[Federal Register Volume 64, Number 245 (Wednesday, December 22, 1999)]
[Rules and Regulations]
[Pages 71957-71962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32604]



  Federal Register / Vol. 64, No. 245 / Wednesday, December 22, 1999 / 
Rules and Regulations  

[[Page 71957]]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 296

[T.D. ATF-423]
RIN 1512-AB95


Floor Stocks Tax for Cigarettes (99R-259P)

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

ACTION: Final Rule (Treasury decision).

-----------------------------------------------------------------------

SUMMARY: This document implements section 9302 of the Balanced Budget 
Act of 1997 (Pub. L. 105-33). This document prescribes regulations 
covering the computation and payment of floor stocks tax on Federally 
taxpaid or tax determined cigarettes which are held for sale on January 
1, 2000 and January 1, 2002. This document also provides regulations 
for conducting inventories and for maintaining required records 
associated with the floor stocks tax.

EFFECTIVE DATE: December 22, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Ruhf, Regulations Division, 
Bureau of Alcohol, Tobacco and Firearms, 650 Massachusetts Avenue, NW, 
Washington, DC 20226, (202) 927-8210, e-mail, alc/
[email protected].

SUPPLEMENTARY INFORMATION:

General Requirements

    Section 9302(j) of the Balanced Budget Act imposes a floor stocks 
tax on all cigarettes. This floor stocks tax is to be computed on 
Federally taxpaid or tax determined large and small cigarettes held for 
sale on the first moment of January 1, 2000 and January 1, 2002.
    The floor stocks tax applies to anyone who holds cigarettes for 
sale on the tax increase dates. This applies to manufacturers, 
importers, wholesalers and retailers. The tax applies to cigarettes 
only; the floor stocks tax does not apply to other tobacco products 
(including cigars, smokeless tobacco, pipe tobacco, and roll-your-own 
tobacco) or cigarette papers and tubes. Cigarettes that are in vending 
machines in accordance with 27 CFR 296.212 on the tax increase dates 
are not subject to the tax.

Inventory Requirements

    Liability for the floor stocks tax is determined on the basis of an 
inventory of cigarettes held for sale. Each person will be required to 
make either a record of the physical inventory or a book or record 
inventory supported by the appropriate source records. The inventory 
must be taken sometime between December 26th and January 10th.
    The inventory must separately account for any cigarettes held for 
sale that have been marked for export from the United States. A package 
of cigarettes marked for export from the United States has been 
imprinted or has been labeled with the words ``Tax-exempt. For use 
outside U.S'' or ``U.S. Tax-Exempt. For use outside U.S.'' or has a 
stamp, sticker or notice, required by a foreign country or a possession 
of the United States, which identifies the foreign country or 
possession. If a person is required to file a return, that person will 
report the quantities of these export cigarettes separately on the tax 
return.
    ATF believes that the requirements of a separate inventory and a 
separate reporting of cigarettes on the tax return marked for export 
are necessary to enforce the provisions of 26 U.S.C. 5761(c). Section 
5761(c) of the IRC penalizes persons who sell, reland or receive 
cigarettes that have been labeled or shipped for export on or after 
January 1, 2000. We note that any person who has cigarettes with such 
export markings that are held on the first moment of January 1, 2000, 
and are tax paid or tax determined may continue to sell these 
cigarettes without incurring the penalties of section 5761(c).
    The requirements to take a separate inventory of cigarettes that 
have been marked for export from the United States, and if required, a 
separate report on the tax return, will identify those who hold such 
cigarettes and the quantities involved. By identifying the quantities 
of cigarettes that have been marked for export before January 1, 2000, 
and the persons holding such cigarettes, ATF can more effectively 
conduct inspections to ensure compliance with the provisions of 26 
U.S.C. 5761(c).

Filing Requirements

    Any person holding Federally taxpaid or tax determined cigarettes 
on January 1, 2000 or January 1, 2002 may have to file a tax return and 
make payment. Each person is allowed a credit of $500 or the amount of 
the tax liability, whichever is less. Therefore, a person whose 
liability is $500 or less will not be required to file a return. 
However, all persons must maintain an inventory record establishing 
that the tax liability is $500 or less.
    Where tax is due, payment in full must accompany the return. For 
the tax increases on January 1, 2000, and January 1, 2002, persons must 
file the floor stocks return and pay the floor stocks tax no later than 
March 31, 2000, or April 1, 2002, respectively.

