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Revenue Administrative Bulletin 2022-16

Revenue Administrative Bulletin 2022-16

Updating RAB 2021-8’s Interpretation of the Manufacturer Carve-out Language of 2020 PA 326 in Response to the Passage of 2022 PA 171

Approved: October 25, 2022

(Replaces RAB 2021-8)

RAB 2022-161 This Revenue Administrative Bulletin (“RAB”) updates and replaces the guidance previously issued by the Michigan Department of Treasury (“Department”) in RAB 2021-8 as a result of changes made to the licensing of manufacturers and unclassified acquirers under the Tobacco Products Tax Act (“TPTA”), MCL 205.421 et seq, from the enactment of 2022 PA 171 (“PA 171”), which became effective July 21, 2022.

Introduction

The Department periodically issues bulletins that explain its interpretation of current state laws.2  2020 PA 326 (“PA 326”) added the “manufacturer”3 carve-out language relating to “unclassified acquirers” under sections 2 and 11 of the TPTA (MCL 205.422 and 205.431).  For example, PA 326 added the references to an “unclassified acquirer that is not a manufacturer” and an “unclassified acquirer other than a manufacturer” in these sections.  The effective date of these amendments was January 1, 2022.  To clarify the appropriate interpretation of the carve-outs – as excluding persons licensed solely under the “manufacturer” subset of the unclassified acquirer license – Treasury published RAB 2021-8. 

PA 171, among other things, removed the “manufacturer” license as a subset of the “unclassified acquirer” license and eliminated the manufacturer carve-out language throughout the TPTA because it established the “manufacturer” license as a standalone license type under section 3 of the TPTA, MCL 205.423. Because the amendments to the TPTA under PA 171 became effective July 21, 2022, the interpretive and administrative issues discussed in RAB 2021-8 are only relevant for the period January 1, 2022, through July 20, 2022.  Accordingly, and as explained further below, the primary focus of this RAB is to update the guidance previously issued in RAB 2021-8 to reflect the impact of PA 171.4

Beginning on January 1, 2022, the effective date of the manufacturer carve-out language added by PA 326, the definition of “unclassified acquirer” in MCL 205.422 included a person located outside Michigan that makes remote sales to a person in Michigan that is not licensed under the TPTA as a wholesaler, secondary wholesaler, or “unclassified acquirer other than a manufacturer.”  Likewise, MCL 205.431 included several references to “an unclassified acquirer that is not a manufacturer” and “an unclassified acquirer other than a manufacturer.”  Through a series of six issues and conclusions with associated discussion, RAB 2021-8 explained that the Department interprets and administers this manufacturer carve-out language to exclude persons licensed solely under the “manufacturer” subset of the unclassified acquirer license.  These issues and conclusions are set forth below with modifications to reflect the impact of PA 171.  

Issues5

  1. What is meant by the phrase “unclassified acquirer other than a manufacturer” in the remote sales language added by PA 326 to the definition of “unclassified acquirer” under MCL 205.422, which was effective from January 1, 2022, through July 20, 2022?
  2. Under the remote sales language added by PA 326 to the definition of “unclassified acquirer,” would a remote seller be considered an unclassified acquirer if, during the period January 1, 2022, through July 20, 2022, it sold a tobacco product to an unclassified acquirer in this state that was licensed solely as a manufacturer under MCL 205.423(3)(d)?
  3. Under the remote sales language added by PA 326 to the definition of “unclassified acquirer,” would a remote seller be considered an unclassified acquirer if, during the period January 1, 2022, through July 20, 2022, it sold a tobacco product to an unclassified acquirer in this state that was not licensed solely as a manufacturer under MCL 205.423(3)(d)?
  4. Is it lawful under the TPTA for a manufacturer to have sold, during the period January 1, 2022, through July 20, 2022, its tobacco products directly to a Michigan retailer or Michigan consumer in accordance with MCL 205.431 if that manufacturer held the appropriate unclassified acquirer license?
  5. Is it lawful under the TPTA for a Michigan retailer or Michigan consumer to have acquired, during the period January 1, 2022, through July 20, 2022, a tobacco product from a Manufacturer located outside Michigan, if that manufacturer held the appropriate unclassified acquirer license?
  6. Notwithstanding section 8(2) of the TPTA, MCL 205.428(2)6, was it lawful under the TPTA for a Michigan retailer to have purchased, possessed, acquired for resale at retail, or sold a tobacco product in Michigan, during the period January 1, 2022, through July 20, 2022, that was purchased or otherwise acquired directly from a manufacturer who held the appropriate unclassified acquirer license?

