New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter I - Franchise and Certain Business Taxes
Subchapter I - Cigarette Tax, Cigarette Marketing Standards And Tobacco Products Tax
Article 1 - Cigarette Tax
Part 71 - Agent's License
Section 71.1 - Licensing of agents
Universal Citation: 20 NY Comp Codes Rules and Regs ยง 71.1
Current through Register Vol. 46, No. 12, March 20, 2024
Tax Law, §§ 471, 472(1), 473, 475, 480(1), (4) and 481(2)
(a) Licensing of agents.
(1)
(i) The Department of Taxation and Finance,
upon application, may license financially responsible cigarette dealers,
importers, exporters, manufacturers and other persons, located within or
outside of the State, as agents to buy and affix stamps to be used for paying
the tax imposed on the possession of cigarettes for sale pursuant to article 20
of the Tax Law. Except as otherwise provided for in this Title, no person may
purchase, possess or affix such stamps evidencing the payment of the cigarette
tax unless such person has been granted and publicly displays, in the person's
place of business, a license as a cigarette agent. Further, unless so licensed
or specifically provided for, no person may possess in this State more than 400
cigarettes in unstamped or unlawfully stamped packages without establishing to
the satisfaction of the department that such cigarettes are not subject to tax.
An agent shall, at all times, have the right to appoint any person in such
agent's lawful employ to affix stamps to any packages of cigarettes under the
agent's control.
(ii) The license
granted to a cigarette agent by the department is personal to the person to
whom it is granted and such license is not assignable. Except as provided in
section
71.8
of this Part, a license as a cigarette agent shall continue in effect until
cancelled or suspended by the department or until surrendered by the licensee.
The relationship which exists between the department and a licensed cigarette
agent must, at all times, be one of good faith and cooperation. As a licensee
of the State, an agent is responsible for the honest and expeditious payment
and collection of the cigarette tax (see Part 74 of this Title).
(2)
(i) The department may license as a cigarette
agent, a dealer in cigarettes, either at the wholesale or retail level, to
purchase cigarette tax stamps and to affix such stamps on packages of
cigarettes to be sold by the dealer in New York State. Such dealer must
maintain a separate warehousing facility for the purpose of receiving and
distributing cigarettes and conducting its business, and must receive
commitments from at least two cigarette manufacturers whose aggregate market
share of the New York State cigarette market is at least 40 percent.
(a) A separate warehousing
facility for the purpose of receiving and distributing cigarettes and
conducting business shall mean a warehouse, storehouse or other commercial
building, or a group of such buildings, wherein cigarettes are received, stored
and distributed and the dealer's day-to-day business activities are conducted.
Such a warehousing facility must be separate and distinct from any other
person's facilities. A warehousing facility shall not include a mere enclosure
within a larger facility, nor a means of transportation (i.e.,
a truck or van).
(b) In addition to
maintaining such a separate warehousing facility, an applicant dealer must
receive and forward to the department as proof thereof, written commitments
from two or more cigarette manufacturers, who collectively share at least 40
percent of the New York State cigarette market, to the effect that such
manufacturers agree or pledge to sell cigarettes directly to the
dealer.
(ii) In limited
circumstances, the department may also license as a cigarette agent, a dealer
in cigarettes for the sole purpose of processing packages of cigarettes in this
State which bear tax stamps of states other than New York and which cigarettes
will be sold exclusively in such other states. As the lawful possession of
unstamped packages of cigarettes in this State is merely an adjunct to the
purpose for which an agent is licensed, that being to purchase and affix New
York State tax stamps, an agent licensed pursuant to this subparagraph shall be
considered a retail dealer or a wholesale dealer, as the case may be, for all
other purposes.
(3) The
department may license as a cigarette agent, an importer of cigarettes, an
exporter of cigarettes, a manufacturer of cigarettes or any other person, who
is not a dealer as defined by section
70.2(h)
of this Title. Accordingly, such importer, exporter, manufacturer or other
person so licensed may make no sales of cigarettes in New York State. Where
sales of cigarettes are made within the State by the importer, exporter,
manufacturer or other person, the importer, exporter, manufacturer or person is
a dealer in cigarettes and as such is subject to the provisions of paragraph
(2) of this subdivision.
