks or mods, and eLiquids or eJuices.

For more information about the retailer license requirement, see the Getting Started section, under Licenses Required.

1 The California Cigarette and Tobacco Products Licensing Act of 2003 does not affect any laws or regulations regarding cannabis or cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consuming cannabis or cannabis products into the human body. Cigarettes and tobacco products may not be sold at the same location that is licensed as a cannabis business.

The cigarette and tobacco products tax is paid by a distributor upon the distribution of cigarettes and tobacco products in California.

A distribution includes the first sale, use, or consumption of untaxed cigarettes, or untaxed tobacco products in California, and the placing of untaxed cigarettes or untaxed tobacco products into a vending machine or retail stock in California (Revenue and Taxation Code Section 30008).

Two types of excise taxes are collected on cigarettes and tobacco products distributed in California: 1) the cigarette tax, and 2) the cigarette and tobacco products surtaxes. Each tax is described below, according to the type of product sold.

Cigarettes

Cigarettes are subject to both the cigarette tax and the cigarette and tobacco products surtaxes, collectively referred to as cigarette taxes. The taxes are assessed on each cigarette distributed in California.

Cigarette distributors pay the taxes by purchasing cigarette tax stamps from the CDTFA. Distributors are required to affix the tax stamp to each package of cigarettes before distribution. In turn, distributors receive a purchase discount of 0.85 percent of the total tax value per purchase order to help offset the cost of affixing cigarette tax stamps. As of April 1, 2017, the 0.85 percent discount for cigarette tax stamps is capped at the first one dollar ($1.00) in denominated value of the stamp (Revenue and Taxation Code section 30166). Distributors pass the cigarette taxes on to their customers, as part of the retail selling price of the cigarettes. The cost of the cigarette tax stamp includes all of the aforementioned taxes.

Tobacco Products

Other tobacco products, also known as OTP, are subject to the cigarette and tobacco products surtaxes. The CDTFA determines one combined rate annually, which is equivalent to the combined rate of the taxes imposed on cigarettes. The calculation of the rate is based on the wholesale premium brand cigarette price as of March 1 each year, as published by the Tobacco Merchants Association, to be effective during the next fiscal year (July 1 through June 30). The tobacco products tax is imposed upon the distribution of tobacco products and is paid by tobacco products distributors.

A tobacco products distributor is required to calculate the amount of tobacco products tax due by applying the tobacco products tax rate to the wholesale cost of the tobacco products distributed in California and remit the total amounts owed each period.

Tax Rates

Visit the tax rate page to view current and historical cigarette and tobacco products tax rates.

Effective April 1, 2017 (due to Proposition 56, November 2016), the cigarette tax rate increased from $0.0435 to $0.1435 per cigarette. Typically, a pack of cigarettes contains 20 sticks of cigarettes. Using this example, the cigarette tax rate on a pack of 20 cigarettes increased from $0.87 to $2.87.

Of the total two dollars and eighty-seven cents ($2.87) cigarette tax rate per package of twenty (20) cigarettes (or equivalent amount of tobacco products):

  • Two dollars ($2.00) are deposited into the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund (Prop. 56, effective April 1, 2017)
    These funds are to be used for various purposes and programs, including:
    • Increased funding for existing healthcare programs and services,
    • Use prevention programs among all Californians, but particularly the youth, and
    • Medical research for cancer, heart and lung tobacco-related diseases.
  • Fifty cents ($0.50) are deposited into the California Children and Families Trust Fund (Prop. 10, effective January 1, 1999)
    These funds are used for programs that encourage proper childhood development, including:
    • The development of professional and parental education and training,
    • Informed selection of childcare,
    • Development and education of childcare providers, and
    • Research into the best practices and standards for all programs and services relating to early childhood development.
  • Twenty-five cents ($0.25) are deposited into the Cigarette and Tobacco Products Surtax Fund (Prop. 99, effective January 1, 1989)
    These funds may only be used for the following purposes:
    • Tobacco-related health education programs and disease research,
    • Medical and hospital care and treatment of patients who cannot afford those services, and for whom payment will not be made by any private coverage or federal program, and
    • Programs for fire prevention; environmental conservation; protection, restoration, enhancement, and maintenance of fish, waterfowl, and wildlife habitat areas; and enhancement of state and local parks and recreation.
  • Ten cents ($0.10) are deposited into the Cigarette Tax Fund
    • These funds are transferred to the General Fund.
  • Two cents ($0.02) are deposited into the Breast Cancer Fund
    • These funds support breast cancer-related research and breast cancer screening for uninsured women.

Cigarette and tobacco products license fees are deposited in to the Cigarette and Tobacco Products Compliance Fund solely for the purpose of implementing, enforcing, and administering the California Cigarette and Tobacco Products Licensing Act of 2003.

How to Use This Guide

The Getting Started section provides information about the licenses required, registration, renewals, and filing your tax forms online, including a link to our Cigarette and Tobacco Product Online Filing webpage where you will find online filing and uniformity reporting resources.

The Retailer & Wholesaler, Distributor, Manufacturer & Importer, and Consumer sections provide detailed information specific to each person along the cigarette and tobacco products supply chain.

See the Industry Topics and Resources sections for helpful information and references.

If You Need Help

If at any time you need assistance with topics included in this guide or have other related questions, please contact us by telephone or email for assistance. Contact information and hours of operation are available in the Resources section.

If you have suggestions for improving this guide, please contact us by email.

Licenses Required

The Cigarette and Tobacco Products Licensing Act of 2003 (Licensing Act), which took effect in January 2004, requires the CDTFA to administer a statewide program to license all persons engaged in the sale of cigarettes and tobacco products in California: manufacturers, importers, distributors, wholesalers, and retailers. These entities are required to obtain and maintain a license in order to sell cigarettes or tobacco products in California. Distributors, wholesalers, and retailers must obtain a separate license for each location where they will sell cigarettes or tobacco products. These entities may purchase/sell cigarettes and tobacco products only from/to other licensed entities along the supply chain.

Prior to the Licensing Act, the Cigarette and Tobacco Products Tax Law only required distributors of cigarettes to be licensed by the CDTFA for reporting and remitting cigarette taxes. California voters approved Proposition 99 (effective January 1989), the Tobacco Tax and Health Protection Act of 1988, which not only increased the cigarette tax rate, but added an equivalent tax on other tobacco products. As a result, tobacco products distributors are also required to hold a license under the Cigarette and Tobacco Products Tax Law for tax reporting and remitting purposes. In addition, cigarette and tobacco products wholesalers are required to hold a license under the Cigarette and Tobacco Products Tax Law for information reporting purposes.

Licenses issued under the Licensing Act and the Cigarette and Tobacco Products Tax Law are required in addition to the seller's permit for sales tax or other licenses that may be required. Depending on your business operations, you may be required to obtain more than just a California cigarette and tobacco products license. Before registering for a Cigarette and Tobacco Products Retailer's License, retailers are advised to check with their local health department, cities, and counties for any local tobacco licensing requirements, which may be more restrictive. Visit the CalGold website for help with permit and licensing requirements by local authorities as well as other state or federal authorities.

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Effective January 1, 2017, any retailer that sells any product included in the expanded definition of tobacco products is required to hold a Cigarette and Tobacco Products Retailer's License from the CDTFA in order to engage in the retail sale of these products. This licensing requirement does not apply to cannabis or cannabis products. See our Overview section for the tobacco products included in the expanded definition.

Please note: if a retailer sells non-nicotine vape liquids and no other cigarettes or tobacco products, the retailer is required to hold a valid retailer's license. However, if a retailer sells "tobacco paraphernalia," as defined under Business and Professions Code section 22962(a)(2), and does not sell cigarettes or tobacco products, the retailer is not required to hold a valid retailer's license. Generally, "tobacco paraphernalia" includes, but is not limited to, items that do not contain tobacco or nicotine such as cigarette papers or wrappers, pipes, and cigarette rolling machines.

You may need a seller's permit as well as multiple cigarette and tobacco products licenses. For example:

  • If you are a distributor that intends to sell directly to consumers, in addition to a seller's permit and distributor's license, you will also need a retailer's license.
  • If you are a manufacturer/importer that intends to sell to wholesalers and retailers, in addition to a seller's permit and manufacturer/importer's license, you will also need a distributor's license.
  • If you are a wholesaler that intends to sell directly to consumers, in addition to a seller's permit and wholesaler's license, you will also need a retailer's license.

Please note: you must have a distributor's license before you purchase any untaxed cigarettes or tobacco products. A person may only hold a distributor's license or wholesaler's license, not both. The Cigarette and Tobacco Products Tax Law license may often be referred to as your "tax account" or "tax reporting account", which is for reporting requirements, such as filing tax returns, reports, and schedules.

Permit, License, and Account Requirements

If you… Sales &
Use Tax Law
Cigarette and Tobacco Products Licensing Act Cigarette and Tobacco Products Tax Law
Sell cigarettes and/or tobacco products at retail Seller's Permit Cigarette and Tobacco Products Retailer's License N/A
, vaporizers, nicotine liquid, etc. at retail Seller's Permit Cigarette and Tobacco Products Retailer's License N/A
Sell cigarettes at wholesale Seller's Permit Cigarette and Tobacco Products Wholesaler's License[2] Cigarette Wholesaler's License[2]
Import cigarettes from outside
of the United States
Seller's Permit Cigarette Manufacturer's/Importer's License Cigarette Distributor's License[3]
Manufacture cigarettes Seller's Permit Cigarette Manufacturer's/Importer's License Cigarette Manufacturer's License
Stamp and distribute cigarettes to wholesalers and/or retailers Seller's Permit Cigarette and Tobacco Products Distributor's License[3] Cigarette Distributor's License[3]
Sell tobacco products at wholesale Seller's Permit Cigarette and Tobacco Products Wholesaler's License[2] Tobacco Products Wholesaler's License[2]
Import and/or manufacture tobacco products Seller's Permit Tobacco Products Manufacturer's/Importer's License Tobacco Products Manufacturer's/Importer's License
Distribute tobacco products Seller's Permit Cigarette and Tobacco Products Distributor's License[3] Tobacco Products Distributor's License[3]
Ship/deliver cigarettes originating outside California into California N/A N/A Cigarette Hauler Account
Transport on land more than 400 unstamped cigarettes and/or untaxed tobacco products valuing $25.00 or more within California N/A N/A Cigarette and Tobacco Transporter's Permit
Purchase unstamped (untaxed) cigarettes and/or untaxed tobacco products for personal use or consumption. "Untaxed" includes both excise and use taxes. N/A N/A Cigarette and Tobacco Products Internet Excise/Use Tax Account

Notes

  1. There are additional requirements under Federal Law, the Jenkins Act (Amended by the PACT Act), if you ship cigarettes and smokeless tobacco into California. See the PACT Act information below under Registration.
  1. The California Cigarette and Tobacco Products Licensing Act of 2003 does not affect any laws or regulations regarding cannabis or cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consuming cannabis or cannabis products into the human body. Cigarettes and tobacco products may not be sold at a location that is licensed as a cannabis business.
  2. Not allowed if licensee is a distributor. A Wholesaler's license may not be issued to an out-of-state person selling at an out-of-state location.
  3. Not allowed if licensee is a wholesaler.

Register online with us for your cigarette and tobacco products license, a seller's permit, and most other permits, licenses, or accounts. Online registration is the convenient way to register and is available 24 hours a day. Upon registration, you will be required to pay the applicable license fees.

Federal Registration Requirements under the Jenkins Act (Amended by the PACT Act)

The federal Prevent All Cigarette Trafficking (PACT) Act (effective June 29, 2010) amended the federal Jenkins Act (15 U.S.C. §375-378). These amendments require any person who sells, transfers, or ships for profit; advertises, or offers taxed or untaxed cigarettes or smokeless tobacco products (such as chew or snuff) in interstate commerce into California, or into or through Indian country of an Indian tribe located within California's borders, to register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the CDTFA. For PACT Act filing requirements, see Tax Return, Report, Schedule Filings and Payments below. For more detailed information about the PACT Act, see our Distributor and Industry Topics sections.

For ATF registration, visit the ATF PACT Act webpage.

If you are applying for a distributor's license, you will be required to post a minimum $1,000 security deposit before the license can be issued (Revenue and Taxation Code section 30141 and 30142; Regulation 4018.

There are no security deposit requirements for a retailer's, wholesaler's, or manufacturer's/importer's license.

All licensees registered under the California Cigarette and Tobacco Products Licensing Act of 2003 must renew their license(s) annually. A license is not assignable or transferable.

Remember, you may not sell cigarettes and/or tobacco products at any location without a valid cigarette and tobacco products license for that location. For more information about online license renewals, please see our frequently asked questions.

License Periods

Retailers

A retailer's license is valid for a 12-month period. A retailer that adds an additional retail location will renew the retailer's license for that retail location based on a 12-month period beginning in the month that the retailer's license for the first retail location was obtained.

Wholesalers and Distributors

A wholesaler or distributor's license is valid for one calendar year (January through December).

