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Cigarette Tax / Cigar and Tobacco Products Tax
Frequently Asked Questions
August 2009




General Questions and Answers

Do I need a permit to sell cigarettes or cigars/tobacco products at my business location?
Yes, a retailer permit is required for each place of business at which sales of cigarettes or cigars and tobacco products are made. You also need a sales and use tax permit.

A retailer permit is issued for a period beginning on the first day of June of each even-numbered year or the actual first business date. The permit expires on the last day of May of each even-numbered year. The permit fee is $180, but this fee is prorated based on the actual first business date of the location subject to permitting. Permitted retailers receive a renewal packet prior to the expiration date of their permit(s). A late fee of $50 is imposed for failure to renew a required permit by the renewal due date.

There are no cigarette/tobacco reporting requirements for permitted retailers; however, sales tax must collected and reported on the sale of cigarettes, cigars, and tobacco products.

Must cigarettes, cigars, and/or tobacco products be sold from a commercial location?
Yes. The statute defines a place of business as a commercial business location where cigarettes are sold, or where cigarettes are kept for sale or consumption or otherwise stored, or a vehicle from which cigarettes are sold.
I have a humidor at my place of business. Do I need a permit?
If you own the cigars in the humidor and sell them to the public, you must obtain a retailer permit.
Do retailers who operate cigarette/tobacco products vending machines need a permit?
Yes, a retailer permit is required and you will be issued a decal to affix to each machine registered with the Comptroller of Public Accounts.
I purchased an existing business. Can I use their permit(s)?
No, permits are non-assignable.
How long does it take to get a retailer permit for cigarette/cigar/tobacco products?
If the business location is actively permitted for sales and use taxes, your request will be processed within three days of the receipt of a properly completed application and the required fees.
How can I get an application?
You can visit the forms page of this site, write to us, contact us via Texas Tax Help, visit your local field office, or call us at (800) 862-2260. For a retailer application, request packet number 400. For a non-retailer application, request packet number 450.
What is a distributor?
A cigarette distributor is: a person who is authorized to purchase (and affix cigarette tax stamps to) unstamped cigarette packages from manufacturers for the purpose of making a first sale in Texas; a person who ships, transports, imports into Texas, acquires, or possesses cigarettes and makes a first sale of the cigarettes in Texas; a person who manufactures or produces cigarettes or is an importer or import broker.

A cigar/tobacco products distributor is: a person who receives tobacco products from a manufacturer inside or outside of Texas, for the purpose of making a first sale in this state; a person who manufactures or produces tobacco products or is an importer or import broker.

A distributor permit is required to perform any of these activities. The distributor permit is issued for a period beginning on the first day of March each year (or the actual first business date if that date is after March 1). The permit expires on the last day of February the following year. The fee for a distributor permit is $300 annually, but this fee is prorated based on the first business date the distributor is subject to permitting. Permitted distributors will receive a renewal packet prior to the expiration date of their permit. A late fee of $50 is imposed for failure to renew a required permit by the renewal due date.

Combination permits (to sell both cigarettes and cigars/tobacco products) are available. The cost of a combination permit is the higher of the two applicable permit fees.

Distributors must file monthly reports with the Comptroller of Public Accounts.

To sell directly to the public, a retailer permit is also required.

Can I obtain a list of permitted distributors?
Yes, you may access permitted distributors information on-line that can be copied into an electronic spreadsheet for analysis;

Or, you may submit a written request and mail it to:

Comptroller of Public Accounts
Tax Applications and Tobacco Tax Section
111 East 17th Street
Austin, Texas 78774-0100

Cigars and Tobacco Products Tax Base and Tax Rate Changes Required by House Bill 2154 Effective September 1, 2009
Frequently Asked Questions