(4) The
department may license as a cigarette agent, the State or city, whenever the
State or city obtains cigarettes for distribution on a nonprofit basis. The
State or city shall not be subject to the bonding requirements of this
Part.
(5) Nothing in this
subdivision, nor Title, shall be construed to permit or require licensing in
any circumstance in which the State is without power to do so by reason of the
United States Constitution or any laws enacted pursuant thereto. Furthermore,
in isolated circumstances, in which the State has the power to permit or
require licensing, the department may allow a person to act in the capacity of
an agent without obtaining an agent's license for an exclusive purpose which is
not in the usual course of such person's business. A person who wishes to act
in such capacity must receive the advanced written approval of the department
or must act under order or direction of a court.
(b)
(1)
Before a person may be licensed as a cigarette agent, such person must submit
to the Department of Taxation and Finance:
(i)
a complete application for license as a cigarette agent;
(ii) a nonrefundable $1,500 fee for filing
such application in the form of a bank check, certified check (or other
guaranteed draft acceptable to the department) or money order, made payable to
the Department of Taxation and Finance, unless such fee has been paid during
the preceding 12 months, in which case, the fee for a new license shall be
$1,000;
(iii) as proof of financial
responsibility, current financial statements certified as to reliability by a
licensed public accountant or a certified public accountant pursuant to an
audit conducted by such accountant;
(iv) a detailed description of such
applicant's business activities; and
(v) in the case of a dealer in cigarettes who
wishes to purchase and affix stamps:
(a)
letters, or other forms of written evidence, from at least two manufacturers
whose aggregate share of the New York State cigarette market is at least 40
percent, indicating the approximate market share of each manufacturer and that
each manufacturer will sell cigarettes directly to the applicant;
(b) an indication of the extent of total
cigarette purchases which will be made from each qualifying manufacturer;
and
(c) a description of the
applicant's warehousing facility as described in subdivision (a) of this
section.
(2)
The department will review the information submitted by the applicant and may
for cause refuse to license such applicant in accordance with section
71.5 of this
Part. Upon approval of an application for a license as a cigarette agent, the
department will issue, for prominent public display, an individual certificate
of license for each of an agent's places of business at which the agent will be
authorized to possess unstamped packages of cigarettes and to affix and cancel
cigarette tax stamps. Each certificate shall bear the address of the
appropriate place of business and a common agent identification number. Each
certificate shall also indicate whether or not the licensee qualifies as an
agent for purposes of the cigarette marketing standards contained in article
20-A of the Tax Law. Failure to display such certificate(s) will constitute a
violation of article 20 of the Tax Law.
(c)
(1) The
Department of Taxation and Finance, in order to protect the State's cigarette
tax revenue and to insure compliance with the cigarette marketing standards
contained in article 20-A of the Tax Law, may periodically review the status of
a licensed agent and may, at any time, require any such person to submit to the
department:
(i) any records maintained in the
normal course of business, including but not limited to, any records required
to be maintained by the department; and
(ii) current financial statements certified
by a licensed public accountant or a certified public accountant pursuant to an
audit conducted by such accountant.
(2) Not more often than once every three
years, the department (in order to properly administer the cigarette tax
imposed by article 20 of the Tax Law or the Cigarette Marketing Standards Act
contained in article 20-A of such law) may require every licensed cigarette
agent to file a new application for a license, again comply with, or prove its
compliance with, all of the requirements of the Tax law and this Title in
relation to cigarette agent's licenses and to surrender its existing license
(see section
71.8
of this Part).
(d)
(1)
Current financial
statements as used in this section means certified financial
statements for a 12-month period of time (or fraction thereof in the case of a
new business) ended not more than 18 months prior to the date such statements
are submitted to the department. Where such certified financial statements are
for a period ended more than six months prior to the date of submission, in
addition to such certified financial statements, interim financial statements
(on a monthly, quarterly or yearly basis) must be submitted to the department
for a period of time ending within such six-month period. All financial
statements submitted to the department must reflect the individual activities
of the applicant or of the agent, as the case may be. Where a certification is
applicable to a consolidated group of entities, the financial spreadsheets upon
which the certification was based, together with an analysis of all
intercompany accounts, must also be provided. The department may require an
unqualified opinion in support of such statements where it deems such an
opinion necessary.
