Overview
The Department’s Cigarette Tax Voluntary Compliance Program educates consumers about cigarette tax liabilities, waives penalties for those who self-report and remit taxes timely and offers opportunity for deferred payment plans to assist taxpayers in resolving their cigarette tax liabilities.
Taxpayers who do not take advantage of the Cigarette Tax Voluntary Compliance Program to satisfy outstanding cigarette tax obligations will subject themselves to stricter tax enforcement measures, including billing notices, assessments and even liens.
For additional information about the Cigarette Tax Voluntary Compliance Program, see the links below or call 717-214-7287.
- Out-of-state businesses and Internet vendors often falsely advertise that they sell cigarettes “tax free”. However, Pennsylvania requires any person who purchases cigarettes outside the state and brings them into Pennsylvania for use to pay the Department of Revenue the appropriate cigarette excise tax and use tax. This also applies to cigarettes purchased from Native American reservations.
- Businesses that sell cigarettes via interstate commerce are required by federal law (Jenkins Act, 15 U.S.C. 375) to report those sales to the destination state’s tax authority. Based on this act, the Pennsylvania Department of Revenue receives information regarding shipments of untaxed cigarettes into Pennsylvania. This information is used by the Department to help enforce cigarette tax compliance.
- Cigarette stamping agents, wholesalers, retailers and vending machine operators must be licensed. Purchasing cigarettes from licensed establishments in Pennsylvania ensures that the cigarettes are genuine and not counterfeit. Certain types of purchases may indicate that the seller is not properly licensed. For example: premium brand cigarette sold at unusually low prices; cigarettes sold at flea markets, by street vendors or from vehicles; cigarette packs with no cigarette tax stamps, out-of-state tax stamps or cigarette packs marked for “Export Only”.
- If you purchase cigarettes over the Internet, you may not be getting the product you expect. Purchasing cigarettes from licensed establishments in Pennsylvania ensures the cigarettes are genuine and not counterfeit. The Revenue Department routinely inspects the state’s 21,000 licensed establishments. The department also employs enforcement agents to ensure Pennsylvania retailers are only selling products bearing the required Pennsylvania cigarette tax stamps.
- You may have noticed that many cigarette Web sites no longer accept credit card payments. This is because the country’s largest credit card companies have policies prohibiting the use of credit cards for illegal transactions. The credit card companies partnered with the federal government and states across the country to prevent the illegal sale of cigarettes online. Virtually all sales of cigarettes over the Internet are illegal because the sellers violate one or more federal and state laws.
Cigarette and use taxes are owed regardless of what an Internet site or mail order service may claim.
When Pennsylvania cigarette and/or use tax is not paid at the point-of-purchase, consumers are required to report and remit cigarette tax using the REV-793 [PDF], Consumer Cigarette Use/Excise Tax Return.
Cigarette tax is due at the end of the month following the month in which the purchase was made. For example, if you purchase a carton of cigarettes April 30, you must remit cigarette and use taxes by May 31.
The Department of Revenue can establish payment plans for taxpayers unable to pay their total liabilities at once. Penalties may be waived when consumers timely participate in the Department’s Cigarette Tax Voluntary Compliance Program.
Failure to pay cigarette and use taxes actually increases the price of cigarettes for the consumer, because the consumer is then responsible for paying interest and penalty on all late tax payments.
Interest is calculated daily on unpaid tax. Penalty is calculated at 5 percent of the unpaid tax for every month or portion of a month in which the tax is not paid.
Cigarette tax evasion also puts Pennsylvania businesses at a competitive disadvantage to out-of-state businesses.
In the following example, a Pennsylvania consumer may believe he saves more than $260 by purchasing 15 cartons of cigarettes online from an out-of-state business that does not charge cigarette tax or sales tax.
| Out-of-State Internet Cigarette Vendor | Licensed Pennsylvania Cigarette Retailer | |
|---|---|---|
| Sales Price ($25 X 15 cartons) | $500.00 | $500.00 |
| PA cigarette tax ($16 per carton) | $0 | $240 |
| Freight | $20.00 | $0 |
| PA sales tax (6 percent) | $0 | $42.15 |
| Total Cost | $520.00 | $782.15 |
It appears the out-of-state business offers the better deal. However, when Pennsylvania cigarette tax and use tax are added to the purchase made from the out-of-state business, it's clear the Pennsylvania business offered he lower purchase price.
In this example, after the consumer pays PA cigarette and use taxes to the Department of Revenue – plus penalty and interest, assuming that the tax was paid 60 days late – the total cost of the out-of-state purchase becomes nearly $850.
By law, each Pennsylvanian may possess up to one carton of cigarettes not bearing PA cigarette tax stamps.
However, the purchaser is still responsible for paying Pennsylvania cigarette and use taxes on those out-of-state cigarettes.
Depending on the quantity of unstamped cigarettes a person or retailer possesses, he or she could be criminally charged with a summary, misdemeanor or felony offense and sentenced to fines and/or imprisonment.
Consumers reporting and remitting cigarette tax payments must use form REV-793 [PDF], Consumer Cigarette Use/Excise Tax Return. There are three steps in calculating tax payments and total amounts due on cigarette and little cigar purchases.
Step One - Calculate Total Tax Due
Cigarette tax is calculated by multiplying the number of cartons by the current tax rate.
Use tax is due when sales tax is not paid on cigarettes and little cigars brought into Pennsylvania. It is calculated by multiplying the purchase price of the cigarettes by 8 percent for Philadelphia residents, 7 percent for residents of Allegheny County or 6 percent for residents in all other parts of Pennsylvania. The cigarette purchase price is the total of sales price, cigarette tax and shipping charges.
The sum of the cigarette tax and use tax represents the total tax due.
Step Two - Calculate Penalty and Interest
Penalty is calculated by multiplying the total tax due by 5 percent for each month or portion of a month the tax remains unpaid.
Interest is calculated by multiplying the total tax due by the number of days late by the daily interest rate. If the late period covers more than one year, then the number of days late and the daily interest rate must be identified for each year.
Revenue’s online penalty and interest calculator is a helpful tool to help calculate a cigarette tax deficiency, interest, late-filing penalty and balance.
Step Three - Calculate Total Amount Due
Add the total tax due plus penalty and interest to arrive at the total amount due.
The consumer must report and remit the amount due to the Department of Revenue using the REV-793 [PDF], Consumer Cigarette Use/Excise Tax Return. The Revenue Department can establish payment plans for taxpayers unable to pay their total liabilities at once.
Penalties may be waived when consumers timely participate in the Department’s Cigarette Tax Voluntary Compliance Program.