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Business Taxes Law Guide—Revision 2024
Cigarette and Tobacco Products Tax Regulations
Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 9. Cigarette and Tobacco Products Tax Law Regulations
Article 3. Distributor's and Wholesaler's License
Regulation 4001
Regulation 4001. Cigarette.
[Repealed May 4, 1982, effective August 19, 1982.]
Regulation 4001. Retail Stock.
Reference: Sections 30008 and 30109, Revenue and Taxation Code; Authority Cited: Section 30451, Revenue and Taxation Code
(a) "Retail stock" means and includes:
(1) All cigarettes and tobacco products intended and available for sale to consumers by a person who holds a retailer license; and
(2) All cigarettes and tobacco products displayed for sale to consumers by a person who concurrently holds a distributor license and a retailer license at the same location.
(A) Cigarettes and tobacco products that are stored in the area where retail sales are made are deemed to be retail stock. Cigarettes and tobacco products that are securely stored away from the area where retail sales are made are not considered retail stock.
(i) Examples of areas that are separated and segregated from retail stock include, but are not limited to, the following secured areas:
- store room or closet,
- back office,
- inside a locked cabinet, safe, or other similar storage container, or
- behind a locked wire-cage door or similar encumbrance.
(ii) Untaxed cigarettes and tobacco products must be in the original manufacturer packaging, with an unbroken seal, and they must be secured, segregated, and separated from inventory accessible by consumers. Untaxed tobacco products must be segregated and secured separately from tax-paid tobacco products away from the retail area.
(B) Walk-in humidors. Tobacco products inside a walk-in humidor displayed for sale to consumers are retail stock. Tobacco products inside a walk-in humidor in the original manufacturer packaging with an unbroken seal, secured, segregated and separated from retail stock, and not displayed for sale to consumers are not retail stock. Examples of areas that are separated and segregated from retail stock include, but are not limited to, the following secured areas:
- inside a locked cabinet, safe, or other similar secured storage container, or
- behind a locked wire-cage door or similar encumbrance.
(b) A person who is both a licensed retailer and a licensed distributor, but who only makes retail sales to consumers and does not make any sales for resale to other licensees, holds all inventory intended for sale in retail stock.
(c) Presumption of Distribution.
(1) All cigarettes and tobacco products placed in retail stock have been distributed. Tax is due upon distribution.
(2) Unless the contrary is established, it shall be presumed that all cigarettes and tobacco products no longer in a distributor's possession, including when they have been lost through an unexplainable disappearance, have been distributed. The presumption may be rebutted by a preponderance of the evidence demonstrating that an explainable disappearance, such as theft, has occurred.
Examples of evidence that may overcome the presumption include, but are not limited to, the following:
(A) Police reports (Required and must have been filed timely)
(B) Insurance claims
(C) Insurance reimbursements
(D) Video surveillance
(E) Photographs
(F) Detailed tobacco inventory reports
(G) Cigarette and tobacco purchase invoices (Required)
(H) Proof of prosecution related to charges of theft of cigarettes or tobacco products.
History—Adopted February 22, 2017, effective July 1, 2017.