- Who is liable for the tobacco tax?
A tobacco tax is levied on cigarettes and tobacco products that are imported or transferred into Alaska. These taxes are primarily collected from licensed wholesalers and distributors. Cigarette taxes are paid through the use of stamps. Tax on tobacco products is based on a percentage of the wholesale price. An individual does not have to pay cigarette tax on the first 400 cigarettes (two cartons) transported on their person into the state for that individual’s personal consumption. Note: The term, “on their person” does not include receiving cigarettes through the mail. Cigarette tax is due on any quantity over 400 cigarettes or two cartons.
- How much is the tax?
The excise tax on the manufacture, importation, acquisition, distribution and/or sale of cigarettes in the state is $.10 per cigarette or $2.00 per pack of 20. There is an additional tax on nonparticipating manufacturer (NPM) cigarettes of $.0125 per cigarette or $.25 per pack.
The excise tax on the sale of tobacco products, except cigarettes, is 75% of their wholesale price.
- Do I need a license if I manufacture, import, acquire, distribute or sell cigarettes or tobacco products in the state?
Yes. Any person who imports, manufactures, sells, purchases, possesses or acquires cigarettes as a manufacturer, distributor, direct-buying retailer, vending machine operator, or buyer must obtain the appropriate license from the Department of Revenue (DOR). In addition, no person can distribute any tobacco product without first having obtained the appropriate license from DOR. A tobacco products license is not required if tobacco products other that cigarettes are brought into the state for personal consumption.
There are six types of cigarette licenses:
Buyer - is a person who imports or acquires cigarettes for the person’s own consumption from any source other than a manufacturer, distributor, direct-buying retailer, retailer, or wholesaler-distributor. The license fee is $25.00 and renewable yearly.
Direct-Buying Retailer – is a person who is engaged in the sale of cigarettes at retail in the state, and who brings, or causes to be brought, cigarettes into the state. The license fee is $50.00 and renewable yearly.
Cigarette Distributor – is a person who brings cigarettes, or has cigarettes brought into the state, and who sells or distributes at least 75% of the cigarettes to others for resale in the state. Tax is levied when cigarettes are first imported or acquired in the state. The license fee is $50.00 and renewable yearly.
Manufacturer – is a person who makes, fashions, or produces cigarettes for sale to distributors or other persons. The license fee is $50.00 and renewable yearly.
Vending Machine Operator – is a person who imports or acquires cigarettes in the state, upon which the tax has not been paid, and distributes them through vending machines. The license fee is $50.00 and renewable yearly.
Wholesale-Distributor – is a person outside of the state who sells cigarettes into the state and agrees to pay the cigarette and tobacco products tax imposed under AS 43-50. The license fee is $50.00 and renewable yearly.
There is a license for persons who exclusively import and/or acquire tobacco products other than cigarettes:
Tobacco Products Only Distributor – is a person who brings, or causes to be brought a tobacco product into the state from outside the state for sale, makes, manufactures, or fabricates a tobacco product in the state for sale in the state, or ships, or transports a tobacco product to a retailer in the state for sale by the retailer. If you import cigarettes as well as tobacco products, you only need to apply for the appropriate cigarette license. The license fee is $50.00 and renewable yearly.
- Do I need more than one license?
If you import to and sell cigarettes from more than one location, you are required to have a license for each location. If you sell cigarettes from vending machines, you are only required to obtain one license even if you have multiple machines in multiple locations. If you are engaged in more than one of the activities defined in the question above, you must obtain a license for each activity. For example, if you manufacture cigarettes in-state and also bring cigarettes into the state for resale, you would be required to obtain a manufacturer’s license as well as a distributor’s license before engaging in either activity.
- How do I obtain a license?
You may obtain a license by completing the State of Alaska, Department of Revenue Form 04-520, Cigarette and Tobacco Products Tax License Application and mailing it to Alaska Department of Revenue, Tax Division, 550 West 7th Avenue, Suite 500, Anchorage, Alaska 99501. Forms can be found at the following link:
Forms can also be requested by mail from the address above or obtained at Division offices located in Anchorage at 550 West 7th Avenue, Suite 500 or in Juneau at the State Office Building at 333 Willoughby Street, 11th Floor.