Delegations

    In the sections of the regulations that are affected by this 
document, we have replaced obsolete ATF titles with the ``appropriate 
ATF officer'' and referred to a delegation order that specifies the 
current title of the ATF official for each activity. The titles of 
responsible persons in the remaining sections of regulations in this 
part will be updated by future technical amendments.

Administrative Procedure Act

    This document merely implements sections of the law that were 
enacted on August 5, 1997. Therefore, we find it is unnecessary to 
issue this Treasury decision with notice and public procedure under 5 
U.S.C. 553(b), or subject to the effective date limitation in section 
553(d).

Regulatory Flexibility Act

    The provisions of the Regulatory Flexibility Act relating to a 
final regulatory flexibility analysis (5 U.S.C. 604) do not apply to 
this final rule. We were not required to publish a general notice of 
proposed rulemaking under 5 U.S.C. 553 or any other law. The revenue 
effects of this rulemaking on small businesses result directly from the 
underlying statute. Pursuant to 26 U.S.C. 7805(f), we have sent a copy 
of this regulation to the Chief Counsel for Advocacy of the Small 
Business Administration for comment on its impact on small businesses 
pursuant to section 7805(f).

Executive Order 12866

    It has been determined that this final rule is not a significant 
regulatory action as defined by Executive Order 12866.

Paperwork Reduction Act of 1995

    The collection of information contained in this final regulation 
has been reviewed and approved by the Office of Management and Budget 
(OMB) in accordance with the requirements of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3507(j)). An agency may not conduct or sponsor, 
and a person is not required to respond to, a collection of information 
unless it displays a valid control number assigned by OMB.
    The collection information for OMB number 1512-0504 is found in 27 
CFR 296.196 and 296.262. The collection information for OMB number 
1512-0141 is found in 27 CFR 296.253. This information is required to 
ensure proper

[[Page 71958]]

records and payment of floor stocks tax on cigarettes. The collection 
of information is mandatory for respondents who are primarily 
businesses or otherwise operate for profit. The estimated average 
burden of this information collection is 4 hours per respondent for a 
small business and 12 hours per respondent for a large business. The 
overall burden of this information collection is estimated at 2 million 
hours. Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Chief, 
Document Services Branch, Bureau of Alcohol, Tobacco and Firearms, 650 
Massachusetts Avenue, NW, Washington, DC 20226, and to the Office of 
Management and Budget, Attention: Desk Officer for the Department of 
the Treasury, Bureau of Alcohol, Tobacco and Firearms, Office of 
Information and Regulatory Affairs, Washington, DC 20503.

Drafting Information

    The principal author of this document is Jackie White of the 
Regulations Division, Bureau of Alcohol, Tobacco and Firearms.

List of Subjects in 27 CFR Part 296

    Authority delegations, Cigars and cigarettes, Claims, Disaster 
assistance, Excise taxes, Penalties, Seizures and forfeitures, Surety 
bonds, Tobacco.

PART 296--[AMENDED]

    Paragraph 1. The authority citation for part 296 is revised to read 
as follows:

    Authority: 18 U.S.C. 2341-2346, 26 U.S.C. 5708, 5751, 5761-5763, 
6001, 6601, 6621, 6622, 7212, 7342, 7602, 7606, 7805, 44 U.S.C. 
3504(h), 49 U.S.C. 782, unless otherwise noted.

    Par. 2. Subpart I is revised to read as follows:

Subpart I--Floor Stocks Tax on Cigarettes Held for Sale on January 1, 
2000 and on January 1, 2002

General

Sec.
296.191  Purpose of this subpart.
296.192  Terms used in this subpart.
296.193  Floor stocks tax defined.
296.194  Persons liable for this tax.
296.195  Persons not liable for this tax.
296.196  Floor stocks requirements.