Renewal Reminders

Approximately 60 days prior to your license expiring, the CDTFA will send you an email and paper notice reminding you to renew your license. The CDTFA will send you another reminder email notice approximately 30 days prior to your license expiring. If you do not renew your license before your license period expires, the CDTFA will send you a final email notice indicating that your license has expired and the date it expired. It is important to renew your license before it expires, as you must have a valid license for each location in order to purchase or sell cigarettes and/or tobacco products at each location.

How to Renew

Please note: If you have an existing User ID, Password, or Express Login, these credentials will not be valid in the new online services system on and after August 12, 2019. You will need to sign up now to create a new Username and Password. Then, login with these new credentials to renew your license in the new online services system beginning August 12, 2019. It is free to use the online system. The only cost is your license(s) renewal fee.

License Renewal Fee

Cigarette and tobacco products distributors, wholesalers, and retailers must pay an annual fee per location to renew their license. Cigarette and tobacco products manufacturers and importers pay a one-time administration/license fee. License fees are not prorated.

Visit the tax rate page to view current and historical cigarette and tobacco products tax rates and license fees for retailers, wholesalers, distributors, manufacturers, and importers.

Important Note: We are incorporating the Federation of Tax Administrators' (FTA) uniformity standards into cigarette tax reporting. Beginning with the May 2020 reporting period (due June 25, 2020), tax forms filed by cigarette manufacturers, importers, distributors, and wholesalers will include the FTA uniformity reporting standards. Please visit our Cigarette and Tobacco Products Online Filing webpage for resources to help you prepare for this transition.

Go paperless! File your return/report using our new online services system.

If you already created a new Username and Password, Login with these new credentials and start filing online using our new online services system. If you have an existing User ID, Password, or Express Login, it will not be valid in the new system on and after August 12, 2019. You will need to sign up for a new Username and Password to file, pay, renew your license, or view your account in the new online services system.

Visit our Cigarette and Tobacco Products Online Filing webpage for online filing guidelines, filing templates, resources, and filing FAQs. Visit our Online Services webpage for the latest information about our new online services system expansions.

All applicable cigarette and tobacco products tax returns, reports, and schedules listed below must be filed even if no transactions or deliveries were made during the reporting period. You may be required to file other returns or reports with the CDTFA. All records must be kept and maintained at the taxpayer's licensed premises in California, unless another location has been approved by the CDTFA.

Due Date: Unless otherwise specified, all tax returns, reports, and/or schedules listed below must be filed on or before the 25th day of the calendar month following the reporting period. For example, a return, report, or schedule for the monthly reporting period of April 2018 would be due on or before May 25, 2018. A remittance of the amount of tax due must be submitted with each return or report.

Cigarettes (For current reporting periods through April 2020)

Cigarettes – FTA Uniformity Versions (For May 2020 reporting periods and after) - Coming Soon!

  • CDTFA-501-CD, Cigarette Distributor/Importer Tax Report
    • CDTFA-810-CTI, Cigarette Tax Receipt Schedule
    • CDTFA-810-CTF, Cigarette Tax Disbursement Schedule
      • CDTFA-810-CTE, Instructions for Preparing Cigarette Tax Schedules
  • CDTFA-413-ACTS, Cigarette Distributor's Report of Returned Stamps

Tobacco Products

Cigarettes (For current reporting periods through April 2020)

Under Revenue and Taxation Code section 30188, every licensed cigarette wholesaler in this state is required to file a report showing their cigarette inventory activity.

Cigarettes – FTA Uniformity Versions (For May 2020 reporting periods and after) - Coming Soon!

Under Revenue and Taxation Code section 30188, every licensed cigarette wholesaler in this state is required to file a report showing their cigarette inventory activity.

  • CDTFA-501-CW, Cigarette Wholesaler's Report
    • CDTFA-810-CTI, Cigarette Tax Receipt Schedule
      • CDTFA-810-CTE, Instructions for Preparing Cigarette Tax Schedules

Tobacco Products

Licensed tobacco products wholesalers do not have a tobacco reporting requirement, but must maintain records.

Cigarettes (For current reporting periods through April 2020)

  • CDTFA-501-CM, Cigarette Manufacturer's Tax Return of Taxable Distributions in California

Cigarettes – FTA Uniformity Versions (For May 2020 reporting periods and after) - Coming Soon!

  • CDTFA-501-CM, Cigarette Manufacturer's Tax Return of Taxable Distributions in California
    • CDTFA-810-CTF, Cigarette Tax Disbursement Schedule
      • CDTFA-810-CTE, Instructions for Preparing Cigarette Tax Schedules

Tobacco Products

  • CDTFA-501-TIM, Tobacco Products Manufacturer/Importer Return of Taxable Distribution of Samples in California
    • CDTFA-501-MIT, Schedule Manufacturer/Importer Report of Tobacco Products Delivered or Shipped into California

Common carriers making a delivery of cigarettes, originating outside of California, to a consignee located in California, must file a report on or before the 25th day of the calendar month following the calendar month in which the delivery of the cigarettes or tobacco products was made (Regulation 4041). The delivery report is informational only; no tax or fee is due.

Cigarettes

  • CDTFA-1071, Common Carrier's Report of Cigarette Deliveries of Interstate or Foreign Shipments of Cigarettes Destined California Points

Cigarettes and/or Tobacco Products

If you purchase cigarettes or tobacco products for your own use outside California without paying both California cigarette and tobacco products excise and California use taxes, you are required to file a return and pay those taxes directly to the CDTFA. This includes products shipped into California that were purchased through the mail, by telephone, or online. You may not report and pay these taxes on your Sales and Use Tax return or on your California state income tax return. For information regarding California use tax, please visit our page California Use Tax, Good for You. Good for California.

A consumer is required to file and pay on or before the last day of the calendar month following the end of a calendar quarter. A consumer is required to report the amount of untaxed cigarettes and/or tobacco products received in the preceding calendar quarter and remit the amount of tax due (Revenue and Taxation Code section 6451, 6452, and 30187). Beginning May 2018, you are required to file returns online using our fast, easy, and convenient CDTFA Online Services page. If you do not file on time, you may owe a 10% percent late filing penalty on the amount of tax due and interest at the current CDTFA rate. You may receive a delinquency notice and/or a compliance assessment for tax, penalty and interest based on the invoices received from the out-of-state companies complying with the Jenkins Act or other documentation available to the CDTFA. You will then have 30 days to pay or dispute the liability.

  • Combined Online Return – A new combined online return is used to report both the excise and use taxes for your cigarette and/or tobacco products purchases. Whether you have filed a return with us in the past or if this is your first time filing, go to our CDTFA Online Services page, click on File a Return, click on Cigarette & Tobacco Internet Purchases Return, and then follow the prompts to report your purchases, file a return, and pay the excise and use taxes.

    Some new features of the combined return you will need to report online include:
    • New product codes
    • Report cigarettes purchased in sticks (number of cigarettes in a pack) instead of the number of packs
    • The use tax rate will be based on your location address

Cigarettes and Smokeless Tobacco

The Federal Prevent All Cigarette Trafficking (PACT) Act (effective June 29, 2010) amended the federal Jenkins Act (15 U.S.C. §375-378). These amendments require any person who sells, transfers, or ships for profit; advertises, or offers taxed or untaxed cigarettes or smokeless tobacco (such as chew or snuff) in interstate commerce into California, or into or through Indian country of an Indian tribe located within California's borders, to file monthly federal PACT Act reports and accompanying schedules with the CDTFA and the California Department of Justice, Office of the Attorney General (AG), no later than the 10th day of each calendar month. The report must contain detailed information on each shipment of cigarettes and/or smokeless tobacco products made during the previous calendar month into California or Indian country. Separate PACT Act monthly reports are to be filed for cigarettes and smokeless tobacco.

Note: Any person who sells, transfers, or ships for profit; advertises, or offers taxed or untaxed cigarettes or smokeless tobacco in interstate commerce out of California, must contact the state(s) receiving the cigarettes or smokeless tobacco to register and file PACT Act reports with that state. Furthermore, if you sell cigarettes or any tobacco products across state lines, the CDTFA recommends you contact those states' revenue taxing authorities to determine if you have a reporting responsibility with them.

You may file the reports electronically to BTFD-PCB.PACTAct@cdtfa.ca.gov. If you are unable to file the reports electronically, mail the reports to: California Department of Tax and Fee Administration, Special Taxes and Fees, MIC: 88, P.O. Box 942879, Sacramento, CA 94279-0088. For more detailed information about the PACT Act, see our Distributor and Industry Topics sections.

PACT Act Reports:

Cigarettes
Smokeless tobacco products

Notify us of any changes to your business ownership, email address, mailing address, location address, phone or fax number to ensure returns and information are received timely. Keep your information current by using form CDTFA-345-SP, Notice of Business Change, Special Taxes and Fees Accounts, to notify us of any business changes.

Retailer

A retailer is a person who sells cigarettes or tobacco products directly to the public from a California retail location. A retailer includes a person who operates vending machines from which cigarettes or tobacco products are sold in California (Business and Professions Code (BPC) section 22971(p)). Retailers cannot purchase or be in possession of unstamped (untaxed) cigarettes or untaxed tobacco products unless they also have a distributor's license for the location. You must hold a California Cigarette and Tobacco Products Distributor's License if you purchase out-of-state tobacco products (untaxed) from an unlicensed seller that did not charge you the tax.

Retail Location

A retail location means both of the following:

  • Any building from which cigarettes or tobacco products are sold at retail.
  • A vending machine.*

*A separate Cigarette and Tobacco Products Retailer's License is required for each vending machine. If you operate multiple vending machines at a single location, you will need a separate license for each vending machine.

Cigarette Wholesaler

A cigarette wholesaler is a person, other than a licensed cigarette distributor, who sells taxed (stamped) cigarettes, obtained from a licensed distributor or another licensed wholesaler, for resale at a specific California location. A cigarette wholesaler may not hold a distributor's license. An out-of-state person selling at an out-of-state location is not a wholesaler and may not be licensed as a cigarette wholesaler. Cigarette wholesalers cannot purchase or be in possession of unstamped (untaxed) cigarettes.

Tobacco Products Wholesaler

A tobacco products wholesaler is a person, other than a licensed tobacco products distributor, who sells tax-paid tobacco products for resale at a specific California location. A tobacco products wholesaler may not hold a distributor's license. An out-of-state person selling at an out-of-state location is not a wholesaler and may not be licensed as a tobacco products wholesaler. Tobacco products wholesalers cannot purchase or be in possession of untaxed tobacco products.

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As a retailer or wholesaler of cigarettes and tobacco products, you must:

  • Obtain a Seller's Permit.
  • Maintain a valid California Cigarette and Tobacco Products Retailer's or Wholesaler's License. See Publication 78, Sales of Cigarettes and Tobacco Products in California – License Requirement for Retailers.
  • Conspicuously display your license at each retail location in a manner visible to the public (retailers only).
  • Keep complete and legible purchase invoices (and sales invoices if you are a wholesaler) for cigarettes and tobacco products for four (4) years.*
  • Keep purchase invoices (and sales invoices if you are a wholesaler) at each licensed location for at least one year after the date of the purchase or sale.* Certain information must be listed on each purchase invoice. See below for Purchase Invoice Requirements. Wholesalers must include certain information on each sales invoice. See below for Sales Invoice Requirements for Wholesalers.
  • Allow CDTFA staff or law enforcement officers to review your purchase invoices (and sales invoices if you are a wholesaler) upon request.*
  • Purchase and sell only those cigarettes and roll-your-own (RYO) tobacco authorized for sale in California as listed on the Office of the Attorney General's California Tobacco Directory.
  • Purchase cigarettes and tobacco products only from California licensed distributors or wholesalers. You may not purchase cigarettes or tobacco products from any person who is not licensed under the Cigarette and Tobacco Products Licensing Act of 2003, or whose license has been suspended or revoked. You are responsible for verifying your suppliers have a valid cigarette and tobacco products license with the CDTFA. To verify that you are purchasing from a licensed distributor or wholesaler with a valid license, go to our Resources section of this guide, under Verify a License. There is also a link to check if a license is currently suspended. Retailers may not purchase cigarettes or tobacco products from other retailers(Revenue and Taxation Code section 30478). Wholesalers may not purchase their products directly from an importer or manufacturer.*
  • Wholesalers may only sell cigarettes or tobacco products to wholesalers and retailers licensed under the Cigarette and Tobacco Products Licensing Act of 2003. Wholesalers may not sell to any person who is not licensed with the CDTFA or whose license has been suspended or revoked. Retailers may only sell to consumers. Wholesalers are responsible for verifying their buyers have a valid cigarette and tobacco products license with the CDTFA. To verify that you are selling to a licensed person with a valid license, go to our Resources section of this guide, under Verify a License. There is also a link to check if a license is currently suspended.*
  • Only purchase cigarettes affixed with valid California tax stamps and California tobacco products tax-paid products.*
  • File a monthly report and/or schedule (cigarette wholesalers only).*
  1. Does not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to the tobacco products tax; however, they are subject to retail licensing.

