REVENUE ADMINISTRATIVE BULLETIN 1989-24

Approved: April 12, 1989

TAXABILITY OF CIGARETTE LOSSES

RAB-89-24. The purpose of this Bulletin is to clarify questions from taxpaying cigarette licensees concerning the imposition of cigarette tax on cigarettes which are rendered unsaleable due to flooding, fire, damaged in transportation, or seizure by the Department.

The Michigan Department of Treasury will treat such losses as a sale under the Cigarette Tax Act 265, of PA 1947 as amended, and therefore, a taxable transaction. Specifically, the Michigan Cigarette Tax Act, MCL 205.501(j), defines "sale" or "sales" in addition to their ordinary meaning, as including or applying to use, gifts, exchanges, barter and theft. It is the Department's position that the definition includes losses which render cigarettes unsaleable. See also the Michigan Department of Treasury Rules, 1979 AC, R 205.401(i).

This Bulletin does not preclude the licensee from returning the damaged cigarettes to the manufacturer(s) for credit.