[Federal Register Volume 61, Number 202 (Thursday, October 17, 1996)]
[Rules and Regulations]
[Pages 54084-54096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26305]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 270, 275, 285, and 295

[T.D. 384]


Manufacture of Cigarette Papers and Tubes and Recodification of 
Regulations Covering Manufacture of Tobacco Products and Cigarette 
Papers and Tubes (88D001)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Final rule, Treasury decision.

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SUMMARY: ATF is revising and recodifying the regulations governing the 
operations of cigarette papers and tubes manufacturers. These revisions 
consist of a clear definition of the term ``set,'' as such term is 
applied to cigarette papers. This term is clearly defined in ATF Ruling 
81-2, A.T.F.Q.B. 1981-3 75, and is being incorporated in this final 
rule to provide its ready reference. We have also eliminated obsolete 
terms and updated the regulations through the use of modernized 
language. ATF believes that these revisions will clarify requirements, 
thus simplifying compliance and relieving some regulatory burden on the 
industry.

EFFECTIVE DATE: October 17, 1996.

FOR FURTHER INFORMATION CONTACT:
Clifford A. Mullen, Wine, Beer and Spirits Regulations Branch, Bureau 
of Alcohol, Tobacco and Firearms, Room 5000, 650 Massachusetts Avenue 
NW, Washington, DC 20226; (202) 927-8210.

SUPPLEMENTARY INFORMATION:

Background

    On February 21, 1995, President Clinton announced a regulatory 
reform initiative. As part of this initiative, each Federal agency was 
instructed to conduct a page by page review of all agency regulations 
to identify those regulations which are obsolete or burdensome and 
those regulations whose goals could be better achieved through the 
private sector, self-regulation or state and local governments. In 
cases where the agency's review disclosed regulations which should be 
revised or eliminated, the agency was instructed to propose changes to 
its regulations as soon as possible.
    The Bureau completed the page by page review of all regulations as 
directed by the President. In addition, on April 13, 1995, the Bureau 
published a notice in the Federal Register requesting comments from the 
public regarding which ATF regulations could be improved or eliminated. 
As a result of both the Bureau's analysis of its regulations and the 
public comments received, a number of regulatory initiatives were 
developed which are intended to accomplish the President's goals. 
However, no public comments were received on part 285. This final rule 
implements one of the regulatory initiatives identified by ATF 
personnel: to revise and recodify the regulations governing the 
operations of cigarette papers and tubes manufacturers from part 285 
into 27 CFR part 270, subpart K. This consolidation in one part of all 
manufacturing regulations relating to tobacco products and cigarette 
papers and tubes is consistent with the existing consolidated approach 
in part 275 on the importation of these items.

Definitions

    The Bureau held in ATF Ruling 81-2 that any packaging intended for 
delivery to the consumer as a unit which contains more than 25 
cigarette papers is taxable. The definition of the term ``sets'' is 
being added to the definitions in Sec. 270.11. ATF Ruling 81-2 is 
therefore obsolete since its provisions are covered by these 
regulations.

Subpart K

    Subpart K is added to part 270 and contains separate undesignated 
center headings for the taxation of cigarette papers and cigarette 
tubes, special (occupational) tax provisions, general administrative 
provisions, qualification requirements for manufacturers, changes 
subsequent to original qualification of manufacturers, bonds and 
extensions of coverage of bonds, operations by manufacturers, 
discontinuance of operations by manufacturers, and claims. Referring 
the reader to this material by means of the undesignated center 
headings will offer a more convenient method of locating this 
information. As a result of these changes, references to part 285 
contained in parts 275 and 295 have been amended to references to part 
270.

Bonds and Extensions of Coverage of Bonds

    Section 270.407 in subpart K has been amended to include the title 
and new number of the ``Extension of Coverage of Bond'' form, ATF Form 
2105 (5000.7).

Operations by Manufacturers

    The Records, Reports and Inventory sections (Secs. 270.421-270.434) 
of amended subpart K have also been amended to include new form 
numbers. To assist the industry in the transition to the new numbering 
system, the old form numbers will remain in these regulations. However, 
immediately after the old form number, the new number will appear 
enclosed in parentheses. These amendments do not make any substantive 
changes and are only intended to improve the clarity of Title 27 CFR or 
relieve regulatory requirements.

Paperwork Reduction Act

    The provisions of the Paperwork Reduction Act of 1995, Pub. L. 104-
13, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR part 
1320, do not apply to this notice because no new requirement to collect 
information is imposed. This final rule only transfers 27 CFR part 285 
to 27 CFR subpart K.

Regulatory Flexibility Act

    The provisions of the Regulatory Flexibility Act relating to an 
initial and final regulatory flexibility analysis (5 U.S.C. 604) are 
not applicable to this final rule because the agency was not

[[Page 54085]]

required to publish a notice of proposed rulemaking under 5 U.S.C. 553 
or any other law. A copy of this final rule was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on the impact of such regulation on small businesses in accordance with 
26 U.S.C. 7805(f).

Executive Order 12866

    It has been determined that this rule is not a significant 
regulatory action because it will not: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
Executive Order 12866.

Administrative Procedures Act

    Because this final rule merely makes technical amendments and 
conforming changes to improve the clarity of the regulations, it is 
found to be unnecessary and contrary to the public interest to issue 
this final rule with notice and public procedure under 5 U.S.C. 553(b). 
Similarity it is found to be unnecessary and contrary to the public 
interest to subject this final rule to the effective date limitation of 
5 U.S.C. 553(d).

Drafting Information

    The principal drafter of this document is Clifford A. Mullen, Wine, 
Beer and Spirits Regulations Branch, Bureau of Alcohol, Tobacco and 
Firearms.

List of Subjects

27 CFR Part 270

    Administrative practice and procedure, Authority delegations 
(Government agencies), Claims, Electronic fund transfer, Excise taxes, 
Labeling, Packaging and containers, Penalties, Reporting requirements, 
Seizures and forfeitures, Surety bonds, Tobacco products.

27 CFR Part 275

    Administrative practice and procedure, Authority delegations 
(Government agencies), Cigarette papers and tubes, Claims, Electronic 
fund transfer, Customs duties and inspection, Excise taxes, Imports, 
Labeling, Packaging and containers, Penalties, Reporting requirements, 
Seizures and forfeitures, Surety bonds, Tobacco products, U.S. 
possessions, Warehouses.

27 CFR Part 285

    Administrative practice and procedure, Authority delegations, 
(Government agencies), Cigarette papers and tubes, Cigars, Cigarettes, 
Claims, Electronic fund transfer, Excise taxes, Packaging and 
containers, Penalties, Reporting and recordkeeping requirements, 
Seizures and forfeitures, Surety bonds.

27 CFR Part 295

    Administrative practice and procedure, Authority delegations 
(Government agencies), Cigarette papers and tubes, Excise taxes, 
Labeling, Packaging and containers, Tobacco products.

Authority and Issuance

    Accordingly, ATF is amending Title 27 of the Code of Federal 
Regulations as follows:
    Sec. A. Title 27 CFR part 270 is amended as follows:

PART 270--MANUFACTURE OF TOBACCO PRODUCTS

    Paragraph 1. The authority citation for part 270 continues to read 
as follows:

    Authority: 26 U.S.C. 5142, 5143, 5146, 5701, 5703-5705, 5711-
5713, 5721-5723, 5731, 5741, 5751, 5753, 5761-5763, 6061, 6065, 
6109, 6151, 6301, 6302, 6311, 6313, 6402, 6404, 6423, 6676, 6806, 
7011, 7212, 7325, 7342, 7502, 7503, 7606, 7805, 31 U.S.C. 9301, 
9303, 9304, 9306.

    Par. 2. Section 270.1 is revised to read as follows:


Sec. 270.1  Manufacture of tobacco products and cigarette papers and 
tubes.

    This part contains regulations relating to the manufacture of 
tobacco products and cigarette papers and tubes; the payment by 
manufacturers of tobacco products and cigarette papers and tubes of 
internal revenue taxes imposed by 26 U.S.C. chapter 52; and the 
qualification of and operations by manufacturers of tobacco products.
    Par. 3. Section 270.11 is amended by adding and revising the 
following definitions:


Sec. 270.11  Meaning of terms.

* * * * *
    Cigarette paper. Paper, or any other material except tobacco, 
prepared for use as a cigarette wrapper.
    Cigarette papers. Taxable books or sets of cigarette papers, i.e., 
books or sets of cigarette papers containing more than 25 papers each.
    Cigarette tube. Cigarette paper made into a hollow cylinder for use 
in making cigarettes.
* * * * *
    Factory. The premises of a manufacturer of tobacco products as 
described in his permit issued under 26 U.S.C. chapter 52, or the 
premises of a manufacturer of cigarette papers and tubes on which such 
business is conducted.
* * * * *
    Manufacturer of cigarette papers and tubes. Any person who makes up 
cigarette paper into books or sets containing more than 25 papers each, 
or into tubes, except for personal use or consumption.
* * * * *
    Package. The immediate container in which tobacco products or 
cigarette papers or tubes are put up in by the manufacturer and offered 
for sale or delivery to the consumer.
* * * * *
    Removal or remove. The removal of tobacco products or cigarette 
papers or tubes from the factory or release from customs custody, 
including the smuggling of other unlawful importation of such articles 
into the United States.
* * * * *
    Sets. Any collection, grouping, or packaging of cigarette papers 
made up by any person for delivery to the consumer as a unit.
* * * * *
    Par. 4. Subpart K is added to read as follows:

Subpart K--MANUFACTURE OF CIGARETTE PAPERS AND TUBES

Taxes

Sec.
270.351  Cigarette papers.
270.352  Cigarette tubes.
270.353  Persons liable for tax.
270.354  Determination of tax and method of payment.
270.355  Return of manufacturer.
270.356  Adjustments in the return of manufacturer.
270.357  Payment of tax by electronic fund transfer.
270.358  Assessment.
270.359  Employer identification number.
270.360  Application for employer identification number.
270.361  Execution and filing of Form SS-4.