The cigarette and tobacco products purchase invoices you receive from distributors and/or wholesalers must be legible and include the following information:

  • The name, address, telephone number, and license number of the distributor or wholesaler from whom you purchased the cigarettes or tobacco products (it is illegal to buy cigarettes or tobacco products from a person who does not have a license).
  • Your name, address, and cigarette and tobacco products retailer's or wholesaler's license number.
  • An itemized list of the cigarettes or tobacco products purchased. Cigarettes must be listed by the brand and style names, flavor, filter, and/or packaging when applicable, number of cartons or packs sold, and the sales price. Tobacco products must be listed by brand, type (such as pipe, cigars, or RYO), flavor, packaging (such as pouches, tins, or boxes), quantity sold, and sales price.
  • The date you purchased the cigarettes or tobacco products.
  • The amount of California cigarette and tobacco products taxes due to the CDTFA by the distributor on the sale of cigarettes and tobacco products listed on the invoice. Please note: a licensed distributor who is also a licensed retailer or manufacturer may include this statement instead of providing the amount of cigarette and tobacco products taxes due to the CDTFA: "All California cigarette and tobacco products taxes are included in the total amount of this invoice."

These purchase invoice requirements do not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to the tobacco products tax; however, they are subject to retail licensing.

Wholesalers must include the following information on each sales invoice.* Each sales invoice must be legible.

  • The name, address, telephone number, and license number of the wholesaler.
  • The name, address, and license number of the business purchasing the cigarettes or tobacco products. You may not legally sell cigarettes or tobacco products to an unlicensed buyer or purchase them from an unlicensed seller.
  • The date the cigarettes or tobacco products are sold.
  • An itemized list of the cigarettes or tobacco products sold. Cigarettes must be listed by the brand and style names, flavor, filter, and/or packaging when applicable, number of cartons or packs sold, and the sales price. Tobacco products must be listed by brand, type (such as pipe, cigars, or RYO), flavor, packaging (such as pouches, tins, or boxes), quantity sold, and sales price.
  • The amount of California cigarette and tobacco products taxes due to the CDTFA by the distributor on the sale of cigarettes and tobacco products. However, a distributor that is also a retailer or manufacturer must include either one of the following on each invoice for the sale of cigarettes or tobacco products:
    • A statement that reads: "All California cigarette and tobacco products taxes are included in the total amount of this invoice."
    • The amount of cigarette and tobacco products taxes due to the CDTFA by the distributor on the distribution of cigarettes and tobacco products.

* Does not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to the tobacco products tax; however, they are subject to retail licensing.

Generally, the sale or transfer of cigarettes and tobacco products between retailers is not permitted. However, if a retailer owns more than one store and the retailer's licenses are held by the same legal entity, that retailer may be allowed to transfer cigarettes or tobacco products between stores belonging to the same legal entity so long as transfer logs are maintained.

Transfer logs must be prepared at the time of transfer. Transfer logs created or provided after an inspection are not acceptable. Legible transfer logs and copies of purchase invoices must be kept at each of the retailer's locations involved in the transfer. Transfer logs must include:

  • The transferring retailer's address and license number where the original purchase was made.
  • The receiving retailer's address and license number where the product was transferred.
  • The supplier's name, license number, purchase invoice number, and date of original purchase.
  • A detailed description of each product transferred (for example, brand, type of package, flavor, style, etc.).
  • The quantity of each product transferred.

These retailer's product transfer requirements do not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to these requirements; however, they are subject to retail licensing.

Sample Retailer's Transfer Log

Store Transferring Product Store Receiving Product Date of Transfer Items Transferred Original Purchase From
A Street Market
123 A Street
Anywhere, CA
Retailer 091-000000
B Street Market
123 B Street
Anywhere, CA
Retailer 091-111111
March 2, 2010
  • 50 packs Marlboro cigarettes, 100s
  • 5 boxes Romeo y Juliet Cigars (25 ea)
LD Tobacco Distributors
Distributor 090-222222
February 14, 2010
Invoice# 12345
A Street Market
123 A Street
Anywhere, CA
Retailer 091-000000
B Street Market
123 B Street
Anywhere, CA
Retailer 091-111111
January 31, 2011
  • 7 rolls Grizzly Long Cut, Mint (5 ea)
  • 2 packs Black & Mild cigars, wine flavor (5 ea)
S&W Wholesale
Wholesaler 090-333333
December 27, 2010
Invoice# 54321

Retailers

The CDTFA offers free instructor-led classes at CDTFA offices located throughout the state to help you better understand the state's requirements and your responsibilities as a retailer of cigarettes and tobacco products in California. This information is also available as an online seminar, and allows you to submit questions electronically to the CDTFA for a timely response.

Wholesalers

The CDTFA offers an online seminar for cigarette and tobacco products wholesalers to help you better understand the state's requirements and your responsibilities as a wholesaler of cigarettes and tobacco products in California.

The information is presented in sections by topic so you can view the information at your own pace. We highly recommend you view all the topics provided to help you understand and comply with California's cigarette and tobacco products licensing and tax laws. The online seminar webpage also allows you to electronically submit your cigarette or tobacco products questions directly to the CDTFA for a timely response.

The cigarette and tobacco products tax is paid by a distributor upon the distribution of cigarettes and tobacco products in California. A distributor may not be a wholesaler. A wholesaler may not be a distributor. A distribution includes the first sale, use or consumption of untaxed cigarettes or untaxed tobacco products in California, and the placing of untaxed cigarettes or untaxed tobacco products into a vending machine or retail stock in California (Revenue and Taxation Code section 30008).

Cigarette Distributor

A cigarette distributor is a person who purchases untaxed (unstamped) cigarettes and makes the distribution of cigarettes in this state. A cigarette distributor may not hold a wholesaler's license. In general, distributors purchase cigarettes before any California cigarette tax is due, and then sell stamped cigarettes to wholesalers, other distributors and retailers. Distributors pay the taxes by purchasing cigarette tax stamps from the CDTFA. A cigarette distributor is required to affix the California cigarette tax stamp to each package of cigarettes prior to distribution to indicate that taxes have been paid. Once the cigarette packs are stamped, distributors can sell the stamped cigarettes to wholesalers, retailers, and other distributors. Anyone who distributes cigarettes in California must register with the CDTFA as a cigarette distributor.

Tobacco Products Distributor

A tobacco products distributor is a person who engages in the distribution of tobacco products in this state. A tobacco products distributor may not hold a wholesaler's license. In general, distributors purchase tobacco products before any California tobacco products tax is due and then pay the tax when the tobacco products are sold or distributed. A tobacco products distributor is required to calculate the tobacco products tax due based on the wholesale cost of the tobacco products distributed and remit the total amount owed each month with their tax return. Anyone who distributes tobacco products in California must register with the CDTFA as a tobacco products distributor and sell only to distributors, wholesalers, or retailers with a valid CDTFA cigarette and tobacco products license.

Out-of-State Tobacco Products Distributor

For detailed information about the topics below, see the Industry Topics section, under the Distributors heading.

  • Wholesale cost basis for out-of-state licensed tobacco products distributors in certain transactions
  • Tobacco products sales by an out-of-state licensed distributor to an in-state licensed distributor is not a distribution
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Distributors of cigarettes or tobacco products must:

  • Obtain a Seller's Permit.
  • Obtain and maintain a valid California Cigarette and Tobacco Products Distributor's License.
  • Maintain complete and legible cigarette and tobacco products purchase and sales records for four (4) years.
  • Keep purchase and sales records at each licensed location for a least one year after the date of purchase or sale.
  • Allow CDTFA staff or law enforcement officers to review your sales and purchase records upon request.
  • Purchase and sell only cigarettes and RYO tobacco authorized for sale in California as listed on the Office of the Attorney General's California Tobacco Directory.
    Please note: As a distributor, it is illegal for you to sell or be in possession of cigarettes (including RYO tobacco) which are not in compliance with the MSA pursuant to Revenue and Taxation Code section 30165.1, unless the product is solely for out-of-state sales.
  • Sell to distributors, wholesalers or retailers with a valid CDTFA cigarette and tobacco products license1. See Verify a License in the Resources section for information on how to verify a license or check if a license is currently suspended. Note: Distributors may sell to out-of-state customers who are not licensed with the CDTFA.
  • Make sure that sales invoices meet all legal requirements. Each sales invoice must be legible and include the following information:
    • Your name, address, telephone number, and your distributor's license number.
    • The name, address, and license number of the business purchasing the cigarettes or tobacco products. You may not legally sell cigarettes or tobacco products to an unlicensed buyer.
    • The date you sold the cigarettes or tobacco products.
    • An itemized list of the cigarettes or tobacco products sold. Cigarettes must be listed by the brand and style names, flavor, filter, and/or packaging when applicable, number of cartons or packs sold, and the sales price. Tobacco products must be listed by brand, type (such as pipe, cigars, or RYO), flavor, packaging (such as pouches, tins, or boxes), quantity sold, and sales price.
    • The amount of California cigarette and tobacco products taxes due to the CDTFA by the distributor on the sale of cigarettes and tobacco products. However, a distributor that is also a retailer or manufacturer must include either one of the following on each invoice for the sale of cigarettes or tobacco products:
      • A statement that reads: "All California cigarette and tobacco products taxes are included in the total amount of this invoice."
      • The amount of cigarette and tobacco products taxes due to the CDTFA by the distributor on the distribution of cigarettes and tobacco products.
      • A statement that identifies any cigarettes or tobacco products sold without tax under Revenue and Taxation Code section 30105 (only if you are a distributor that is an original importer of the tobacco products you are selling).
  • File tax returns, reports, and/or schedules. See Tax Return, Report, Schedule Filings and Payments in the Getting Started section for more information.

Notes

  1. These requirements do not apply to tobacco products that are not subject to the tobacco products tax. For example, vape liquids that do not contain any nicotine are not subject to these requirements; however, they are subject to retail licensing.

The PACT Act is a federal law that amends the Federal Jenkins Act. It revises provisions governing the collection of taxes and trafficking by requiring Internet and other remote sellers of cigarettes and smokeless tobacco products to comply with the same laws that apply to local cigarette and tobacco products sellers. These provisions apply to California's tribal reservations, as well as to both in-state and out-of-state distributors shipping cigarettes and smokeless tobacco into California.

If you sell, transfer, ship for profit; advertise, or offer for sale cigarettes or smokeless tobacco products through interstate commerce into California, or into or through Indian country of an Indian tribe, located within the external borders of California, you must register and file monthly reports with the CDTFA.

For more detailed information on the PACT Act see the Industry Topics section of this guide. For PACT Act registration requirements, see Registration, under the Getting Started section. For PACT Act filing requirements, see Tax Return, Report, Schedule Filings and Payments, under the Getting Started section.

Note: If you are a California licensed Cigarette and Tobacco Products Distributor physically located in California and only engages in distributions to California licensed retailers, wholesaler, or other distributors who are physically located in California, you do not have a PACT Act reporting requirement. Your Cigarette Distributor's Tax Report (CDTFA-501-CD) and Tobacco Products Distributor Tax Return (CDTFA-501-CT) will fulfill the PACT Act reporting requirements.

Cigarettes are subject to excise taxes. Cigarette distributors pay the excise taxes to the State of California by purchasing cigarette tax stamps. Distributors must affix a stamp to each package of cigarettes prior to distribution to indicate that taxes have been paid. Distributors receive a purchase discount of 0.85 percent, which is capped at the first one dollar ($1.00) in denominated value to help offset the costs of applying the stamps. Distributors may include the cost of the stamps in the amounts they charge their customers.

To purchase cigarette tax stamps, you must register as a cigarette distributor. For information on how to become a cigarette distributor, please refer to Publication 63, Cigarette Distributor Licensing and Tax Stamp Guide.

Information About

Tax Stamp Forms and Publications

Questions on Tax Stamps? Contact CDTFA

  • By Email
  • By Phone
    1-916-341-6923 Stamp Desk
    1-916-327-6235 Stamp Desk Fax
  • By Mail
    California Department of Tax and Fee Administration
    Cigarette Tax Stamp Program, MIC: 41
    P.O. Box 942879
    Sacramento, CA 94279-0041

The CDTFA offers an online seminar for cigarette and tobacco products distributors to help you better understand the state's requirements and your responsibilities as a distributor of cigarettes and tobacco products in California.

The information is presented in sections by topic so you can view the information at your own pace. We highly recommend you view all the topics provided to help you understand and comply with California's cigarette and tobacco products licensing and tax laws. The online seminar webpage also allows you to electronically submit your cigarette or tobacco products questions directly to the CDTFA for a timely response.

Manufacturer

A manufacturer is a person who manufactures cigarettes and/or tobacco products sold in this state (Business and Professions Code section 22971(l)). There are some reporting requirements imposed on manufacturers and there are additional restrictions which carry potential tax consequences regarding product promotions and samples provided to recipients at no cost, as set forth in Regulation 4081.

Importer

An importer is any purchaser who purchases for resale in the United States cigarettes and/or tobacco products manufactured outside the United States for the purpose of making a first sale or distribution within the United States (Revenue and Taxation Code section 30019).

