The Virginia Department of Taxation has issued guidelines on the new cigarette resale exemption certificate. As of January 1, 2018, retailers and other dealers must use a new exemption certificate form when buying cigarettes bearing Virginia revenue stamps for resale.
The certificate will be titled Form ST-10C. Form ST-10 will no longer be valid for purchases of stamped cigarettes. The department will issue Form ST-10C to dealers purchasing cigarettes for resale in Virginia. The new certificate will not be valid for the purchase of cigarettes that will be taken out of Virginia. Generally, dealers must:
- apply for a certificate; and
- pass a background investigation.
However, dealers may get new certificates in one of three ways. The fast-track process and the expedited process do not require paying fees.
Fast-track expedited process
First, dealers will automatically receive a cigarette resale exemption certificate from the department if they qualify for the fast-track process. Such dealers include those who:
- are current customers of a licensed stamping agent;
- pay for all cigarettes on a basis other than cash; and
- have all cigarettes delivered to the dealer’s place of business by or on behalf of the stamping agent.
In short, qualifying dealers will not be required to apply for the certificate.
The department will issue certificates to dealers that it can identify as meeting the requirements. If a dealer does not receive a Form ST-10C certificate by October 1, 2017, the dealer should apply for one.
Second, a dealer qualifies for the expedited process to receive a cigarette resale exemption certificate if it has:
- an active license, in good standing, issued by the Department of Alcoholic Beverage Control;
- an active tobacco products tax distributor’s license, in good standing; or
- an active retail sales and use tax registration for a fixed place of business in Virginia, issued by the department and in good standing with the department for five years or more.
A dealer qualifying for the expedited process must apply for a certificate on the department’s website. However, the dealer will not be required to pay an application fee or be subject to a background check or waiting period.
Applications will be available on October 1, 2017. Applicants who apply before December 1, 2017, will be issued or denied a certificate before January 1, 2018.
Full application process
Finally, a dealer that does not qualify for either the fast-track process or the expedited process may apply for the cigarette resale exemption certificate on the department’s website as of October 1, 2017. In addition, the dealer must submit a nonrefundable $50 fee with its application. The department will issue a certificate no sooner than 30 days after the date that the application was submitted. An applicant who applies for a certificate before December 1, 2017, will be issued or denied the cigarette exemption certificate before January 1, 2018.
In general, a dealer who purchases cigarettes for resale in Virginia must submit an application. Applicants will be subject to background checks.
Sales Tax Registration
In addition, applicants must be registered as retail sales and use tax dealers or wholesale dealers and be in good standing with the department. However, the department will not deny a cigarette resale exemption certificate solely because:
- the applicant is 30 days or less delinquent in filing a retail sales and use tax return or remitting the tax; or
- has entered into an installment agreement.
Locations in Virginia
The applicant must have a physical place of business in Virginia. The department will:
- inspect each location listed in the application; and
- verify that any location that purchases cigarettes for resale meets various requirements.
All physical places of business in Virginia that sell cigarettes for the dealer must be listed on the application. The dealer:
- will be issued a certificate for each qualifying location; and
- is authorized to purchase cigarettes and resell them only at the location listed on each certificate.
Additionally, the applicant must possess a local business license for each locality in which the applicant has a physical place of business, if one is required by the locality. Further, the applicant must have a copy of its:
- corporate charter and articles of incorporation, in the case of a corporation,
- partnership agreement, in the case of a partnership, or
- organizational registration from the Virginia State Corporation Commission, in the case of a limited liability company.
Moving a physical place of business
The information relating to the physical places of business contained in the application may change. If so, the dealer must file an amendment to the application at least 30 days before such change. The department will inspect the new physical place of business. If such place of business meets all of the requirements,the department issue a new certificate bearing the updated address.
A dealer will not be required to pay a fee for the issuance of the new certificate. The old certificate becomes invalid on the issuance of the new certificate, or 30 days after notice of the move is given to the department, whichever occurs first.
Renewal of cigarette exemption certificate
The cigarette resale exemption certificate will be valid for five years from the date of issuance. At the end of the five-year period, the exemption certificate issued to a dealer who qualifies for the fast-track or expedited process will be automatically renewed.
Currently, a person may not possess more than 25 cartons of stamped cigarettes with the intent to distribute unless such person is an “authorized holder.” Under the new law, a person must possess a valid cigarette resale exemption certificate in order to be an authorized holder. This rule applies to retail dealers and wholesale dealers, and their affiliates.
Penalties for using forged or invalid certificate
Notably, a person who uuses a forged or invalid cigarette resale exemption certificate to purchase cigarettes is subject to civil penalties of:
- $2.50 per pack, but not less than $5,000, for a first offense;
- $5 per pack, but not less than $10,000, for a second offense committed within a 36-month period; and
- $10 per pack, but not less than $50,000, for a third or subsequent offense committed within a 36-month period.
In addition, a person who purchases 5,000 or fewer cigarettes using a forged or invalid certificate is guilty of:
- a Class 1 misdemeanor for a first offense; and
- a Class 6 felony for a second or subsequent offense.
Finally, a person purchasing more than 5,000 cigarettes is guilty of:
- a Class 6 felony for a first offense; and
- a Class 5 felony for a second or subsequent offense.
Ruling of Commissioner, P.D. 17-155, Virginia Department of Taxation, August 21, 2017 , ¶206-380