What is House Bill 2154?
Passed by the 81st Texas Legislature in May 2009, the bill, in part, changed the way the excise tax due on tobacco products (other than cigars and cigarettes) is calculated. Beginning Sept. 1, 2009, manufacturers and distributors must use the manufacturer's listed net weight for each individual can or package of these products, and the applicable tax rate in effect for the current state fiscal year, to calculate the tax.
What tobacco products are affected?
Tobacco products (other than cigars and cigarettes), including:
  • chewing tobacco, including plug, scrap and any kind of tobacco suitable for chewing and that is not intended to be smoked;
  • snuff or other preparations of finely cut, ground, powdered, pulverized or dissolvable tobacco that is not intended to be smoked;
  • pipe tobacco, including any tobacco which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco to be smoked in a pipe;
  • roll-your-own smoking tobacco, including granulated, plug-cut, crimp-cut, ready rubbed and any form of tobacco, which, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or use as wrappers; and
  • other tobacco products, including an article or product that is made of tobacco or a tobacco substitute and that is not a cigarette.
Which tobacco businesses are affected?
Tobacco business owners who report and pay the tax to the Comptroller's office are primarily affected by the bill. These include:
  • manufacturers outside Texas who distribute promotional or “gratis” tobacco products in Texas;
  • manufacturers in Texas who first sell, distribute or exchange tobacco products in intrastate commerce; and
  • distributors who receive tobacco products for the purpose of making a first sale or distribution in Texas.

Wholesalers, bonded agents, export warehouse operators and retailers must ensure that their records of tobacco products purchased or received includes the manufacturer's listed net weight for each can or package.

When is the bill effective?
Provisions in the bill relating to tobacco products are effective Sept. 1, 2009. Manufacturers and distributors who are required to report and pay the tax must calculate the tax using the new tax base and rates for tobacco products distributed, sold, exchanged or received on or after 12:00:01 a.m. on Sept. 1, 2009.
Is there a floor tax on inventory on Sept. 1, 2009?
No, there is no floor tax on inventory.
Is the manufacturer's listed net weight required on invoices?
Yes, all invoices for tobacco products issued by manufacturers, distributors and wholesalers on or after 12:00:01 a.m. on Sept. 1, 2009, must show the manufacturer's listed net weight for each tobacco product can or package. The bill also requires that distributors, wholesalers, bonded agents, export warehouse operators and retailers must ensure that their records of tobacco products purchased or received show the manufacturer's listed net weight for each tobacco product.
What is the new tax base?
The new tax base is the manufacturer's listed net weight for each individual can or package.
What are the new tax rates and when do they apply?
The tax rate is based on the current state fiscal year. The rate applies to each ounce of net product weight and all fractional parts of an ounce. A tax rate in effect for a state fiscal year does not affect taxes imposed before that fiscal year, and the rate in effect when those taxes were imposed continues in effect for purposes of the liability for and collection of those taxes. Following are the rates by state fiscal year.
Fiscal Year Rate
2010 (Sept. 1, 2009 - Aug. 31, 2010)$1.10 per ounce*
2011 (Sept. 1, 2010 - Aug. 31, 2011)$1.13 per ounce*
2012 (Sept. 1, 2011 - Aug. 31, 2012)$1.16 per ounce*
2013 (Sept. 1, 2012 - Aug. 31, 2013)$1.19 per ounce*
2014 (Sept. 1, 2013 and each fiscal year thereafter)$1.22 per ounce*

*Plus the proportionate rate on all fractional parts of an ounce

Tax Rate Table for State Fiscal Year 2010
The following table is provided as a guide and shows the actual tax rates and proportionate rates for fractional parts of an ounce, up to two ounces, to use from Sept. 1, 2009, through Aug. 31, 2010.

Tax rate per ounce - $1.10

Total ounces in
can or package
Tax for an individual
can or package
1.2 ounces or less$1.32
1.3 ounces$1.43
1.4 ounces$1.54
1.5 ounces$1.65
1.6 ounces$1.76
1.7 ounces$1.87
1.8 ounces$1.98
1.9 ounces$2.09
2.0 ounces$2.20
Is there a table that shows the tax rates for more than two ounces?
Yes. An expanded chart showing tax rates for individual cans or packages weighing up to 15 ounces for state fiscal years 2010 and beyond is available online.
How does the bill affect calculating and reporting the tax?

Calculation of Tax

Individual Can or Package
For an individual can or package weighing less than 1.2 ounces, the amount of tax due is equal to the amount of tax due on an individual can or package weighing 1.2 ounces. For example, in fiscal 2010, the tax due on a can of snuff weighing 1.2 ounces would be $1.32 (see Tax Rate Table for State Fiscal Year 2010 above). The tax due on a can of snuff weighing 1.1 ounces would also be $1.32. Similarly, the tax due on a package of chewing tobacco weighing 1 ounce would be $1.32, just as the tax due on a package of chewing tobacco weighing 0.98 of an ounce would be $1.32.