Responsibilities

As a manufacturer or importer of cigarettes and tobacco products, you must:

  • Obtain a Seller's Permit.
  • Maintain a valid Cigarette and/or Tobacco Products Manufacturer/Importer's License.
  • Submit to the CDTFA a list of all brand families that you manufacture or import.
  • Update the list of brand families that you manufacture or import whenever you manufacture or import a new brand or additional brand, or stop manufacturing or importing a listed brand.
  • Consent to the jurisdiction of the California courts for the purpose of enforcing the Cigarette and Tobacco Products Licensing Act of 2003, appoint a registered agent for service of process in this state, and identify that agent to the CDTFA.
  • Certify when the license is granted and each year upon license renewal that all packages of cigarettes the licensee manufactures or imports and distributes in this state fully comply with subdivision (b) of the Revenue and Taxation Code section 30163, and that the cigarettes contained in those packages are the subject of filed reports that fully comply with all requirements of the federal Cigarette Labeling and Advertising Act (15 U.S.C. Sec. 1331 et seq.) for the reporting of ingredients added to cigarettes.
  • A cigarette manufacturer or importer must waive any sovereign immunity defense or post a surety bond as provided in the Business and Professions Code section 22979(a)(4).
  • A manufacturer or importer that is a "tobacco product manufacturer selling cigarettes to consumers within the state" as defined in Health and Safety Code section 104556, subdivision (i) must certify to the CDTFA that it is a "participating manufacturer" as defined in subsection II(jj) of the "Master Settlement Agreement" (MSA), or is in full compliance with paragraph (2) of subdivision (a) of the Health and Safety Code Section 104557.
  • In accordance with the Business and Professions Code section 22979.2(c), all California cigarette manufacturers and importers are required to comply with a one-time license administration fee. The fee amount charged shall equal your respective market share of cigarettes manufactured or imported and sold in this state during the next calendar year as estimated by the CDTFA.
  • In accordance with the Business and Professions Code section 22979.23(a), all California manufacturers or importers of chewing tobacco or snuff must submit a one-time license fee.
  • In accordance with the Business and Professions Code section 22979.23(b), all California manufacturers or importers of tobacco products, excluding chewing tobacco or snuff, must submit a one-time license fee.
  • File tax returns, reports, and/or schedules. See Tax Return, Report, Schedule Filings and Payments in the Getting Started section for more information.

If you purchase cigarettes and/or tobacco products for your own use from outside California or over the Internet without paying both the California cigarette and tobacco products excise taxes and California use tax at the time of your purchase, you are required to file a return online to report your purchases and pay those taxes to the CDTFA. You may not report and pay these taxes on your Sales and Use Tax return or on your California state income tax return. This includes cigarettes or tobacco products shipped into California that were purchased through the mail, by telephone, or online. For information regarding California use tax, please visit our guide for Use Tax.

You will not owe the cigarette excise taxes if you personally bring less than 400 cigarettes (typically 20 packs or two cartons) into California for your own use or consumption, but you will still owe the use tax.

You will be liable for the payment of taxes to the CDTFA unless your purchase invoices show you paid the California cigarette and tobacco products excise taxes and California sales or use taxes. You should keep documents that show what you paid on your purchase (for example, bills, receipts, invoices, and so forth.) and all working papers used to prepare your returns.

Responsibilities

Consumers of cigarettes and/or tobacco products are required to:

  • Report the amount of cigarettes and/or tobacco products received in the preceding calendar quarter,
  • File a tax return, and
  • Submit the amount of tax due on or before the last day of the month following the end of a calendar quarter.

Special/Important Notices

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General

Cigarette and Tobacco Products Tax Regulation 4001 further clarifies and defines retail stock for cigarette and tobacco products tax purposes. The cigarette and tobacco products tax (excise tax) is imposed on the distribution of untaxed cigarette and tobacco products in this state. A distribution includes, among other things, placing of untaxed cigarette and tobacco products in retail stock for purposes of selling the products to consumers.

What is considered retail stock?

  • Retail stock includes cigarette and tobacco products that are stored in the area where retail sales are made and available for sale to consumers by a person who holds a retailer's license.
  • If you hold both a California distributor's license and a retailer's license, purchase untaxed products, and only make retail sales to consumers; then all cigarette and tobacco products in your inventory are considered retail stock, distributed in this state, and the excise tax is due (regardless of where the product is placed or stored). All cigarette packs placed in retail stock must have a cigarette tax stamp affixed.
  • If you hold both a California distributor's license and a retailer's license, purchase untaxed products, and make sales to licensed distributors, wholesalers, or retailers; then the untaxed cigarette and tobacco products that are placed or stored in the area where retail sales are made are considered to be retail stock, distributed in this state, and the excise tax is due. All cigarette packs placed in retail stock must have a cigarette tax stamp affixed. However, the untaxed cigarette and tobacco products that are securely stored away from the area where retail sales are made are not considered retail stock. The untaxed products must be in the original manufacturer's packaging, with an unbroken seal, and they must be secured, segregated, and separated from your entire retail inventory, including your tax-paid products that you store or hold in areas not accessible to consumers.

Examples of secured, segregated, and separated from retail stock include, but are not limited to, the following areas:

  • a secured store room or closet;
  • a secured back office;
  • inside a locked cabinet, safe or other similar storage container; or
  • behind a locked wire-cage door or similar encumbrance.

Walk-in humidors

Tobacco products placed inside a walk-in humidor displayed for sale to consumers are considered retail stock. If you hold both a California distributor's license and a retailer's license, purchase untaxed tobacco products, and only make retail sales to consumers, your entire inventory is considered retail stock, whether or not the untaxed tobacco products are separately stored away. The excise tax is due immediately upon placing the untaxed tobacco products in retail stock.

If you hold both a California distributor's license and a retailer's license and you sell to other tobacco products licensees in addition to consumers, untaxed tobacco products are not considered retail stock if the product is placed in a walk-in humidor in the original manufacturer's packaging with an unbroken seal, secured, segregated, and separated from retail stock, and not on display for sale to consumers.

Examples of secured, segregated and separated from retail stock include, but are not limited to, the following areas:

  • inside a locked cabinet, safe, or similar secured storage container, or
  • behind a locked wire-cage door, or similar encumbrance.

Presumption of Distribution

It is presumed that all cigarette and tobacco products no longer in a distributor's possession have been distributed. Unless the contrary is established, this presumption includes instances where cigarette and tobacco products have been lost through an unexplainable disappearance.

You can rebut this presumption by demonstrating that an explainable disappearance, such as theft, has occurred. However, product placed in retail stock is already distributed and there is no presumption that may be rebutted.

Examples of evidence that may overcome the presumption include, but are not limited to:

  • Timely police reports (required)
  • Insurance claims
  • Insurance reimbursements
  • Cigarette and tobacco purchase invoices (required)
  • Video surveillance footage
  • Photographs
  • Detailed tobacco inventory reports
  • Proof of prosecution for theft of cigarettes and tobacco products

The Master Settlement Agreement (MSA) is a legal contract between 46 states, including California, and five U.S. Territories, with participating tobacco manufacturers. The contract was entered into in 1998, in settlement of various lawsuits, and provides for the allocation of funds to states and certain territories. The MSA restricts cigarette advertising and marketing by participating tobacco manufacturers in various ways, including a ban on cartoons in tobacco advertisements, youth exposure to sampling, certain sponsorships, and most outdoor advertisements.

Revenue and Taxation Code (R&TC) section 30165.1 requires the Attorney General to compile and publish a directory of cigarette and RYO tobacco manufacturers and brand families. A person may not sell, offer, possess for sale, or import for personal consumption any cigarettes or RYO tobacco in California unless the manufacturer and brand family are listed in that directory (except if the product is solely for sale out-of-state). In addition, it is illegal for any person to affix or cause to be affixed any tax stamp or meter impression to a pack of cigarettes or pay the tax on RYO tobacco unless the tobacco products manufacturer and brand family are listed in the directory. Cigarettes or RYO tobacco not listed on that directory are subject to seizure by the CDTFA and law enforcement agencies. The Attorney General posts the California Tobacco Directory online on their California Tobacco Directory page. You can also subscribe to receive Tobacco Directory Notices by providing your email address on the Attorney General's California Tobacco Directory webpage or by sending an email to their directory subscription mailbox. You will receive an email acknowledging that the Attorney General has received and recorded your email address.

The Attorney General must provide distributors and wholesalers with written notice of any changes to the directory after it is first published (R&TC section 30165.1(c)(3)). Distributors and wholesalers are required to provide the written notices received from the Attorney General to their customers. For more information, see Publication 407, Master Settlement Agreement.

Anyone that violates these provisions may be subject to civil and criminal penalties and the seizure of any noncompliant product. In addition, we may revoke or suspend your license. For additional information on the citation process under this Licensing Act, visit the Legal Division, Investigations and Special Operations, webpage or contact them by phone at 1-916-324-0105.

Routine inspections are conducted to ensure the proper implementation of the the state laws that control the sale of cigarettes and tobacco products in California. These inspections are authorized by state laws known as the California Cigarette and Tobacco Products Licensing Act of 2003 (Division 8.6 of the California Business and Professions Code), Cigarette and Tobacco Products Tax Law (Part 13, Division 2 of the Revenue and Taxation Code), and the California Cigarette Fire Safety and Firefighter Protection Act (Division 12 of the California Health and Safety Code). For more information on the inspection process, please see Publication 152, Cigarette and Tobacco Products Inspections.

Inspectors make sure that:

  • You have a valid Cigarette and Tobacco Products license pursuant to the Licensing Act and Tax Law and any other business permits or licenses that may be required.
  • You conspicuously display your licenses at each location in a manner visible to the public (retailers only).
  • You keep purchase and/or sales invoices at each licensed location for at least one year after the date of purchase.
  • You bought your cigarettes and tobacco products from a CDTFA-licensed cigarette and/or tobacco products distributor, wholesaler, manufacturer, or importer (sales between retailers are prohibited) and have supporting purchase invoices for your inventory.
  • The cigarettes in your inventory:
    • Have valid California tax stamps attached,
    • Do not include flavored cigarettes (excluding menthols),
    • Are listed on the California Tobacco Directory as legal to sell in California (RYO tobacco must also be listed on the directory), and
    • Comply with the "low ignition propensity" fire safety requirements of California.
  • The California tobacco products tax was paid on your other tobacco products.
  • The STAKE Act signage is displayed at each cash register and other points of sale.

Note: California Distributors may be in possession of unlisted and/or unstamped (untaxed) cigarettes, unlisted RYO tobacco, or untaxed tobacco products only if sales and delivery of these brands are made to out-of-state customers.

CDTFA has inspectors with the authority to inspect any location where cigarettes or tobacco products are sold, produced, or stored and any site where there is evidence of tax evasion related to cigarette or tobacco products or non-compliance with the MSA (Revenue and Taxation Code section 30435). To see a list of MSA compliant manufacturers and brands, check the California Tobacco Directory. Upon entering your business, our inspectors will present their official identification and credentials to you or your employees. Any person who refuses to allow an inspection is guilty of a misdemeanor and is subject to a fine.

CDTFA inspectors and law enforcement officers may inspect your location and seize any untaxed cigarettes and/or tobacco products, including cigarettes without tax stamps, with stamps from other states, or with counterfeit or reused tax stamps; non-MSA compliant cigarettes or RYO tobacco; and/or tobacco products upon which tax is due but has not yet been paid to the CDTFA. Any retailer or wholesaler in possession of untaxed cigarettes and/or tobacco products is subject to penalties such as suspension or revocation of its license and/or imprisonment, or both. Please note: distributors may possess untaxed tobacco, cigarettes stamped with other state stamps, unlisted and/or unstamped cigarettes or unlisted RYO tobacco only if sales and delivery of these brands are made to out-of-state customers.

To help prevent cigarette tax evasion, the CDTFA was given the authority (Assembly Bill 1901) to seize and destroy any "unaffixed" cigarette tax stamps aggregated for reuse (for example, a collection or accumulation of "unaffixed" stamps for reapplying to untaxed packs of cigarettes). Effective January 1, 2017, it is a misdemeanor for any person to possess, sell or offer to sell, or buy or offer to buy, any false, fraudulent, or "unaffixed" cigarette tax stamps. For purposes of this law, "unaffixed stamps" means tax-paid cigarette tax stamps purchased by a licensed distributor and previously affixed to cigarette packs. For more information about our inspections and your rights, see Publication 152, Cigarette and Tobacco Products Inspections.

You may be subject to civil and criminal penalties and the seizure and/or forfeiture of any noncompliant product if you violate any of the provisions of the:

Any person who intentionally evades the reporting, assessment, or payment of cigarette or tobacco products taxes that would otherwise be due is guilty of cigarette or tobacco products tax evasion. Evasion of tax liabilities over $25,000 in a 12-month period is a felony.

For more information about cigarette and tobacco products inspection program, citation appeal process, tax evasion, Licensing Act violations, or to file a complaint and report tax evasion, visit the Legal Division webpage, under the Investigations and Special Operations tab.

