Tax and Revenue Administration Tobacco Tax Act Information Circular TTA-5R5

TTA-5R5 / October 2007

TOBACCO TAX ACT INFORMATION CIRCULAR:
ADMINISTRATION

This Information Circular discusses the following topics:

• Records
  • Wholesalers, Importers and Retailers
  • Manufacturers of Tear Tape
• Objections and Appeals
• Refunds of Tobacco Tax
• Uncollectible Accounts
• Stolen or Destroyed Tobacco
• Stale-dated Tobacco
• Recoveries

Records

Wholesalers, Importers and Retailers

1. Every wholesaler, importer or retailer is required to keep any record and book used for tobacco tax collection purposes. The records must provide information for accurate determinations of:
   
   
   • tobacco tax to be collected,
   • transactions involving tobacco that is black stock,
   • transactions in tobacco marked for tax-paid sale in Alberta, and
   • transactions in tobacco other than black stock not marked for tax-paid sale in Alberta.
     
     
2. Records and books of a wholesaler, importer or retailer should be available for review by Tax and Revenue Administration (TRA). Records that should be retained by a wholesaler, importer or retailer include:

• purchase orders;
• invoices from tobacco suppliers;
• receiving reports;
• records of periodic physical inventory counts;
• sales invoices showing delivery date, customer name and address;
• accounts receivable ledger cards; and
• shipping documents; e.g., bills of lading.

Note that records of the sale and purchase of cigarettes and fine cut tobacco must distinguish between tobacco marked for tax-paid sale in Alberta, and black stock tobacco sold to registered exempt sale retailers.

3. Records must be kept at the wholesaler's, importer's or importer's place of business in Alberta unless otherwise authorized in writing by TRA. All records must be retained for a period of four years from the end of the last fiscal year to which they relate unless written permission has been obtained from TRA to destroy them earlier. All records relating to an objection or an appeal must be kept until the matter is resolved and the time for filing any further appeal has expired.

Manufacturers of Tear Tape

4. Licensed manufacturers of tear tape must maintain records of the quantity of tear tape:
   
   
• produced,
• sold by the manufacturer, and
• maintained in inventory.
  
  
5. Records of licensed tear tape manufacturers must be kept for a period of four years from the end of the fiscal year to which they relate.
   

Objections and Appeals

6. The Tax Services Branch of TRA considers objections to the following:

• assessment of tobacco tax, interest or penalties;
• refusal to issue or renew a licence;
• suspension or cancellation of a licence;
• refusal to register;
• suspension or cancellation of a registration;
• refusal to issue a refund.

7. A separate Notice of Objection must be completed for each action. The Notice of Objection must be served in the form provided by TRA within 90 days of the day of mailing of the notice of the action leading to the objection. Notices of Objection may be served by certified or registered mail to:

Tax Services
Tax and Revenue Administration
Alberta Finance
2nd Floor, 9811 - 109 Street
EDMONTON, Alberta
T5K 2L5

8. An appeals officer will review the objection and will either confirm, vary or vacate the assessment or reassessment, or confirm or vacate the refusal, suspension or cancellation. The objector will be notified of the decision.
   
   
9. Notice of objection forms can be obtained online or by calling 427-3044 (Edmonton calling area) or 310-0000 (780) 427-3044 (toll free within Alberta). 
   
   
10. If dissatisfied with the disposition of the objection, the objector may file an appeal with the Alberta Court of Queen's Bench within 90 days of the date of mailing of the response to the Notice of Objection. Also, an objector who has not received a response from the Tax Services Branch within 90 days of the filing of the Notice of Objection may directly file an appeal with the Court of Queen's Bench. In both cases the appeal must be served on the Minister of Finance and a copy must be filed with the Clerk of the Court. The Court may confirm, vary or vacate the assessment or reassessment leading to the appeal or confirm or vacate the refusal, suspension or cancellation leading to the appeal. The Court may make an order relating to costs. The decision of the Court of Queen's Bench may be appealed to the Alberta Court of Appeal and, finally, to the Supreme Court of Canada.