Conclusions7

  1. The phrase “unclassified acquirer other than a manufacturer” in the remote sales language added by PA 326 to the “unclassified acquirer” definition, effective from January 1, 2022, through July 20, 2022, means an unclassified acquirer that is not licensed solely as a manufacturer under MCL 205.423(3)(d)(v).
  2. Yes, a remote seller would be considered an unclassified acquirer if, during the period January 1, 2022, through July 20, 2022, it sold a tobacco product to an unclassified acquirer in this state that was licensed solely as a manufacturer under MCL 205.423(3)(d)(v).
  3. No, a remote seller would not be considered an unclassified acquirer under the language added by PA 326 to the definition of “unclassified acquirer” if, during the period January 1, 2022, through July 20, 2022, it sold a tobacco product to a person in this state, licensed as an unclassified acquirer under any other provision of MCL 205.423(3)(d), even if that person was also licensed as a manufacturer under MCL 205.423(3)(d)(v).
  4. Yes, if the manufacturer held the appropriate “unclassified acquirer” license during the period January 1, 2022, through July 20, 2022, for the tobacco product it sold at that time.
  5. Yes, if the manufacturer through whom the retailer or consumer acquired the tobacco product during the period January 1, 2022, through July 20, 2022, held at that time the appropriate “unclassified acquirer” license for the tobacco product acquired.
  6. Yes, if the manufacturer from whom the retailer purchased or otherwise acquired the tobacco product during the period January 1, 2022, through July 20, 2022, held at that time the appropriate “unclassified acquirer” license for the tobacco product transacted.

Analysis and Discussion

As amended by PA 326 and effective January 1, 2022, through July 20, 2022, the “unclassified acquirer” definition in the TPTA included in relevant part:

i.     a person “who imports or acquires a tobacco product from a source other than a wholesaler or secondary wholesaler licensed under [the TPTA] for use, sale or distribution in this state;”

ii.     a person “who purchases or receives tobacco products directly from a manufacturer licensed under [the TPTA] or from another source outside this state, which source is not licensed under [the TPTA];” or

iii.     “a person not located in this state that sells a tobacco product, through a mail order, catalog sale, telephone order, internet sale, or any other means, to a retailer or other person in this state that is not licensed under this act as a wholesaler, unclassified acquirer other than a manufacturer, or secondary wholesaler.8

The TPTA declares that a person may not purchase, possess, acquire for resale, or sell a tobacco product “as a manufacturer . . . [or] unclassified acquirer . . . in this state unless licensed to do so.”  Moreover, the TPTA requires that a person obtain a license for each capacity requiring licensure in which a person engages.9  Until July 20, 2022, even though a person acting as a “manufacturer” and a person acting as an “unclassified acquirer” are acting in different capacities, the TPTA established the “manufacturer” license as a subset of the “unclassified acquirer” license category along with other subsets.10  The license subsets and associated annual fees for the “unclassified acquirer” license category through July 20, 2022 are as follows:

Unclassified Acquirer License

(i)     State of Michigan, no fee.

(ii)     Retail importer of tobacco products other than cigarettes, $10.00.

(iii)     Retail importer of cigarettes, $100.00.

(iv)     Vending machine operator buying direct from a manufacturer, $100.00.

(v)     Manufacturer, $100.00.11

(vi)     Any other importer, $100.00.

