PACT Taxes

[GoVegan]

rickcharles - can you confirm that Northerner will be able to do sales in California? It is a huge market but from what I understand, the permit to sell tobacco here is quite costly. Also, many of the state tax guidelines use the wholesale price as a base. Am I safe to assume that the average mark up on snus is about 100% and that most snus averages $1.00 or $2.00 a can at the wholesale level? Also, there is a post on this forum indicating that UPS is charging a $50.00 customs fee for international shipments in addition to their base price. Have you heard anything about this?

[rickcharles606]

Yep, we'll be good to go in California. You are right it is costly to get licensed in California, and the state and local tax structure is ridiculously complex. The tobacco tax is 33.02%, then you have to figure in all the district/city/county taxes (they usually aren't much ranging from .10%-1.0%) and the state sales tax of 8.25%. As to UPS adding this customs fee, I'm not too sure and haven't experienced this myself, but I plan on speaking to someone next week about it, to find out the details.

[GoVegan]

Thanks rickcharles - it sounds like Northerner is way ahead of the game. Please let me know when Northerner will be able to distribute snus in California as well. I have several stores lined up that might be interested in carrying snus and their distributors here only offer Camel or Marlboro snus.

[socal70xr7]

it's a brokerage fee. mcoffman got stuck with that one.

[rickcharles606]

Thanks rickcharles - it sounds like Northerner is way ahead of the game. Please let me know when Northerner will be able to distribute snus in California as well. I have several stores lined up that might be interested in carrying snus and their distributors here only offer Camel or Marlboro snus.

If you have contact info for specific stores, shoot me a PM and give it up..lol. I can contact them, many retailers prefer we go through their distributor though. Maybe they will get us in contact with the distributor, etc. Thanks guys/gals...none of this is possible without the support you provide as customers and friends here on the forum.

[Snusdog]

!!!!UPDATE !!!!

Please Read

Guys,

It has been my position all along that overseas merchants will NOT have to collect US state sales taxes. This portion of the law only applies to domestic merchants.

I won’t bother you by repeating my reasons for this take. You can read my basis here (post #44)
http://www.snuson.com/forum/showthre...-s-self!/page3

What I want to add is an update on this debate--- IT IS GOOD NEWS

To get a clarification once and for all on the issue I called a former Congressman and SC Supreme Court Chief Justice who said that my reading of the law was legitimate but that he had not studied it and so could not give me a definitive answer. However, he did tell me to contact the SC Department of Revenue (since they are responsible for collecting SC State Taxes) and they would be able to provide the definitive answer I am looking for.

I called the SC department of Revenue and spoke with the supervisor over the tobacco sales tax division. She told me that:

The SC department of revenue is NOT preparing to receive taxes collected by overseas merchants under the new PACT law. The consumer will be responsible to declare and pay all taxes on overseas transaction………. as before.

I repeat: the SC department of revenue is NOT preparing to receive taxes collected by overseas merchants under the new PACT law.

Between all these calls with the Dept of Rev and the Chief Justice I also placed a call to US senator Herb Kohl who sponsored the Pact Act. I spoke with Marney Colin his chief judiciary aid (who actually worked on the bill) to ask for a definitive interpretation. She returned my call and we had a great conversation. She said she would research the matter and call me back Monday or Tuesday with the answer

Three points:

1. If this is the case (as it is getting more and more certain that it is) then overseas merchants will not have to collect taxes and thus overseas prices will be less than domestic ones. Shipping will remain a factor but it may pan out that big orders are better placed overseas while the can or two orders are best placed with domestic sellers (due to less shipping cost).
2. I hope to get contact info from Marney for someone that can give Northerner, Buysnus, Toque, Nic Rush, and Mr. Snuff a legally definitive reading (short of a court decision) regarding the law upon which they can base their business practices. (Marney who does Frank need to talk with in order to have the legal confidence that he is indeed compliant)
3. This is where you all come in:

I contacted the Department of Revenue in my state (SC) why don't some of you contact the revenue depts in your state and see what they say. Let’s see if the actual tax collectors are unanimous on this point

And be sure to talk to a supervisor and not just to Jenny at the front desk. Also be sure to call the office located in your state capital (verses a local field office) since that is where those in the know will be.

When I called I asked to speak with someone regarding the state sales tax on tobacco (clarify that you are asking about sales tax and not wholesale taxes or you will waist an initial few minutes until they realize that you need to be transferred).

I asked them this: if I order a tin of tobacco on line (for personal consumption) from say a shop in London England will the merchant in England have to collect (South Carolina) state sales tax at the point of the sale and send it to the dept of revenue? In other words, in light of the PACT ACT (s. 1147) are you guys preparing to receive state taxes collected by overseas merchants or will it remain the responsibility of the individual to declare and pay these taxes to the state?

