What must an out-of-state or online seller do to ship cigarettes or smokeless tobacco to South Carolina consumers under the PACT Act (per SC IL #11-9)?

Plain-English summary

A seller that ships cigarettes or smokeless tobacco to South Carolina consumers through remote sales — by phone, mail, internet, or any sale where the seller is not physically present with the buyer — is a "delivery seller," and it must pay the South Carolina (and any local) excise tax in advance of shipping. If it cannot pre-pay, it cannot ship into South Carolina.

The federal Prevent All Cigarette Trafficking (PACT) Act (15 U.S.C. § 375 et seq., amending the Jenkins Act) requires a delivery seller to comply with all state and local laws that would apply if the sale occurred entirely within South Carolina — including excise taxes, licensing and tax-stamping requirements, and restrictions on sales to minors. Under 15 U.S.C. § 376a(d), the delivery seller must not sell, deliver, or tender product to a carrier unless the South Carolina and local excise taxes have already been paid and any required stamps are affixed. There is a federal exception for smokeless tobacco where state law makes the seller collect the tax from the consumer — but South Carolina does not require sellers to collect the smokeless-tobacco tax from consumers, so a delivery seller must remit that tax in advance too.

Why advance payment is the sticking point. South Carolina (1) does not require tax stamps or indicia on cigarettes, (2) does not require the smokeless-tobacco tax to be collected from the consumer, and (3) uses a monthly reporting system where tax is paid after the product is sold or received. Those features conflict with the PACT Act's "pay before you ship" rule, so a delivery seller must build its own advance-payment method.

One acceptable method — a tax-paid South Carolina inventory. The letter describes setting up a separately tracked, tax-paid inventory for South Carolina: obtain a South Carolina cigarette and tobacco tax license; set aside South Carolina-only stock (kept separate even within a shared warehouse); pay the South Carolina excise tax on that stock on a monthly return in advance, or buy already-tax-paid product from a licensed South Carolina distributor; and ship only that tax-paid, separately maintained inventory to South Carolina consumers, replenishing it with continued advance payments.

South Carolina compliance checklist for a delivery seller. In addition to advance payment, a delivery seller must:

1. License — obtain a cigarette and tobacco tax license under § 12-21-660 (the same license issued to distributors).
2. Bond — post a bond (cash or surety) or a statement of financial stability under § 12-21-735 to cover possible losses; the Department's minimum bond is $5,000.
3. Advance payment — pay the cigarette and tobacco excise taxes before the sale, delivery, or tender to a carrier (a federal requirement, restated for completeness).
4. Monthly excise return — file the cigarette and tobacco tax return (Form L-922) by the 20th of the month.
5. Sales/use tax — be licensed for sales and use tax and remit state and local sales or use tax on cigarettes, smokeless tobacco, and other items by the 20th of the following month.
6. PACT Act shipment report — by the 10th of each month, file a memorandum or copy of every invoice for each shipment made into South Carolina the prior month, including the recipient's name and address, the brand and quantity, and the name, address, and phone of the person delivering the shipment.

What this means for you

If you sell cigarettes or smokeless tobacco online, by phone, or by mail into South Carolina

You are almost certainly a "delivery seller." You cannot lawfully ship into South Carolina unless you have solved the advance-payment problem (for example, by maintaining a separately tracked, tax-paid South Carolina inventory), obtained the § 12-21-660 license and § 12-21-735 bond, and set up the monthly excise (L-922), sales/use tax, and PACT Act shipment filings. If you cannot remit the tax in advance, the letter is explicit: you cannot ship into South Carolina.

If you are a South Carolina consumer or licensed distributor

The rules push remote sellers toward buying South Carolina tax-paid product from licensed distributors, which is one of the two ways a delivery seller can satisfy the advance-payment requirement.

Common questions

Q: Who is a "delivery seller"?
A: A person who makes a "delivery sale" — a sale of cigarettes or smokeless tobacco to a consumer that is ordered remotely (phone, mail, internet, or otherwise not in the seller's physical presence) or delivered by common carrier, private delivery service, or other remote method.

Q: When must the excise tax be paid?
A: Before the sale, delivery, or tender of the product to a carrier — in advance of shipment, as the PACT Act requires. South Carolina's normal after-sale monthly system does not satisfy this, so the seller must arrange advance payment.

Q: What South Carolina filings and credentials are required?
A: A § 12-21-660 cigarette and tobacco tax license; a § 12-21-735 bond or financial-stability statement (minimum $5,000); a monthly Form L-922 excise return by the 20th; sales/use tax registration and remittance by the 20th; and a monthly PACT Act shipment memorandum/invoice report by the 10th.

Q: What if the seller cannot pay the tax in advance?
A: Then the delivery seller cannot ship cigarettes or smokeless tobacco in or into South Carolina.