A "mobile location" does not meet the definition of a retail location. If you operate from a catering truck, lunch wagon, or other mobile facility, you may not hold a California Cigarette and Tobacco Products Retailer's License and therefore, cannot sell cigarettes or tobacco products from your truck, wagon, or other mobile facility in California. For more information on this topic, please see our Mobile Sellers of Cigarettes and Tobacco Products notice.

Cigarettes and RYO tobacco that contain certain characterizing flavors (excluding menthol) are considered adulterated and are banned from manufacture, import, or sale in the United States. See Publication 429, Flavored Cigarettes Banned in the United States.

Retailer's License

As of June 9, 2016, state law expanded the definition of tobacco products for cigarette and tobacco products retail licensing purposes. See Expanded Definition of Tobacco Products for Retail Licensing Purposes, under the Overview section.

Effective January 1, 2017, any retailer that sells any products included in the expanded definition of tobacco products, is required to obtain and maintain a Cigarette and Tobacco Products Retailer's License from the CDTFA in order to engage in the retail sale of these products. If you already have a valid Cigarette and Tobacco Products Retailer's License issued by the CDTFA, you may sell the products listed above under your existing Cigarette and Tobacco Products Retailer's License. This licensing requirement does not apply to cannabis or cannabis products such as vape devices, pens, or accessories that are intended and designed for consuming cannabis or cannabis products.

Please note, if a retailer sells non-nicotine vape liquids and no other cigarettes or tobacco products, the retailer is required to hold a valid Cigarette and Tobacco Products Retailer's License. However, if a retailer sells tobacco paraphernalia, as defined under section 22962(a)(2) of the Business and Professions Code, and does not sell cigarettes or tobacco products, the retailer is not required to hold a valid retailer's license.

In addition to the Cigarette and Tobacco Products Retailer's License and seller's permit, you may also need one or more of the following licenses:

  • Cigarette and Tobacco Products Distributor's or Wholesaler's License (only one or the other, but not both)
  • Cigarette and Tobacco Products Manufacturer's/Importer's License
  • Tobacco Products Distributor's or Wholesaler's License (for tax reporting purposes; only one or the other, but not both)
  • Tobacco Products Manufacturer's/Importer's License (for tax reporting purposes)

Notes

  1. Tobacco paraphernalia includes, but is not limited to, items that do not contain tobacco or nicotine such as cigarette papers or wrappers, pipes, and cigarette rolling machines.

Please note: The California Cigarette and Tobacco Products Licensing Act of 2003 does not affect any laws or regulations regarding cannabis or cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consuming cannabis or cannabis products. Cigarettes and tobacco products may not be sold at the same location that is licensed as a cannabis business.

Below is a chart to help determine if a retailer's license is required for retail sales of certain types of products.

Product Sold Is a Cigarette and Tobacco Products Retailer's License Required?
Nicotine and non-nicotine eJuice or eLiquid (vape liquids) Yes
Electronic device, component, part, or accessory sold without nicotine Yes
Electronic device, component, part, or accessory sold with nicotine Yes
Tobacco Paraphernalia (cigarette paper, pipes, cigarette rolling machines) No
Cannabis products such as vape devices, pens, or accessories that are intended and designed for use in consumption of cannabis or cannabis products No

Retailer, Wholesaler, Distributor, and Manufacturer/Importer's License

Any retailer, wholesaler, distributor, manufacturer, or importer that sells any tobacco or nicotine products intended for human consumption, including, but not limited to, electronic cigarettes sold with nicotine (for a single price), or any component, part, or accessory of an electronic cigarette that is used during the operation of the device when sold in combination with nicotine (for a single price), is required to obtain and maintain a cigarette and tobacco products license(s) from the CDTFA in order to engage in the sale of these products. Please note, sales transactions of cigarettes, tobacco or nicotine products, including electronic cigarettes sold with nicotine, between retailers are prohibited. This restriction does not apply to non-nicotine products such as eLiquids or eJuice that contain no nicotine.

See our chart below for a quick reference of the license(s) required for sellers of nicotine products.

Examples of what type of license(s) are required (in addition to a Seller's Permit):

Retailers

Example 1: Retailer A only sells eLiquid or eJuice products that do not contain nicotine or tobacco. Regardless if the eLiquid or eJuice products contain nicotine or tobacco or not, Retailer A is required to register with the CDTFA for a Cigarette and Tobacco Products Retailer's License.

Example 2: Retailer B sells tax-paid vape liquids that contain nicotine and no other tobacco products such as cigars, chew, or snuff. Retailer B is required to register with the CDTFA for a Cigarette and Tobacco Products Retailer's License.

Example 3: Retailer C purchases vape liquids that contain nicotine from an unlicensed distributor located outside California. Retailer C is required to register with the CDTFA for a Tobacco Products Distributor's License and a Cigarette and Tobacco Products Distributor's License.

Wholesalers

Example 4: Wholesaler A purchases untaxed vape liquids that contain nicotine from an unlicensed distributor located outside of California. Wholesaler A is required to register with the CDTFA for a Tobacco Products Distributor's License and a Cigarette and Tobacco Products Distributor's License. Wholesaler A must close its existing Wholesaler's license.

In addition to these licenses, if Wholesaler A sells vape liquids that contain nicotine directly to consumers, Wholesaler A is also required to register with the CDTFA for a Cigarette and Tobacco Products Retailer's License.

Example 5: Wholesaler B purchases tax-paid nicotine products for resale. Wholesaler B is required to hold a Tobacco Products Wholesaler's License and a Cigarette and Tobacco Products Wholesaler's License in order to purchase these products for resale. In addition to the license, if Wholesaler B sells these products directly to consumers, Wholesaler B is required to register with the CDTFA for a Cigarette and Tobacco Products Retailer's License.

Distributors

Example 6: Distributor A solely sells eLiquid or eJuice products that do not contain nicotine or tobacco. Distributor A is not required to register with the CDTFA for a tobacco products license since the eLiquid or eJuice products do not contain nicotine or tobacco. However, if Distributor A sells untaxed eLiquid or eJuice products that do contain nicotine or tobacco, Distributor A is required to register with the CDTFA for a tobacco products distributor's license and Cigarette and Tobacco Products Distributor's License. In addition to these licenses, if Distributor A sells these products, regardless if the products contain nicotine or not, directly to consumers, Distributor A is also required to register with the CDTFA for a Cigarette and Tobacco Products Retailer's License.

Manufacturers

Example 7: Company A manufactures nicotine vape liquids in California and sells them to stores located in California and online directly to customers located in California. Company A is required to register with the CDTFA for a Tobacco Products Distributor's License, Cigarette and Tobacco Products Distributor's License, Tobacco Products Manufacturer's/Importer's License, and a Cigarette and Tobacco Products Manufacturer/Importer's License. In addition to these licenses, Company A is required to obtain a Cigarette and Tobacco Products Retailer's License for selling vape liquids directly to consumers from a California retail location.

Example 8: Company B is engaged in business in California (as defined in Revenue and Taxation Code section 30108(c)), manufactures nicotine vape liquids outside of California, and sells them to a store located in California. Company B can only sell to licensed distributors in California. Company B is required to hold a Tobacco Products Manufacturer's/Importer's License from the CDTFA to engage in the sale of nicotine vape liquids (tobacco products). A California licensed distributor may not purchase tobacco products from an unlicensed manufacturer who is required to be licensed. The distributor located in California who purchases the nicotine vape liquids from Company B is required to report and pay the tobacco products tax due to the CDTFA upon distribution in California and hold a Tobacco Products Distributor's License because the distributor is making distributions in California. In addition, California licensed wholesalers may not purchase tobacco products directly from California licensed manufacturers. (Business and Professions Code section 22980.1).

Example 9: Company C is not engaged in business in California (as defined in Revenue and Taxation Code section 30108(c)), manufactures nicotine vape liquids outside of California, and sells them directly to customers located in California. Company C is not required to hold a manufacturer's license from the CDTFA. Instead, the customers who purchase from Company C owe the tobacco products tax and are required to register with the CDTFA for a distributor's license. This would be considered a distribution pursuant to Revenue and Taxation Code section 30008, which includes the first sale, use or consumption of untaxed cigarettes or tobacco products in this state. The customer would owe the tobacco products tax based on the wholesale cost, which in this situation would be the amount paid to Company C, not including any discounts or trade allowances. If the California customer is a consumer, they would also owe the use tax (equivalent to the sales tax) on the price charged by Company C in addition to the tobacco products tax. For more information about consumer requirements, see the Consumer section of this guide.

Purchases by Consumers

If a consumer purchases any nicotine products, vape liquids, or electronic cigarettes for their own use from outside of California without paying California tobacco products excise tax and California sales or use taxes, the consumer is required to report and pay California tobacco products excise taxes and California use tax on the tobacco products purchased. Consumers are required to file a tax return online to report and pay cigarette and tobacco products excise taxes and California use tax directly to the CDTFA. For more information about the responsibilities of consumers and how to file a return online, see the Consumer section and the Getting Started section, under Tax Return, Report, Schedule Filings and Payments.

License(s) Required by a Manufacturer*
Sales to Untaxed 0mg nicotine/electronic cigarettes without nicotine Tax-paid nicotine/tobacco product Untaxed nicotine/tobacco product
Distributor None N/A
  • Cigarette and Tobacco Products Manufacturer's/ Importer's License
  • Tobacco Products Manufacturer's/Importer's License
Wholesaler None
  • Cigarette and Tobacco Products Manufacturer's/Importer's License
  • Tobacco Products Manufacturer's/Importer's License
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
Prohibited
Retailer None
  • Cigarette and Tobacco Products Manufacturer's/Importer's License
  • Tobacco Products Manufacturer's/Importer's License
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
Prohibited
Consumer
  • Cigarette and Tobacco Products Retailer's License**
  • Cigarette and Tobacco Products Manufacturer's/Importer's License
  • Tobacco Products Manufacturer's/Importer's License
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
  • Cigarette and Tobacco Products Retailer's License**
Prohibited
License(s) Required by a Distributor*
Sales to Untaxed 0mg nicotine/electronic cigarettes without nicotine Tax-paid nicotine/tobacco product Untaxed nicotine/tobacco product
Other Distributors None
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
Prohibited
Wholesaler None
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
Prohibited
Retailer None
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
Prohibited
Consumer
  • Cigarette and Tobacco Products Retailer's License**
  • Cigarette and Tobacco Products Distributor's License
  • Tobacco Products Distributor's License
  • Cigarette and Tobacco Products Retailer's License**
Prohibited
License(s) Required by a Wholesaler***
Sales to Untaxed 0mg nicotine/electronic cigarettes without nicotine Tax-paid nicotine/tobacco product Untaxed nicotine/tobacco product
Other Wholesalers None
  • Cigarette and Tobacco Products Wholesaler's License
  • Tobacco Products Wholesaler's License
Prohibited
Retailer None
  • Cigarette and Tobacco Products Wholesaler's License
  • Tobacco Products Wholesaler's License
Prohibited
Consumer
  • Cigarette and Tobacco Products Retailer's License**
  • Cigarette and Tobacco Products Wholesaler's License
  • Tobacco Products Wholesaler's License
  • Cigarette and Tobacco Products Retailer's License
Prohibited
License(s) Required by a Retailer**
Sales to Untaxed 0mg nicotine/electronic cigarettes without nicotine Tax-paid nicotine/tobacco product Untaxed nicotine/tobacco product
Other Retailers None Prohibited Prohibited
Consumers
  • Cigarette and Tobacco Products Retailer's License**
  • Cigarette and Tobacco Products Retailer's License**
Prohibited
Account Required for Purchases by Consumers
Purchasing Untaxed 0mg nicotine/electronic cigarettes without nicotine Tax-paid nicotine/tobacco product Untaxed nicotine/tobacco product
Type of Account N/A N/A
  • Cigarette and Tobacco Products Internet Excise/Use Tax Account

Notes

  1. Out-of-state manufacturers and distributors that are not engaged in business in California (Revenue and Taxation Code section 30108(c)) may voluntarily register with the CDTFA for a Distributor's License. Important note: A person may only hold a distributor's license or a wholesaler's license, but not both.
  2. For California retail locations (Business and Professions Code section 22971(q)). A retailer may not sell to another retailer. Retailers may only purchase tax-paid product from licensed distributors and wholesalers (Revenue and Taxation Code section 30478).
  3. Possession of untaxed product is prohibited. A wholesaler may not hold a distributor's license. A person making sales at an out-of-state location is not a wholesaler since they are not engaged in making sales in this state, and thus may not be licensed as a wholesaler.
Tobacco Products Tax

Proposition 56 amended the definition of "tobacco products" under the California Cigarette and Tobacco Products Tax Law (Revenue and Taxation Code section 30121) for tax purposes. In addition to the traditional tobacco products (such as cigars, smoking, chewing, or pipe tobacco, or snuff) that are subject to the tobacco products tax, the distribution of the following tobacco products are subject to the tobacco products tax beginning April 1, 2017:

  • Little cigars (a cigarette tax stamp is no longer required to be affixed to the package).
  • Any product containing, made of, or derived from tobacco that is intended for human consumption (previously tobacco products, other than cigars, smoking or chewing tobacco, or snuff, had to contain at least 50 percent tobacco to be subject to the tobacco products tax).
  • Any product containing, made of, or derived from nicotine that is intended for human consumption and sold with (for a single price) or without a nicotine delivery device.
  • Electronic cigarettes or any device or delivery system sold in combination with nicotine for a single price (examples of a device or delivery system include, but are not limited to, eCigars, ePipes, vape pens and eHookahs).
  • Any component, part, or accessory of an electronic cigarette that is used during the operation of the device when sold in combination with nicotine for a single price (for example, a battery used in the operation of the device sold in combination with nicotine).

