KRS 138.146: Evidence of cigarette tax payments -- Administrative regulation -- When

payment for units of cigarette tax evidence shall be made -- Consequence of

failure to make timely payment.

(1) The cigarette tax shall be due when any licensed wholesaler or unclassified acquirer

takes possession within this state of untax-paid cigarettes.

(2) (a) The cigarette tax shall be paid by the purchase of stamps by a resident

wholesaler within forty -eight (48) hours after the wholesaler receives the

cigarettes.

(b) A stamp shall be affixed to each package of an aggregate denomination not

less than the amount of the cigarette tax on the package.

(c) The affixed stamp shall be prima facie evidence of payment of the cigarette

tax.

(d) Unless stamps have been prev iously affixed, they shall be affixed by each

resident wholesaler prior to the delivery of any cigarettes to a retail location or

any person in this state.

(e) The evidence of cigarette tax payment shall be affixed to each individual

package of cigarettes by a nonresident wholesaler prior to the introduction or

importation of the cigarettes into the territorial limits of this state.

(f) The evidence of cigarette tax payment shall be affixed by an unclassified

acquirer within twenty-four (24) hours after the cigarettes are received by the

unclassified acquirer.

(3) (a) The department shall, by an administrative regulation promulgated in

accordance with KRS Chapter 13A, prescribe the form of cigarette tax

evidence, the method and manner of the sale and distrib ution of cigarette tax

evidence, and the method and manner that tax evidence shall be affixed to the

cigarettes.

(b) All cigarette tax evidence prescribed by the department shall be designed and

furnished in a fashion to permit identification of the person that affixed the

cigarette tax evidence to the particular package of cigarettes, by means of

numerical rolls or other mark on the cigarette tax evidence.

(c) The department shall maintain for at least three (3) years information

identifying the person that affixed the cigarette tax evidence to each package

of cigarettes. This information shall not be kept confidential o r exempt from

disclosure to the public through open records.

(4) (a) Units of cigarette tax evidence shall be sold at their face value, but the

department shall allow as compensation to any licensed wholesaler an amount

of tax evidence equal to a proportio nate rate of one and one -half cents

($0.015) on each twenty (20) cigarettes.

(b) The department shall have the power to withhold compensation as provided in

paragraph (a) of this subsection from any licensed wholesaler for failure to

abide by any provision s of KRS 138.130 to 138.205 or any administrative

regulations promulgated thereunder. Any refund or credit for unused cigarette

tax evidence shall be reduced by the amount allowed as compensation at the

time of purchase.

(5) (a) Payment for units of cigarette tax evidence shall be made at the time the units

are sold, unless the licensed wholesaler:

1. Has filed with the department a bond, issued by a corporation authorized

to do surety business in Kentucky, in an amount:

a. Determined by the department; or

b. i. Not less than the monthly average of payments by the

wholesaler for the units of cigarette tax evidence purchased

in the immediately preceding calendar year, which may be

delayed under paragraph (b) of this subsection; and

ii. No greater than ten million dollars ($10,000,000); and

2. Has registered and agrees to make the payment of tax to the department

electronically.

The licensed wholesaler shall not be allowed to delay any payment for units

of cigarette tax evidence, including tax, penalty, intere st, or collection fees,

which would exceed the amount of bond filed with the department.

(b) Except as provided in paragraph (c) of this subsection, if the licensed

wholesaler qualifies under paragraph (a) of this subsection, the licensed

wholesaler shall have ten (10) days from the date of purchase to remit

payment of cigarette tax, without the assessment of civil penalties under KRS

131.180 or interest under KRS 131.183 during the ten (10) day period.

(c) 1. The ten (10) day payment period under paragraph (b) of this subsection

shall not apply to the payment for units of cigarette tax evidence during

the last ten (10) days of the month of June during each fiscal year.

2. All payments for units of cigarette tax evidence made under paragraph

(b) of this subsection during the month of June shall be made the earlier

of:

a. The ten (10) day period; or

b. June 25.

(d) If the licensed wholesaler does not make the payment of cigarette tax within

the ten (10) day period, or within the period of time under paragraph (c) of

this subsection, the department shall:

1. Revoke the license required under KRS 138.195;

2. Issue a demand for payment in an amount equal to the cigarette tax

evidence purchased, plus all penalties, interest, and collection fees

applicable, up to the amount of the required bond; and

3. Require immediate payment of the bond.

(6) (a) The bond required under subsection (5) of this section shall be on a form and

with a surety approved by the department.

(b) The licensed wholesaler shall be named as the p rincipal obligor and the

department shall be named as the obligee within the bond.

(c) The bond shall be conditioned upon the payment by the licensed wholesaler of

all cigarette tax imposed by the Commonwealth.

(d) The provisions of KRS 131.110 shall not apply to the demand for payment

required under subsection (5)(c)2. of this section.

(7) (a) Tax evidence shall not be affixed or used in any way by any person other than

the person purchasing the tax evidence from the department.

(b) Tax evidence shall not be transferred or negotiated, and shall not, by any

scheme or device, be given, bartere d, sold, traded, or loaned to any other

person.

(c) Unaffixed tax evidence may be returned to the department for credit or refund

for any reason satisfactory to the department.

(8) (a) In the event any retailer takes possession of cigarettes to which evide nce of

Kentucky tax payment is not properly affixed, the retailer shall, within

twenty-four (24) hours, notify the department of the receipt.

(b) The notification to the department shall be in writing, stating the name of the

person from whom the cigarette s were received and the quantity of those

cigarettes.

(c) The written notice may be:

1. Given to any field agent of the department; or

2. Directed to the commissioner of the Department of Revenue, Frankfort,

Kentucky.

(d) If the notice is given by means of the United States mail, it shall be sent by

certified mail.

(e) Any cigarettes to which evidence of Kentucky tax payment is not properly

affixed shall be retained by the retailer, and not sold, for a period of fifteen

(15) days after giving the notice provided in this subsection.

(f) The retailer may, at the retailer's option, pay the tax due on those cigarettes

according to administrative regulations prescribed by the department, and

proceed to sell those cigarettes after the payment.

(9) (a) Cigarettes stamped with the cigarette tax evidence of another state shall at no

time be commingled with cigarettes on which the Kentucky cigarette tax

evidence has been affixed.

(b) Any licensed wholesaler, licensed subjobber, or licensed vending machine

operator may hold cigarettes stamped with the tax evidence of another state

for any period of time, subsection (2) of this section notwithstanding.