In 2016, Florida’s appellate court ruled that blunt wraps are not taxable in Florida.  In Brandy’s, the court determined that a blunt wrap was not a taxable “tobacco product,” because it did not meet the statutory definition as ‘loose tobacco suitable for smoking.”  Specifically, the court said that the blunt wraps was a “distinct cohesive uniform product . . . cut to a predetermined shape” and not taxable.”  Due to Florida’s high 85% tax rate, many companies had large assessments withdrawn and others claimed large refunds on the product. 

Despite the relatively straightforward ruling Brandy’s, the Department continued to assess tax on whole-leaf (100% tobacco wraps). The Department went a step further and issued a memo outlining its newly determined position but did not bother to go through rulemaking.  Grabba-Leaf LLC, a blunt wrap distributor, took exception with the Department’s policy and challenged the memo as an unadopted rule. 

After securing victory in the appellate court on the rule challenge issue, the court determined Grabba Leaf was entitled to recoup its attorney’s fees in the case.  On February 12, 2019, the Department agreed to pay Grabba Leaf attorney’s fees of $150,000 as a result of the litigation.  On March 1, 2019, the Division of Administrative Hearings blessed the party’s agreement and officially entered an order that required the Department to pay Grabba Leaf $150,000 in attorneys fees. 

This case provides another great example as to why it is important for taxpayers to challenge the agencies actions and tax assessments. In addition to challenging the assessment itself, a rule or unadopted rule challenge case serve as a powerful alternative to combat unreasonable state agencies.  Moreover, in Florida, like many states, a successful rule challenge can also result in significant and mandatory attorney’s fees.

If you have any questions about taxes imposed by state agencies including the Division of Alcohol, Beverages, and Tobacco or a state’s Department of Revenue, then please contact our office for a free initial consultation. If any agency threatens you or your business’s professional license or your business license, then please contact a competent tax or administrative law attorney to fight back.

About the Author: Gerald “Jerry” Donnini II is a shareholder of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of state and Federal tax matters, with a heavy emphasis on the tobacco, alcohol, motor fuel and related industries. He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Use Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.

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