In recognition of this distinction among “unclassified acquirer” license subsets,12 and the interpretive canon that the TPTA be read as a whole,13 the Department construes PA 326 as excluding persons licensed solely under the “manufacturer” subset of the “unclassified acquirer” license (as described in MCL 205.423(3)(d)(v))14 when the phrase “unclassified acquirer other than a manufacturer” or the phrase “unclassified acquirer that is not a manufacturer” was used in the definition of “unclassified acquirer” in MCL 205.422 or in MCL 205.431(1) – (4) during the period January 1, 2022, through July 20, 2022.  In other words, for the period January 1, 2022, through July 20, 2022, the Department interprets these phrases as relating to a person who held the appropriate “unclassified acquirer” license (subset) for the tobacco product transacted and excluding those persons whose only “unclassified acquirer” license was the “manufacturer” subset described in MCL 205.423(3)(d)(v) during that period.

Accordingly, to have lawfully engaged in the transactions described in MCL 205.431(1) – (4), during the period January 1, 2022, through July 20, 2022, a person who was a manufacturer would have needed to obtain the appropriate “unclassified acquirer” license for the type of tobacco product at issue.  If the tobacco products were cigarettes, the relevant license would have been that of an “unclassified acquirer-retail importer of cigarettes.”  If the tobacco products were noncigarette tobacco products (e.g., cigars), the relevant license would have been that of an “unclassified acquirer-retail importer of tobacco products other than cigarettes.”15

 


[1] Pursuant to MCL 205.6a, a taxpayer may rely on a Revenue Administrative Bulletin issued by the Department of Treasury after September 30, 2006 and shall not be penalized for that reliance until the bulletin is revoked in writing. However, reliance by the taxpayer is limited to issues addressed in the bulletin for tax periods up to the effective date of an amendment to the law upon which the bulletin is based or for tax periods up to the date of a final order of a court of competent jurisdiction for which all rights of appeal have been exhausted or have expired that overrules or modifies the law upon which the bulletin is based.

[2]  See MCL 205.3(f).

[3]  References in this RAB to a “manufacturer” relate to a person who is a “manufacturer” (as that term is defined under Section 2 of the TPTA, MCL 205.422).

[4]  Although outside the primary focus of this RAB, it is worth noting that PA 171 significantly modifies the regulation of remote sales of tobacco products by, among other things, adding or revising definitions, licensing requirements, and prohibitions relating to “remote retail sales.”  For example, an “unclassified acquirer” now includes a person located in or outside Michigan that makes a remote retail sale of a tobacco product to a Michigan consumer.

[5] Again, each issue and conclusion relate to the effective period of PA 326, January 1, 2022 through July 20, 2022.

[6] MCL 205.428(2) allows for certain activities concerning the possession and sale, exchange, or other disposition of tobacco products in Michigan by a person who is a representative of a licensed manufacturer.

[7] These conclusions assume compliance with any other applicable requirements under the TPTA and/or other applicable federal and state laws.

[8] MCL 205.422(ff); (emphasis added).  An unclassified acquirer does not include a wholesaler.  As previously noted, effective July 21, 2022, PA 171 removed the manufacturer carveout language added by PA 326 and added the following language to the definition of “unclassified acquirer”: “Unclassified acquirer also includes a person located within or outside of this state that makes a remote retail sale of a tobacco product to a consumer in this state.”

[9] MCL 205.423(2).

[10] Under PA 171, as of July 21, 2022, the manufacturer’s license is no longer a subcategory of “unclassified acquirer.”

[11] MCL 205.423(3)(d).  As previously noted, effective July 21, 2022, PA 171 eliminated manufacturers as a subcategory of the unclassified acquirer license and established the “manufacturer” license as a standalone license type.

[12] When enacting legislation, the Legislature is presumed to be “fully aware of existing statutes” and “to know the law as it existed before the amendment and to have considered its effect on new legislation.”  See Alvin Motor Freight, Inc v Department of Treasury, 281 Mich App 35, 41 (2008) and Williams v Auto Club Group Ins Co, 224 Mich App 313, 319 (1997).

[13] Words in a statute are not to be construed in a vacuum but must be read together to harmonize the meaning, giving effect to the act as a whole.  See GC Timmis & Co v Guardian Alarm Co, 468 Mich 416, 421 (2003).

[14] Of course, a manufacturer that holds no TPTA license would also be excluded.

[15] These are also the relevant “unclassified acquirer” license subsets for purposes of the remote sales language added to the definition of an “unclassified acquirer” by PA 326.