|(a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Bonded agent--A person in this state who is a third-party
agent of a manufacturer outside this state and who receives cigarettes
in interstate commerce and stores the cigarettes for distribution
or delivery to distributors under orders from the manufacturer.
(2) Cigar--A roll of fermented tobacco that is wrapped
in tobacco and the main stream of smoke from which produces an alkaline
reaction to litmus paper.
(3) Cigarette--A roll for smoking:
(A) that is made of tobacco or tobacco mixed with another
ingredient and wrapped or covered with a material other than tobacco;
(B) that is not a cigar.
(4) Distributor--A person who:
(A) is authorized to purchase for the purpose of making
a first sale in this state, cigarettes in unstamped packages from
manufacturers who distribute cigarettes in this state and to stamp
(B) ships, transports, imports into this state, acquires,
or possesses cigarettes and makes a first sale of the cigarettes in
(C) manufactures or produces cigarettes; or
(D) is an importer.
(5) Export warehouse--A person in this state who receives
cigarettes in unstamped packages from manufacturers and stores the
cigarettes for the purpose of making sales to authorized persons for
resale, use, or consumption outside the United States.
(6) First sale--Except as otherwise provided in this
(A) the first transfer of possession in connection
with a purchase, sale, or any exchange for value of cigarettes in
or into this state, which:
(i) includes the sale of cigarettes by:
(I) a distributor in or outside this state to a distributor,
wholesaler, or retailer in this state; and
(II) a manufacturer in this state who transfers the
cigarettes in this state; and
(ii) does not include;
(I) the sale of cigarettes by a manufacturer outside
this state to a distributor in this state;
(II) the transfer of cigarettes from a manufacturer
outside this state to a bonded agent in this state;
(III) the sale of cigarettes by a manufacturer, bonded
agent, distributor, or importer to an interstate warehouse in this
(IV) the transfer of cigarettes by an interstate warehouse
in an interstate warehouse transaction;
(B) the first use or consumption of cigarettes in this
(C) the loss of cigarettes in this state whether through
negligence, theft, or other unaccountable loss.
(7) Individual package of cigarettes--A package that
contains at least 20 cigarettes.
(8) Interstate warehouse--A person in this state who
receives unstamped cigarettes from a manufacturer, bonded agent, distributor,
or importer and stores the cigarettes exclusively for an interstate
(9) Interstate warehouse transaction--The sale or delivery
of cigarettes from an interstate warehouse to a person located in
another state who is licensed or permitted by the other state to affix
that state's cigarette stamps or otherwise pay the state's excise
tax on cigarettes as required.
(10) Manufacturer--A person who manufactures, fabricates,
or assembles cigarettes, or causes or arranges for the manufacture,
fabrication, or assembly of cigarettes, for sale or distribution.
(11) Retailer--A person who engages in the business
of selling cigarettes to consumers and includes the owner of a cigarette
(12) Stamp--Includes only a stamp that:
(A) is printed, manufactured, or made by authority
of the comptroller;
(B) shows payment of the tax imposed by this chapter;
(C) is consecutively numbered and uniquely identifiable
as a Texas tax stamp; and
(D) is not damaged beyond recognition as a valid Texas
(13) Wholesaler--A person, including a manufacturer's
representative, who sells or distributes cigarettes in this state
for resale but who is not a distributor or interstate warehouse.
(b) Imposition of tax.
(1) A tax is imposed on a person who uses or disposes
of cigarettes in this state. The tax rate is $70.50 per thousand on
cigarettes weighing three pounds or less per thousand plus $2.10 per
thousand on cigarettes weighing more than three pounds per thousand.
The tax becomes due and payable when a person receives cigarettes
to make a first sale. A person who pays the tax shall securely affix
a stamp to each individual package of cigarettes to show payment of
the tax. The ultimate consumer or user of cigarettes in this state
bears the impact of the tax; and, if another person pays the tax,
the amount of the tax is added to the price to the ultimate consumer
or user. Absence of a stamp on an individual package of cigarettes
is notice that the tax has not been paid.
(2) Cigarettes are exempt from the imposition of tax
and the stamping requirements described in this section if the cigarettes
(A) contained in a package labeled with "Experimental
Use Only," "Reference Cigarettes," or other similar
wording indicating that the manufacturer intends for the product to
be used exclusively for experimental purposes in compliance with Experimental
Purposes, 27 C.F.R. §40.232 (2002);
(B) sold directly by a manufacturer to a research facility
in this state, including:
(i) a laboratory, hospital, medical center, college,
or university; or
(ii) a facility designated as a Tobacco Center of Regulatory
Science by the National Institutes of Health;
(C) used by the research facility exclusively for experimental
(D) not resold by the research facility.
(c) Liability of a permitted distributor. A permitted
distributor who makes a first sale to a permitted distributor in this
state is liable for and shall pay the tax.
(d) Cigarette tax stamp meters. Cigarette distributors
cannot use stamp metering machines as evidence of payment of the cigarette
(e) Cigarette tax stamp credits.
