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Approved: April 12, 1989


RAB-89-32. The purpose of this Bulletin is to clarify the imposition of cigarette tax when a cigarette tax licensee operating vending machines must pay the tax on cigarettes used in vending machines.  The Michigan Cigarette Tax Act, MCL 205.501(f), defines a vending machine operator as any person who operates one or more vending machines for the sale of cigarettes and who purchases cigarettes from a manufacturer, licensed wholesaler or secondary wholesaler.  See also Department of Treasury Cigarette Tax Rules, 1979 AC, R 205.401(n).

The Michigan Cigarette Tax Act, MCL 205503, provides that “[N]o person shall have in his possession a machine for vending cigarettes for a period in excess of 72 hours unless there shall be attached to the same a disc or marker as provided in this section.” A cigarette licensee operating cigarette vending machines must remit cigarette tax on the purchase of the cigarettes used in the vending machine operation. See Department of Treasury Cigarette Tax Rules, 1979 AC, R 205.404.

Sales of cigarettes through a vending machine are retail transactions. A taxpaying licensee with a tax-free inventory may not consider cigarettes in their vending machines as part of the tax-free inventory and may not defer remitting cigarette tax until these cigarettes are sold.

Cigarettes removed from a tax-free inventory, by the licensee for loading into their vending machines, are subject to cigarette tax at that moment.


A licensed wholesaler removing cigarettes from its tax-free inventory during the month will report these cigarettes as sold on line 9 of their monthly cigarette tax return.  The vending machine inventory reported on Schedule E, “Physical Inventory of Cigarettes in Michigan”, is to be reported as tax paid inventory.

If an increase in cigarette tax is enacted with a resulting inventory tax, then the unsold cigarettes in a taxpaying licensee’s vending machines are subject to the inventory tax.