For an individual can or package weighing more than 1.2 ounces, the tax due is calculated by multiplying the net weight by the tax rate in effect for the current state fiscal year. For example, in fiscal 2010 the tax due on a can of snuff weighing 3.3 ounces would be $3.63. The tax is calculated by multiplying the total number of ounces (3.3) by the tax rate for each ounce ($1.10), for a total tax due of $3.63.

Multiple Cans or Packages
The tax imposed on a unit that contains multiple individual cans or packages is the sum of the taxes imposed on each individual can or package intended for sale or retail distribution.

Example 1: On Sept. 10, 2009, a distributor receives from a manufacturer, for the purpose of making a first sale in Texas, a unit of snuff consisting of 20 individual cans weighing 1.2 ounces each. Individual cans of snuff weighing 1.2 ounces can be purchased by consumers from a tobacco retailer. Because each individual can weighs 1.2 ounces, the effective tax rate is $1.32 for each can. The total tax due for each unit of 20 cans is calculated by multiplying the effective tax rate for each individual can ($1.32) by the total number of individual cans in the unit (20), for a total tax due of $26.40.

Example 2: On Nov. 1, 2009, a distributor receives from a manufacturer, for the purpose of making a first sale in Texas, a unit of snuff consisting of 10 individual cans weighing 1.3 ounces each. Individual cans of snuff weighing 1.3 ounces can be purchased by consumers from a tobacco retailer. Because each individual can weighs more than 1.2 ounces, the effective tax rate is $1.10 per ounce and all fractional parts of an ounce. The tax due for each can is calculated by multiplying the net weight (1.3 ounces) by the effective tax rate ($1.10), for a tax due for each can of $1.43. The total tax due for each unit of 10 individual cans is calculated by multiplying the tax due on each individual can ($1.43) by the total number of individual cans in the unit (10), for a total tax due of $14.30.

Example 3: On March 1, 2010, a distributor receives from a manufacturer, for the purpose of making a first sale in Texas, 24 units of snuff. Each unit consists of four individual tubs weighing 12 ounces each. Individual tubs of snuff weighing 12 ounces can be purchased by consumers from a tobacco retailer. The total number of individual tubs is 96 (24 units x 4 tubs per unit). Because each individual tub weighs more than 1.2 ounces, the effective tax rate is $1.10 per ounce and all fractional parts of an ounce. The tax due for each tub is calculated by multiplying the tax rate for each ounce ($1.10) by the total number of ounces in each tub (12), for a tax due of $13.20. The tax due for each unit is calculated by multiplying the tax for each tub ($13.20) by the number of tubs in each unit (4), for a tax due of $52.80. The total tax due for the 24 units of snuff is calculated by multiplying the tax due on each unit ($52.80) by the total number of individual units (24), for a total tax due of $1,267.20 ($52.80 x 24).

Reporting the Tax

The method used by manufacturers outside Texas to report and pay the tax due on promotional or “gratis” tobacco products in Texas has not changed. The tax on these products must be calculated using the new tax base and current tax rates.

Distributors who report and pay the tax must use the revised Texas Distributor Monthly Report of Cigar and/or Tobacco Products (Form 69-133) (PDF, 160KB) to calculate and report the tax on tobacco products received during the month. A new worksheet, Texas Distributor Monthly Report of Tobacco Products - Class W Worksheet, (Form 69-134), (PDF, 154KB) has been added to the report, and must be completed and is required to be filed along with the report. The worksheet is designed so that distributors can total by product type the total number of individual cans or packages weighing 1.2 ounces or less and the total weight of individual cans or packages weighing more than 1.2 ounces. Once the two totals are determined in Item 6, the total number of individual cans or packages weighing 1.2 ounces or less (Item 6a) is entered on Line 1 of the report under “Enter Totals,” and total weight in ounces for all individual cans or packages weighing more than 1.2 ounces (Item 6b) is entered on Line 1 under “Enter Ounces.”

The following supplement forms used by distributors to provide supporting documentation to the monthly report (along with their instructions) have also been revised to reflect the changes required by HB 2154.

Will a distributor still be able to amend an original report?
Yes. The procedure for amending a previous report filed within the last four years has not changed.
Will previous versions of the monthly report and the supplement forms still be available?
Yes, versions of the report and the supplement forms prior to the changes required by HB 2154 are available on the Window on State Government.