(1) Allowance of credit for cigarette tax stamps. The
comptroller may authorize credit for:
(A) stamps that are affixed to cigarette packages that
have been damaged or are unfit for sale and have been returned to
the manufacturer in accordance with Tax Code, §154.306 (Exchange
(B) stamps that have been destroyed by vandalism, fire,
flood, or other natural disasters. The distributor must present evidence
that such stamps were purchased by the distributor and were subsequently
destroyed by such natural disaster;
(C) stamps that have been erroneously affixed to cigarette
carton flaps rather than the cigarette packages. The distributor must
submit the stamped carton flaps to the comptroller in order to obtain
credit. The comptroller will issue an authorization for refund of
the tax with disallowance of the stamping discount;
(D) stamps used to restamp cigarette packages provided
that the original tax stamps were of an illegible quality and the
restamping is required by the comptroller's office. There is no stamping
allowance for restamped cigarettes; or
(E) stamps that have been torn or otherwise damaged
by a stamping machine. The distributor must submit the damaged stamps
to the comptroller in order to obtain credit. The comptroller will
notify the distributor of the amount of stamp credit authorized.
(2) Disallowance of credit for cigarette tax stamps.
The comptroller will not authorize credit for stamps lost due to theft,
negligence, or any unaccountable loss or for stamps that have been
affixed two or more times to the same package of cigarettes resulting
in double stamping.
(f) Cigarette tax stamp payments. All persons who purchase
cigarette tax stamps from the comptroller shall transfer payments
by electronic funds transfer.
(g) Evidence of return of cigarettes unfit for use.
A distributor who requests replacement of cigarette tax stamps affixed
to cigarettes that have been returned to the manufacturer must submit
the following documentation to the comptroller:
(1) a credit memorandum from the manufacturer to whom
the cigarettes were returned, verifying the number of cigarettes returned
(2) an affidavit from the manufacturer confirming that
the tax stamps affixed to the cigarettes listed in the memorandum
have been destroyed and listing the number, denomination, and the
value of such stamps; and
(3) an affidavit from the distributor stating that
the distributor returned the number of cigarettes listed in the manufacturer's
credit memorandum and that the number, denomination, and the value
of state cigarette tax stamps shown in the manufacturer's affidavit
were affixed to the cigarettes returned.
(h) Delivery of unstamped cigarettes to instrumentalities
of the United States government.
(1) Distributors may use their own vehicles to deliver
previously invoiced quantities of unstamped cigarettes to instrumentalities
of the United States government. These tax-free cigarettes must be
packaged in a manner that prevents the unstamped cigarettes from commingling
with any other cigarettes in the distributor's vehicle.
(2) Each sale of unstamped cigarettes by a distributor
to an instrumentality of the United States government shall be supported
by a separate sales invoice and a properly completed federal exemption
certificate. Sales invoices must be numbered and dated and must show
the name of the seller, name of the purchaser, and the destination.
(i) Generation and affixing of cigarette tax stamps
by the Texas Alcoholic Beverage Commission (TABC).
(1) The comptroller, by interagency cooperation contract,
may authorize the TABC to generate a cigarette tax stamp using the
TABC's Port of Entry Tax Collection System and to affix the cigarette
tax stamp to cigarette packages for the purpose of collecting the
cigarette tax at ports of entry into the state.
(2) The TABC imposes a rate of $1.50 per pack for a
conventional package of 20 cigarettes.
(3) Payment for the cigarette tax stamps sold will
be made by that agency according to the terms and conditions stipulated
in the interagency cooperation contract between the comptroller and
(j) Affixing of cigarette tax stamps by TABC agents.
Cigarette tax stamps affixed by agents of the TABC must be affixed
to the cellophane wrapper on the bottom of each individual package
(k) Disposition of cigarettes seized by TABC agents.
(1) TABC agents shall seize all cigarettes for which
the holder refuses to pay the tax imposed by Tax Code, §154.021
(Imposition and Rate of Tax).
(2) Cigarettes seized shall be released to agents of
the comptroller for ultimate disposition.
(l) Importation of cigarettes for personal use.
(1) Only a person 21 years of age or older, a person
who is at least 18 and in the United States military or State military
forces, or a person who was born on or before August 31, 2001, may
import and personally transport cigarettes into this state.
(2) A person who imports and personally transports
200 or fewer cigarettes into this state from another state or an Indian
reservation under the jurisdiction of the U.S. government, for personal
use and not for sale, is not required to pay the tax imposed by Tax
(3) TABC employees shall collect the tax imposed by
Tax Code, §154.021, at ports of entry from each person who imports
and personally transports more than 200 cigarettes into this state
from another country.
(4) TABC employees shall seize at ports of entry all
cigarettes in the possession of a person younger than 21 years of
age, unless the person is at least 18 and in the United States military
or State military forces, or was born on or before August 31, 2001.
|Source Note: The provisions of this §3.101 adopted to be effective June 5, 2003, 28 TexReg 4308; amended to be effective February 18, 2007, 32 TexReg 536; amended to be effective August 25, 2009, 34 TexReg 5749; amended to be effective March 20, 2018, 43 TexReg 1639; amended to be effective April 20, 2020, 45 TexReg 2565; amended to be effective October 23, 2022, 47 TexReg 6887