Special (Occupational) Taxes

270.371  Liability for special tax.
270.372  Rate of special tax.
270.373  Special tax returns.

[[Page 54086]]

270.374  Issuance, distribution, and examination of special tax 
stamps.
270.375  Changes in special tax stamps.

General

270.382  Authority of ATF officers to enter premises.
270.383  Interference with administration.
270.384  Disposal of forfeited, condemned, and abandoned cigarette 
papers and tubes.
270.385  Alternate methods or procedures.
270.386  Emergency variations from requirements.
270.387  Penalties and forfeitures.

Qualification Requirements for Manufacturers

Original Qualifications

270.391  Persons required to qualify.
270.392  Bond.
270.393  Power of attorney.
270.394  Notice of approval of bond.

Changes After Original Qualification

270.395  Change in name.
270.396  Change in proprietorship.
270.397  Change in location.

Bonds and Extensions of Coverage of Bonds

270.401  Corporate surety.
270.402  Two or more corporate sureties.
270.403  Deposit of securities in lieu of corporate surety.
270.404  Amount of bond.
270.405  Strengthening bond.
270.406  Superseding bond.
270.407  Extension of coverage of bond.
270.408  Approval of bond and extension of coverage of bond.
270.409  Termination of liability of surety under bond.
270.410  Release of pledged securities.

Operations by Manufacturers

Records

270.421  General.

Reports

270.422  General.
270.423  Opening.
270.424  Monthly.
270.425  Special.
270.426  Closing.

Inventories

270.431  General.
270.432  Opening.
270.433  Special.
270.434  Closing.

Document Retention

270.435  General.

Packages

270.441  General.

Miscellaneous Operations

270.451  Transfer in bond.
270.452  Release from customs custody.
270.453  Use of the United States.
270.454  Removal for export purposes.

Permanent Discontinuance of Business

270.461  Discontinuance of operations.

Claims by Manufacturers

General

270.471  Abatement.
270.472  Credit or refund.
270.474  Remission.

Lost or Destroyed

270.475  Action by claimant.

Withdrawn From the Market

270.476  Action by claimant.
270.477  Action by regional director (compliance).
270.478  Disposition of cigarette papers and tubes and schedule.


Sec. 270.351  Cigarette papers.

    On each book or set of cigarette papers containing more than 25 
papers, manufactured in or imported into the United States, the 
following taxes are imposed by law:
    (a) Cigarette papers removed before January 1, 1991, \1/2\ cent for 
each 50 papers or fractional part thereof.
    (b) Cigarette papers removed on or after January 1, 1991, and 
before January 1, 1993, 0.625 cent for each 50 papers or fractional 
part thereof.
    (c) Cigarette papers removed on or after January 1, 1993, 0.75 cent 
for each 50 papers or fractional part thereof.
    (d) Where cigarette papers measure more than 6\1/2\ inches in 
length, they shall be taxable at the above rates, counting each 2\3/4\ 
inches, or fraction thereof, of the length of each as one cigarette 
paper.

(72 Stat. 1414; 26 U.S.C. 5701)


Sec. 270.352  Cigarette tubes.

    On cigarette tubes, manufactured in or imported into the United 
States, the following tax is imposed by law for each 50 tubes or 
fractional part thereof:
    (a) Cigarette tubes removed before January 1, 1991, 1 cent.
    (b) Cigarette tubes removed on or after January 1, 1991 and before 
January 1, 1993, 1.25 cents.
    (c) Cigarette tubes removed on or after January 1, 1993, 1.5 cents.
    (d) Where cigarette tubes measure more than 6\1/2\ inches in 
length, they shall be taxable at the above rates, counting each 2\3/4\ 
inches, or fraction thereof, of the length of each as one cigarette 
tube.

(72 Stat. 1414; 26 U.S.C. 5701)


Sec. 270.353  Persons liable for tax.

    The manufacturer of cigarette papers and tubes shall be liable for 
the taxes imposed on such articles by 26 U.S.C. 5701. When a 
manufacturer of cigarette papers and tubes transfers such papers and 
tubes without payment of tax, pursuant to 26 U.S.C. 5704 to the bonded 
premises of another such manufacturer, a manufacturer of tobacco 
products, or an export warehouse proprietor, the transferee shall 
become liable for the tax upon receipt of such papers and tubes and the 
transferor shall thereupon be relieved of liability for the tax. When 
cigarette papers and tubes are released in bond from customs custody 
for transfer to the bonded premises of a manufacturer of such papers 
and tubes or a manufacturer of tobacco products, the transferee shall 
become liable for the tax on the papers and tubes upon release from 
customs custody. Any person who possesses cigarette papers and tubes in 
violation of 26 U.S.C. 5751(a) (1) or (2), shall be liable for a tax 
equal to the rate of tax applicable to such articles.

(72 Stat. 1417, 1424; 26 U.S.C. 5703, 5751)


Sec. 270.354  Determination of tax and method of payment.

    Except for removals without payment of tax and transfers in bond, 
as authorized by law, no cigarette papers and tubes shall be removed 
until the taxes imposed by section 5701, I.R.C., have been determined. 
The payment of taxes on cigarette papers and tubes which are removed on 
determination of tax shall be made by return in accordance with the 
provisions of this subpart.

(72 Stat. 1417; 26 U.S.C. 5703)


Sec. 270.355  Return of manufacturer.

    (a) Requirement for filing. A manufacturer of cigarette papers and 
tubes shall file, for each factory, a semimonthly tax return on ATF 
Form 5000.24. A return shall be filed for each semimonthly return 
period regardless of whether cigarette papers and tubes were removed 
subject to tax or whether tax is due for that particular return period.
    (b) Waiver from filing. The manufacturer need not file a return for 
each semimonthly return period if:
    (1) Cigarette papers and tubes were not removed subject to tax 
during the period, and
    (2) The regional director (compliance) has granted a waiver from 
filing in response to a written request from the manufacturer.
    (c) Semimonthly return periods. Except as provided by paragraph (g) 
of this section, semimonthly return periods shall run from the first 
day of the month through the 15th day of the month, and from the 16th 
day of the month through the last day of the month.
    (d) Preparation and filing. The return shall be executed and filed 
with ATF in accordance with the instructions on the form.
    (e) Remittance of tax. Except as provided in Sec. 270.357, 
remittance of the tax, if any, shall accompany the return.
    (f) Time for filing. Except as provided by paragraph (g) of this 
section, for each

[[Page 54087]]

semimonthly return period, the return shall be filed not later than the 
14th day after the last day of the return period. If the due date falls 
on a Saturday, Sunday, or legal holiday, the return and remittance 
shall be due on the immediately preceding day which is not a Saturday, 
Sunday or legal holiday.
    (g) Special rule for taxes due for the month of September 
(effective after December 31, 1994). (1) Except as provided in 
paragraph (g)(2) of this section, the second semimonthly period for the 
month of September shall be divided into two payment periods, from the 
16th day through the 26th day, and from the 27th day through the 30th 
day. The manufacturer shall file a return on Form 5000.24, and make 
remittance, for the period September 16-26, no later than September 29. 
The manufacturer shall file a return on Form 5000.24, and make 
remittance, for the period September 27-30, no later than October 14.
    (2) Taxpayment not by electronic fund transfer. In the case of 
taxes not required to be remitted by electronic fund transfer as 
prescribed by Sec. 270.357, the second semimonthly period of September 
shall be divided into two payment periods, from the 16th day through 
the 25th day, and the 26th day through the 30th day. The manufacturer 
shall file a return on Form 5000.24, and remittance, for the period 
September 16-25, no later than September 28. The manufacturer shall 
file a return on Form 5000.24, and make remittance, for the period 
September 26-30, no later than October 14.
    (3) Amount of payment: Safe harbor rule. (i) Taxpayers are 
considered to have met the requirements of paragraph (g)(1) of this 
section, if the amount paid no later than September 29 is not less than 
\11/15\ (73.3 percent) of the tax liability incurred for the 
semimonthly period beginning on September 1 and ending on September 15, 
and if any underpayment of tax is paid by October 14.
    (ii) Taxpayers are considered to have met the requirements of 
paragraph (g)(2) of this section, if the amount paid no later than 
September 28 is not less than two-thirds (66.7 percent) of the tax 
liability incurred for the semimonthly period beginning on September 1 
and ending on September 15, and if any underpayment of tax is paid by 
October 14.
    (4) Last day for payment. If the required due date for taxpayment 
for the periods September 16-25 or September 16-26, as applicable, 
falls on a Saturday, the return and remittance shall be due on the 
immediately preceding day. If the required due date falls on a Sunday, 
the return and remittance shall be due on the immediately following 
day.