Refunds of Tobacco Tax

Uncollectible Accounts

11. A tax collector may apply for a refund of the tobacco tax paid where tobacco was sold on credit to a retailer or another wholesaler and all or a portion of the debt associated with the sale has become uncollectible. A debt is not an uncollectible debt unless all reasonable efforts to collect the debt have been made and been unsuccessful.
    
    
12. To qualify for a refund, the tax collector must not be related to, or associated with, the debtor. The tax collector may request a refund for a debt that has been identified as an uncollectible debt for purposes of the Income Tax Act (Canada) and eligible for a deduction from its income for a year. Where the uncollectible debt is owed by a retailer or wholesaler that is in receivership or bankruptcy, the tax collector must have filed a claim for the debt with the receiver or trustee in bankruptcy to qualify for a refund of the tax.
    
    
13. If the debtor has been placed in receivership or petitioned into bankruptcy, the tax collector must notify TRA within 30 days of the day the collector was notified of the receivership or bankruptcy.
    
    
14. An application for a refund of the tobacco tax must be received by TRA within 90 days of the earlier of:
    
    
    • the date the tax collector received a Notice of Bankruptcy or notice appointing a receiver, or
    • the date the tax collector identified the debt as uncollectible for income tax purposes.
      
      
15. Tax collectors must submit an application form AT346 together with all sales invoices, ledger cards and any other records and documents to support that the tax collector delivered tobacco sold on credit, that the tax was in fact remitted in respect of the sale, and that the debt is uncollectible, as evidenced by:
    
    
    • in the case of a bankruptcy, a copy of the Notice of Bankruptcy received from the trustee;
    • in the case of a receivership, a copy of the notification from the receiver;
    • in any other case, a summary of the steps taken to collect the debt, and the date the receivable was written off.
      
      
16. TRA will determine the amount of tax to be refunded based on the information provided by the tax collector with the application.

Stolen or Destroyed Tobacco

17. A tax collector or retailer may apply for a refund of tobacco tax remitted where the tobacco has been stolen or destroyed before being sold to a consumer.
    
    
18. To receive a refund, the tax collector or retailer must:
    
    
    • notify TRA of the loss within 30 days of the day the tax collector or retailer first became aware of the loss;
      
      
    • apply for the refund on form AT346 (for tax collectors) or form AT 4771 (for retailers) within one year of when the claimant first became aware of the theft or destruction;
      
      
    • attach the following applicable records to the claim to demonstrate the quantity of tobacco stolen or destroyed:

• inventory records;
• purchase orders and invoices;
• receiving reports;
• sales invoices;
• insurance claims or police reports applicable to the stolen or destroyed tobacco; and,
• other records necessary to satisfy TRA of the amount of tax applicable to the stolen or destroyed tobacco.
• in the case of theft, proof that the theft was reported to the police; and
• in the case of fire, proof that the fire was reported to the fire department.

19. TRA may refund tax for stolen or destroyed tobacco despite the claimant not reporting the loss to TRA within 30 days of its discovery if the failure to comply does not prevent TRA from collecting the tax from another person.

Stale-dated Tobacco

20. A tax collector or retailer may apply for a refund of tobacco tax remitted where the tobacco has been stale-dated and cannot be returned to the manufacturer or supplier.

To receive a refund, the tax collector or retailer must:

• notify TRA within 30 days that the tax collector or retailer first became aware of the stale-dated tobacco;
• apply for the refund on form AT346 (for tax collectors) or form AT4771 (for retailers) within one year of when the claimant first became aware of the stale-dated tobacco;
• keep the tobacco in a dry and secure location until arrangements can be made with TRA for its destruction;
• attach the following supporting documents to the claim:
  • types of stale-dated tobacco and information regarding when the tobacco became stale-dated;
  • quantity of stale-dated tobacco;
  • purchase orders and invoices from the manufacturer or supplier;
  • proof of tobacco tax paid on the stale-dated tobacco.

A TRA representative will verify the stale-dated tobacco according to the supporting documents and require witnessing of the destruction of tobacco once arrangements can be made.

Recoveries

21. If a refund has been paid to a tax collector or retailer under paragraphs 11 to 19 above and part of the loss is subsequently recovered, the tax collector or retailer must repay TRA its pro-rata share of the recovery.