Revenue Administrative Bulletin 2022-25

Tobacco Products Tax Act: Interpretative Bulletin Concerning 2022 PA 171 and the Acquisition of Tobacco Products by a Retailer from an Authorized Representative of a Licensed Manufacturer

Approved: December 20, 2022

RAB 2022-25.¹  This Revenue Administrative Bulletin (“RAB”) explains how the Michigan Department of Treasury (“Department”) interprets and will administer and enforce certain changes made by 2022 PA 171 to Section 8(1) of the Tobacco Products Tax Act (“TPTA”), MCL 205.428(1), related to the acquisition by a retailer of a tobacco product from an authorized representative of a TPTA-licensed manufacturer.

The Department periodically issues bulletins that explain its interpretation of current state tax laws.²  With the enactment of 2022 PA 171, effective July 21, 2022, MCL 205.428(1)(c) establishes that a person, other than a TPTA licensee, is personally liable for the TPTA tax (plus a penalty equal to 500% of the TPTA tax) if the person offers to sell (or does sell) at retail any tobacco product purchased or acquired from a person who was not licensed under the TPTA as a secondary wholesaler, wholesaler, or unclassified acquirer at the time of purchase or acquisition.³

Even though MCL 205.428(1)(c) only references tobacco product purchases or acquisitions from a TPTA licensee that is a “secondary wholesaler, wholesaler, or unclassified acquirer,” MCL 205.428(2) implicitly permits a retailer (and certain licensees) to acquire a tobacco product from an authorized representative of a TPTA-licensed manufacturer under certain conditions.

To reconcile these provisions, the Department is issuing this RAB to explain how the Department will administer and enforce MCL 205.428(1)(c) considering the language in MCL 205.428(2) related to tobacco product transactions involving authorized representatives of TPTA-licensed manufacturers.

Issues

I. Is a retailer personally liable for the tobacco tax and 500% penalty under MCL 205.428(1)(c) if the retailer sells or offers to sell a tobacco product it acquired from an authorized representative of a TPTA-licensed manufacturer as permitted by MCL 205.428(2)?

II. Does an authorized representative of a TPTA-licensed manufacturer violate the TPTA by conducting tobacco product transactions with a retailer, as permitted by MCL 205.428(2), following the enactment of 2022 PA 171?

Conclusions

I. No.  A retailer that sells or offers to sell a tobacco product that it acquired from an authorized representative of a TPTA-licensed manufacturer as provided in MCL 205.428(2) is not personally liable for the tax and 500% penalty under MCL 205.428(1)(c) even though it did not acquire the tobacco product from a TPTA-licensed secondary wholesaler, wholesaler, or unclassified acquirer.

II. No. The enactment of 2022 PA 171 does not change or otherwise affect the ability of an authorized representative of a TPTA-licensed manufacturer to lawfully engage in transactions involving tobacco products with a retailer (or a TPTA licensee), as permitted by MCL 205.428(2).

Analysis and Discussion

MCL 205.428(1) describes certain persons (not licensed under the TPTA) that are personally liable for the tobacco tax imposed by the TPTA, plus a penalty equal to 500% of the tax.  2022 PA 171 amended MCL 205.428(1) by adding to the list of persons liable for this tax and penalty a person who “offers to sell at retail, or who does sell at retail, … any tobacco product purchased or acquired from a person that was not licensed under this act as [a] secondary wholesaler, wholesaler, or unclassified acquirer, at the time of purchase or acquisition.”  Absent from the list of persons from whom a retailer may purchase or acquirer a tobacco product to avoid personal liability under MCL 205.428(1) is an authorized representative of a TPTA-licensed manufacturer.

Under MCL 205.428(2), the Department may permit an authorized representative of a TPTA-licensed manufacturer to travel within Michigan carrying up to 138,000 cigarettes and also non-cigarette tobacco products with a wholesale value of not more than $5,000.00.⁴  This statutory provision contemplates tobacco product transactions between the manufacturer representative and retailers (as well as certain TPTA licensees).  For example, the manufacturer must maintain a record of each “transaction” by the representative and the record “must identify the quantity and identity of the tobacco products, detail whether exchanged, received, removed, or otherwise disposed of, and identify the retailer, wholesaler, secondary wholesaler, vending machine operator, or unclassified acquirer involved.”⁵  In such transactions, the “retailer, wholesaler, secondary wholesaler, vending machine operator, or unclassified acquirer shall retain the copy of the record in the same place and for the same time period as other records required by this section.”⁶  The applicable time period for maintaining the record for inspection by the Department is “4 years immediately following the transaction.”⁷

Under Michigan law, when enacting legislation, the Legislature is “presumed to be fully aware of existing laws” and “to know the law as it existed before the amendment and to have considered its effect on new legislation.”⁸  Moreover, 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 and to avoid an interpretation that would render any part of the statute surplusage.⁹  With these principles in mind, MCL 205.428(1) and MCL 205.428(2) must be read together to give effect and meaning to both provisions in a way that is harmonious to the entire statutory framework.  Therefore, MCL 205.428(2) operates in full force and effect even with the enactment of 2022 PA 171.

Accordingly, the lack of any reference in MCL 205.428(1) to an authorized representative of a TPTA-licensed manufacturer does not mean that a retailer that acquires a tobacco product from such a manufacturer’s representative in accordance with MCL 205.428(2), and sells or offers to sell that product, is liable for the tobacco tax and 500% penalty prescribed in MCL 205.428(1)(c).

The Department will administer and enforce MCL 205.428(1)(c) in a manner consistent with this RAB.

¹ Pursuant to MCL 205.6a, a taxpayer may rely on a RAB 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 A person that fits within the definition of a “retailer” under MCL 205.422 and is not otherwise acting in a capacity for which licensure is required under MCL 205.423, is not required to be licensed under the TPTA.

⁴ See Mich Admin Code, R 205.453 and Treasury Form 4857 (Tobacco Manufacturer’s Representative Permission List) for information concerning this authorization from the Department.

⁵ MCL 205.428(2).

⁶ Id. 

⁷ Id.

⁸ See Alvin Motor Fright, Inc v Dep’t of Treasury, 281 Mich App 35, 41 (2008) and Williams v Auto Club Group Ins Co, 224 Mich App 313, 319 (1997). 

⁹ See GC Timmis & Co v Guardian Alarm Co, 468 Mich 416, 421 (2003).  See also TOMRA of N Am, Inc v Dep't of Treasury, 505 Mich 333, 349–50 (2020).