(Approved by the Office of Management and Budget under Control 
Number 1512-0467).


Sec. 270.356  Adjustments in the return of manufacturer.

    Adjustments may be made in Schedules A and B of the manufacturer's 
semimonthly tax return, ATF Form 5000.24, as provided in this section. 
Schedule A of the return will be used where an unintentional error in a 
previous return resulted in an underpayment of tax. Schedule B of the 
return will be used where an unintentional error in a previous return 
resulted in an overpayment of tax, or where notice has been received 
from the regional director (compliance) that a claim for allowance of 
tax has been approved. In the case of an overpayment, the manufacturer 
shall have the option of filing a claim on ATF Form 2635 (5620.8) for 
refund or taking credit in Schedule B of the return, both subject to 
the period of limitations prescribed in 26 U.S.C. 6511. Any adjustment 
made in a return must be fully explained in the appropriate schedule or 
in a statement attached to and made a part of the return in which such 
adjustment is made.

(72 Stat. 1417, 68A Stat. 791; 26 U.S.C. 5703, 6402)


Sec. 270.357  Payment of tax by electronic fund transfer.

    (a) General. (1) Each taxpayer who was liable, during a calendar 
year, for a gross amount equal to or exceeding five millions dollars in 
taxes on tobacco products, cigarette papers, and cigarette tubes 
combining tax liabilities incurred under this part and part 275 of this 
chapter, shall use a commercial bank in making payment by electronic 
fund transfer (EFT) of taxes on tobacco products, cigarette papers, and 
cigarette tubes during the succeeding calendar year. Payment of taxes 
on tobacco products, cigarette papers, and cigarette tubes in any other 
form of remittance, as authorized in Sec. 270.355, is not authorized 
for a taxpayer who is required, by this section, to make remittances by 
EFT. For purposes of this section, the dollar amount of tax liability 
is defined as the gross tax liability on all taxable withdrawals and 
importations (including tobacco products, cigarette papers, and 
cigarette tubes brought into the United States from Puerto Rico or the 
Virgin Islands) during the calendar year, without regard to any 
drawbacks, credits, or refunds, for all premises from which such 
activities are conducted by the taxpayer. Overpayments are not taken 
into account in summarizing the gross tax liability.
    (2) For the purposes of this section, a taxpayer includes a 
controlled group of corporations, as defined in 26 U.S.C. 1563, and 
implementing regulations in 26 CFR Secs. 1.563-1 through 1.1563-4. 
Also, the rules for a ``controlled group of corporations'' apply in a 
similar fashion to groups which include partnerships and/or sole 
proprietorships. If one entity maintains more than 50% control over a 
group consisting of corporations and one, or more, partnerships and/or 
sole proprietorships, all of the members of the controlled group are 
one taxpayer for the purpose of determining who is required to make 
remittances by EFT.
    (3) A taxpayer who is required by this section to make remittances 
by EFT shall make a separate EFT remittance and file a separate return, 
ATF Form 5000.24, for each factory from which cigarette papers or 
cigarette tubes are withdrawn upon determination of tax.
    (b) Requirements. (1) On or before January 10 of each calendar 
year, except for a taxpayer already remitting the tax by EFT, each 
taxpayer who was liable for a gross amount equal to or exceeding five 
million dollars in taxes on tobacco products, cigarette papers, and 
cigarette tubes combining tax liabilities incurred under this part and 
part 275 of this chapter during the previous calendar year, shall 
notify, in writing, the regional director (compliance), for each region 
in which taxes are paid. The notice shall be an agreement to make 
remittances by EFT.
    (2) For each return filed in accordance with this part, the 
taxpayer shall direct the taxpayer's bank to make an electronic fund 
transfer in the amount of the taxpayment to the Department of the 
Treasury's General Account or the Federal Reserve Bank of New York as 
provided in paragraph (e) of this section. The request shall be made to 
the bank early enough for the transfer to be made to the Treasury 
Account by no later than the close of business on the last day for 
filing the return, prescribed in Sec. 270.355. The request shall take 
into account any time limit established by the bank.
    (3) If a taxpayer was liable for less than five million dollars in 
taxes on tobacco products, cigarette papers, and cigarette tubes 
combining tax liabilities incurred under this part and part 275 of this 
chapter during the preceding calendar year, the taxpayer may choose 
either to continue remitting the tax as provided in this section or to 
remit the tax with the return as prescribed by Sec. 270.355. Upon 
filing the first return on

[[Page 54088]]

which the taxpayer chooses to discontinue remitting the tax by EFT and 
to begin remitting the tax with the tax return, the taxpayer shall 
notify the regional director (compliance) by attaching a written 
notification to ATF Form 5000.24, stating that no taxes are due by EFT, 
because the tax liability during the preceding calendar year was less 
than five million dollars, and that the remittance shall be filed with 
the tax return.
    c. Remittance. (1) Each taxpayer shall show on the return, ATF Form 
5000.24, information about remitting the tax for that return period by 
EFT and shall file the return with ATF, in accordance with the 
instructions of ATF Form 5000.24.
    (2) Remittances shall be considered as made when the taxpayment by 
EFT is received by the Treasury Account. For purposes of this section, 
a taxpayment by EFT shall be considered as received by the Treasury 
Account when it is paid to a Federal Reserve Bank.
    (3) When the taxpayer directs the bank to effect an EFT message as 
required by paragraph (b)(2) of this section, any transfer data record 
furnished to the taxpayer, through normal banking procedures, will 
serve as the record of payment, and shall be retained as part of 
required records.
    (d) Failure to make a taxpayment by EFT. The taxpayer is subject to 
a penalty imposed by 26 U.S.C. 5761, 6651, or 6656, as applicable, for 
failure to make a taxpayment by EFT on or before the close of business 
on the prescribed last day for filing.
    (e) Procedure. Upon the notification required under paragraph 
(b)(1) of this section, the regional director (compliance) will issue 
to the taxpayer an AFT Procedure entitled Payment of Tax by Electronic 
Fund Transfer. This publication outlines the procedure a taxpayer is to 
follow when preparing returns and EFT remittances in accordance with 
this part. The U.S. Customs Service will provide the taxpayer with 
instructions for preparing EFT remittances for payments to be made to 
the U.S. Customs Service.

(Approved by the Office of Management and Budget under control 
number 1512-0457)

(Act of August 16, 1954, 68A Stat. 775, as amended (26 U.S.C. 6302); 
sec. 202, Pub. L. 85-859, 72 Stat. 1417, as amended (26 U.S.C. 
5703))


Sec. 270.358  Assessment.

    Whenever any person required by law to pay tax on cigarette papers 
and tubes fails to pay such tax, the tax shall be ascertained and 
assessed against such person, subject to the limitations prescribed in 
26 U.S.C. 6501. The tax so assessed shall be in addition to the 
penalties imposed by law for failure to pay such tax when required. 
Except in cases where delay may jeopardize collection of the tax, or 
where the amount is nominal or the result of an evident mathematical 
error, no such assessment shall be made until and after notice has been 
afforded such person to show cause against assessment. The person will 
be allowed 45 days from the date of such notice to show cause, in 
writing, against such assessment.

(72 Stat. 1417; 26 U.S.C. 5703)


Sec. 270.359  Employer identification number.

    The employer identification number (EIN) (defined at 26 CFR 
301.7701-12) of a manufacturer of cigarette papers and/or tubes who has 
been assigned such a number shall be shown on each semimonthly tax 
return, ATF Form 5000.24, and special tax return (including amended 
returns), ATF Form 5630.5, filed under this subpart. Failure of the 
taxpayer to include the EIN on ATF Form 5000.24 may result in assertion 
and collection of the penalty specified in Sec. 70.113 of this chapter. 
Failure of the taxpayer to include the EIN on ATF Form 5630.5 may 
result in the imposition of the penalty specified in 27 CFR 70.113 of 
this chapter.

(75 Stat. 828; 26 U.S.C. 6109, 6676)


Sec. 270.360  Application for employer identification number.

    Each manufacturer of cigarette papers and tubes who has neither 
secured an EIN nor made application therefor shall file an application 
on IRS Form SS-4. IRS Form SS-4 may be obtained from any service center 
director or from any district director. Such application shall be filed 
on or before the seventh day after the date on which any tax return 
under this subpart is filed. Each manufacturer shall make application 
for and shall be assigned only one EIN for all internal revenue 
purposes.

(75 Stat. 828; 26 U.S.C. 6109)


Sec. 270.361  Execution and filing of Form SS-4.

    The application on IRS form SS-4, together with any supplementary 
statement, shall be prepared in accordance with the applicable form, 
instructions, and regulations, and the data called for shall be set 
forth fully and clearly. The application shall be filed with the 
service center director serving the internal revenue district where the 
applicant is required to file returns under this subpart, except that 
hand-carried applications may be filed with the district director of 
any such district as provided for in 26 CFR Sec. 301.6091-1. The 
application shall be signed by:
    (a) the individual if the person is an individual;
    (b) the president, vice president, or other principal officer if 
the person is a corporation;
    (c) a responsible and duly authorized member or officer having 
knowledge of its affairs if the person is a partnership or other 
unincorporated organization; or
    (d) the fiduciary if the person is a trust or estate.