The following products are not subject to the tobacco products tax; however, they are still subject to cigarette and tobacco products retail licensing requirements (This retail licensing requirement does not apply to cannabis or cannabis products. Cigarettes and tobacco products may not be sold at the same location that is licensed as a cannabis business.):

  • Vape liquids such as eLiquid or eJuice that do not contain nicotine or tobacco.
  • Any delivery device or system not sold in combination with any liquid or substance containing nicotine for a single price.
  • Any battery, battery charger, carrying case, or any other accessory not sold in combination with nicotine for a single price.

Please note: if a retailer sells non-nicotine vape liquids and no other cigarettes or tobacco products, the retailer is still required to hold a valid retailer's license. However, if a retailer sells tobacco paraphernalia, as defined under section 22962(a)(2) of the Business and Professions Code, and does not sell cigarettes or tobacco products, the retailer is not required to hold a valid retailer's license. Tobacco paraphernalia includes, but is not limited to, items that do not contain tobacco or nicotine such as cigarette papers or wrappers, pipes, and cigarette rolling machines.

Notes

  1. Tobacco products do not include cigarettes. Tobacco products do not include products approved by the U. S. Food and Drug Administration as tobacco cessation products or for other therapeutic purposes(for example, nicotine patches) when those products are marketed and sold for such approved use.
  2. Nicotine does not include any food products as defined in Revenue and Taxation Code section 6359.
Point of taxation

In California, the tobacco products distributor is responsible for paying the tobacco products tax to the CDTFA. The tobacco products tax is paid by a distributor upon the distribution of tobacco products in California. A distribution includes the first sale, use, or consumption of untaxed tobacco products in California (Revenue and Taxation Code section 30008). In general, distributors purchase tobacco products before any California tobacco products taxes are due and then pay the tobacco products taxes when it distributes the tobacco products. A tobacco products distributor is required to calculate and report the tobacco products tax due based on the wholesale cost (including federal excise tax) of the tobacco products distributed multiplied by the tobacco products tax rate, on the tax returns to be filed with the CDTFA along with the remittance for the tax due.

Nicotine/Tobacco products tax basis – wholesale cost

Effective April 1, 2017, products containing nicotine are subject to the tobacco products tax based on the wholesale cost, the same as all other conventional tobacco products.

For additional information, please refer to Regulation 4076, Wholesale Cost of Tobacco Products.

Calculation of wholesale cost on combination packages

Effective April 1, 2017, distributions of a finished nicotine product sold in combination with items such as atomizers, mods, vaping tanks, or part of any other nicotine delivery device for a single price are subject to the tobacco products tax. The tax is calculated on the combined finished product's wholesale cost.

Tobacco products tax rate

Tobacco products are taxed based on their wholesale cost prior to any discounts or trade allowances. Effective April 1, 2017, distributions of tobacco products containing nicotine are subject to the tobacco products tax. The CDTFA sets the tax rate for the tobacco products tax on July 1 on an annual basis based at an equivalent rate to that of cigarettes. Proposition 56 increased the cigarette tax rate from $0.0435 to $0.1435 per cigarette (tax on a package of 20 cigarettes increased from $0.87 to $2.87) effective April 1, 2017. The tax on distributions of tobacco products, including electronic cigarette products containing nicotine, increased at a rate equivalent to the Proposition 56 increase on cigarettes, effective July 1, 2017. Current and past tobacco products tax rates can be found on the CDTFA public website.

Examples of who owes the tobacco products tax:

Example 1: Business A purchases untaxed eLiquids containing nicotine from a manufacturer (either in-state or out-of-state). Business A is considered a tobacco products distributor and owes the tobacco products tax to the CDTFA upon distribution in California. Sales invoices from licensed distributors must include a statement that indicates the California tobacco products taxes have been paid on the tobacco products sold.

Example 2: Business B purchases untaxed eLiquids containing nicotine from an out-of-state vendor who is not licensed by the CDTFA as a tobacco products distributor and sells to stores in California. Business B is considered a tobacco products distributor and owes the tobacco products tax to the CDTFA upon distribution in California. Only licensed distributors may be in possession of untaxed tobacco products. Licensed distributors must include a statement on their sales invoices that indicates the California tobacco products taxes have been paid on the tobacco products sold.

Example 3: Business C, a licensed tobacco products distributor, is located in California and sells eLiquids containing nicotine online to stores outside of California. Sales of tobacco products delivered to customers at an out-of-state location are exempt from the California tobacco products tax. Interstate commerce sales of tobacco products are not considered California distributions of untaxed tobacco products subject to the tobacco products tax.

Example 4: Business D manufactures eLiquids containing nicotine in California and sells them directly and online across the U.S., including to California distributors, wholesalers, retailers, and consumers. Business D is considered a tobacco products manufacturer, distributor and retailer. Business D, as a tobacco products manufacturer can make untaxed sales to licensed distributors in California. Business D, as a tobacco products distributor, owes the tobacco products tax to the CDTFA upon distribution to California licensed wholesalers, retailers and consumers. Since Business D sells directly to consumers, Business D is also considered a tobacco products retailer.

Example 5: Business E is a licensed distributor located in California and sells tobacco products that were purchased ex-tax from a manufacturer, to Business F, another licensed distributor. Business E owes the tobacco products tax to the CDTFA upon this distribution.

Example 6: Business G is an original importer that holds a tobacco products importer's license and sells untaxed tobacco products to Business H, a licensed distributor. An importer is any purchaser who purchases for resale in the United States tobacco products manufactured outside the United States for the purpose of making a first sale or distribution within the United States (Revenue and Taxation Code section 30019). Business H (the licensed distributor) owes the tobacco products tax to the CDTFA upon distribution in California.

Example 7: Business J manufactures nicotine vape liquids outside of California and sells them to Business K located in California for resale. Business J and K are both engaged in the sale of tobacco products in California and are required to be licensed with the CDTFA. Business K may not purchase nicotine products from an unlicensed manufacturer who is required to have a license. Business K is considered a distributor, is required to hold a Tobacco Products Distributor's License, and owes the tobacco products excise tax to the CDTFA upon distribution in California.

If you have overpaid the tax directly to the CDTFA, you may file a claim by using the form CDTFA-101, Claim for Refund or Credit, or file an amended return stating the specific reason(s) for the overpayment. Additional details about filing a claim for refund can be found at our Special Taxes and Fees Refund page.

For additional information regarding claiming a refund for cigarette tax stamps, read Publication 63, Cigarette Distributor Licensing and Tax Stamp Guide.

Time Limit for Filing a Claim for Refund

Be sure to file your claim for refund by the applicable deadline. If you do not file on time, the CDTFA cannot consider your claim, even if you overpaid the tax. You must file a claim for refund by whichever of the following dates occur later:

  • Three years after the due date of the return on which you overpaid the tax
  • Six months after the date you overpaid the tax
  • Six months after the date a determination (billing) became final
  • Three years after the date the CDTFA collected an involuntary payment, such as from a levy or lien

Exported Tax-Paid Tobacco Products

Retailer or Wholesaler

If you purchased tax-paid tobacco products from an out-of-state California licensed distributor and you subsequently exported or shipped those tobacco products to a buyer outside of California, you may file a claim for refund directly with the CDTFA for the excise taxes paid on those tobacco products. Claims for the excise tax paid on these purchases may only be made if the tax is separately stated on the wholesaler or retailer's purchase invoice from the out-of-state California licensed distributor.

Distributor

A claim for refund or credit based upon the exportation of tax-paid tobacco products from this state to a point outside this state must be filed within three months after the close of the calendar month in which the tobacco products were exported. (Cigarette and Tobacco Products Tax Regulation 4063.5) A distributor may only receive a refund or credit for the exportation of tax-paid tobacco products for which they remitted the tax directly to the CDTFA. A refund or credit does not apply to the exportation of tax-paid tobacco products that a distributor purchased tax-paid.

California Cigarette and Tobacco Products Tax Regulation 4041, Common Carrier Delivery Reports, requires that every common carrier making deliveries of cigarettes, originating outside California to a consignee located in California, must file a report to the CDTFA, on or before the 25th day of the calendar month, following the calendar month in which the delivery of the cigarettes or tobacco products was made. A report must be filed each month even if no deliveries were made. The delivery report is informational only; no tax or fee is due. Reports are filed online through our online services. Please refer to the top of this page for information regarding filing online. The report must include the following information concerning the shipment:

  • The name of the shipper and the point of origin;
  • The name of the consignee and the address to which the products were delivered;
  • The date and number of the waybill covering the shipment;
  • The number of cases, bales or other containers of cigarettes delivered, and the quantity of cigarettes contained therein, and the quantity of tobacco products delivered, as shown by the shipping documents; and
  • In the case of rail shipments, the car initials and number; and
  • In the case of water shipments, the name of the vessel and the number of the steamship bill of lading.

Proposition 56

What was the floor stock tax and cigarette stamp adjustment tax? Who owed it?

With the passage of Proposition 56, starting April 1, 2017, the cigarette tax increased from $0.87 to $2.87 on a pack of 20 cigarettes. The additional cigarette tax created a requirement for retailers and wholesalers to report and pay the "floor stock tax" and for distributors to report and pay the "stamp adjustment tax."

What was the floor stock tax and cigarette stamp adjustment tax based on?

Inventory counts:

Proposition 56 required retailers and wholesalers to take inventory of all stamped packages of cigarettes in their possession or control as of 12:01 a.m. on April 1, 2017, to report and determine the amount of floor stock tax due. It also required distributors to take inventory of all cigarette tax stamps (affixed and unaffixed) in their possession or control as of 12:01 a.m. April 1, 2017, to report and determine the amount of cigarette stamp adjustment tax due.

The following items should not have been included in your inventory count:

  • Retailers and wholesalers:
    • Stamped packages of little cigars.
  • Distributors:
    • Stamped packages of little cigars.
    • Excess unaffixed tax stamps – 10 denomination

For more information on how Proposition 56 affected little cigars for tax purposes, see How did Proposition 56 affect the taxation of little cigars? below.

Floor stock tax and cigarette stamp adjustment tax rates:

For retailers and wholesalers, the floor stock tax was applied to the inventory counts at the equivalent rate of:

  • $2.00 per pack of twenty (20) cigarettes
  • $2.50 per pack of twenty-five (25) cigarettes

For distributors, the cigarette stamp adjustment tax was applied to the cigarette inventory counts that had stamps affixed as of April 1, 2017, and unaffixed tax stamps purchased prior to April 1, 2017, at the equivalent rate of:

  • $2.00 per tax stamp – 20 denomination
  • $2.50 per tax stamp – 25 denomination

Were electronic cigarettes (eCigarettes) and vape liquids containing nicotine subject to the cigarette floor stock tax?

No. Proposition 56 limited the cigarette floor stock tax to cigarettes only (Revenue and Taxation Code section 30130.52). eCigarettes and vape liquids containing nicotine were taxed as tobacco products as of April 1, 2017.

In addition, the cigarette floor stock tax did not apply to tobacco products such as cigars, pouch tobacco, snuff, chewing tobacco, and as of April 1, 2017, little or small cigars.

Is the floor stock tax return and/or cigarette stamp adjustment tax return available on the CDTFA website?

Yes. Below are the links to the returns:

  • Retailers: CDTFA-501-Q1, Cigarette Dealer (Retailer) Floor Stock Tax Return
  • Wholesalers: CDTFA-501-Q2, Cigarette Wholesaler Floor Stock Tax Return
  • Cigarette Distributors: CDTFA-501-Q3, Cigarette Distributor Cigarette Stamp Adjustment Tax Return

Do I need to keep records of my inventory counts when I determined the floor stock tax and/or cigarette stamp adjustment tax?

Yes. Retailers and wholesalers should keep inventory records of their stamped cigarettes and distributors should keep inventory records of their affixed and unaffixed cigarette tax stamps that were in their possession or under their control as of 12:01 a.m. on April 1, 2017, to substantiate their tax returns.

When were floor stock tax returns/cigarette stamp adjustment tax returns and payment of the additional tax due?

The Cigarette Dealer (Retailer) Floor Stock Tax Return, Cigarette Wholesaler Floor Stock Tax Return, and Cigarette Distributor Cigarette Stamp Adjustment Tax Return and payment were due July 1, 2017. Because July 1, 2017, was a Saturday, the due date was Monday, July 3, 2017. If you file after July 3, 2017, you will owe interest and penalties.

