Sec. 79.3. Tax due on inventory based on increased cigarette tax

Tax Law, §§ 471 and 475

(a) Effective June 3, 2008, amendments made by part RR-1 of chapter 57 of the Laws of 2008 to section 471 of article 20 of the Tax Law increased the tax on cigarettes possessed in New York State by any person for sale from $1.50 to $2.75 for each 20 cigarettes or fraction thereof. Provided, however, if a package of cigarettes contains more than 20 cigarettes, the rate of tax on those cigarettes in excess of 20 increased from 37½ cents to 68¾ cents for each five cigarettes or fraction thereof.

(b) Every dealer of cigarettes, including agents licensed to purchase and affix stamps, shall take a physical inventory of all cigarettes possessed in this State as of the close of business on June 2, 2008. In addition, every dealer who is a licensed agent shall take a physical inventory of all unaffixed cigarette tax stamps possessed as of the close of business on such date. Because it may be impossible to take a physical inventory of cigarettes in all vending machines that are on location throughout the State, a dealer may take as many physical inventories of the contents of such machines as is possible with available personnel. For those machines that cannot be physically inventoried as of the close of business on June 2, 2008, cigarettes may be accounted for at one-half of the normal fill capacities of such machines, as reflected in the individual inventory records maintained for such machines.

(c) Returns and payments.

(1)

(i) On or before August 20, 2008, every such dealer shall file a return with the Department of Taxation and Finance, on a form prescribed by the department for such purpose, showing the quantity of all cigarettes and unaffixed stamps possessed as of the June 2, 2008, close of business inventory. Such return must reflect the entire wholesale and/or retail inventories of the dealer within the State, as required by the department, regardless of the number of business locations of the dealer. Except as provided in subparagraph (ii) of this paragraph, every dealer shall pay, with the filing of such return, an additional amount of tax for all cigarettes in such inventory which are contained in packages bearing stamps evidencing tax payment at the rates in effect prior to June 3, 2008, and for all unaffixed cigarette tax stamps in such inventory evidencing tax payment at such rates. The additional amount of tax shall be paid at the rate of $1.25 for each 20 cigarettes or fraction thereof unless cigarettes are contained in packages of more than 20, in which case the additional amount of tax for those cigarettes in excess of 20 shall be at the rate of 31¼cents for each five cigarettes or fraction thereof ($1.5625 per package of 25 cigarettes). Such tax shall be paid regardless of whether the affixed or unaffixed stamps show payment of the New York State tax or both the New York State and City of New York taxes.

(ii) Notwithstanding any other provision of this Title to the contrary, a dealer who has additional amount of tax due on inventory based on the increased cigarette tax may elect to pay such tax in two installments. The first installment is due with the filing of the return on or before August 20, 2008, and shall not be less than 25 percent of the entire additional amount of tax due. Provided, however, in no event shall such installment be less than $500 or the entire additional amount of cigarette tax due, if less than $500. Thus a dealer having an additional amount of tax due on inventory based on the increased cigarette tax of $400 would be liable for the full payment on August 20, 2008; a dealer having such a liability of $1,000 would be liable for a first installment of at least $500; and a dealer having such a liability of $10,000 would be liable for a first installment of at least $2,500 ($10,000 x 25 percent). The second and final installment must be paid to the department on or before December 22, 2008, and must be accompanied by a final payment document prescribed by the department for this purpose. Where the department has cause to believe that the final installment of the additional amount of tax due on inventory may be jeopardized by delay, the department may require such payment at any time prior to December 22, 2008. (See subdivision [d] of this section for sanctions concerning untimely installments.)

(2) The additional amount of tax due on inventory based on the increased cigarette tax and any applicable installment should be paid by check or money order, payable to NYS Cigarette Tax.

(d)

(1) Failure to file a return on cigarette and cigarette tax stamp inventory or to pay the additional amount of tax due thereon, or failure to comply with any provision of this section may result in civil or criminal sanctions, or both.

(2) In the case of any dealer who elects to pay the additional amount of tax due in installments, as described in subdivision (c) of this section, if the required first installment is not properly paid on or before August 20, 2008, the entire additional amount of tax shall be due and owing, and any civil penalty and interest imposed pursuant to section 481 of the Tax Law and Part 78 of this Title will accrue from such date on the entire tax liability that remains unpaid. Where the required first installment is timely paid but any portion of the second and final installment is paid after December 22, 2008, any civil penalty and interest so imposed will accrue from such date on the unpaid balance.