(75 Stat. 828; 26 U.S.C. 6109)

Special (Occupational) Taxes


Sec. 270.371  Liability for special tax.

    (a) Manufacturer of cigarette papers and tubes. Every manufacturer 
of cigarette papers and tubes shall pay a special (occupational) tax at 
a rate specified by Sec. 270.372 of this part. The tax shall be paid on 
or before July 1. On commencing business, the tax shall be computed 
from the first day of the month in which liability is incurred, through 
the following June 30. Thereafter, the tax shall be computed for the 
entire year (July 1 through June 30).
    (b) Each place of business taxable. A manufacturer of cigarette 
papers and tubes incurs special tax liability at each place of business 
in which an occupation subject to special tax is conducted. A place of 
business means the entire office, plant or area of the business in any 
one location under the same proprietorship. Passageways, streets, 
highways, rail crossings, waterways, or partitions dividing the 
premises are not sufficient separation to require additional special 
tax, if the divisions of the premises are otherwise contiguous.

(26 U.S.C. 5143, 5731)


Sec. 270.372  Rate of special tax.

    (a) General. Title 26 U.S.C. 5731(a)(2) imposes a special tax of 
$1,000 per year on every manufacturer of cigarette papers and tubes.
    (b) Reduced rate for small proprietors. Title 26 U.S.C. 5731(b) 
provides for a reduced rate of $500 per year with respect to any 
manufacturer of cigarette papers and tubes whose gross receipts (for 
the most recent taxable year ending before the first day of the taxable 
period to which the special tax imposed by Sec. 270.371 relates) are 
less than $500,000. The ``taxable year'' to be used for determining 
gross receipts is the taxpayer's income tax year. All gross receipts of 
the taxpayer shall be included, not just the gross receipts of the 
business subject to special tax. Proprietors of new businesses that 
have not yet begun a taxable year, as well as proprietors of existing 
businesses that have not yet ended a taxable year, who

[[Page 54089]]

commence a new activity subject to special tax, qualify for the reduced 
special (occupational) tax rate, unless the business is a member of a 
``controlled group''; in that case the rules of paragraph (c) of this 
section shall apply.
    (c) Controlled group. All persons treated as one taxpayer under 26 
U.S.C. 5061(e)(3) shall be treated as one taxpayer for the purpose of 
determining gross receipts under paragraph (b) of this section. 
``Controlled group'' means a controlled group of corporations, as 
defined in 26 U.S.C. 1563 and implementing regulations in 26 CFR 
1.1563-1 through 1.1563-4. Also, the rules for a ``controlled group of 
corporations'' apply in a similar fashion to groups which include 
partnerships and/or sole proprietorships. If one entity maintains more 
than 50% control over a group consisting of corporations and one, or 
more, partnerships and/or sole proprietorships, all of the members of 
the controlled group are one taxpayer for the purpose of this section.
    (d) Short taxable year. Gross receipts for any taxable year of less 
than 12 months shall be annualized by multiplying the gross receipts 
for the short period by 12 and dividing the result by the number of 
months in the short period as required by 26 U.S.C. 448(c)(3).
    (e) Returns and allowances. Gross receipts for any taxable year 
shall be reduced by returns and allowances made during such year under 
26 U.S.C. 448(c)(3).

(26 U.S.C. 448, 5061, 5731)


Sec. 270.373  Special tax returns.

    (a) General. Special tax shall be paid by return. The prescribed 
return is ATF Form 5630.5, Special Tax Registration and Return. Special 
tax returns, with payment of tax, shall be filed with ATF in accordance 
with instructions on the form.
    (b) Preparation of ATF Form 5630.5. All of the information called 
for on ATF Form 5630.5 shall be provided including:
    (1) The true name of the taxpayer.
    (2) The trade name(s) (if any) of the business(es) subject to 
special tax.
    (3) The employer identification number (see Secs.  270.359-361).
    (4) The exact location of the place of business, by name and number 
of building or street, or if these do not exist, by some description in 
addition to the post office address. In the case of one return for two 
or more locations, the address to be shown shall be the taxpayer's 
principal place of business (or principal office, in the case of a 
corporate taxpayer).
    (5) The class(es) of special tax to which the taxpayer is subject.
    (6) Ownership and control information: That is, the name, position, 
and residence address of every owner of the business and of every 
person having power to control its management and policies with respect 
to the activity subject to special tax. ``Owner of the business'' shall 
include every partner, if the taxpayer is a partnership, and every 
person owning 10% or more of its stock, if the taxpayer is a 
corporation. However, the ownership and control information required by 
this paragraph need not be stated if the same information has been 
previously provided to ATF in connection with a permit application, and 
if the information previously provided is still current.
    (c) Multiple locations and/or classes of tax.
    A taxpayer subject to special tax for the same period at more than 
one location or for more than one class of tax shall--
    (1) File one special tax return, ATF Form 5630.5, with payment of 
tax, to cover all such locations and classes of tax; and
    (2) Prepare, in duplicate, a list identified with the taxpayer's 
name, address (as shown on ATF Form 5630.5), employer identification 
number, and period covered by the return. The list shall show, by 
State, the name, address, and tax class of each location for which 
special tax is being paid. The original of the list shall be filed with 
ATF in accordance with instructions on the return, and the copy shall 
be retained at the taxpayer's principal place of business (or principal 
office, in the case of a corporate taxpayer) for the period specified 
in Sec. 270.371.
    (d) Signing of ATF Forms 5630.5.--(1) Ordinary returns. The return 
of an individual proprietor shall be signed by the individual. The 
return of a partnership shall be signed by a general partner. The 
return of a corporation shall be signed by any officer. In each case, 
the person signing the return shall designate his or her capacity as 
``individual owner,'' ``member of firm,'' or, in the case of a 
corporation, the title of the officer.
    (2) Fiduciaries. Receivers, trustees, assignees, executors, 
administrators, and other legal representatives who continue the 
business of a bankrupt, insolvent, deceased person, etc., shall 
indicate the fiduciary capacity in which they act.
    (3) Agent or attorney in fact. If a return is signed by an agent or 
attorney in fact, the signature shall be preceded by the name of the 
principal and followed by the title of the agent or attorney in fact. A 
return signed by a person as agent will not be accepted unless there is 
filed, with the ATF office with which the return is required to be 
filed, a power of attorney authorizing the agent to perform the act.
    (4) Perjury statement. ATF Forms 5630.5 shall contain or be 
verified by a written declaration that the return has been executed 
under the penalties of perjury.


Sec. 270.374  Issuance, distribution, and examination of special tax 
stamps.

    (a) Issuance of special tax stamps. Upon filing a properly executed 
return on ATF Form 5630.5 together with the full remittance, the 
taxpayer will be issued an appropriately designated special tax stamp. 
If the return covers multiple locations, the taxpayer will be issued 
one appropriately designated stamp for each location listed on the 
attachment required by Sec. 270.373(c)(2), but showing, as to name and 
address, only the name of the taxpayer and the address of the 
taxpayer's principal place of business (or principal office in the case 
of a corporate taxpayer).
    (b) Distribution of special tax stamps for multiple locations. On 
receipt of the special tax stamps, the taxpayer shall verify that there 
is one stamp for each location listed on the attachment to ATF Form 
5630.5. The taxpayer shall designate one stamp for each location and 
type on each stamp the address of the business conducted at the 
location for which that stamp is designated. The taxpayer shall then 
forward each stamp to the place of business designated on the stamp.
    (c) Examination of special tax stamps. All stamps denoting payment 
of special tax shall be kept available for inspection by ATF officers, 
at the location for which designated, during business hours.

(26 U.S.C. 5142, 5146, 6806)


Sec. 270.375  Changes in special tax stamps.

    (a) Change in name. If there is a change in the corporate or firm 
name, or in the trade name, as shown on ATF Form 5630.5, the 
manufacturer shall file an amended special tax return as soon as 
practicable after the change, covering the new corporate or firm name, 
or trade names. No new special tax is required to be paid. The 
manufacturer shall attach the special tax stamp for endorsement of the 
change in name.
    (b) Change in proprietorship.--(1) General. If there is a change in 
the proprietorship of a cigarette papers and tubes factory, the 
successor shall pay a

[[Page 54090]]

new special tax and obtain the required special tax stamps.
    (2) Exemption for certain successors. Persons having the right of 
succession provided for in paragraph (c) of this section may carry on 
the business for the remainder of the period for which the special tax 
was paid, without paying a new special tax, if within 30 days after the 
date on which the successor begins to carry on the business, the 
successor files a special tax return on ATF Form 5630.5 with ATF, which 
shows the basis of succession. A person who is a successor to a 
business for which special tax has been paid and who fails to register 
the succession is liable for special tax computed from the first day of 
the calendar month in which the successor began to carry on the 
business.
    (c) Persons having right of succession. Under the conditions 
indicated in paragraph (b)(2) of this section, the right of succession 
will pass to certain persons in the following cases:
    (1) Death. The spouse or child, or executor, administrator, or 
other legal representative of the taxpayer;
    (2) Succession of spouse. A husband or wife succeeding to the 
business of his or her spouse (living);
    (3) Insolvency. A receiver or trustee in bankruptcy, or an assignee 
for benefit of creditors;
    (4) Withdrawal from firm. The partner or partners remaining after 
death or withdrawal of a member.
    (d) Change in location. If there is a change in location of a 
taxable place of business, the manufacturer shall within 30 days after 
the change, file with ATF an amended special tax return covering the 
new location. The manufacturer shall attach the special tax stamp or 
stamps for endorsement of the change in location. No new special tax is 
required to be paid. However, if the manufacturer does not file the 
amended return within 30 days, the manufacturer is required to pay a 
new special tax and obtain a new special tax stamp.