How do I pay the floor stock tax and cigarette stamp adjustment tax?

We offer a number of convenient payment methods. You can make payments directly from your bank account, credit card, check, or money order. Information regarding payment options may be found under "Make a Payment".

How did Proposition 56 affect the taxation of little cigars?

Prior to April 1, 2017, little cigars were taxed as cigarettes and required a cigarette tax stamp. Proposition 56 revised the definition of "tobacco products" (Revenue and Taxation Code section 30121(b)) thereby including little cigars as tobacco products.

As of April 1, 2017:

  • Little cigars must not be affixed with a cigarette tax stamp.
  • Licensed distributors may distribute little cigars that are affixed with a cigarette tax stamp as "tax paid" tobacco products until their inventories of these stamped products are exhausted.
  • Little cigars are taxed upon distribution at the tobacco products tax rate based on the wholesale cost of these products.
  • Licensed distributors owe the tobacco products tax on the distribution of unstamped little cigars.

For more information on how to report stamped packages of little cigars for the floor stock tax and cigarette tax stamp adjustment tax, see What was the floor stock tax and cigarette stamp adjustment tax based on? above.

What do I do with my existing inventory after I paid the floor stock tax and stamp adjustment tax?

Retailers and wholesalers who have reported and paid the floor stock tax may exhaust their inventory of cigarette packs affixed with the old cigarette tax stamps.

Distributors who have reported and paid the stamp adjustment tax may exhaust their inventory of pre-Proposition 56 cigarette tax stamps (affixed and unaffixed), except for unaffixed tax stamps bearing the "10" designation. Unaffixed tax stamps with the "10" designation were used to stamp packages of little cigars, which were taxed as "cigarettes" prior to April 1, 2017. Since starting April 1, 2017, little cigars are taxed as tobacco products and do not require a tax stamp, distributors may return any unaffixed "10" denomination cigarette tax stamps to the CDTFA for a refund. See below for more information about obtaining a refund.

I'm a distributor and had unaffixed tax stamps bearing the "10" designation for stamping little cigars. Since little cigars are taxed as tobacco products upon distribution as of April 1, 2017, was I able to get a refund for these stamps?

Yes. Distributors were able to return their excess unaffixed "10" cigarette tax stamps to the CDTFA for a refund. Distributors should have sent their claim for refund by mail to the Appeals and Data Analysis Branch, P.O. Box 942879, Sacramento, CA 94279-0033, or fax to 1-916-323-9497, or email the Appeals and Data Analysis Branch. CDTFA staff contacted the distributor and provided instructions on how to return the stamps. For more information, see our March 2017 Special Notice, Cigarette Distributors Cigarette Tax Stamp Adjustment Tax Return Requirement.

I'm a retailer with over 100 separate retail locations. Could I have filed a printed spreadsheet containing the cigarette floor stock tax information (including account numbers) for all my locations or did I need to complete and file an individual floor stock tax return form for each of my locations?

All retailers should have filed an individual floor stock tax return form for each of their retail location(s).

I'm a retailer and a wholesaler. Did I have to complete two separate floor stock returns?

Retailers that are registered as wholesalers were required to report both their retail and wholesale cigarette stock and pay the floor stock tax on their CDTFA-501-Q2, Cigarette Wholesaler Floor Stock Tax Return, for each business location.They were required to complete the CDTFA-501-Q1, Cigarette Dealer (Retailer) Floor Stock Tax Return, by checking the box on the front of the return and providing their cigarette wholesaler account number to indicate that they also have a cigarette wholesaler account and are reporting and paying the floor stock tax on their cigarette wholesaler floor stock tax return. They were required to sign, date, and file this return with the CDTFA.

I am a Native American retailer with a retail business located on an Indian reservation that sells cigarettes at retail. Was I required to file a floor stock tax return and pay the tax on my inventory of cigarettes?

Native American retailers with a retail business selling cigarettes located on an Indian reservation were required to file a floor stock tax return with the CDTFA but may indicate zero due.

Since the cigarette tax rate increase took effect on April 1, 2017, was a new cigarette tax stamp issued?

Yes. Effective April 1, 2017, a new red/orange tax stamp replaced the old gold/yellow tax stamp. It is recommended that you first sell/distribute cigarettes with the gold/yellow tax stamp affixed. For more information, see Publication 403, California's Counterfeit-Resistant Cigarette Tax Stamp.

Was a new $2.00 tax stamp for the additional cigarette tax required to be applied in conjunction with the old cigarette tax stamp?

No. Once cigarette distributors exhaust their inventory of old (pre-Proposition 56) gold/yellow tax stamps, they should have begun affixing the new (post-Proposition 56) red/orange cigarette tax stamp to cigarette packs prior to subsequent distribution. Retailers and wholesalers were required to pay a floor stock tax on their inventory of stamped cigarette packs and were allowed to exhaust their inventory of cigarette packs affixed with the old cigarette tax stamps. Distributors were required to pay a cigarette tax stamp adjustment tax on their inventory of affixed and unaffixed cigarette tax stamps. Proposition 56 did not impose a time limit for distributors, wholesalers or retailers to exhaust their inventories of cigarette packs affixed with the old tax stamps.

Retailers

If a retailer makes available a commercial cigarette-making machine for use by customers, federal law requires the retailer to obtain a permit as a "manufacturer of tobacco products" from the Alcohol and Tobacco Tax and Trade Bureau (TTB). Under the Cigarette and Tobacco Products Licensing Act of 2003, the retailer does not manufacture cigarettes if the retailer does not own the tobacco when it is manufactured into cigarettes. In this scenario, the retailer is not required to register with the CDTFA as a cigarette manufacturer.

It is against federal law to operate as a manufacturer of tobacco products without a TTB permit, and doing so without proper permits risks civil and/or criminal liability. The TTB has instructed that retailers operating without a permit "must immediately cease operations until a TTB permit is obtained." The TTB's enforcement efforts have included investigations of retail locations where the machines are made available to members of a "social club" or "non-profit." The TTB has indicated that the non-profit status of the "person" making the machine available is not relevant in evaluating "commercial purposes" under Internal Revenue Code section 5702 and has found members of a "social club" or "non-profit" to be in violation of the law and has assessed taxes.

Please note: These requirements do not apply to cannabis businesses that only use the making or rolling machine to roll cannabis or cannabis products. Furthermore, cigarette and tobacco products may not be sold at the same location that is licensed as a cannabis business.

Effective June 9, 2016, the minimum age to purchase cigarettes and tobacco products in California was raised from 18 to 21, except for active duty military personnel in the U.S. Armed Forces. See the California Department of Public Health's Tobacco 21 website for more information.

Electronic cigarettes, personal vaporizers, eCigars, eHookahs, ePipes, and vaping devices are some of the terms used to describe electronic nicotine delivery systems (ENDS). Generally, these ENDs heat a liquid solution or “eLiquid,” which typically, but not always, contains nicotine as well as varying flavorings and other ingredients, to create a vapor that the user inhales. The ENDS that do not contain nicotine, or are not sold in a kit that contains nicotine, are considered tobacco products for retail licensing purposes, but not for tax purposes. Thus, the sale of ENDS that do not contain nicotine or are not sold with nicotine are not subject to the California excise tax on tobacco products. However, a California Cigarette and Tobacco Products Retailer's License is required if you sells ENDS that do not contain nicotine or are not sold with nicotine to a consumer in California. A distributor or wholesaler does not need to be licensed under the California Cigarette and Tobacco Products Licensing Act of 2003 to sell ENDS that do not contain nicotine or are not sold with nicotine to a retailer.

Important Note: The California Cigarette and Tobacco Products Licensing Act does not apply to cannabis or other cannabis products such as cannabis vape pens or accessories. In addition, cigarette and tobacco products may not be sold at the same location that is licensed as a cannabis business.

Distributors

"Wholesale cost" means the cost of tobacco products to the distributor prior to any discounts or trade allowances. The CDTFA adopted Regulation 4076, Wholesale Cost of Tobacco Products, to provide additional guidance. This regulation:

  • Defines
    • Arm's-length transactions
    • Discounts or trade allowances
    • Finished tobacco products
  • Clarifies the wholesale cost of tobacco products
  • Provides alternative methods of estimating or calculating the wholesale cost for certain instances
  • Offers examples of estimating or calculating the wholesale cost

This regulation also establishes a rebuttable presumption that sales between related parties are not arm's-length transactions. Distributors can rebut this presumption by showing that the price, terms, and conditions of the transaction were substantially equivalent to those that would have been negotiated between unrelated parties.

If tobacco products are not purchased in an arm's-length transaction or tobacco product costs include express, implicit, or unstated discounts or trade allowances, the correct wholesale costs to be reported by the distributor may be determined using any of the alternative methods provided in subdivision (c) of Regulation 4076.

Examples of determining the wholesale cost of tobacco:

Example 1: Distributor B is also licensed as a manufacturer and produces handmade cigars. Distributor B's tobacco products costs include: all manufacturing costs, the cost of raw materials (including waste materials not incorporated into the final product), the cost of labor, any direct and indirect overhead costs, and any federal excise and/or U.S. Customs taxes paid. The cost does not include freight or transportation charges for shipment from the supplier to the distributor.

Example 2: Distributor C purchases tobacco products from a subsidiary corporation in which it owns or controls more than 50 percent of the voting stock. Due to this corporate relationship between seller and buyer, the CDTFA presumes that the sale and purchase were not at arm's-length, and the presumption is not rebutted by Distributor C. In the absence of an arm's-length transaction, the methods discussed in subdivision (c) of Regulation 4076 may be used to determine the correct wholesale cost.

Example 3: Distributor D acquires tobacco products free of charge and reports no wholesale cost for the products on its Tobacco Products Distributor Tax Return. However, Distributor D acquired such tobacco products at a 100 percent discount or trade allowance. In the absence of an arm's-length transaction, the methods discussed in subdivision (c) of Regulation 4076 may be used to determine the correct wholesale cost.

Example 4: Distributor E, with a Tobacco Products Importer's License, acquires tobacco products or finished tobacco products from a supplier outside the United States. Distributor E's tobacco products costs include, in addition to all other production or acquisition costs, the costs of all U.S. Customs fees and federal excise taxes paid or incurred by Distributor E with respect to such tobacco products.

Example 5: Distributor F receives three tobacco products packaged as one unit, as a "three for the price of two" promotional package, labeled with a single UPC barcode. As the products are packaged together as one inseparable unit, tax is based on the total package price.

Example 6: Distributor G receives 2 units, to sell as a "buy one, get one free" promotion. Each unit is separately packaged and each unit is labeled with a UPC barcode. Because one unit is being provided for free, tax would apply to the wholesale cost of each separate unit as calculated by a method discussed in subdivision (c) of Regulation 4076.

Example 7: Distributor H receives a three percent discount for paying their supplier within 10 days of receipt of their items. To calculate the wholesale cost, Distributor H must add the three percent discount to the price paid for the products.

When an out-of-state California-licensed tobacco products distributor sells tobacco products delivered from outside California to a wholesaler, retailer, or consumer located in California, the licensed distributor must collect the excise tax from the California customer based on the California customer's wholesale cost (for example, the cost to the customer).

  • The California customer's wholesale cost is the price charged by the out-of-state California-licensed distributor to the California customer and should be calculated in accordance with Regulation 4076, Wholesale Cost of Tobacco Products.
  • The California customer is the distributor for purposes of calculating the tobacco products excise tax owed by the out-of-state California-licensed distributor.

If an out-of-state California-licensed tobacco products distributor is also a California-licensed tobacco products manufacturer, the wholesale cost is the California customer's wholesale cost.

Example:

Distributor A, an out-of-state California-licensed tobacco products distributor, sells cigars to Wholesaler A, a California-licensed cigarette and tobacco products wholesaler located in California. Distributor A must collect the excise tax from Wholesaler A based on the wholesale cost of the cigars (tobacco products) to Wholesaler A. The wholesale cost is the invoiced sales price charged by Distributor A to Wholesaler A for the cigars, prior to any discounts or trade allowances. The excise tax required to be collected by Distributor A constitutes a debt owed by Distributor A to California.

This guidance is effective October 1, 2019 and will be updated in Regulation 4011, Distributors Not Engaged in Business in this State. For reference, view the Special Notice (L-698, August 2019), Clarifying the Wholesale Cost Basis for Out-of-State Licensed Tobacco Products Distributors Effective October 1, 2019.

The sale of tobacco products by an out-of-state California-licensed tobacco products distributor to an in-state California-licensed tobacco products distributor is not considered a distribution of tobacco products in California by the out-of-state seller. Instead, the licensed distributor in California who purchases the tobacco products from out-of-state and who makes the distribution of tobacco products in California owes the applicable excise tax.

License Requirements

An out-of-state distributor who is engaged in business in California must have a California distributor license for licensing and tax reporting purposes (Revenue and Taxation Code [R&TC] section 30108). An out-of-state distributor who is not engaged in business in California may apply for a distributor license (R&TC section 30140.1) for licensing and tax reporting purposes. Out-of-state California-licensed distributors have the same responsibilities and requirements as in-state California-licensed distributors.