Inventories

296.201  Establish quantities of cigarettes.
296.202  Inventory for cigarettes with export markings.
296.203  How to identify cigarettes with export markings.
296.204  When to take inventory.
296.205  Physical inventory requirements.
296.206  Book or record inventory requirements.
296.207  Cigarettes in transit.
296.208  Guidelines to determine title of cigarettes in transit.
296.209  Cigarettes in a foreign trade zone.
296.210  Cigarettes held in bond.
296.211  Unmerchantable cigarettes.
296.212  Cigarettes in vending machines.
296.213  Cigarettes marked ``not for sale'' or ``complimentary.''

Compute Tax Liability

296.221  Determine amount of tax due.
296.222  Floor stocks tax rates.
296.223  Apply tax credit.

Filing Requirements

296.231  How to obtain a tax return.
296.232  Prepare tax return.
296.233  How to pay.
296.234  Tax return due dates.
296.235  Filing requirements for multiple locations.
296.236  Cigarettes in a warehouse.
296.237  Controlled group members.

Records

296.241  Required records.
296.242  Period for maintaining records.
296.243  Cigarettes at multiple locations.
296.244  Where records must be maintained.
296.245  Errors in records.

Claims

296.251  Before filing a claim.
296.252  When to file a claim for errors on return.
296.253  How to file a claim for errors on return.
296.254  Destruction of cigarettes by a Presidentially-declared 
major disaster.
296.255  Additional reasons for filing a claim.

Alternate Methods or Procedures

296.261  Purpose of an alternate method or procedure.
296.262  How to apply for approval.
296.263  Conditions for approval.
296.264  Withdrawal of an alternate method or procedure.

ATF Authorities

296.270  Delegations of the Director
296.271  Entry, examination and testimony.
296.272  Issuance of summons.
296.273  Refusing entry or examination.
296.274  Penalties for failure to comply.

Subpart I--Floor Stocks Tax on Cigarettes Held for Sale on January 
1, 2000 and on January 1, 2002

    Authority: Section 9302, Pub.L. 105-33, 111 Stat. 251, unless 
otherwise noted.

General


Sec. 296.191  Purpose of this subpart.

    The regulations in this subpart implement the floor stocks tax on 
cigarettes held for sale the first moment on January 1, 2000 and on 
January 1, 2002.


Sec. 296.192  Terms used in this subpart.

    (a) Appropriate ATF officer. An officer or employee of the Bureau 
of Alcohol, Tobacco and Firearms (ATF) authorized to perform any 
functions relating to the administration or enforcement of this subpart 
by ATF Order 1130.14, Delegation Order--Delegation of the Director's 
Authorities in Subpart I of 27 CFR Part 296.
    (b) Controlled group. Pursuant to 26 U.S.C. 5061(e)(3), the term 
``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, except that the words ``at least 80 
percent'' shall be replaced by the words ``more than 50 percent'' in 
each place they appear in subsection (a) of 26 U.S.C. 1563, as well as 
in the implementing regulations. Controlled groups of corporations 
include, but are not limited to:
    (1) Parent-subsidiary controlled groups as defined in 26 CFR 
1.1563-1 (a)(2).
    (2) Brother-sister controlled groups as defined in 26 CFR 1.1563-
1(a)(3).
    (3) Combined groups as defined in 26 CFR 1.1563-1(a)(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 are members of a controlled group.
    (c) Foreign trade zone. A foreign trade zone established and 
operated pursuant to the Act of June 18, 1934, as amended, 19 U.S.C. 
81a.
    (d) Large cigarettes. Cigarettes weighing more than three pounds 
per thousand.
    (e) Person. When the term ``person'' is used in this subpart, it 
refers to an individual, partnership, association, company, 
corporation, a trust, or an estate. It also includes any State or 
political subdivision.
    (f) Small cigarettes. Cigarettes weighing not more than three 
pounds per thousand.
    (g) Tax increase dates. For the purposes of this floor stocks tax, 
the tax increase dates are January 1, 2000 and January 1, 2002.


Sec. 296.193  Floor stocks tax defined.

