|(a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Agency--The Comptroller of Public Accounts of the
State of Texas or the comptroller's duly authorized agents and employees.
(2) 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.
(3) 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.
(4) 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.
(5) Commercial business location--The entire premises
occupied by a permit applicant or a person required to hold a permit
under Tax Code, Chapter 154 (Cigarette Tax). A commercial business
location cannot include a residence or a unit in a public storage
(6) Consumer--A person who possesses cigarettes for
(7) 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.
(8) Engage in business--A person engaging either directly
or through a representative, in any of the following activities:
(A) selling cigarettes in or into this state;
(B) using a warehouse or another location to store
(C) otherwise conducting through a physical presence
cigarette-related business in this state.
(9) 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.
(10) 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 includes:
(i) the sale of cigarettes by:
(ii) a distributor in or outside this state to a distributor,
wholesaler, or retailer in this state; and
(iii) a manufacturer in this state who transfers the
tobacco products in this state; and
(iv) 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. First sale also includes
giving away cigarettes as promotional items.
(11) Importer--A person who ships, transports, or imports
into this state cigarettes manufactured or produced outside the United
States for the purpose of making a first sale in this state.
(12) 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
(13) 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.
(14) 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.
(15) Manufacturer's representative--A person employed
by a manufacturer to sell or distribute the manufacturer's stamped
(16) Permit--Any agency license, certificate, approval,
registration, or similar form of permission required by law to buy,
sell, stamp, store, transport, or distribute cigarettes. A permit
includes a vending machine decal.
(17) Permit holder--A person who has been issued a
bonded agent, interstate warehouse, distributor, importer, export
warehouse, manufacturer, wholesaler, or retailer permit under Tax
Code, §154.101 (Permits).
(18) Place of business--
(A) a commercial business location where cigarettes
(B) a commercial business location where cigarettes
are kept for sale or consumption or otherwise stored;
(C) a vehicle from which cigarettes are sold; or
(D) a vending machine from which cigarettes are sold.
(19) Retailer--A person who engages in the business
of selling cigarettes to consumers. The owner of a cigarette vending
machine is a retailer.
(20) 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 Tax Code, §154.021
(Imposition and Rate of Tax);
(C) is consecutively numbered and uniquely identifiable
as a Texas cigarette tax stamp; and
(D) is not damaged beyond recognition as a valid Texas
(21) Wholesaler--A person, including a manufacturer's
representative, who sells or distributes cigarettes in this state
for resale. A wholesaler is not a distributor.
(b) Permits required.
(1) To engage in business as a distributor, importer,
manufacturer, export warehouse, wholesaler, bonded agent, interstate
warehouse, or retailer, a person must apply for and receive the applicable
permit from the comptroller. The permits are not transferable. A new
application is required if a change in ownership occurs (sole ownership
to partnership, sole ownership to corporation, partnership to limited
liability company, etc.). Each legal entity must apply for its own
permit(s). All permits issued to a legal entity will have the same
taxpayer number. Tax Code, §154.501(a)(2) (Penalties), provides
that a person who engages in the business of a bonded agent, interstate
warehouse, distributor, importer, manufacturer, export warehouse,
wholesaler, or retailer without a valid permit is subject to a penalty
of not more than $2,000 for each violation. Tax Code, §154.501(c),
provides that a separate offense is committed each day on which a
(2) Each distributor, importer, manufacturer, export
warehouse, wholesaler, bonded agent, interstate warehouse, or retailer
shall obtain a permit for each place of business owned or operated
by the distributor, importer, manufacturer, wholesaler, bonded agent,
interstate warehouse, or retailer. A new permit shall be required
for each physical change in the location of the place of business.
Correction or change of street listing by a city, state, or U.S. Post
Office shall not require a new permit so long as the physical location
(3) Permits are valid for one place of business at
the location shown on the permit. If the location houses more than
one place of business under common ownership, an additional permit
is required for each separate place of business. For example, each
retailer who operates a cigarette vending machine shall place a retailer's
permit on the machine.
