Prepaid sales tax on cigarettes
Cigarette tax agents must prepay the sales tax on cigarettes possessed for sale or use in New York. The prepaid sales tax the agent pays must be passed through to each successive purchaser until the cigarettes are sold at retail to a customer. When cigarettes are sold at retail, the seller collects the combined rate of state and local sales tax from the customer. The seller then takes a credit for any prepaid tax that it previously paid when filing its sales tax return.
The prepaid sales tax rate on cigarettes increased for the period September 1, 2023, through August 31, 2024.
| Pack size | Rate increase | New prepaid sales tax rate |
|---|---|---|
| 20 cigarettes | $0.05 | $1.02 |
| 25 cigarettes | $0.07 | $1.28 |
Information
What rate do I pass through?
Cigarette agents or other wholesalers of cigarettes must charge their customers the exact amount of tax they already prepaid on the cigarettes being sold. If the agents or wholesalers paid tax at the prepaid rate applicable before September 1, 2023, they must pass through the tax at that rate. If the agents or wholesalers paid the new prepaid rate, they must pass through the tax at the new rate.
Calculation
Every year, the Tax Department adjusts the base retail price of cigarettes by a factor based on the manufacturers’ list prices for standard brand cigarettes sold by the carton.
The prepaid tax equals the base retail price of cigarettes, multiplied by the 8% prepaid sales tax rate. This is then rounded to the nearest cent for the pack of cigarettes.
The base retail sales price, effective September 1, 2023, is $12.788 for a pack of 20 cigarettes and $3.194 for each additional five cigarettes.
Example: Using the current base retail sales price, the calculation for a pack of 20 cigarettes is $12.788 x 0.08 = $1.02 (1.02304 rounded to the nearest cent).
Note: The base retail price of cigarettes does not replace, and does not have any impact on, the cost of cigarettes or the minimum wholesale or retail sales prices set by the Cigarette Marketing Standards Act (Tax Law Article 20-A).
Recordkeeping
When sellers pass through the prepaid sales tax, they must either provide the purchasers with Form ST-133, Certificate of Prepayment of Sales Tax on Cigarettes, or an invoice that incorporates all the information on this form. The purchasers must keep records of this information for a minimum of three years in order to support all credits claimed on their sales tax return for prepaid tax paid on cigarettes sold to the final customer. Failure to obtain Form ST-133 (or an invoice, as described above) from a supplier will make the purchaser liable for the prepaid tax.
Credit or refund of the prepaid sales tax
A credit or refund of the prepaid sales tax is allowed in any of the following situations:
- A retailer sells cigarettes to a customer and collects the retail sales tax due on the sale.
- A vendor sells cigarettes to an exempt purchaser.
- A wholesale or retail vendor takes cigarettes out of inventory for self-use and pays the required use tax.
- The vendor exports cigarettes for sale or use outside New York State.
- The cigarettes have been destroyed or have become unfit for sale or use.
- The prepaid tax was paid in error.
- The cigarettes are sold to the United States government, its agencies or instrumentalities, or to a voluntary unincorporated organization of the armed forces of the United States operating a post exchange.
A seller may claim a credit for the prepaid sales tax on cigarettes sold at retail when filing their sales and use tax return using Sales Tax Web File. To apply for a refund, the seller must use either Form AU-11, Application for Credit or Refund of Sales or Use Tax, or Form CG-114, Claim for Redemption/Refund of Cigarette Tax Stamps and Prepaid Sales Tax.
Sales on Indian reservations
Except for sales to the Oneida Indian Nation, all packs of cigarettes sold by wholesale dealers (including agents) to Indian nations and tribes and reservation cigarette sellers are required to have New York State or, if applicable, joint New York State & New York City tax stamps affixed to them. The Oneida Indian Nation imposes its own taxes and applies their own tax stamps, so they do not require New York State stamps. The prepaid sales tax must be collected on all packs of cigarettes that will be resold to:
- non Indians, or
- non members of an Indian nation or tribe.
The prepaid sales tax does not need to be collected on packs of cigarettes sold to Indian nations, tribes, or reservation cigarette sellers if:
- Indian tax exemption coupons are provided, or
- prior approval for the sale is received from the Tax Department.
An expedited refund can be issued to the wholesale dealer (including agents) using Form CG-114-E, Expedited Claim for Refund for Indian Tax-Exempt Cigarette Sales. See also View/Report Indian Tax-Exempt Cigarette Sales.
For information on sales made within the boundaries of the Oneida Reservation, see Oneida Nation Settlement Agreement.
Historical rates
| Year | Prepaid rate |
|---|---|
| September 1, 2022 – August 31, 2023 | 20 cigarettes, $0.97 25 cigarettes, $1.21 |
| September 1, 2021 – August 31, 2022 | 20 cigarettes, $0.94 25 cigarettes, $1.17 |
| September 1, 2020 – August 31, 2021 | 20 cigarettes, $0.91 25 cigarettes, $1.13 |
| September 1, 2019 – August 31, 2020 | 20 cigarettes, $0.88 25 cigarettes, $1.10 |
| September 1, 2018 – August 31, 2019 | 20 cigarettes, $0.86 25 cigarettes, $1.08 |
For more historical rates, see Important notices for the applicable year.
Resources
- Tax Law: §§ 1103, 1111(j), and 1121
- Memorandum: TSB-M-14(1)M, (4)S, Federal Court Ratifies Settlement Agreement by the Oneida Nation, the State of New York, the County of Madison and the County of Oneida
For more information on minimum wholesale or retail sales prices, see Publication 508, Minimum Price List for Cigarettes, and Publication 509, Minimum Wholesale and Retail Cigarette Prices.