    Floor stocks tax is a tax imposed on all Federally taxpaid or tax 
determined cigarettes held for sale on the first moment a tax increase 
becomes effective. The tax is the difference between the previous 
excise tax rate and the new tax rate.

[[Page 71959]]

Sec. 296.194  Persons liable for this tax.

    You are liable for this tax if you hold for sale any taxpaid or tax 
determined cigarettes at the moment a tax increase is effective. You 
are liable for floor stocks tax on cigarettes that you own that may be 
in transit (refer to Secs. 296.207 and 296.208). You may also be liable 
if you hold cigarettes in a foreign trade zone (refer to Sec. 296.209).


Sec. 296.195  Persons not liable for this tax.

    If you do not hold any taxpaid or tax determined cigarettes for 
sale at the moment a tax increase is effective, you are not liable for 
this tax.


Sec. 296.196  Floor stocks requirements.

    (a) Take an inventory. Establish the quantity of cigarettes subject 
to the floor stocks tax held for sale at the beginning of the tax 
increase dates (January 1, 2000 and January 1, 2002). You may take a 
physical inventory or you may use a book or record inventory, as 
specified in Secs. 296.205 and 296.206.
    (b) Compute tax amount. Compute the amount of tax for the 
cigarettes held for sale at the start of each of the tax increase 
dates. Refer to the table shown in Sec. 296.222. Apply the tax credit 
as provided by Sec. 296.223.
    (c) File tax return. After you have computed the floor stocks tax, 
you must file a return for each tax increase date if tax is due.
    (d) Maintain records. Maintain all records used to determine the 
quantity of cigarettes on hand at the start of each tax increase date. 
You must also maintain all computations used to determine the amount of 
tax owed. Refer to Sec. 296.241.

    (Approved by the Office of Management and Budget under control 
number 1512-0554)

Inventories


Sec. 296.201  Establish quantities of cigarettes.

    You must take an inventory to establish the quantity of cigarettes 
subject to the floor stocks tax. You may take a physical inventory or a 
book or record inventory.


Sec. 296.202  Inventory for cigarettes with export markings.

    Your inventory of cigarettes must count separately cigarettes that 
have been labeled for export from the United States.


Sec. 296.203  How to identify cigarettes with export markings.

    Each package (the container in which cigarettes are put up by the 
manufacturer and delivered to the consumer) of cigarettes will have:
    (a) A mark or a label with the words ``Tax-exempt. For use outside 
U.S.'' or ``U.S. Tax Exempt. For use outside U.S.''; or
    (b) A stamp, sticker, or notice, required by a foreign country or 
possession of the United States, which identifies such country or 
possession.


Sec. 296.204  When to take inventory.

    You must take your physical inventory or book or record inventory 
during the periods noted in the table to this section.


------------------------------------------------------------------------
  Date of floor stocks tax      Not earlier than        No later than
------------------------------------------------------------------------
January 1, 2000.............  December 26, 1999...  January 10, 2000.
January 1, 2002.............  December 26, 2001...  January 10, 2002.
------------------------------------------------------------------------

Sec. 296.205  Physical inventory requirements.

    Your physical inventory must include a written record of:
    (a) Quantity and Type. You must record the quantity and type of 
cigarettes in sufficient detail to determine the tax rate as stated in 
Sec. 296.222 and whether the cigarettes have export markings as stated 
in Sec. 296.203. The following chart provides the type of cigarette and 
method to use to determine quantities:

------------------------------------------------------------------------
         Type or kind                       Inventory method
------------------------------------------------------------------------
Small cigarettes (Class A)...  Count the:
                                 Number of cigarettes without
                                export markings.
                                 Number of cigarettes with
                                export markings.
Large cigarettes (Class B)...  Count the:
                                 Number of large cigarettes
                                6.5'' or less in length without export
                                markings.
                                 Number of large cigarettes
                                6.5'' or less in length with export
                                markings.
                                 Number of each size of large
                                cigarettes more than 6.5'' in length
                                without export markings.
                                 Number of each size of large
                                cigarettes more than 6.5'' in length
                                with export markings.
------------------------------------------------------------------------

    (b) Date. Date(s) the inventory was taken.
    (c) Name. Name of individual(s) conducting the inventory and the 
name of the person for whom the inventory was taken.
    (d) Location. Record where the inventory was taken (street address, 
city and State).
    (e) Time. The physical inventory must be taken between the dates 
shown in Sec. 296.204. If you do not take the physical inventory as of 
the close of business on the last respective business days of 1999 and 
2001, the records must be reconciled. The inventory records must be 
reconciled to reflect the actual quantity of cigarettes held as of the 
first moment of January 1, 2000 and January 1, 2002, respectively. 
These records must include all supporting records of receipt and 
disposition.