See what they say and report it back to us.

[Fredrik_Northerner]

Snusdog, yes, the state sales tax will not need to be collected on online tobacco sales (overseas or domestic) unless you have a physical business presence in that state. As such, we will only apply sales tax when we sell to customers in PA (since that's where our business is located). However, in the grander scheme of things the sales tax would compose a very small portion of the price of snus.

I wish the same could be said for the state tobacco taxes:-)

[rickcharles606]

Dog...I have contacted ALL state dept of Revenue and here's what the deal is. Most know they cannot enforce US law against a foreign company, and they accept that people will go online and purchase tobacco products outside of their state. The states that have tobacco taxes have passed laws that put the onus on the purchaser/end user to pay the taxes, and the same goes for sales tax. If you purchase something from another state, you are required to pay sales tax. The real issue here is that Northerner has a US warehouse and wants to distribute tobacco products in all these states, and will be shipping product to end users from this warehouse.

I spoke to the SC department of revenue, and the law requires END users to pay the tax, and as a SC distributor/retailer we have to collect all sales and tobacco taxes and prepare them for remittance to the state, before we can ship them. Northerner will collect sales and tobacco taxes on all orders, where taxes are due, we have to if we're ever to have a US brick and mortar presence.

Now what other stores do is their own business, but I want to assure everyone that all federal/state agencies are prepared to find and track stores and purchasers that evade the tax laws. Some of these states are VERY serious about this and are going to great lengths to enforce PACT, some states could care less...wish there were more of them.

EDIT: Sorry all, I screwed this post all up. Sorry for the confusion on nexus

Here's the skinny though. Before Northerner begins selling to brick and mortar in a state, we will only collect the tobacco tax for online purchases. After we begin selling to brick and mortar in a state, we will collect tobacco and sales tax and remit it to the state for our customers.

[Snusdog]

Dog...I have contacted ALL state dept of Revenue and here's what the deal is. Most know they cannot enforce US law against a foreign company, and they accept that people will go online and purchase tobacco products outside of their state. The states that have tobacco taxes have passed laws that put the onus on the purchaser/end user to pay the taxes, and the same goes for sales tax. If you purchase something from another state, you are required to pay sales tax. The real issue here is that Northerner has a US warehouse and wants to distribute tobacco products in all these states, and will be shipping product to end users from this warehouse.

I spoke to the SC department of revenue, and the law requires END users to pay the tax, and as a SC distributor/retailer we have to collect all sales and tobacco taxes and prepare them for remittance to the state, before we can ship them. Northerner will collect sales and tobacco taxes on all orders, where taxes are due, we have to if we're ever to have a US brick and mortar presence.

Now what other stores do is their own business, but I want to assure everyone that all federal/state agencies are prepared to find and track stores and purchasers that evade the tax laws. Some of these states are VERY serious about this and are going to great lengths to enforce PACT, some states could care less...wish there were more of them.

Rick and Frank,

Thank ya'll both for your reply they have both been very helpful.

Rick can I get you to clarify one point so I can be sure I understand exactly what you are saying. In your reply you said

The states that have tobacco taxes have passed laws that put the onus on the purchaser/end user to pay the taxes, and the same goes for sales tax.

This sounds exactly like what I was told by the SC Dept of Rev. I am required to declare and pay all taxes due my state on overseas purchases.

Then you add

as a SC distributor/retailer we have to collect all sales and tobacco taxes and prepare them for remittance to the state, before we can ship them. Northerner will collect sales and tobacco taxes on all orders, where taxes are due

At this point we seem to have changed who is required to collect the taxes for the state. My question is this:

Is this change due to the fact that Northerner is acting as a USA based seller/distributor? In other words, is Northerner's requirement different from that of say the Dunhill Tobacco shop in London that has no US presence?

Thus when I buy snuff from Dunhill I am responsible to declare and pay the taxes directly to my state

When I buy from Northerner they are required to collect those taxes.

[rickcharles606]

Rick and Frank,

Thank ya'll both for your reply they have both been very helpful.

Rick can I get you to clarify one point so I can be sure I understand exactly what you are saying. In your reply you said



This sounds exactly like what I was told by the SC Dept of Rev. I am required to declare and pay all taxes due my state on overseas purchases.

Then you add



At this point we seem to have changed who is required to collect the taxes for the state. My question is this:

Is this change due to the fact that Northerner is acting as a USA based seller/distributor? In other words, is Northerner's requirement different from that of say the Dunhill Tobacco shop in London that has no US presence?