Monthly Reports PRIOR to September 2009

Backup Documentation

What records must be kept by retailers?
A retailer must ensure that the records of tobacco products purchased or received include the manufacturer's listed net weight for each can or package. The records must be kept at a single business location and must be maintained for four years.
How are the monthly reports affected?
Manufacturers, distributors and wholesalers who report to the Comptroller's office the tobacco products they sell, distribute, exchange or use in Texas are required by the HB 2154 to include in those reports the manufacturer's listed net weight for each tobacco product.

Manufacturer Reports
Manufacturers who distribute promotional or “gratis” tobacco products in Texas must show the net weight for each can or package of tobacco products on their monthly reports to the Comptroller's office. September 2009 reports will be due to the Comptroller's office by Oct. 31, 2009, but since that date falls on Saturday, the reports will be due by Nov. 2, 2009.

Distributor Reports
Distributors must provide the net weight as listed by the manufacturer for each can or package of tobacco products in their monthly reports to the Comptroller's office of tobacco products purchased, received or acquired. Reports for September 2009 will be due to the Comptroller's office by Oct. 31, 2009, but since that date falls on Saturday, the reports will be due by Nov. 2, 2009.

Distributor and Wholesaler Reports of Sales to Retailers
Distributors and wholesalers who file online reports of tobacco products sold to retailers using the Retailer Inventory Tracking System must provide in the “Unit of Measure” data field the manufacturer's listed net weight in ounces for tobacco products other than cigars. Reports for sales made in September 2009 must be filed by Oct. 25, 2009.

Are there any recordkeeping changes?
Yes. Records maintained by manufacturers who sell or distribute tobacco products in Texas must show the manufacturer's listed net weight for each can or package of tobacco products that is sold or distributed.

Records maintained by distributors, wholesalers, bonded agents, export warehouse operators and retailers for each purchase or receipt of tobacco products must show the manufacturer's listed net weight for each can or package.

Records maintained by distributors and wholesalers for each sale, distribution, exchange or use of tobacco products must show the manufacturer's listed net weight for each can or package of tobacco products.

What happens to the additional revenue?
The additional revenue collected as a result of the way the tax on tobacco products is calculated under the provisions of HB 2154 will be allocated to the credit of the Physician Education Loan Repayment Program account.

For more information, see the Cigars and Tobacco Products Tax section of our Web site.


Cigarette Tax Increase Effective January 1, 2007
Frequently Asked Questions

When do the increases in the cigarette tax and in the other tobacco products tax take effect?
Both tax increases become effective January 1, 2007.
How much is the cigarette tax increase?
The tax on a pack of 20 cigarettes will go up $1.00, from 41 cents to $1.41. The tax on a pack of 25 cigarettes will go up $1.25, from 51 cents to $1.76.
How much is the tax increase on other tobacco products?
The tax increase for other tobacco products (smoking and chewing tobacco and snuff), but excluding cigars, is 4.787 percent.

The new tax rate of 40 percent (up from 35.213 percent) of the manufacturer's list price - exclusive of any trade discount, special discount, or deal - applies to all smoking and chewing tobacco and snuff a distributor receives on and after January 1, 2007.

What is a floor stock inventory?
A floor stock inventory means the total number of cigarettes a distributor, wholesaler, or retailer owns, controls, or possesses in packages stamped with the old denomination tax stamps on January 1, 2007. The inventory includes cigarettes stored in a warehouse, awaiting return to the manufacturer, or in transit on January 1, 2007.

A cigarette distributor must also pay the additional tax on any unused tax stamps the distributor owns, controls, or possesses on January 1, 2007.