Sec. 296.206  Book or record inventory requirements.

    You may use a book or record inventory if you have source records 
that show:
    (a) The quantity of receipts and dispositions of all cigarettes.
    (b) The actual type and quantities of cigarettes on hand as if a 
physical inventory had taken place the moment the tax increase became 
effective. Refer to Sec. 296.205(a).
    (c) The name and address of the consignor and consignee.
    (d) The date of receipt or disposition of the cigarettes.
    (e) The brand name of each product.
    (f) If you do not take the inventory as of the close of business on 
the last respective business days of 1999 and 2001, the records must be 
reconciled as described in Sec. 296.205(e).


Sec. 296.207  Cigarettes in transit.

    Cigarettes in transit must be included in your inventory if you 
hold title to the cigarettes. If you have transferred the

[[Page 71960]]

title, you must document the title transfer in writing. For example, 
you may mark the bill of lading with a written statement that indicates 
the time and place of the title transfer.


Sec. 296.208  Guidelines to determine title of cigarettes in transit.

    You may use the following guidelines to establish who holds title 
to cigarettes in transit.
    (a) If State law mandates the change in title, then no agreement or 
contract between seller and buyer can alter it.
    (b) In the absence of State law governing the change of title 
between seller and buyer, the Uniform Commercial Code allows the seller 
and buyer to agree when title passes.
    (c) If there is no State law or agreement between the seller and 
buyer, the Uniform Commercial Code states that title transfer depends 
on how the seller ships the cigarettes.
    (1) Freight on board (F.O.B.) destination. The title transfer 
occurs when the seller completes the performance of the physical 
delivery of the cigarettes.
    (2) Freight on board (F.O.B.) shipping point. The title transfer 
occurs when the seller transfers the title at the time and place of 
shipment, which is generally by common carrier.


Sec. 296.209  Cigarettes in a foreign trade zone.

    You are liable for the tax and must take an inventory when either 
of the following conditions apply:
    (a) Internal revenue taxes have been determined or Customs duties 
liquidated, with respect to cigarettes pursuant to the first proviso of 
section 3(a) of the Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a), 
or
    (b) Cigarettes are held by a Customs officer pursuant to the second 
proviso of section 3(a) of the Act of June 18, 1934 (48 Stat. 998, 19 
U.S.C. 81a).


Sec. 296.210  Cigarettes held in bond.

    If you are a manufacturer or an export warehouse proprietor and 
hold cigarettes in ATF bond on the tax increase dates, the floor stocks 
tax does not apply to those cigarettes. Likewise, if you have 
cigarettes held in a Customs bonded warehouse, the floor stocks tax 
does not apply on those cigarettes.


Sec. 296.211  Unmerchantable cigarettes.

    Any cigarettes that you hold for return to a supplier because of 
some defect are not subject to the floor stocks tax. You must prepare a 
separate list of these items. You cannot include as unmerchantable any 
items that may be held because of poor market demand or to reduce your 
inventory.


Sec. 296.212  Cigarettes in vending machines.

    You do not have to inventory cigarettes held in a vending machine 
for retail sale, provided:
    (a) The vending machine holding the cigarettes is placed at a 
location where retail sales occur, and
    (b) The cigarettes are ready to be dispensed by a consumer.


Sec. 296.213  Cigarettes marked ``not for sale'' or ``complimentary.''

    Cigarettes marked ``not for sale'' or ``complimentary'' that are 
part of a sale (for example, buy two packs and get one pack free) are 
subject to the floor stocks tax and must be included in the book or 
record inventory as required by Secs. 296.205 and 296.206. Cigarettes 
that are marked ``not for sale'' or ``complimentary'' and are intended 
to be given away and not in conjunction with any sale are not subject 
to the floor stocks tax.

