                                 CODE OF VIRGINIA

CIGARETTE EXEMPTION CERTIFICATE (§ 58.1-623.2)

A. 1. Notwithstanding any other provision of law, all sales of cigarettes, as
defined in § 58.1-1031, bearing Virginia revenue stamps in the Commonwealth
shall be subject to the tax until the contrary is established. The burden of
proving that a sale is not taxable is upon the dealer unless he takes from the
taxpayer a cigarette exemption certificate issued by the Department to the
taxpayer to the effect that the cigarettes are exempt under this chapter for the
purposes of resale in the Commonwealth.

   2. The cigarette exemption certificate mentioned in this section shall relieve
   the person who takes such certificate from any liability for the payment or
   collection of the tax on the sale of cigarettes, except upon notice from the
   Tax Commissioner or the taxpayer that such certificate is no longer
   acceptable.

   3. If a taxpayer who gives a cigarette exemption certificate under this
   section makes any use of the property other than an exempt use or retention,
   demonstration, or display while holding the property for resale or
   distribution in the regular course of business, such use shall be deemed a
   taxable sale by the taxpayer as of the time the property or service is first
   used by him, and the cost of the property to him shall be deemed the sales
   price of such retail sale.

B. 1. Prior to issuing a cigarette exemption certificate under this section, the
Department shall conduct a background investigation on the taxpayer for the
certificate. The Department shall not issue a cigarette exemption certificate
until at least 30 days have passed from the receipt of the application, unless
the taxpayer qualifies for the expedited process set forth in subdivision 3, or
any other expedited process set forth in guidelines issued pursuant to
subsection L. If the taxpayer does not qualify for the expedited process, the
Department shall inspect each location listed in the application and verify that
any location that resells cigarettes meets the requirements prescribed in
subsection E.

   2. A taxpayer shall be required to pay an application fee, not to exceed $50,
   to the Department for a cigarette exemption certificate.

   3. A taxpayer shall be eligible for an expedited process to receive a
   cigarette exemption certificate if the taxpayer possesses, at the time of
   filing an application for a cigarette exemption certificate, (i) an active
   license, in good standing, issued by the Department of Alcoholic Beverage
   Control pursuant to Title 4.1, as verified by electronic or other means by the
   Department, or (ii) an active tobacco products tax distributor&#8217;s
   license, in good standing, issued by the Department pursuant to &#xA7;
   58.1-1021.04:1. The Department may identify other categories of taxpayers who
   qualify for an expedited process through guidelines issued pursuant to
   subsection L. Taxpayers that qualify for an expedited process shall not be
   subject to the background check or the waiting period set forth in subdivision
   1, nor shall such taxpayers be required to pay the application fee set forth
   in subdivision 2.

   4. If a taxpayer has been denied a cigarette exemption certificate, or has
   been issued a cigarette exemption certificate that has subsequently been
   suspended or revoked, the Department shall not consider an application from
   the taxpayer for a new cigarette exemption certificate for six months from the
   date of the denial, suspension, or revocation.

C. The Department shall deny an application for a cigarette exemption
certificate, or suspend or revoke a cigarette exemption certificate previously
issued to a taxpayer, if the Department determines that:

   1. The taxpayer is a person who is not 18 years of age or older;

   2. The taxpayer is a person who is physically unable to carry on the business
   for which the application for a cigarette exemption certificate is filed, or
   has been adjudicated incapacitated;

   3. The taxpayer has not resided in the Commonwealth for at least one year
   immediately preceding the application, unless in the opinion of the
   Department, good cause exists for the taxpayer to have not resided in the
   Commonwealth for the immediately preceding year;

   4. The taxpayer has not established a physical place of business in the
   Commonwealth, as described in subsection E;

   5. A court or administrative body having jurisdiction has found that the
   physical place of business occupied by the taxpayer, as described in
   subsection E, does not conform to the sanitation, health, construction, or
   equipment requirements of the governing body of the county, city, or town in
   which such physical place is located, or to similar requirements established
   pursuant to the laws of the Commonwealth;

   6. The physical place of business occupied by the taxpayer, as described in
   subsection E, is not constructed, arranged, or illuminated so as to allow
   access to and reasonable observation of, any room or area in which cigarettes
   are to be sold;

   7. The taxpayer is not an authorized representative of the business;

   8. The taxpayer made a material misstatement or material omission in the
   application;

   9. The taxpayer has defrauded, or attempted to defraud, the Department, or any
   federal, state, or local government or governmental agency or authority, by
   making or filing any report, document, or tax return required by statute or
   regulation that is fraudulent or contains a false representation of material
   fact, or the taxpayer has willfully deceived or attempted to deceive the
   Department, or any federal, state, or local government or governmental agency
   or authority, by making or maintaining business records required by statute or
   regulation that are false or fraudulent;

   10. The Tax Commissioner has determined that the taxpayer has misused the
   certificate;

   11. The taxpayer has knowingly and willfully allowed any individual, other
   than an authorized representative, to use the certificate;

   12. The taxpayer has failed to comply with or has been convicted under any of
   the provisions of this chapter or Chapter 10 (&#xA7; 58.1-1000 et seq.) or any
   of the rules of the Department adopted or promulgated under the authority of
   this chapter or Chapter 10; however, no certificate shall be denied,
   suspended, or revoked on the basis of a failure to file a retail sales and use
   tax return or remit retail sales and use tax unless the taxpayer is more than
   30 days delinquent in any filing or payment and has not entered into an
   installment agreement pursuant to &#xA7; 58.1-1817; or

   13. The taxpayer has been convicted under the laws of any state or of the
   United States of (i) any robbery, extortion, burglary, larceny, embezzlement,
   gambling, perjury, bribery, treason, racketeering, money laundering, other
   crime involving fraud under Chapter 6 (&#xA7; 18.2-168 et seq.) of Title 18.2,
   or crime that has the same elements of the offenses set forth in &#xA7;
   58.1-1017 or 58.1-1017.1, or (ii) a felony.