(26 U.S.C. 5143, 7011)

General


Sec. 270.382  Authority of ATF officers to enter premises.

    Any ATF officer may enter in the daytime any premises where 
cigarette papers and tubes are produced or kept, so far as it may be 
necessary for the purpose of examining such articles. When such 
premises are open at night, any ATF officer may enter them, while so 
open, in the performance of his or her official duties. The owner of 
such premises, or person having the superintendence of the same, who 
refuses to admit any ATF officer or permit any AFT officer to examine 
such cigarette papers and tubes shall be liable to the penalties 
prescribed by law for the offense.

(68A Stat. 872; 903 26 U.S.C. 7342, 7606)


Sec. 270.383  Interference with administration.

    Whoever, corruptly or by force or threats of force, endeavors to 
hinder or obstruct the administration of this subpart, or endeavors to 
intimidate or impede any ATF officer acting in an official capacity, or 
forcibly rescues or attempts to rescue or causes to be rescued any 
property, after it has been duly seized for forfeiture to the United 
States in connection with a violation or intended violation of this 
subpart, shall be liable to the penalties prescribed by law.

(68A Stat. 855; 26 U.S.C. 7212)


Sec. 270.384  Disposal of forfeited, condemned, and abandoned cigarette 
papers and tubes.

    Forfeited, condemned, or abandoned cigarette papers or tubes in the 
custody of a Federal, State, or local officer upon which the Federal 
tax has not been paid shall not be sold or caused to be sold for 
consumption in the United States if, in the opinion of the officer, the 
sale of such papers and tubes will not bring a price equal to the tax 
due and payable, and the expenses incident to the sale. Where the 
cigarette papers or tubes are not sold the officer may deliver them to 
a Federal or State institution (if they are fit for consumption) or 
cause their destruction by burning completely or by rendering them 
unfit for consumption. Where such papers or tubes are sold, release by 
the officer having custody shall be made only after such papers and 
tubes are properly packaged and taxpaid. A receipt from the regional 
director (compliance) evidencing payment of tax on such papers or tubes 
shall be presented to the officer having custody of the articles, which 
tax shall be considered part of the sales price. Where cigarette papers 
or tubes which have been packaged under the provisions of part 295 of 
this chapter are to be released after payment of tax, the purchaser 
shall appropriately mark each package ``Federal Tax Paid (date)'' 
before the officer having custody of the papers or tubes releases them. 
However, the articles may be released without such marking of the 
packages if the purchaser is a qualified manufacturer of cigarette 
papers and tubes and does not intend to place such papers or tubes on 
the domestic market for taxable articles but will otherwise dispose of 
them. A written statement of notification of disposal by destruction or 
return to bond through claim for refund, shall be filed, in original 
only, with the officer having custody of the articles. In the case of 
cigarette papers and tubes forfeited under the internal revenue laws, 
the sale shall be subject to the provisions of part 72 of this chapter.

(68A Stat. 870, as amended, 72 Stat. 1425, as amended; 26 U.S.C. 
7325, 5753)


Sec. 270.385  Alternate methods or procedures.

    A manufacturer of cigarette papers and tubes, on specific approval 
by the Director as provided in this section, may use an alternate 
method or procedure in lieu of a method or procedure specifically 
prescribed in this subpart. The Director may approve an alternate 
method or procedure, subject to stated conditions, when the Director 
finds that--
    (a) Good cause has been shown for the use of the alternate method 
or procedure,
    (b) The alternate method or procedure is within the purpose of, and 
consistent with the effect intended by, the specifically prescribed 
method or procedure, and affords equivalent security to the revenue, 
and
    (c) The alternate method or procedure will not be contrary to any 
provision of law, and will not result in an increase in cost to the 
Government or hinder the effective administration of this subpart.
    No alternate method or procedure relating to the giving of any bond 
or to the assessment, payment, or collection of tax, shall be 
authorized under this section. A manufacturer who desires to employ an 
alternate method or procedure shall submit a written application, in 
triplicate, to the regional director (compliance) for transmittal to 
the Director. The application shall specifically describe the proposed 
alternate method or procedure, and shall set forth the reasons 
therefor. Alternate methods or procedures shall not be employed until 
the application has been approved by the Director. The manufacturer 
shall, during the period of authorization of an alternate method or 
procedure, comply with the terms of the approved application. 
Authorization for any alternate method or procedure may be withdrawn 
whenever, in the judgment of the Director, the revenue is jeopardized 
or the effective administration of this part is hindered. Any 
authorization of the Director under this section shall be retained as 
part of the manufacturer's record in accordance with this subpart.

[[Page 54091]]

Sec. 270.386  Emergency variations from requirements.

    The Director may approve methods of operation other than as 
specified in this subpart, where it is determined that an emergency 
exists and the proposed variations from the specified requirements are 
necessary, and the proposed variations--
    (a) Will afford the security and protection to the revenue intended 
by the prescribed specifications;
    (b) Will not hinder the effective administration of this subpart; 
and
    (c) Will not be contrary to any provision of law. Variations from 
requirements granted under this section are conditioned on compliance 
with the procedures, conditions, and limitations set forth in the 
approval of the application. Failure to comply in good faith with such 
procedures, conditions and limitations shall automatically terminate 
the authority for such variations and the manufacturer thereupon shall 
fully comply with the prescribed requirements of regulations from which 
the variations were authorized. Authority for any variation may be 
withdrawn whenever in the judgment of the Director the revenue is 
jeopardized or the effective administration of this subpart is hindered 
by the continuation of such variation. Where a manufacturer desires to 
employ such variation, the manufacturer shall submit a written 
application to do so (in triplicate) to the regional director 
(compliance) for transmittal to the Director. The application shall 
describe the proposed variations and set forth the reasons therefor. 
Variations shall not be employed until the application has been 
approved. In accordance with this subpart, any authorization of the 
Director under this section shall be retained as part of the 
manufacturer's records.


Sec. 270.387  Penalties and forfeitures.

    Anyone who fails to comply with the provisions of this subpart 
becomes liable to the civil and criminal penalties, and forfeitures, 
provided by law.

(72 Stat. 1425, 1426; 26 U.S.C. 5761, 5762, 5763)

Qualification Requirements for Manufacturers

Original Qualifications


Sec. 270.391  Persons required to qualify.

    Every person who makes up cigarette paper into books or sets 
containing more than 25 papers each, or into tubes, except for his or 
her own personal use or consumption, shall first qualify as a 
manufacturer of cigarette papers and tubes in accordance with the 
provisions of this subpart.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.392  Bond.

    Every person, before commencing business as a manufacturer of 
cigarette papers and tubes, shall file a bond on ATF Form 2102 
(5210.1). Such bond shall be filed in accordance with the applicable 
provisions of subpart G of this part and conditioned upon compliance 
with the provisions of 26 U.S.C. Chapter 52, and regulations 
thereunder, including, but not limited to, the timely payment of taxes 
imposed by such chapter and penalties and interest in connection 
therewith for which the manufacturer may become liable to the United 
States.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.393  Power of attorney.

    If the bond or any other document required under this part is 
signed by an attorney in fact for an individual, partnership, 
association, company, or corporation, by one of the partners for a 
partnership, or by one of the members of an association, a power of 
attorney on ATF Form 1534 (5000.8) shall be furnished to the regional 
director (compliance). If such bond or other document is signed on 
behalf of a corporation by an officer thereof, it must be supported by 
duly authenticated extracts of the stockholders' meeting, by-laws, or 
directors' meeting authorizing such officer to execute such document 
for the corporation. ATF Form 5000.8 or support of authority does not 
have to be filed again with a regional director (compliance) where such 
form or support has previously been submitted to that regional director 
(compliance) and is still in effect.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.394  Notice of approval of bond.

    If the bond required under this subpart is approved by the regional 
director (compliance), a number will be assigned to the factory of the 
manufacturer of cigarette papers and tubes for internal revenue 
purposes. The regional director (compliance) will immediately notify 
the manufacturer, in writing, of the bond approval, in order that the 
manufacturer may commence operations.

(72 Stat. 1421; 26 U.S.C. 5711)

Changes after Original Qualifications


Sec. 270.395  Change in name.

    Where there is a change in the individual, trade, or corporate name 
of a manufacturer of cigarette papers and tubes, the manufacturer 
shall, within 30 days of the change, furnish the regional director 
(compliance) a written notice of such change.

(72 Stat. 1422; 26 U.S.C. 5722)


Sec. 270.396  Change in proprietorship.