(2) If an
applicant or an agent fails to supply current financial statements which have
been independently certified by a licensed public accountant or by a certified
public accountant and/or fails to supply an unqualified opinion where necessary
in support of such statements, as required by this section, the applicant will
not be licensed or such agent's license will be cancelled. However, on
petition, either through the hearing process or on the motion of the
department, the requirements for a certification by a licensed public
accountant or by a certified public accountant and for an unqualified
supporting opinion may be waived. If such requirements are waived, the
department may instead require alternative certification.
(e)
(1) A
license as an agent granted pursuant to article 20 of the Tax Law and this Part
does not necessarily qualify a person as an agent for purposes of the cigarette
marketing standards contained in article 20-A of the Tax Law (see article 2 of
this Subchapter).
(2) Where an
applicant for a license as a cigarette agent or where an agent is also a
wholesale dealer of cigarettes, such applicant or agent must also obtain a
license as a wholesale dealer pursuant to Part 72 of this Title. Both the
application for a license as a cigarette agent and the application for a
license as a wholesale dealer of cigarettes are subject to individual
application filing fees.
(3) Where
an applicant for a license as a cigarette agent or where an agent is also a
retail dealer of cigarettes or a cigarette vending machine owner/operator, such
applicant or agent must also comply with the registration provisions of Part 73
of this Title.
(4) Except as
provided in this Title, where an applicant or agent is also a distributor,
wholesale dealer or retail dealer of tobacco products, other than cigarettes,
or an owner/operator of a vending machine through which such tobacco products
are sold, a separate appointment, license and/or registration, as the case may
be, must be obtained (see article 3 of this Subchapter).
(5) Licensing as a cigarette agent by the New
York State Department of Taxation and Finance shall not authorize a person to
purchase and affix tax stamps of the City of New York nor joint stamps which
evidence the payment of both the State and city taxes. Persons wishing to
purchase and affix such stamps must be authorized agents pursuant to chapter 13
of title 11 of the Administrative Code of the City of New York.
(f)
(1) An agent must immediately inform the
Department of Taxation and Finance, in writing, of any change to the
information shown on the application for a license as a cigarette agent or as
last reported to the department, including but not limited to, any change of
name or any change in such agent's officers, directors or partners or such
persons' addresses. However, any change of location of the agent, including any
additions or deletions of individual places of business, must be reported to
the department, in writing, prior to such change.
(2) When shares of stock in a corporation
which is an agent are acquired by any person, such that:
(i) an agent which had four or fewer
shareholders owning, directly or indirectly, the voting stock of such agent
upon such acquisition has more than four shareholders so owning such stock;
or
(ii) a person not previously
owning, directly or indirectly, more than 10 percent of the number of shares of
voting stock of the agent upon such acquisition owns, directly or indirectly,
more than 10 percent of such stock, the agent must immediately file a
notification of such acquisition with the department.
(g)
(1) A license as a cigarette tax agent is not
assignable. That is, such license shall not be transferred to any person. In
addition to any other meaning, a license shall be deemed assigned, if any
change in partnership interest has occurred or if shares of stock of a
corporate agent are acquired by any person such that the person owns, directly
or indirectly, more than 10 percent (25 percent or more in the case of an agent
which has four or fewer shareholders) of the number of shares of voting stock
of such agent. Except as provided herein, an assignment of a license is invalid
and shall immediately result in the cancellation of such license.
(2) The assignment of a license as a
cigarette tax agent occasioned by way of bequest or inheritance from a decedent
directly to:
(i) an ancestor of the
decedent;
(ii) the spouse of the
decedent;
(iii) a lineal descendant
of the decedent, of the decedent's spouse, or of a parent of the decedent;
or
(iv) the spouse of any lineal
descendant described in subparagraph (iii) of this paragraph, will not, of
itself, be considered a transfer of license which will operate as grounds to
immediately cancel such license provided the Department of Taxation and Finance
is promptly notified. However, such assignment by bequest or inheritance shall
cause cancellation of the license 90 days after the death of the
decedent.
(h) The Department of Taxation and Finance may license a fiscal agent or agent bank for the purpose of selling cigarette stamps if the department deems such licensing necessary for the proper administration of article 20 of the Tax Law.
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