Thus when I buy snuff from Dunhill I am responsible to declare and pay the taxes directly to my state

When I buy from Northerner they are required to collect those taxes.

Dog....it's like Fred said, once we establish a business presence or "nexus" in a state with the US distribution, then we will have to collect the sales tax. Before that happens, it will only be required to collect the tobacco tax and remit to the state. In my earlier post when I said, " Northerner will collect sales and tobacco taxes on all orders, where taxes are due", I failed to add "once we've established nexus in that state".

Once we begin selling at brick and mortar in SC, we will be acting as both distributor and retailer and must collect the taxes accordingly. if you buy snus from a brick and mortar, then the tobacco tax was already paid by the retailer, and he (retailer)will collect only the sales tax from you. If you purchase from the website, then both taxes will need to be collected and remitted to the state, but ONLY after we've begun selling to brick and mortar in your particular state.

Yes, if you buy from Dunhill, you are responsible for paying the taxes to your state. Dunhill is a foreign company, not a SC resident. That being said, these states are going to do everything they can to keep end users honest. Not sure how, but they assure me that they will be doing whatever they can to catch non PACT compliant companies. Again, not sure how, but Northerner will be compliant, lol.

Hope this answered your question.

[Snusdog]

Rick,

First, thank you for your patience in helping me understand this. I really do appreciate it.

I deleted my last post and I want to go at this from another angle. I think you are answering more than I am asking.

For the moment forget Northerner.

Let’s take Tom from Nicotine Rush as an example. Tom has relocated his business and it now resides in England (for the sake of the argument let’s assume this is the case and that Tom’s only business is in England)

In your opinion, based on what you have been told by the various revenue departments, when I buy a tin of snuff from Tom’s shop in England, Tom does NOT have to collect the tobacco tax required by my state. Instead, I am responsible to declare it and pay it to the state myself.

Based on your understanding, is this correct (yes or no)?

[rickcharles606]

Rick,

First, thank you for your patience in helping me understand this. I really do appreciate it.

I deleted my last post and I want to go at this from another angle. I think you are answering more than I am asking.

For the moment forget Northerner.

Let’s take Tom from Nicotine Rush as an example. Tom has relocated his business and it now resides in England (for the sake of the argument let’s assume this is the case and that Tom’s only business is in England)

In your opinion, based on what you have been told by the various revenue departments, when I buy a tin of snuff from Tom’s shop in England, Tom does NOT have to collect the tobacco tax required by my state. Instead, I am responsible to declare it and pay it to the state myself.

Based on your understanding, is this correct (yes or no)?

LOL, "forget Northerner"....I most certainly will not sir, lol. j/k

Based on what I've been told by the 50 different dept's of revenue....they all want their tax money, lol. Some want the seller or the person/entity that imports the product to pay it, and some require the purchaser/end user to pay the taxes. Then there are several states that don't know what the hell to do and haven't even heard of PACT, lol. Dog, I know what you want to hear, you want me to say that these states put the onus on the end user to pay the tax, but that's not always true.

If I'm a retailer overseas, I err on the side of legality, rather than illegality. These questions would be better answered by a tax attorney my friend as you are getting into the area of federal -vs- state law.

[Snusdog]

Rick,

Thank you so much for your candid answer and your patience.

What you have found to a much greater degree is what I have found on a much smaller scale. No one really knows.

To me the issue is not what states want or would like but what the Pact law requires. I have asked one of the people who helped to write this law to give me an official take on it. I hope to hear something back on Monday or Tuesday. But regardless..........

In the end the only definitive answer (in a legal sense) is one that a court will give.

It sounds to me that with so much chaos and so much uncertainty a court case will probably be necessary and likely before it is all said and done.

My guess is that it will be brought by the Seneca Nation. It might be worth different sellers contacting their legal council and at least letting them know the shared concern and desire to see this law die fast and hard. Who knows they might see your concern as furthering their complaint and thus might let you ride in on their coat tails

Regardless, your insights have been a huge help and have provided insight into the hazy landscape.

[bover907]

Pennsylvania No Tax

Question as I am a PA resident. So, if I'm correct, I'll just have to pay PA's 6% state sales tax on my snus orders from Northerner, plus the increased shipping cost of Fed/Ex or UPS over USPS?

[LaZeR]

Question as I am a PA resident. So, if I'm correct, I'll just have to pay PA's 6% state sales tax on my snus orders from Northerner, plus the increased shipping cost of Fed/Ex or UPS over USPS?

Correct. Unless/If/When our asshole state politicians get their way.

http://www.post-gazette.com/pg/10161/1064548-454.stm