SN 99(8)

Sale and Possession of "Gray Market" Cigarettes

This publication has been cited in IP 2000(26)

PURPOSE: This Special Notice describes the restrictions placed on "gray market" cigarettes, most notably the prohibition on the sale or possession of such cigarettes by licensed cigarette distributors or licensed cigarette dealers. "Gray market" cigarettes are commonly referred to as those manufactured in the United States and intended to be sold outside the United States, but which reenter the United States market. Licensed cigarette distributors and licensed cigarette dealers are prohibited from affixing Connecticut cigarette tax stamps (including heat-applied decals) to "gray market" cigarettes. (See "Stamping of ‘Gray Market’ Cigarettes Prohibited," below.)

EFFECTIVE DATE: July 1, 1999.

STATUTORY AUTHORITY: Conn. Gen. Stat. §§12-302, 12-303, 12-304, 12-305, 12-306a, 12-314, and 12-315, as amended by 1999 Conn. Pub. Acts 109, §§1 through 7.

STAMPING OF "GRAY MARKET" CIGARETTES PROHIBITED: Licensed cigarette distributors and licensed cigarette dealers are prohibited from affixing a Connecticut cigarette tax stamp (including a heat-applied decal) to a package of cigarettes if the package falls within one or more of the following categories:

• The package is not labeled in conformity with the requirements of the Federal Cigarette Labeling and Advertising Act (79 Stat. 282, 15 U.S.C. §1331 et seq.), or any other federal requirement for the placement of labels, warnings and other information, applicable to packages of cigarettes that are intended to be sold within the United States. (The Federal Cigarette Labeling and Advertising Act makes it unlawful for any person to manufacture, package or import for sale or distribution within the United States any cigarettes the package of which fails to bear the Surgeon General’s Warning.)
• The package bears any label or notice prescribed by the United States Department of Treasury to identify cigarettes intended for export and exempt from federal cigarette tax pursuant to 26 U.S.C. §5704(b), including "For export only," "U.S. Tax-exempt," "For use outside U.S." or similar wording indicating that the manufacturer did not intend that the product be sold within the United States, including any notice or label described in 27 C.F.R. §290.185. (27 C.F.R. §290.185 requires the words "Tax-exempt. For use outside U.S." or "U.S. Tax-exempt. For use outside U.S." except where a stamp, sticker, or notice, required by a foreign country or a possession of the United States, which identifies such country or possession, is imprinted or affixed.)
• The package has been imported into the United States after January 1, 2000, in violation of 26 U.S.C. §5754 or regulations adopted thereunder. (26 U.S.C. §5754 allows cigarettes that have previously been exported from the United States to be imported or brought into the United States only as provided in 26 U.S.C. §5704(d).)
• The package in any way violates federal trademark or copyright law or all federal taxes due have not been paid on the cigarettes.
• The package has been modified or altered by a person (other than the manufacturer or a person specifically authorized by the manufacturer), including modification or alteration by the placement of a sticker or label to cover information, including the wording, labels or warnings described above, on the package.

SALE OR POSSESSION OF "GRAY MARKET" CIGARETTES PROHIBITED: Licensed cigarette distributors and licensed cigarette dealers are prohibited from selling, offering for sale, displaying for sale or possessing with intent to sell any cigarettes the stamping of which is prohibited by Conn. Gen. Stat. §12-302 or §12-303, as amended by 1999 Conn. Pub. Acts 109. Any person who possesses, transports for sale, sells or offers for sale cigarettes, the stamping of which is prohibited by Conn. Gen. Stat. §12-302 or §12-303, as amended by 1999 Conn Pub. Acts 109, shall be fined not more than $1,000 or imprisoned not less than 1 year or both fined and imprisoned. Any person who possesses, transports for sale, sells or offers for sale 20,000 or more cigarettes, the stamping of which is prohibited by Conn. Gen. Stat. §12-302 or §12-303, as amended by 1999 Conn. Pub. Acts 109, shall be fined not more than $5,000 or imprisoned not less than one year nor more than five years, or both fined and imprisoned.

"GRAY MARKET" CIGARETTES SUBJECT TO SEIZURE AND SALE AS CONTRABAND: All cigarettes, the stamping of which is prohibited by Conn. Gen. Stat. §12-302 or §12-303, as amended by 1999 Conn. Pub. Acts 109, in the possession, custody or control of any person for the purpose of being consumed, sold or transported in this state or for the purpose of evading or violating the provisions of Chapter 214 of the Connecticut General Statutes, and any automobile, truck, conveyance or other vehicle used in the transportation of such cigarettes, and all paraphernalia, equipment or other tangible personal property, incident to the use of such purposes, found in the place, building, vehicle or vehicles where such cigarettes are found, are contraband goods, subject to seizure and sale by the Commissioner of Revenue Services. Seizure and sale of any cigarettes or other property shall not relieve any person from a fine or other penalty for violation of Chapter 214 of the Connecticut General Statutes.

COPY TO BE PROVIDED TO EACH LICENSED CIGARETTE DEALER: Licensed cigarette distributors have been furnished with additional copies of this Special Notice. Licensed cigarette distributors are requested to provide a copy of this Special Notice to each licensed cigarette dealer to whom they sell cigarettes.

EFFECT ON OTHER DOCUMENTS: None affected.

EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department’s informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.

FOR FURTHER INFORMATION: Please call the Department of Revenue Services during business hours, Monday through Friday:

• 1-800-382-9463
(toll-free from within Connecticut), or
• 860-297-5962
(from anywhere).
• TTY, TDD and Text Telephone users only
may transmit inquiries 24 hours a day by calling 860-297-4911.

SN 99(8)
Cigarette Tax
Sale and Possession of "Gray Market" Cigarettes
Issued 06-29-99