- When do I renew my license?
Licenses are good for one year. A year is defined as the period July 1 through June 30. If you obtain a license in May, it will expire on June 30 of the same year and you will be required to renew your license and pay the appropriate fee on July 1.
- What is the difference between a tobacco endorsement on a business license and a tobacco license issued by the Department of Revenue?
A tobacco endorsement is part of the business license issued by the Department of Commerce, Community and Economic Development. The endorsement is found on the face of the business license. For more specifics, please see the statute below:
Sec. 43.70.075. License endorsement.
(a) Unless a person has a business license endorsement issued under this section for each location or outlet in a location where the person offers tobacco products for sale, a person may not sell or allow a vending machine to sell in its location or outlet cigarettes, cigars, tobacco, or other products containing tobacco as a retailer at that location or outlet. Each endorsement required under this section is in addition to any other license or endorsement required by law. A person may not apply for an endorsement under this section for a location or outlet if an endorsement issued for the same location or outlet is currently suspended or revoked. An endorsement issued for a location or outlet to a person in violation of this subsection is void.
For questions concerning tobacco endorsements, please contact the Division of Corporations, Business and Professional Licensing at (907)465-2550.
A tobacco license is issued by the Department of Revenue, Tax Division. The tobacco license is a separate license from a business license. See above for more specifics about tobacco licenses.
- What is the difference between cigarettes and other tobacco products?
A cigarette is defined as a roll for smoking of any size or shape, made wholly or partly of tobacco whether the tobacco is flavored, adulterated, or mixed with another ingredient, if the wrapper or cover of the roll is made of paper or a material other than tobacco.
Other tobacco products include cigars, also known as cheroots or stogies, perique, snuff and snuff flour, smoking tobacco, including granulated, plug-cut, crimp-cut, ready-rubbed and any form of tobacco suitable for smoking in a pipe or cigarette, chewing tobacco, including cavendish, twist, plug, scrap, and tobacco suitable for chewing, or articles or products made of tobacco or a tobacco substitute, but not including cigarettes as defined above.
- Do I need to have a license if I order cigarettes and/or other tobacco products through the mail, over the Internet or buy them in another state and bring them into Alaska?
Yes. Generally it is illegal to ship or receive cigarettes thought the mail unless the person shipping the cigarettes holds a current cigarette license issued by the Department of Revenue and the person receiving the cigarettes holds a current tobacco endorsement issued by the Alaska Department of Community and Economic Development or the person receiving the cigarettes provides the shipping company an affidavit stating they are 19 years of age or older and are receiving the cigarettes for personal consumption.
Individuals may personally carry into the state of Alaska up to 2 cartons (400 cigarettes) of unstamped cigarettes each month for their own consumption. This exemption, however, does not apply to cigarettes received through the mail.
- What if I fail to obtain a cigarette license and I bring cigarettes into the state through the mail or on my person for my own consumption?
Failure to obtain a required cigarette license and pay the appropriate tax can and will subject an individual to substantial penalties. Penalties can include both fines and jail time. Be aware that federal law requires mail order businesses that sell to consumers in states with a cigarette tax to report those sales to state revenue authorities. Therefore, DOR does have the means to track mail order cigarette sales into the state.
- What are the penalties for failure to obtain a cigarette or tobacco products license?
Penalties for failure to obtain a license include a civil penalty of 100% of the tax liability plus the tax, if not paid, and a criminal misdemeanor of not more than $2,000, or imprisonment for not more than six months, or both. These penalties only apply to the failure to obtain a license. If you also fail to file a return and remit the appropriate cigarette and/or tobacco products tax, the penalties under the next question will apply.
- What are the penalties if I fail to file a cigarette and/or tobacco products tax return and remit the tax?