    Where there is to be any change in proprietorship (including a 
change in the identity of the members of a partnership or association, 
but excluding any change in stock ownership in a corporation) of the 
business of a manufacturer of cigarette papers and tubes, the proposed 
successor shall, before commencing operations, qualify as a 
manufacturer of cigarette papers and tubes, in accordance with this 
part. If such manufacturer promptly files the required documentation 
with the regional director (compliance), an administrator, executor, 
receiver, trustee, assignee, or other fiduciary successor may liquidate 
the business without qualifying as a manufacturer. The manufacturer 
must promptly file with the regional director (compliance) a statement 
of the intent to liquidate and furnish a certified copy of the order of 
the court, or other pertinent documents. These documents must show the 
appointment and qualification of any administrator, executor, receiver, 
trustee, assignee, or other fiduciary, together with an extension of 
coverage of the predecessor's bond executed by the administrator, 
executor, receiver, trustee, assignee, or other fiduciary and the 
surety, in accordance with the provisions of Sec. 270.407. The 
predecessor shall make a closing inventory and closing report in 
accordance with the provisions of Secs. 270.434 and 270.426, 
respectively, and the successor shall make an opening inventory and 
opening report, in accordance with the provision of Secs. 270.432 and 
270.423, respectively.

(72 Stat. 1421, 1422; 26 U.S.C. 5711, 5721, and 5722)


Sec. 270.397  Change in location.

    Whenever a manufacturer of cigarette papers and tubes contemplates 
a change in location of a factory within the same region, the 
manufacturer shall, before commencing operations at the new location, 
file an extension of coverage of bond in accordance with the provisions 
of Sec. 270.407. Whenever a manufacturer of cigarette papers and tubes 
contemplates changing the location of a factory to another region, the 
manufacturer shall, before commencing operations at the new location, 
qualify as a manufacturer in the new region, in accordance with the 
applicable provisions of this subpart, and make a closing inventory and 
closing report, in

[[Page 54092]]

accordance with the provisions of Secs. 270.434 and 270.426, 
respectively.

(72 Stat. 1421, 1422; 26 U.S.C. 5711, 5721, and 5722)

Bonds and Extensions of Coverage of Bonds


Sec. 270.401  Corporate surety.

    (a) Surety bonds required by this subpart may be given only with 
corporate sureties holding certificates of authority from, and subject 
to any limitations prescribed by the Secretary of the Treasury as set 
forth in the current revision of Treasury Department Circular No. 570 
(Companies Holding Certificates of Authority as Acceptable Sureties on 
Federal Bonds and as Acceptable Reinsuring Companies). The surety shall 
have no interest whatever in the business covered by the bond.
    (b) Each bond and each extension of coverage of bond shall at the 
time of filing be accompanied by a power of attorney authorizing the 
agent or officer who executed the bond to so act on behalf of the 
surety. The regional director (compliance) who is authorized to approve 
the bond may, whenever deemed necessary, require additional evidence of 
the authority of the agent or officer to execute the bond or extension 
of coverage of bond. The power of attorney shall be prepared on a form 
provided by the surety company and executed under the corporate seal of 
the company. If the power of attorney submitted is other than a 
manually signed document, it shall be accompanied by a certificate of 
its validity.
    (c) Treasury Department Circular No. 570 is published in the 
Federal Register annually as of the first workday in July. As they 
occur, interim revisions of the circular are published in the Federal 
Register. Copies may be obtained from the Surety Bond Branch, Financial 
Management Service, Department of the Treasury, Washington, D.C. 20220.

(July 30, 1947, ch. 390, 61 Stat. 648, as amended (31 U.S.C. 9304, 
9306); sec. 202. Pub. L. 85-859, 72 Stat. 1421, as amended (26 
U.S.C. 5711))


Sec. 270.402  Two or more corporate sureties.

    A bond executed by two or more corporate sureties shall be the 
joint and several liability of the principal and the sureties. However, 
each corporate surety may limit its liability in terms upon the face of 
the bond in a definite, specific amount, which amount shall not exceed 
the limitations prescribed for such corporate surety by the Secretary, 
as set forth in the current revision of Treasury Department Circular 
570 (Companies Holding Certificates of Authority as Acceptable Sureties 
on Federal Bonds and as Acceptable Reinsuring Companies). (See 
Sec. 270.401(c)) When the sureties so limit their liability, the 
aggregate of such limited liabilities must equal the required amount of 
the bond.

(July 30, 1947, ch. 390, 61 Stat. 648, as amended (31 U.S.C. 9304, 
9306); sec. 202. Pub. L. 85-859, 72 Stat. 1421, as amended (26 
U.S.C. 5711))


Sec. 270.403  Deposit of securities in lieu of corporate surety.

    In lieu of corporate surety, the manufacturer of cigarette papers 
and tubes may pledge and deposit, as security for the bond, securities 
which are transferable and are guaranteed as to both interest and 
principal by the United States, in accordance with the provisions of 31 
CFR Part 225--Acceptance of Bonds, Notes or Other Obligations Issued or 
Guaranteed by the United States as Security in Lieu of Surety or 
Sureties on Penal Bonds.

(61 Stat. 650, 72 Stat. 1421, 31 U.S.C. 9301, 9303, 26 U.S.C. 5711, 
5 U.S.C. 552(a) (80 Stat. 383, as amended))


Sec. 270.404  Amount of bond.

    The amount of the bond of a manufacturer of cigarette papers and 
tubes shall be not less than the maximum amount of the tax liability on 
the cigarette papers and tubes manufactured in the factory, received 
without payment of tax from other factories, and released without 
payment of tax from customs custody as provided in Sec. 270.452, during 
any month. In the case of a manufacturer commencing business, the 
production, receipts from other factories, and releases from customs 
custody, without payment of tax, shall be estimated for the purpose of 
this section. The amount of any such bond (or the total amount where 
strengthening bonds are filed) shall not exceed $20,000, nor be less 
than $1,000.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.405  Strengthening bond.

    Where the regional director (compliance) determines that the amount 
of the bond, under which a manufacturer of cigarette papers and tubes 
is currently carrying on such business, no longer adequately protects 
the revenue, the regional director (compliance) may require the 
manufacturer to file a strengthening bond in an appropriate amount with 
the same surety as that on the bond already in effect, in lieu of a 
superseding bond to cover the full liability on the basis of 
Sec. 270.404. The regional director (compliance) shall refuse to 
approve any strengthening bond where any notation is made thereon which 
is intended or which may be construed as a release of any former bond, 
or as limiting the amount of either bond to less than its full amount.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.406  Superseding bond.

    A manufacturer of cigarette papers and tubes shall file a new bond 
to supersede the current bond immediately when:
    (a) The corporate surety on the current bond becomes insolvent,
    (b) The regional director (compliance) approves a request from the 
surety of the current bond to terminate liability under the bond,
    (c) Payment of any liability under a bond is made by the surety 
thereon, or
    (d) The regional director (compliance) considers such a superseding 
bond necessary for the protection of the revenue.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.407  Extension of coverage of bond.

    An extension of the coverage of bond filed under this subpart shall 
be manifested on ATF Form 2105 (5000.7), Extension of Coverage of Bond, 
by the manufacturer of cigarette papers and tubes and by the surety on 
the bond with the same formality and proof of authority as required for 
the execution of the bond.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.408  Approval of bond and extension of coverage of bond.

    No person shall commence operations under any bond, nor extend 
operations, until such person receives from the regional director 
(compliance) notice of approval of the bond or an appropriate extension 
of coverage of the bond required under this subpart. Upon receipt of an 
approved bond or extension of coverage of bond from the regional 
director (compliance), such bond or extension of coverage of bond shall 
be retained by the manufacturer of cigarette papers and tubes in 
factory and shall be made available for inspection by any ATF officer 
upon request.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.409  Termination of liability of surety under bond.

    The liability of a surety on any bond required by this subpart 
shall be terminated only as to operations on and after the effective 
date of a superseding bond, or the date of approval of the 
discontinuance of operations by the manufacturer of cigarette papers 
and tubes, or otherwise in accordance with the termination provisions 
of the bond. The surety shall remain bound in

[[Page 54093]]

respect of any liability for unpaid taxes, penalties and interest, not 
in excess of the amount of the bond, incurred by the manufacturer while 
the bond is in force.

(72 Stat. 1421; 26 U.S.C. 5711)


Sec. 270.410  Release of pledged securities.

    Securities of the United States pledged and deposited as provided 
in Sec. 270.403 shall be released only in accordance with the 
provisions of 31 CFR Part 225. Such securities will not be released by 
the regional director (compliance) until liability under the bond for 
which they were pledged has been terminated. When the regional director 
(compliance) is satisfied that they may be released, the regional 
director (compliance) shall fix the date or dates on which a part or 
all of such securities may be released. At any time prior to the 
release of such securities, the regional director (compliance) may 
extend the date of release for such additional length of time as is 
deemed necessary.

(61 Stat. 650, 72 Stat. 1421; 31 U.S.C. 9301, 9303; 26 U.S.C. 5711)

Operations By Manufacturers

Records


Sec. 270.421  General.