Compute Tax Liability


Sec. 296.221  Determine amount of tax due.

    After you have taken your inventory, apply the applicable tax rate 
for each type of cigarette using the table in Sec. 296.222. Multiply 
the amount of each type of cigarette by the applicable tax rate.


Sec. 296.222  Floor stocks tax rates.

------------------------------------------------------------------------
          Type or kind              January 1, 2000     January 1, 2002
------------------------------------------------------------------------
Small Cigarettes (3 pounds or     $5 per 1,000 or 10  $2.50 per 1,000 or
 less per 1,000).                  cents per 20.       5 cents per 20
Large Cigarettes (more than 3     $10.50 per 1,000    $5.25 per 1,000 or
 pounds per 1,000).                or 21 cents per     10.5 cents per 20
                                   20.
 
------------------------------------------------------------------------
  Special rule: For large cigarettes over 6\1/2\ inches long determine
   the rate for each length. Multiply the rate prescribed for small
   cigarettes by the whole number that represents the addition of each
   2\3/4\ inches and any fraction of the length, as one (1).
------------------------------------------------------------------------

Sec. 296.223  Apply tax credit.

    You are allowed a credit against your floor stocks tax of up to 
$500. However, controlled groups are eligible for only one credit for 
the entire group. The credit may be divided equally among the members 
or apportioned in any other manner agreeable to the members.

Filing Requirements


Sec. 296.231  How to obtain a tax return.

    You may obtain ATF Form 5000.28T, Floor Stocks Tax Return for 
Cigarettes, from any of the following sources:
    (a) ATF web site (www.atf.treas.gov);
    (b) ATF Distribution Center, PO Box 5950, Springfield, Virginia 
22150-5950, telephone (703) 455-7801; or
    (c) National Revenue Center, 550 Main Street, Cincinnati, Ohio 
45202-3263, telephone (800) 398-2282 or (513) 684-7151.


Sec. 296.232  Prepare tax return.

    If your tax liability is zero, you do not have to complete or file 
a tax return. Otherwise, complete and file the floor stocks tax return 
in accordance with the instructions for the form.


Sec. 296.233  How to pay.

    Your payment must be in the form of a check or money order and sent 
with ATF Form 5000.28T unless you are required to file by electronic 
fund transfer as described in paragraph (a) of this section.
    (a) Electronic fund transfer. If you pay any other excise taxes 
collected by ATF by electronic fund transfer, then you must also send 
your payment for this floor stocks tax by an electronic fund transfer. 
ATF P 5000.10, Payment by Electronic Funds Transfer, specifies how to 
make an electronic fund transfer. You can get ATF P 5000.10 from any of 
the following sources:
    (1) ATF web site (www.atf.treas.gov);
    (2) ATF Distribution Center, P.O. Box 5950, Springfield, Virginia 
22150-5950, telephone (703) 455-7801; or
    (3) National Revenue Center, 550 Main Street, Cincinnati, Ohio 
45202-3263, telephone (800) 398-2282 or (513) 684-7151.
    (b) [Reserved]

[[Page 71961]]

Sec. 296.234  Tax return due dates.

------------------------------------------------------------------------
           Tax increase date              File tax return no later than:
------------------------------------------------------------------------
January 1, 2000........................  March 31, 2000 \1\
January 1, 2002........................  April 1, 2002
------------------------------------------------------------------------
\1\ Section 9302(j) of P.L. 105-33 states that the due date is April 1,
  2000. However, section 5703(b)(2)(E) of the Internal Revenue Code
  requires that when a due date falls on a Saturday, Sunday or a legal
  holiday, the preceding day that is not a Saturday, Sunday or legal
  holiday will be the due date. Therefore, the floor stocks tax for this
  period is due on March 31, 2000 since April 1, 2000, falls on a
  Saturday.

Sec. 296.235  Filing requirements for multiple locations.