D. The provisions of &#xA7; 58.1-623.1 shall apply to the suspension and
revocation of exemption certificates issued pursuant to this section, mutatis
mutandis.

E. A cigarette exemption certificate shall only be issued to a taxpayer who:

   1. Has a physical place of business in the Commonwealth, owned or leased by
   him, where a substantial portion of the sales activity of the retail cigarette
   sales activity of the business is routinely conducted and that (i) satisfies
   all local zoning regulations; (ii) has sales and office space of at least 250
   square feet in a permanent, enclosed building not used as a house, apartment,
   storage unit, garage, or other building other than a building zoned for retail
   business; (iii) houses all records required to be maintained pursuant to
   &#xA7; 58.1-1007; (iv) is equipped with office equipment, including but not
   limited to, a desk, a chair, a Point of Sale System, filing space, a working
   telephone listed in the name of the taxpayer or his business, working
   utilities, including electricity and provisions for space heating, and an
   Internet connection and email address; (v) displays a sign and business hours
   and is open to the public during the listed business hours; and (vi) does not
   occupy the same physical place of business of any other taxpayer who has been
   issued a cigarette exemption certificate;

   2. Possesses a copy of the (i) corporate charter and articles of incorporation
   in the case of a corporation, (ii) partnership agreement in the case of a
   partnership, or (iii) organizational registration from the Virginia State
   Corporation Commission in the case of an LLC; and

   3. Possesses a local business license, if such local business license is
   required by the locality where the taxpayer&#8217;s physical place of business
   is located.

F. A taxpayer with more than one physical place of business shall be required to
complete only one application for a cigarette exemption certificate but shall
list on the application every physical place of business in the Commonwealth
where cigarettes are purchased, stored, or resold by the taxpayer or his
affiliate. Upon approval of the application, the Department shall issue a
cigarette exemption certificate to the taxpayer. The taxpayer shall be
authorized to resell cigarettes only at the locations listed on the application.
No cigarette exemption certificate shall be transferrable. For purposes of this
subsection, a taxpayer shall be considered to have more than one physical place
of business if the taxpayer owns or leases two or more physical locations in the
Commonwealth where cigarettes are purchased, stored, or resold.

G. A cigarette exemption certificate issued to a taxpayer shall bear the address
of the physical place of business occupied or to be occupied by the taxpayer in
conducting the business of purchasing cigarettes in the Commonwealth. In the
event that a taxpayer intends to move the physical place of business listed on a
certificate to a new location, he shall provide written notice to the Department
at least 30 days in advance of the move. A successful inspection of the new
physical place of business shall be required by the Department prior to the
issuance of a new cigarette exemption certificate bearing the updated address.
If the taxpayer intends to change any of the required information relating to
the physical places of business contained in the application for the cigarette
exemption certificate submitted pursuant to subsection F, the taxpayer shall
file an amendment to the application at least 30 days in advance of such change.
The certificate with the original address shall become invalid upon the issuance
of the new certificate, or 30 days after notice of the move is provided to the
Department, whichever occurs sooner. A taxpayer shall not be required to pay a
fee to the Department for the issuance of a new cigarette exemption certificate
pursuant to this subsection.

H. The privilege of a taxpayer issued a cigarette exemption certificate to
purchase cigarettes shall extend to any authorized representative of such
taxpayer. The taxpayer issued a cigarette exemption certificate may be held
liable for any violation of this chapter, Chapter 10 (&#xA7; 58.1-1000 et seq.),
Chapter 10.1 (&#xA7; 58.1-1031 et seq.), or any related Department guidelines by
such authorized representative.

I. A taxpayer issued a cigarette exemption certificate shall comply with the
recordkeeping requirements prescribed in &#xA7; 58.1-1007 and shall make such
records available for audit and inspection as provided therein. A taxpayer
issued a cigarette exemption certificate who fails to comply with such
requirements shall be subject to the penalties provided in &#xA7; 58.1-1007.

J. A cigarette exemption certificate granted by the Department shall be valid
for five years from the date of issuance. At the end of the five-year period,
the cigarette exemption certificate of a taxpayer who qualifies for the
expedited application process set forth in subdivision B 3 shall be
automatically renewed and no fee shall be required. If a taxpayer does not
qualify for the expedited application process, then such taxpayer shall apply to
the Department to renew the new cigarette exemption certificate as set forth in
subdivision B 1 and shall pay an application fee not to exceed $50 as set forth
in subdivision B 2; however, the 30-day waiting period set forth in subdivision
B 1 shall not apply.

K. No taxpayer issued a cigarette exemption certificate shall display the
certificate, or a copy thereof, in the physical place of business where a
substantial portion of the retail cigarette sales activity of the business is
routinely conducted.

L. The Tax Commissioner shall develop guidelines implementing the provisions of
this section, including but not limited to (i) defining categories of taxpayers
who qualify for the expedited process, (ii) prescribing the form of the
application for the cigarette exemption certificate, (iii) prescribing the form
of the application for the expedited cigarette exemption certificate, (iv)
establishing procedures for suspending and revoking the cigarette exemption
certificate, and (v) establishing procedures for renewing the cigarette
exemption certificate. Such guidelines shall be exempt from the provisions of
the Administrative Process Act (&#xA7; 2.2-4000 et seq.).

M. For the purposes of this section:
			&#8220;Authorized representative&#8221; means an individual who has an
ownership interest in or is a current employee of the taxpayer who possesses a
valid cigarette exemption certificate pursuant to this section.

HISTORY: 2017, cc. 112, 453.