“Engaged in business” includes, but is not limited to:

  • Maintaining, occupying, or using any type of business location. This includes use that is temporary, direct or indirect, or through any type of subsidiary or agent.
  • Having a representative in California who sells, delivers, or takes orders of tobacco products.

Distributor licenses are required for each business location that distributes tobacco products in California (R&TC section 30140). A warehouse/storage location is not considered a location that distributes tobacco products unless direct tobacco products distributions are made from that warehouse/storage location.

Calculation of Tax

The excise tax is due on the in-state California licensed tobacco products distributor's wholesale cost of the tobacco products. The in-state distributor's wholesale cost is usually the list price on their purchase invoice from their supplier prior to any discounts or trade allowances. The tax rate that applies is the rate in effect at the time the in-state distributor sells the tobacco products. For additional information on the wholesale cost, please read Regulation 4076, Wholesale Cost of Tobacco Products. In-state distributors responsible for paying the excise tax on taxable distributions (sales) must: indicate the excise tax on the sales invoice issued to customers; calculate the excise tax due based on their wholesale cost; report their distribution of the tobacco products, based on the date sold, on the tax return (Tobacco Products Distributor Tax Return) provided by the state; and pay the total amount due to the state.

For reference, view the Special Notice (L-506, September 2017), Tobacco Product Sales by Out-of-State Distributors to In-State Distributors.

Cigarettes

The measure of tax is different for a "Buy 1 Get 1 Free" unit of cigarettes. With cigarettes, the two packages cannot be viewed as one unit for tax purposes because the cigarette tax is based on each cigarette (stick) distributed, not wholesale cost, and both packages require a tax stamp. In short, cigarettes are taxed per each cigarette (stick) distributed and tobacco products are taxed based on the wholesale cost to the distributor.

Tobacco Products

When multiple cans of chewing tobacco, for example, are sold by a manufacturer to a licensed distributor in a one-pack unit commonly referred to as "Buy 1, Get 1 Free," or "Three for the Price of Two," what is the measure of tax? See examples below:

Example 1: Distributor A receives three tobacco products packaged as one unit, as a "three for the price of two" promotional package, labeled with a single UPC barcode. As the products are packaged together as one inseparable unit, tax would apply on the total package wholesale price.

Example 2: Distributor B receives 2 units, to sell as a "buy one, get one free" promotion. Each unit is separately packaged and each unit is labeled with a UPC barcode. Because one unit is being provided for free, tax would apply to the wholesale cost of each separate unit.

The following sales and distributions of cigarettes and tobacco products are generally not subject to the tax although these transactions may be subject to reporting requirements. This list is not intended to be all-inclusive.

  • Sales of cigarettes or tobacco products by the original importer to a licensed distributor if the cigarettes or tobacco products are manufactured outside the United States (Revenue and Taxation Code (R&TC) section 30105);
  • Sale or gift of federally tax-free cigarettes or tobacco products when the cigarettes or tobacco products are delivered directly from the manufacturer under Internal Revenue bond to a veteran's home of the State of California or a hospital or domiciliary facility of the United States Veterans' Administration for gratuitous issue to veterans receiving hospitalization or domiciliary care. The tax shall not apply to the use or consumption of such cigarettes or tobacco products by the institution or by the veteran patients or domiciliaries (R&TC section 30105.5);
  • Sales of cigarettes or tobacco products by the manufacturer to a licensed distributor (R&TC section 30103);
  • Sales by a distributor to a common carrier engaged in interstate or foreign passenger service. (R&TC section 30104); Note: To properly support your claim for the interstate commerce exemption, you must:
    • Maintain adequate documentation. Evidence of delivery of cigarettes or tobacco products to a destination outside of California must be retained by the distributor. In the case of cigarettes or tobacco products for foreign export, copies of United States Customs shippers' export declarations filed with the Collector of Customs or other documentary evidence of export must be obtained and retained.
    • Claim the correct wholesale cost for tobacco products. All distributions of untaxed tobacco products must be included in the wholesale cost of distributions. With proper documentation, sales of tobacco products which are shipped to a buyer outside of California may be claimed as an exempt sale. The amount claimed is the wholesale cost to the distributor, not the distributor's selling price.
  • Sales to United States military exchanges, commissaries, ships' stores, or the U.S. Department of Veterans Affairs (R&TC section 30102);
  • Distributions of federally untaxed cigarettes or tobacco products that are under Internal Revenue bond or U.S. Customs control (R&TC section 30102.5);
  • An individual shipment of not more than 400 cigarettes (typically 20 packs or 2 cartons) personally transported into California (R&TC Section 30106);
  • Sales and distributions of cigarettes and tobacco products that cannot be taxed by the state under the U.S. Constitution or federal law, or under the California Constitution or state law, such as shipments to purchasers in other states, territories, or foreign countries when the cigarette and tobacco products are not to be returned to California before use.

The federal Prevent All Cigarette Trafficking (PACT) Act (effective June 29, 2010) amended the federal Jenkins Act (15 U.S.C. §§ 375-378). These amendments require any person who sells, transfers, or ships for-profit taxed or untaxed cigarettes or smokeless tobacco1 (such as chew or snuff) or who advertises or offers such, in interstate commerce2 into California, or into or through Indian country of an Indian tribe located within California's borders, to register with the tobacco tax administrator of the state into which shipment is made and file monthly reports no later than the 10th day of each calendar month. These provisions apply to California's tribal reservations, as well as to both in-state and out-of-state distributors shipping cigarettes and smokeless tobacco into California. Failure to comply with these requirements may result in the assessment of penalties or civil action brought by the Office of the California Attorney General.

Notes

  1. “Smokeless tobacco” means any finely cut, ground, powdered, or leaf tobacco, or other product containing tobacco, that is intended to be placed in the oral or nasal cavity or otherwise consumed without being combusted.
  2. “Interstate commerce” means commerce between a State and any place outside the State, commerce between a State and any Indian country in the State, or commerce between points in the same State, but through any place outside the State or through any Indian country.
    A sale, shipment, or transfer of cigarettes or smokeless tobacco that is made in interstate commerce, shall be deemed to have been made if the sale into the State, place, or locality in which such cigarettes or smokeless tobacco is delivered.

For additional information, see Special Notice L-298, PACT Act Requirements for California Licensed Cigarette and Tobacco Products Distributors.

Delivery Sellers (Internet or Remote Sellers Selling Directly to Consumers)

A “delivery seller” is a person who makes a delivery sale. A “delivery sale” means any sale of cigarettes or smokeless tobacco to a consumer if:

  • The consumer submits the order for sale by means of a telephone or other method of voice transmission, the mail, or the Internet or other online service, or the seller is otherwise not in the physical presence of the buyer when the request for purchase or order is made; or
  • The cigarettes or smokeless tobacco are delivered to the buyer by common carrier, private delivery service, or other method of remote delivery, or the seller is otherwise not in the physical presence of the buyer when the buyer obtains possession of the cigarettes or smokeless tobacco.

For example, you are a “delivery seller” if you are a vendor located outside of California and sell cigarettes or smokeless tobacco products directly to a consumer located in California. Delivery sellers must comply with all California laws regarding the sale of cigarettes and smokeless tobacco into California as if that delivery seller were located in California. A delivery seller is required to register with the CDTFA under the PACT Act and under the Cigarette and Tobacco Products Licensing Act Law (California Cigarette and Tobacco Products Distributor's license) and Cigarette and Tobacco Products Tax Law (Cigarette Distributor's license and/or Tobacco Products Distributor's license). You are also a “delivery seller” if you are located in California making such sales and thus, in addition to the distributor's licenses required, you would be required to hold a retailer's license.

Note: You must obtain a distributor's license before you purchase untaxed cigarettes or tobacco products from an out-of-state seller who does not have a license issued under the Cigarette and Tobacco Products Licensing Act of 2003 and Cigarette and Tobacco Products Tax Law. A wholesaler's license is required if you purchase tax-paid cigarettes or tobacco products for resale to in-state licensed retailers and other wholesalers. However, a person may only hold a distributor's license or a wholesaler's license, but not both. See the Distributors and Wholesalers sections for license fees and requirements.

In-State Licensed Cigarette and Tobacco Products Distributor

If you are a California licensed Cigarette and Tobacco Products Distributor physically located in California and only make distributions to California licensed retailers, wholesaler, or other distributors who are physically located in California, you do not have a PACT Act reporting requirement. Your Cigarette Distributor's Tax Report (CDTFA-501-CD) and Tobacco Products Distributor Tax Return (CDTFA-501-CT) will fulfill the PACT Act reporting requirements with California.

PACT Act Requirements of Other States - Shipped in Interstate Commerce Outside of California

Any person who sells, transfers, or ships for profit taxed or untaxed cigarettes or smokeless tobacco or who advertises or offers such, in interstate commerce outside of California, must contact the state receiving the cigarettes or smokeless tobacco to register and file PACT Act reports with that state.

American Indian Tribal Topics

Indian retailers

An Indian retailer in California who buys untaxed tobacco products or cigarettes without a California tax stamp and sells them to non-Indians in Indian Country is required to collect the cigarette and tobacco products excise taxes from those purchasers and pay the excise tax to the CDTFA. If the Indian retailer does not collect and pay the excise taxes due, the non-Indian purchaser is ultimately liable for the excise taxes. Non-Indians who purchase cigarettes without California tax stamps or untaxed tobacco products from an Indian retailer, owe the cigarette and tobacco products excise and use taxes. The non-Indian purchaser must file a return with the CDTFA to report purchases and pay applicable California cigarette and tobacco products excise and use taxes. For more information on how non-Indian purchasers report and pay excise and use taxes, see the Consumer section.

Distributors

There are no special exemptions from the state's cigarette and tobacco products excise taxes for sales of cigarettes and tobacco products to Indians. A non-Indian cigarette or tobacco products distributor who sells cigarettes or tobacco products to an Indian must pay cigarette and tobacco products excise taxes and apply California cigarette tax stamps to the cigarette packages.

License Requirement

To comply with California law, generally Indian Tribes are required to obtain and maintain the appropriate cigarette and tobacco products license(s) in order to make sales in California of cigarettes and tobacco products to businesses or consumers.

If an Indian Tribe operates on its own tribal land and exclusively makes sales to members of its own tribe, that Indian Tribe is not required to hold a cigarette and tobacco products license.

If an Indian Tribe makes sales of cigarettes and tobacco products to non-Indians or tribe members of a different tribe, however, California law requires the Indian Tribe to obtain a cigarette and tobacco products license since those sales must be reported and the tax must be collected and remitted to the CDTFA.

License Fee

If an Indian Tribe is required to hold a cigarette and tobacco products license in order to sell cigarettes and tobacco products to non-Indians or tribe members of a different tribe in California, the license fee for a cigarette and tobacco products license does not apply to that Indian Tribe.

Disclaimer

This page summarizes the law and applicable regulations in effect when it was written. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between text on this webpage and the law, the decision will be based on the law and not on this webpage.

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

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Archives:

Select one of the following links below for a current list of licensed California cigarette and tobacco products distributors, wholesalers or retailers. You are responsible for verifying the entity you are purchasing from or selling to has a valid cigarette and tobacco products license.

  • Contact Us – A listing of CDTFA contacts for your questions and concerns.
  • Sign Up for CDTFA Updates – Subscribe to our email lists and receive the latest news, newsletters, tax and fee updates, public meeting agendas, and other announcements.
  • Videos and How-To Guides – These resources will help you avoid common mistakes, file your tax returns online, and more.
  • City and County Tax Rates – A listing of current and historical tax rates.
  • Find a Sales and Use Tax Rate – Enter an address and find the sales and use tax rate for that location.
  • Online Services – Learn about the online services CDTFA offers.
  • Verify a Permit, License or Account – You can use this application to verify a seller's permit, Cigarette and Tobacco products license, Covered Electronic Waste Recycling (eWaste) Fee account, or Underground Storage Tank Maintenance Fee Account.
  • Office Locations and Addresses – A comprehensive listing of all CDTFA offices and contact information.
  • Get It In Writing! – Tax and fee laws can be complex, and you are encouraged to put your tax questions in writing. You may also send your request in a letter to: Special Taxes and Fees, MIC:31, California Department of Tax and Fee Administration, P.O. Box 942879, Sacramento, CA 94279-0031.
  • Taxpayers' Rights Advocate (TRA) – The TRA Office helps taxpayers when they are unable to resolve a matter through normal channels, such as speaking to a supervisor, or when there are apparent rights violations.
  • GO-Biz – The Governor's Office of Business and Economic Development offers extensive information on state, local, and federal permit requirements. For a listing of their assistance centers, visit their website.
  • CalGold – Provides help with permit and licensing requirements for other state, federal, and local authorities. For example, you may need to register with the Franchise Tax Board or the Employment Development Department. You may also want to consult with a tax professional or your local city and county authorities for assistance regarding other agencies' requirements or restrictions.
  • California's Tax Service Center – A one-stop tax help and resource website that guides taxpayers to forms and services they need.