    You may file a consolidated return if all locations or places of 
business have the same employer identification number. You also have 
the option of filing a separate return for each place of business or 
location.


Sec. 296.236  Cigarettes in a warehouse.

    (a) Cigarettes warehoused at one or more locations must be reported 
on the tax return representing the location where the cigarettes will 
be offered for sale.
    (b) Cigarettes offered for sale at several locations must be 
reported on a tax return filed by one or more of the locations. The 
cigarettes can be reported by a single location or apportioned among 
several locations.


Sec. 296.237  Controlled group members.

    If you are a member of a controlled group, you must file if the 
combined liability with other members is more than $500. If you have 
your own employer identification number, you must file a separate tax 
return. You may take the tax credit discussed in Sec. 296.223 if it is 
apportioned to you as a member of the controlled group.

Records


Sec. 296.241  Required records.

    You must maintain:
    (a) Inventory records.
    (b) Tax computations.
    (c) Names, addresses and employer identification number of all 
controlled group members, if applicable.
    (d) Copy of tax return, if you filed one.
    (e) List of locations and warehouses covered by the tax return.
    (f) Any approved alternate method or procedure under 296.263.


Sec. 296.242  Period for maintaining records.

    An appropriate ATF officer may require, in writing, that you keep 
records and any tax returns for an additional period of not more than 3 
years. Keep your records in accordance with time frames shown in the 
table to this section.

------------------------------------------------------------------------
                                           Maintain your records for at
              If you have:                            least:
------------------------------------------------------------------------
Taken an inventory but are not required  3 years from the tax increase
 to file a tax return.                    date.
Filed a tax return on or before the due  3 years from the due date of
 date of the return.                      the tax return, as specified
                                          in Sec.  296.234.
Filed a tax return after the due date    3 years from the date of filing
 of the tax return.                       the tax return.
------------------------------------------------------------------------

Sec. 296.243  Cigarettes at multiple locations.

    You must maintain a list of each place where you hold cigarettes 
subject to the floor stocks tax. This list must include:
    (a) Address.
    (b) Name of the proprietor (if different).
    (c) The employer identification number (if different).
    (d) Quantity and classification of all cigarettes held at each 
location.


Sec. 296.244  Where records must be maintained.

    Keep your inventory records at your principal place of business. 
All records must be made available to an appropriate ATF officer upon 
demand.


Sec. 296.245  Errors in records.

    If your inventory records or tax computation records contain an 
error that resulted in an overpayment of tax, you can file a claim for 
refund. If your inventory or tax computation records contain an error 
that resulted in an underpayment of tax, you must file an additional 
tax return on which you show and pay the additional tax, interest and 
any applicable penalties.

Claims


Sec. 296.251  Before filing a claim.

    Before you can file a claim for refund, you must have paid your 
floor stocks tax on ATF F 5200.28T and subsequently determined that you 
overpaid the tax.


Sec. 296.252  When to file a claim for errors on return.

    You must file the claim within 3 years from the due date of filing 
the tax return or 2 years from the time the tax was paid, whichever is 
later.


Sec. 296.253  How to file a claim for errors on return.

    Your claim must be filed on ATF Form 2635 (5620.8). The claim must 
include detailed and sufficient evidence to support why you believe the 
tax was overpaid. The claim and supporting documentation must be mailed 
or delivered to the address shown on the form.

(Approved by the Office of Management and Budget under control 
number 1512-0554)


Sec. 296.254  Destruction of cigarettes by a Presidentially-declared 
major disaster.

    After you have paid the floor stocks tax, you may file a claim for 
refund of tax on cigarettes lost, rendered unmarketable, or condemned 
because of a Presidentially-declared major disaster. Refer to subpart C 
of this part for the time, evidence and procedures for filing a claim.


Sec. 296.255  Additional reasons for filing a claim.

    (a) Manufacturer. 27 CFR part 270, subparts I and K state the 
times, reasons and procedures for filing a claim for refund.
    (b) Export warehouse proprietor. 27 CFR part 290, subpart G, states 
the time, evidence and procedures for filing a claim for refund.
    (c) Exported taxpaid. If cigarettes are shipped from the United 
States, you may file a claim for drawback of taxes under subpart K of 
27 CFR part 290.
    (d) Importer. An importer may follow the procedures for filing a 
claim as described in 27 CFR part 275, subpart I.