(4) A vehicle from which cigarettes are sold is considered
to be a place of business and requires a permit. A motor vehicle permit
is issued to a distributor or wholesaler holding a current permit.
Vehicle permits are issued bearing a specific motor vehicle identification
number and are valid only when physically carried in the vehicle having
the corresponding motor vehicle identification number. Vehicle permits
may not be moved from one vehicle to another. No cigarette permit
is required for a vehicle used only to deliver invoiced cigarettes.
(5) The comptroller may issue a combination permit
for cigarettes and tobacco products to a person who is a distributor,
importer, manufacturer, wholesaler, bonded agent, interstate warehouse,
or retailer as defined by Tax Code, Chapter 154 and Chapter 155 (Cigars
and Tobacco Products Tax). A person who receives a combination permit
pays only the higher of the two permit fees.
(6) The comptroller will not issue a permit for a residence
or a unit in a public storage facility because cigarettes may not
be stored at such places.
(7) A permit is not required for a research facility
that possesses and only uses cigarettes for experimental purposes.
(8) A person who engages in the business of selling
cigarettes for commercial purposes who provides a roll-your-own machine
that is available for use by consumers must obtain a manufacturer's,
distributor's and a retailer's permit.
(9) The comptroller may not issue a distributor's permit
and an interstate warehouse permit to the same location.
(10) A person who engages in the business of importing
cigarettes from a foreign country into Texas is required to be permitted
as a cigarette distributor.
(c) Sales and purchase requirements for permit holders.
Except for retail sales to consumers, cigarettes may only be sold
or distributed by and between permit holders as provided by this section.
A permit holder may engage in the following business activities:
(1) A manufacturer outside this state who is not a
permitted distributor may sell cigarettes only to a permitted distributor
or interstate warehouse.
(2) A permitted distributor may sell cigarettes only
to a permitted distributor, wholesaler, or retailer. A permitted distributor
who manufactures or produces cigarettes in this state may sell those
cigarettes to a permitted interstate warehouse.
(3) A permitted importer may sell cigarettes only to
a permitted interstate warehouse, distributor, wholesaler, or retailer.
(4) A permitted wholesaler may sell cigarettes only
to a permitted distributor, wholesaler, or retailer.
(5) A permitted retailer may sell cigarettes only to
the consumer and may purchase cigarettes only from a permitted distributor
(6) A permitted export warehouse may sell cigarettes
only to persons authorized to sell or consume unstamped cigarettes
outside the United States.
(7) A manufacturer's representative may sell cigarettes
only to a permitted distributor, wholesaler, or retailer.
(8) A permitted interstate warehouse may sell cigarettes
only in an interstate warehouse transaction. An interstate warehouse
may not make an intrastate sale of cigarettes without written authorization
by the comptroller.
(d) Permit period.
(1) Bonded agent, interstate warehouse, distributor,
importer, manufacturer, wholesaler, and motor vehicle permits expire
on the last day of February of each year.
(2) Retailer permits expire on the last day of May
of each even-numbered year.
(e) Permit fees. An application for a bonded agent,
interstate warehouse, distributor, manufacturer, wholesaler, motor
vehicle, or retailer permit must be accompanied by the appropriate
fee. The permit fee payment must be made in cash, by money order,
check, or credit card.
(1) The permit fee for a bonded agent is $300.
(2) The permit fee for an interstate warehouse is $300.
(3) The permit fee for a distributor is $300.
(4) The permit fee for a manufacturer with representation
in Texas is $300.
(5) The permit fee for a wholesaler is $200.
(6) The permit fee for a motor vehicle is $15.
(7) The permit fee for a retailer permit is $180.
(8) No permit fee is required to obtain an importer
or an export warehouse permit.
(9) A $50 fee is assessed for failure to obtain a permit
in a timely manner.
(10) The comptroller prorates the permit fee for new
permits according to the number of months remaining in the permit
period. If a permit will expire within three months of the date of
issuance, the comptroller may collect the prorated permit fee for
the current permit period and the total permit fee for the next permit