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For several years, I have been heavily involved with wholesale tobacco tax throughout the country. On April 6, 2016, the 1stDCA spoke loud and clear by determining that a blunt wrap or cigar wrap (a “Wrap”) product is not subject to Florida tax. This is a giant step towards putting an end towards at least 1 important issue that has plagued the industry for years.

Under Florida law, in order for Florida wholesale tax to apply to the wrap product, the wrap must be a “tobacco product” under Florida law. A tobacco product for tax purposes is defined as:

[L]oose tobacco suitable for smoking; snuff; snuff flour; cavendish; plug and twist tobacco; fine cuts and other chewing tobaccos; shorts; refuse scraps; clippings, cuttings, and sweepings of tobacco, and other kinds and forms of tobacco prepared in such manner as to be suitable for chewing; but “tobacco products” does not include cigarettes, as defined by s. 210.01(1), or cigars.

We argued that a rolling paper is not “loose tobacco,” but rather is a bound cohesive sheet of tobacco. Shocking Florida’s taxing agency, the Division of Alcoholic Beverages and Tobacco (DABT), disagreed and took the position that any item made from tobacco was subject to Florida’s steep 85% tax.

In 2014, we litigated a case called Brandy’s Products in Florida. In the Brandy’s case, a Florida distributor was assessed about $70,000 based on its blunt wraps purchases that were sold in Florida. Ultimately, The “trial” or final hearing took place in administrative court (Division of Administrative Hearings or DOAH) in January 2015.

The administrative law judge, Judge Van Laningham, had to decide whether the Wraps was “loose tobacco.” The judge said it was not loose tobacco. Instead, the judge viewed the blunt wraps as “a distinct, cohesive, uniform product . . . cut to a predetermined shape.” Being that the Wraps were not loose tobacco , the blunt wraps would not be considered taxable. Following the judge’s order, the Department, DABT, ignored the judge’s recommendation and issued a Final Order against the taxpayer.

Brandys was forced to appeal and an oral argument was heard by Florida’s First District Court of Appeal on March 8, 2016.

On April 6, 2016, the sound and straightforward opinion delivered by judge Kent Wetherall, the First DCA spoke loud and clear. It is also somewhat surprising the issue was decided within 30 days of the appellate argument. The DCA agreed with the administrative law judge (ALJ) in that the wrap was examined at hearing and is a “distinct cohesive uniform product . . . cut to a predetermined shape” and not taxable.

With an 85% tax rate in Florida, many companies had large assessments or large refunds at stake. It will be interesting to see how other states follow Floridas lead on this issue. In particular, there may be significant refund opportunities for distributors in other states such as Alaska, California, Connecticut, Delaware, Georgia, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, North Dakota, Nebraska, New Hampshire, Virginia, and Wisconsin. Ohio, Oregon. If you sell significant wraps in those states, please call us for a free consultation.

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  For more information please call us at 888-966-8216.

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