When will I receive a floor stock inventory report form to complete?
The Comptroller's office will mail floor stock inventory report forms during the week of December 11th, 2006.
When is the floor stock inventory report due?
A floor stock inventory report is due January 31, 2007. You must file a report by the due date even if no additional tax is due.
What is the due date for payment of the additional tax on floor stock inventory or unused tax stamps?
The due date for payment of additional tax due on any floor stock inventory or any unused tax stamps is January 31, 2007. Penalty and interest will accrue on any additional tax payments not made by April 2, 2007.
Do I submit only one floor stock inventory report for all my locations, vehicles, and vending machines?
We will mail a separate floor stock inventory report form for each business location, vehicle, and vending machine. You must file a separate report and pay any additional tax for each location, vehicle, and machine that you operate.
Do I get a cigarette tax stamp discount?
Cigarette distributors in good standing with the Comptroller's office will receive their normal stamping discount on the total amount of additional tax due.
If my floor stock inventory exceeds 2000 cigarettes, is tax due only on the excess?
The additional tax is due on each stamped package of cigarettes when a distributor, wholesaler, or retailer has an inventory of 2000 or more cigarettes.
2000 cigarettes = 100 packs of 20 per pack, or 80 packs of 25; or
10 cartons of packs of 20, or 8 cartons of packs of 25

Following are some examples.

Example 1
On January 1, 2007, a cigarette retailer counts 120 packs containing 20 cigarettes per pack stamped with the old denomination tax stamp. That means the retailer has 2,400 cigarettes (120 packs x 20 each). Since the total number of cigarettes is at least 2,000, the retailer owes additional tax of $120 (120 packs x $1 additional tax per pack).

Example 2
On January 1, 2007, a cigarette wholesaler counts 225 packs containing 25 cigarettes per pack stamped with the old denomination tax stamp. That means the wholesaler has 5,625 cigarettes (225 packs x 25 each). Since the total number of cigarettes is at least 2,000, the wholesaler owes additional tax of $281.25 (225 packs x $1.25 additional tax per pack).

Example 3
On January 1, 2007, a cigarette distributor counts 100 cartons, each containing 10 packs of 20 cigarettes per pack stamped with the old denomination tax stamp. That means the distributor has 20,000 cigarettes (100 cartons x 10 packs x 20 cigarettes each). Since the total number of cigarettes is at least 2,000, the distributor owes additional tax of $1,000 (100 cartons x 10 packs per carton x $1 additional tax per pack).

Example 4
On January 1, 2007, a cigarette retailer counts 150 cartons containing 20 cigarettes per pack and 125 cartons containing 25 cigarettes per pack stamped with the old denomination tax stamp. That means the retailer has 55,000 cigarettes (150 cartons x 10 packs per carton x 20 cigarettes per pack = 30,000, plus 125 cartons x 8 packs per carton x 25 cigarettes per pack = 25,000). Since the total number of cigarettes is at least 2,000, the retailer owes additional tax of $2,500 (150 cartons x 10 packs per carton x $1 additional tax per pack, plus 125 cartons x 8 packs per carton x $1.25 additional tax per pack).

Example 5
On January 1, 2007, a cigarette distributor, in addition to counting 2,400 unused tax stamps for 20's, counts 5 cartons of 10 packs of 20 cigarettes, and 2 cartons of 25 cigarettes per pack with the old denomination tax stamp. That means the distributor has 1,400 cigarettes (5 cartons x 10 packs per carton x 20 per pack = 1,000, plus 2 cartons x 8 packs per carton x 25 per pack = 400). Since the total number of cigarettes is less than 2,000, the distributor does not owe additional tax on the cigarettes, but does owe $2,400 additional tax on the unused tax stamps (2,400 tax stamps x $1 additional tax per stamp).

Example 6
On January 1, 2007, a cigarette distributor has no inventory of cigarette packages stamped with the old denomination tax stamp, but has 1,200 unused tax stamps of 20's, and 1,200 unused tax stamps of 25's. The distributor owes additional tax of $2,700 on the unused tax stamps (1,200 stamps for 20's x $1 additional tax per stamp, plus 1,200 stamps for 25's x $1.25 additional tax per stamp).

If my floor stock inventory is less than 2000 cigarettes, is any additional tax due?
No additional tax is due if your inventory has less than 2000 cigarettes, but you are still required to submit a floor stock inventory report by January 31, 2007.
Do I have to conduct a floor stock inventory of any other tobacco products?
No. The excise tax on other tobacco products (smoking and chewing tobacco and snuff) is reported and paid monthly by distributors.

The January 2007 monthly distributor's report due in February 2007 will reflect the new tax rate of 40 percent (0.40) for other tobacco products.

Is there a number I can call if I have other questions or need assistance completing the floor stock inventory report?
You can contact the Comptroller's office toll free at (800) 862-2260. The local number in Austin is (512) 463-3731.
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