A person who willfully attempts to evade the tax or willfully fails to collect, account for and pay over the tax, is guilty of a class C felony. In addition, a person who willfully fails to pay the tax, file a return, keep records or supply information required by law is guilty of a class A misdemeanor. If a return is filed which contains information which the person does not believe to be true and correct as to every material matter, that person is guilty of a felony, punishable by a fine of not more than $25,000, or by imprisonment for not more than three years, or both. These penalties only apply to the failure to file a return and pay the tax. If you also fail to obtain a license, the penalties under the previous question will apply.
- Who must file a return?
Any person who is required to obtain a license is required to file a return.
- When is the return due?
A person holding a manufacturer’s, distributor’s, direct-buying retailer’s, vending machine operator’s, or buyer’s license must file a return on the last day of the month following the month in which cigarettes were manufactured, imported or acquired by the license. For example, if you purchase cigarettes from an out-of-state vendor and bring them into the state in the month of June, you must file a return reporting the acquisition of those cigarettes and pay the applicable tax by July 31. A person holding a wholesaler-distributor’s license or selling tobacco products other than cigarettes must file a return on the last day of the month following the month in which the cigarettes or other tobacco products were sold.
- Where do I file the return?
The State of Alaska Cigarette and Tobacco Products Monthly Tax Return, Form 04-522, must be filed with the Alaska Department of Revenue, Tax Division, PO Box 110420, Juneau, Alaska 99811-0420. Forms are available online at the following link:
Forms may also be requested by mail or obtained at Division offices located in Anchorage at 550 West 7th Avenue, Suite 500 or in Juneau at the State Office Building at 333 Willoughby Street, 11th Floor.
- Are there any exemptions from the cigarette and tobacco products tax?
Yes, there are two exemptions:
Sales to Military – Cigarettes imported or acquired by a military exchange, commissary or ship store are exempt from tax if the cigarettes are sold to and for the sole use of authorized personnel. Cigarettes imported or acquired by a military exchange, commissary of ship store and sold to or for the use of unauthorized personnel are not exempt from the tax. Cigarettes imported or acquired by independent contractors and sold to consumers within military installations are not exempt from tax. For example, if a member of the Armed Forces presents a valid military I.D. card to purchase cigarettes or tobacco products from a nonmilitary vendor, sales to that member are not exempt from tax. Only sales made directly to the military exchange, commissary or ship store are exempt from tax.
Sales to Indians – Cigarettes and tobacco products imported or acquired by an Indian operating a cigarette business within an Indian reservation, or which he/she is a member, are exempt from tax if the cigarettes are sold to and for the sole use of members of the reservation. Cigarettes imported or acquired by an Indian operating a cigarette business within an Indian reservation are not exempt from the tax if sold to anyone who is not a member of the reservation. Alaska regulations currently define an Indian reservation as:
All land set aside by the United States for the exclusive use and occupancy of Indian tribes which are recognized as Indian reservations under federal law and, as of February 2, 1983, includes only the Annette Islands Reserve set aside by the United States for the exclusive use and occupancy of the Metlakatla Indian Community.
Pending decision by the U.S. Supreme Court, Indian sales on trust lands held by the Klawock Indian Community, set aside for the exclusive use and occupancy of an Indian tribe, are also exempt from taxation.
- What are my filing requirements if I am an out-of-state manufacturer, wholesaler, or distributor of cigarettes and I make sales to customers in Alaska?
Under Alaska law, manufacturers, wholesalers, distributors and any person who sells or transfers cigarettes into the state for profit to a customer who is appropriately licensed by the Department of Revenue is not required to obtain a license or file a cigarette excise tax return. It is the first recipient in the state who has licensing and filing requirements. However, Title 15 of the U.S. Code, the Jenkins Act, requires that any person who sells or transfers cigarettes for profit into Alaska, to other than a distributor licensed by DOR, must file a memorandum with DOR showing each and every shipment of cigarettes made into Alaska during the previous calendar month. The memorandum, which is due no later than the 10th day of each month, must include the name and address of the person to whom the shipment was made and the brand and quantity of cigarettes.