    Every manufacturer of cigarette papers and tubes shall keep records 
of the daily operations and transactions, which shall reflect the date 
and number of books or sets of cigarette papers of each different 
numerical content and the date and number of cigarette tubes:
    (a) Manufactured;
    (b) Received, without payment of tax from another factory, an 
export warehouse, customs custody, or by withdrawal from the market;
    (c) Removed subject to tax;
    (d) Removed, without payment of tax, for export purposes, use of 
the transfer in bond pursuant to Sec. 270.451; or
    (e) Lost or destroyed.
    The entries for each day in the records maintained or kept under 
this subpart will be considered timely if made by the close of the 
business day following that on which the operations or transactions 
occur. No particular form of records is prescribed, but the information 
required shall be readily ascertainable from the records kept.

(72 Stat. 1423; 26 U.S.C. 5741)

Reports


Sec. 270.422  General.

    Every manufacturer of cigarette papers and tubes shall make a 
report, on ATF Form 2138 (5230.3), to the regional director 
(compliance), of the number of books or sets of cigarette papers of 
each different numerical content and the number of cigarette tubes 
manufactured, received, removed, and lost or destroyed. The report 
shall be made at the times specified in this subpart and shall be made 
whether or not any operations or transactions occurred during the 
period covered by the report. A copy of each report shall be retained 
by the manufacturer in accordance with the provisions of this subpart.

(72 Stat. 1422; 26 U.S.C. 5722)


Sec. 270.423  Opening.

    An opening report, covering the period from the date of the opening 
inventory to the end of the month, shall be made on or before the 10th 
day following the end of the month in which the business was commenced.

(72 Stat. 1422; 26 U.S.C. 5722)


Sec. 270.424  Monthly.

    A report for each calendar month shall be made on or before the 
20th day of the next succeeding month.

(72 Stat. 1422; 26 U.S.C. 5722)


Sec. 270.425  Special.

    A special report, covering the unreported period to the day 
preceding the date of any special inventory required by an ATF officer, 
shall be made with such inventory. Another report, covering the period 
from the date of the special inventory to the end of the month, shall 
be made on or before the 14th day following the end of the month in 
which the inventory was made.

(72 Stat. 1422; 26 U.S.C. 5722)


Sec. 270.426  Closing.

    A closing report, covering the period from the first of the month 
to the date of the closing inventory, shall be made with such 
inventory.

(72 Stat. 1422; 26 U.S.C. 5722)

Inventories


Sec. 270.431  General.

    Every manufacturer of cigarette papers and tubes shall provide a 
true and accurate inventory, on ATF Form 2132 (5230.2), to the regional 
director (compliance), of the number of books or sets of cigarette 
papers of each different numerical content and the number of cigarette 
tubes held at the times specified in this subpart. Such inventory shall 
be subject to verification by an ATF officer. A copy of each inventory 
shall be retained by the manufacturer in accordance with this subpart.

(72 Stat. 1422; 26 U.S.C. 5721)


Sec. 270.432  Opening.

    An opening inventory shall be made by the manufacturer of cigarette 
papers and tubes at the time of first commencing business.

(72 Stat. 1422; 26 U.S.C. 5721)


Sec. 270.433  Special.

    A special inventory shall be made by the manufacturer of cigarette 
papers and tubes when required by any ATF officer.

(72 Stat. 1422; 26 U.S.C. 5721)


Sec. 270.434  Closing.

    A closing inventory shall be made by the manufacturer of cigarette 
papers and tubes when a change in proprietorship occurs, or when the 
manufacturer changes location of the factory to another region, or 
concludes business. Where a change in proprietorship occurs, the 
closing inventory shall be made as of the day preceding the date of the 
opening inventory of the successor.

(72 Stat. 1422; 26 U.S.C. 5721)

Document Retention


Sec. 270.435  General.

    All records and reports required to be kept or maintained under 
this subpart, including copies of authorizations, inventories, reports, 
returns, and claims filed with verified supporting schedules, shall be 
retained by the manufacturer for three years following the close of the 
calendar year in which filed or made, or in the case of an 
authorization, for three years following the close of the calendar year 
in which the operation under such authorization is concluded. Such 
records shall be made available for inspection by any ATF officer upon 
request.

(72 Stat. 1423; 26 U.S.C. 5741)

Packages


Sec. 270.441  General.

    All cigarette papers and tubes shall, before removal subject to 
tax, be put up by the manufacturer in packages which shall be of such 
construction as will securely contain the papers or tubes therein. No 
package of cigarette papers or tubes shall have contained therein, 
attached thereto, or stamped, marked, written, or printed thereon:
    (a) Any certificate, coupon, or other device purporting to be or to 
represent a ticket, chance, share, or an interest in, or dependent on, 
the event of a lottery,
    (b) Any indecent or immoral picture, print, or representation, or
    (c) Any statement or indication that United States tax has been 
paid.

(72 Stat. 1422; 26 U.S.C. 5723)

[[Page 54094]]

Miscellaneous Operations


Sec. 270.451  Transfer in bond.

    A manufacturer of cigarette papers and tubes may transfer such 
papers and tubes, under bond, without payment of tax, to the bonded 
premises of any manufacturer of cigarette papers and tubes, or to the 
bonded premises of a manufacturer of tobacco products solely for use in 
the manufacture of cigarettes. The transfer of cigarette papers and 
tubes, without payment of tax, to the bonded premises of an export 
warehouse proprietor shall be in accordance with the provisions of part 
290 of this chapter.

(72 Stat. 1418, as amended; 26 U.S.C. 5704)


Sec. 270.452  Release from customs custody.

    Cigarette papers and tubes which were made in the United States, 
exported, and subsequently returned to the United States, may be 
removed from customs custody for transfer to the premises of a 
manufacturer without payment of the internal revenue tax, upon 
compliance with part 275 of this chapter.

(72 Stat. 1418; 26 U.S.C. 5704)


Sec. 270.453  Use of the United States.

    A manufacturer of cigarette papers and tubes may remove cigarette 
papers and tubes covered under bond, without payment of tax, for use of 
the United States. Such removal shall be in accordance with the 
provisions of part 295 of this chapter.

(72 Stat. 1418; 26 U.S.C. 5704)


Sec. 270.454  Removal for export purposes.

    The removal of cigarette papers and tubes, without payment of tax, 
for shipment to a foreign country, Puerto Rico, the Virgin Islands, or 
a possession of the United States, or for consumption beyond the 
jurisdiction of the internal revenue laws of the United States, shall 
be in accordance with the provisions of part 290 of this chapter.

(72 Stat. 1418; 26 U.S.C. 5704)

Permanent Discontinuance of Business


Sec. 270.461  Discontinuance of operations.

    Every manufacturer of cigarette papers and tubes who desires to 
discontinue operations and close out a factory shall dispose of all 
cigarette papers and tubes on hand, in accordance with this subpart, 
and make a closing inventory and closing report, in accordance with the 
provisions of Secs. 270.434 and 270.426, respectively.

(72 Stat. 1422; 26 U.S.C. 5721, 5722)

Claims By Manufacturers

General


Sec. 270.471  Abatement.

    A claim for abatement of the unpaid portion of the assessment of 
any tax on cigarette papers and tubes, or any liability in respect 
thereof, may be allowed to the extent that such assessment is excessive 
in amount, is assessed after the expiration of the applicable period of 
limitation, or is erroneously or illegally assessed. Any claim under 
this section shall be prepared on ATF Form 2635 (5620.8), in duplicate, 
and shall set forth the particulars under which the claim is filed. The 
original of the claim, accompanied by such evidence as is necessary to 
establish to the satisfaction of the regional director (compliance) 
that the claim is valid, shall be filed with the regional director 
(compliance) for the region in which the tax or liability was assessed.

(68A Stat. 792, 6404)


Sec. 270.472  Allowance.

    Relief from the payment of tax on cigarette papers and tubes may be 
extended to a manufacturer by allowance of the tax where the cigarette 
papers and tubes, after removal from the factory upon determination of 
tax and prior to the payment of such tax, are lost (otherwise than by 
theft) or destroyed by fire, casualty, or act of God, while in the 
possession or ownership of the manufacturer who removed such articles, 
or are withdrawn by the manufacturer from the market. Any claim for 
allowance under this section shall be filed on ATF Form 2635 (5620.8) 
with the regional director (compliance) for the region in which the 
articles were removed, shall be executed under penalties and perjury 
and shall show the date the cigarette papers and tubes were removed 
from the factory. A claim relating to articles lost or destroyed shall 
be supported as prescribed in Sec. 270.475. In the case of a claim 
relating to cigarette papers or tubes withdrawn from the market the 
schedule prescribed in Sec. 270.476 shall be filed with the regional 
director (compliance) for the region in which the articles are 
assembled. The manufacturer may not anticipate allowance of a claim by 
making the adjusting entry in a tax return pending consideration and 
action on the claim. Cigarette papers and tubes to which such a claim 
relates must be shown as removed on determination of tax in the return 
covering the period during which such articles were so removed. Upon 
action on the claim by the regional director (compliance) a copy of ATF 
Form 2635 (5620.8) will be returned to the manufacturer as notice of 
such action. This copy of ATF Form 2635 (5620.8), with the copy of any 
verified supporting schedules, shall be retained by the manufacturer. 
When such notification of allowance of the claim or any part thereof is 
received prior to the time the return covering the tax on the cigarette 
papers or tubes to which the claim relates is to be filed, the 
manufacturer may make an adjusting entry and explanatory statement in 
that tax return. Where the notice of allowance is received after the 
filing of the return and taxpayment of the cigarette papers or tubes to 
which the claim relates, the manufacturer may make an adjusting entry 
and explanatory statement in the next tax return(s) to the extent 
necessary to take credit in the amount of the allowance.