Alternate Methods or Procedures


Sec. 296.261  Purpose of an alternate method or procedure.

    An alternate method or procedure is a different way of performing a 
requirement than is provided in this subpart of regulations. You would 
only make a request if you wanted to perform a requirement in a 
different way than is provided in this subpart.


Sec. 296.262  How to apply for approval.

    You must apply in writing to the National Revenue Center, 550 Main 
Street, Cincinnati, Ohio 45202-3263. You must describe the alternate 
method or procedure and reasons you wish to use it. You cannot use the 
alternate method until you receive written approval from ATF.

(Approved by the Office of Management and Budget under control 
number 1512-0554)

[[Page 71962]]

Sec. 296.263  Conditions for approval.

    The alternate method or procedure may be approved if it meets all 
of the following conditions:
    (a) There is good cause for its use.
    (b) It is consistent with the purpose and effect intended by the 
prescribed method or procedure.
    (c) It affords equivalent security to the revenue.
    (d) It is not contrary to any provision of law.
    (e) It will not result in an increase in cost to the Government.
    (f) It will not hinder the effective administration of this subpart 
such as delaying timely payment of taxes.
    (g) It is not a method or procedure that relates to the payment or 
collection of tax.


Sec. 296.264  Withdrawal of an alternate method or procedure.

    The approval will be withdrawn if revenue is jeopardized or 
administration of this subpart is hindered. ATF will give you a written 
notice of the withdrawal.

ATF Authorities


Sec. 296.270  Delegations of the Director.

    The regulatory authorities of the Director contained in this 
subpart are delegated to appropriate ATF officers. These ATF officers 
are specified in ATF O 1130.14, Delegation Order--Delegation of the 
Director's Authorities in Subpart I of 27 CFR part 296. ATF delegation 
orders, such as ATF O 1130.14, are available to any interested party by 
mailing a request to the ATF Distribution Center, PO Box 5950, 
Springfield, VA 22150-5190, or by accessing the ATF web site (http://
www.atf.treas.gov/).


Sec. 296.271  Entry, examination and testimony.

    Appropriate ATF officers, in performing official duties, may enter 
any premises to examine cigarettes subject to floor stocks tax. They 
may enter the premises during the day or may also enter at night if the 
premises are open. Appropriate ATF officers may audit and examine all 
cigarettes, inventory records, books, papers, or other resource data 
for the purpose of ascertaining, determining or collecting floor stocks 
tax. They may take testimony (under oath) of any person when inquiring 
as to proper payment of floor stocks taxes.


Sec. 296.272  Issuance of summons.

    Appropriate ATF officers can issue summonses when there is no 
Justice Department referral under the authority stated in 27 CFR 70.22. 
The summons will state a place and time for such items or person to 
appear. ATF will issue a summons to require:
    (a) Any books of account or other data pertaining to liability of 
floor stocks tax.
    (b) Any person liable for the floor stocks tax or having possession 
of books of account or other data.
    (c) Any other appropriate person in connection with the books or 
tax liability.


Sec. 296.273  Refusing entry or examination.

    If you or another person in charge of the premises refuses to admit 
any appropriate ATF officer or prevents any appropriate ATF officer 
from examining the records or cigarettes, you may be liable for the 
penalties described in 26 U.S.C. 7342 and 7212, respectively.


Sec. 296.274  Penalties for failure to comply.

    If you fail to follow these regulations, ATF may apply applicable 
civil and criminal penalties under the Internal Revenue Code of 1986. 
For example, failure to file and failure to pay penalties may be 
assessed against you if you do not timely file your tax return or 
timely pay the taxes due. In addition, interest under 26 U.S.C. 6621 
accrues for any underpayment of tax and on all assessed penalties until 
paid.

    Signed: October 13, 1999.
John W. Magaw,
Director.
    Approved: October 27, 1999.
John P. Simpson,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 99-32604 Filed 12-21-99; 8:45 am]
BILLING CODE 4810-31-P