(72 Stat. 1419, as amended, 26 U.S.C. 5705)


Sec. 270.473  Credit or refund.

    The taxes paid on cigarette papers and tubes may be credited or 
refunded (without interest) to a manufacturer on proof satisfactory to 
the regional director (compliance) that the claimant manufacturer paid 
the tax on cigarette papers and tubes lost (otherwise than by theft) or 
destroyed, by fire, casualty, or act of God, while in the possession or 
ownership of such manufacturer, or withdrawn by the manufacturer from 
the market. Any claim for credit or refund under this section shall be 
prepared on ATF Form 2635 (5620.8), in duplicate. Claims shall include 
a statement that the tax imposed on cigarette papers and tubes by 26 
U.S.C. 7652 or Chapter 52, was paid in respect to the cigarette papers 
or tubes covered by the claim, and that the articles were lost, 
destroyed, or withdrawn from the market within 6 months preceding the 
date the claim is filed. A claim for credit or refund relating to 
articles lost or destroyed shall be supported as prescribed in 
Sec. 270.475, and a claim relating to articles withdrawn from the 
market shall be accompanied by a schedule prepared and verified as 
prescribed in Secs. 270.476, and 270.477. The original and one copy of 
ATF Form 2635 (5620.8), shall be filed with the regional director 
(compliance) for the region in which the tax was paid, or where the tax 
was paid in more than one region with the regional director 
(compliance) for any one of the regions in which the tax was paid. Upon 
action by the regional director (compliance) on a claim for credit, a 
copy of ATF Form 2635 (5620.8) will be returned to the manufacturer as 
notification of

[[Page 54095]]

allowance or disallowance of the claim or any part thereof. This copy, 
with the copy of any verified supporting schedules, shall be retained 
by the manufacturer. When the manufacturer is notified of allowance of 
the claim for credit or any part thereof, the manufacturer shall make 
an adjusting entry and explanatory statement in the next tax return(s) 
to the extent necessary to take credit in the amount of the allowance. 
The manufacturer may not anticipate allowance of a claim by taking 
credit on a tax return prior to consideration and action on such claim. 
The duplicate of a claim for refund or credit, with a copy of any 
verified supporting schedules, shall be retained by the manufacturer.

(72 Stat. 1419, as amended, 26 U.S.C. 5705)


Sec. 270.474  Remission.

    Remission of the tax liability on cigarette papers and tubes may be 
extended to the manufacturer liable for the tax where cigarette papers 
and tubes in bond are lost (other than by theft) or destroyed, by fire, 
casualty, or act of God, while in the possession or ownership of such 
manufacturer. Where cigarette papers and tubes are so lost or destroyed 
the manufacturer shall report promptly such fact, and the 
circumstances, to the regional director (compliance) for the region in 
which the factory is located. If the manufacturer wishes to be relieved 
of the tax liability, a claim on ATF Form 2635 (5620.8), in duplicate, 
shall also be prepared, setting forth the nature, date, place, and 
extent of the loss or destruction. The original and one copy of the 
claim, accompanied by such evidence as is necessary to establish to the 
satisfaction of the regional director (compliance) that the claim is 
valid, shall be filed with the regional director (compliance) for the 
region in which the factory is located. Upon action on the claim by the 
regional director (compliance), the copy of ATF Form 2635 (5620.8) will 
be returned to the manufacturer as notice of such action, which copy 
shall be retained by the manufacturer.

(72 Stat. 1419, as amended, 26 U.S.C. 5707)

Lost or Destroyed


Sec. 270.475  Action by claimant.

    Where cigarette papers and tubes are lost (other than by theft) or 
destroyed, by fire, casualty, or act of God, and the manufacturer 
desires to file claim under the provisions of Sec. 270.472 or 
Sec. 270.473, the manufacturer shall indicate on the claim the nature, 
date, and extent of such loss or destruction. The claim shall be 
accompanied by such evidence as necessary to establish to the 
satisfaction of the regional director (compliance) that the claim is 
valid.

(72 Stat. 1419; 26 U.S.C. 5705)

Withdrawn From the Market.


Sec. 270.476  Action by Claimant.

    Where cigarette papers and tubes are withdrawn from the market and 
the manufacturer desires to file claim under the provisions of 
Sec. 270.472 or Sec. 270.473, the manufacturer shall assemble the 
articles in or adjacent to a factory if they are to be retained in or 
received into such factory, or at any suitable place if they are to be 
destroyed. The manufacturer shall group the articles according to the 
rate of tax applicable thereto, and shall prepare and submit a schedule 
of the articles, on ATF Form 3069 (5200.7) in accordance with the 
instructions, on the form. All copies of the schedule shall be 
forwarded to the regional director (compliance) for the region in which 
the articles are assembled.

(72 Stat. 1419; 26 U.S.C. 5705)


Sec. 270.477  Action by regional director (compliance).

    Upon receipt of a schedule of cigarette papers and tubes withdrawn 
from the market, the regional director (compliance) may assign an ATF 
officer to verify the schedule and supervise disposition of the 
cigarette papers and tubes, or may authorize the manufacturer to 
dispose of the articles without supervision by so stating on the 
original and one copy of the schedule returned to the manufacturer.

(72 Stat. 1419; 26 U.S.C. 5705)


Sec. 270.478  Disposition of cigarette papers and tubes and schedule.

    When so authorized, as evidenced by the regional director's 
(compliance) statement on the schedule, the manufacturer shall dispose 
of the cigarette papers and tubes as specified in the schedule. After 
the articles are disposed of, the manufacturer shall execute a 
certificate on both copies of the schedule received from the regional 
director (compliance), to show the disposition and the date of 
disposition of the articles. In connection with a claim for credit or 
refund, the manufacturer shall attach the original of the schedule to 
the claim for credit or refund, ATF Form 2635 (5620.8), filed under 
Sec. 270.473. When an ATF officer is assigned to verify the schedule 
and supervise disposition of the cigarette papers and tubes, such 
officer shall, upon completion of the assignment, execute a certificate 
on all copies of the schedule to show the disposition and the date of 
disposition of the articles. In connection with a claim for allowance, 
the officer shall return one copy of the schedule to the manufacturer 
for the record, and in connection with a claim for credit or refund, 
the officer shall return the original and one copy of the schedule to 
the manufacturer, the original of which the manufacturer shall attach 
to the claim filed under Sec. 270.473.

(72 Stat. 1419, as amended; 26 U.S.C. 26 U.S.C. 5705)

    Sec. B. The regulations in 27 CFR part 275 are amended as follows:

PART 275--IMPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES

    Paragraph 1. The authority citation for part 275 continues to read 
as follows:

    Authority: 26 U.S.C. 5701, 5703-5705, 5708, 5722, 5723, 5741, 
5761-5763, 6301, 6302, 6313, 6404, 7101, 7212, 7342, 7606, 7652; 31 
U.S.C. 9301, 9303, 9304, 9306.


Sec. 275.63  [Amended]

    Par. 2. Section 275.63(a) is amended by removing ``parts 270 and 
285'' and adding ``part 270''.


Sec. 275.85  [Amended]

    Par. 3. Section 275.85 concluding text is amended by removing 
``part 270 and part 285'' and adding ``part 270''.
    Par. 4. Section 275.85a(b) is amended by removing ``part 270 or 
285'' and adding ``part 270''.


Sec. 275.86  [Amended]

    Par. 5. Section 275.86 is amended by removing ``parts 270 and 285'' 
and adding ``part 270''.


Sec. 275.115  [Amended]

    Par. 6. Section 275.115a (a)(1) and (b)(1) are amended by removing 
``parts 270 and 285'' and adding ``part 270''.


Sec. 275.137  [Amended]

    Par. 7. Section 275.137 introductory text is amended by removing 
``parts 270 and 285'' and adding ``part 270''.


Sec. 275.140  [Amended]

    Par. 8. Section 275.140 is amended by removing ``part 285'' and 
adding ``part 270''.
    Sec. C. The regulations in 27 CFR part 285 are amended as follows:

PART 285--MANUFACTURE OF CIGARETTE PAPERS AND TUBES

PART 285--[REMOVED AND RESERVED]

    Paragraph 1. Part 285 is removed and reserved.

[[Page 54096]]

    Sec. D. The regulations in 27 CFR part 295 are amended as follows:

PART 295--REMOVAL OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES, WITHOUT PAYMENT OF TAX FOR USE OF THE UNITED STATES

    Paragraph 1. The authority citation for part 295 continues to read 
as follows:

    Authority: 26 U.S.C. 5703, 5704, 5705, 5723, 5741, 5751, 5762, 
5763, 6313, 7212, 7342, 7606, 7805; 44 U.S.C. 3504(h).
    Par. 2. Section 295.34 is amended by removing the phrase ``or Part 
285''.

    Signed: June 10, 1996.
John W. Magaw,
Director.

    Approved: July 29, 1996.
Dennis M. O'Donnell,
Acting Deputy Assistant Secretary (Regulatory, Tariff and Trade 
Enforcement).
[FR Doc. 96-26305 Filed 10-16-96; 8:45 am]
BILLING CODE 4810-31-M