Subject

Remittance of Cigarette and Tobacco Taxes by “Delivery Sellers” under the Federal “Prevent All Cigarette Trafficking Act” and South Carolina Cigarette and Tobacco Tax Laws

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL11-9.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org

SC INFORMATION LETTER #11-9

SUBJECT:

Remittance of Cigarette and Tobacco Taxes by “Delivery Sellers” under the
Federal “Prevent All Cigarette Trafficking Act” and South Carolina Cigarette
and Tobacco Tax Laws

DATE:

June 27, 2011

REFERENCE:

SC Code Section 12-21-610 et. seq. (2000; Supp. 2010)
15 U.S.C. Section 375 et. seq. (Amended 2010)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2000)
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to announce
general information useful in complying with the laws administered by the
Department. An Information Letter has no precedential value.

Prevent All Cigarette Trafficking Act (“PACT”)
South Carolina Cigarette and Tobacco Excise Taxes
Background:
The federal Prevent All Cigarette Trafficking Act (“PACT Act”) amends and extends the
provisions of the Jenkins Act governing the delivery of all shipments of cigarettes and smokeless
tobacco in interstate commerce. The provisions of the PACT Act apply to manufacturers,
common carriers, and delivery sellers. However, this information letter will only address the
requirements of a “delivery seller” (as defined below) to pay of South Carolina cigarette and
tobacco taxes and sales and use taxes and to provide information to the Department of Revenue
concerning shipments into South Carolina.
The PACT Act establishes certain requirements a delivery seller must follow in order to sell at
retail and ship cigarettes and smokeless tobacco into a state.
A “delivery seller” is a person who makes a delivery sale and a “delivery sale” is any sale of
cigarettes or smokeless tobacco to a consumer if-(a) the consumer submits the order for the sale by means of a telephone or other method
of voice transmission, the mails, or the Internet or other online service, or the seller is
otherwise not in the physical presence of the buyer when the request for purchase or
order is made; or
1

(b) the cigarettes or smokeless tobacco are delivered to the buyer by common carrier,
private delivery service, or other method of remote delivery, or the seller is not in the
physical presence of the buyer when the buyer obtains possession of the cigarettes or
smokeless tobacco.
Under 15 U.S.C. Section 376a(a)(3) of the PACT Act, the delivery seller must comply with:
all state, local, tribal, and other laws generally applicable to sales of cigarette or
smokeless tobacco as if the delivery sales occurred entirely within [South
Carolina], including laws imposing –
(A) excise taxes;
(B) licensing and tax-stamping requirements;
(C) restrictions on sales to minors; and
other payment obligations and legal requirements relating to the sale, distribution,
or delivery of cigarettes or smokeless tobacco;
However, since South Carolina has a reporting system for the payment of the cigarette tax, it is
important to note that under 15 U.S.C. Section 376a(d) a delivery seller must not sell or deliver
to any consumer or common carrier or other delivery service any cigarettes or smokeless tobacco
unless in advance of the sale, delivery or tender to the common carrier or delivery service
(i) the excise tax imposed by SC has been paid; (ii) the excise tax imposed by a local government
has been paid; and (iii) any tax stamps or other indicia that the excise tax has been paid are
properly affixed or applied to the cigarettes or smokeless tobacco.
This requirement does not apply to delivery sales of smokeless tobacco if state law requires the
delivery seller collect the excise tax from the consumer and remit the excise tax to the state and
the delivery seller complies with this requirement. 15 U.S.C. Section 376a(d). However, since
South Carolina law does not require the seller to collect the excise tax on smokeless tobacco
from the consumer, delivery sellers must remit the excise tax on smokeless tobacco in advance
of the sale, delivery or tender to the common carrier or delivery service.
Please note that a delivery seller must comply with various other state provisions pursuant to the
requirements of the PACT Act, including, but not limited to, the requirement to file with the SC
Department of Revenue by the 10th of each calendar month a memorandum or a copy of each and
every invoice covering every shipment of cigarettes and smokeless tobacco made in the prior
month into South Carolina. 15 U.S.C. Section 376(a)(2).
Compliance with the PACT Act:
Since South Carolina (1) does not require use tax stamps or tax indicia to be affixed to cigarettes,
(2) does not require that smokeless tobacco to be collected from the consumer, and (3) uses a
monthly reporting system in which the tax is paid after the cigarettes and smokeless tobacco are
sold (sales method) or received (receipt method), delivery sellers cannot ship cigarettes or
smokeless tobacco in or into South Carolina unless the delivery seller can develop some method
of paying the excise tax in advance of the sale, delivery or tender to the common carrier or
delivery service as required by the PACT Act.
2

If a delivery seller cannot remit the South Carolina cigarette and tobacco tax in advance of the
sale, delivery or tender to the common carrier or delivery service as required by the PACT Act,
then the delivery seller sellers cannot ship cigarettes or smokeless tobacco in or into South
Carolina.
While not necessarily the only method, a delivery seller could pay the excise tax in advance of
the sale, delivery or tender to the common carrier or delivery service as required by the PACT
Act by establishing a tax paid South Carolina inventory of cigarettes and smokeless tobacco as
follows:
(1) Obtain a South Carolina cigarette and tobacco tax license.
(2) Set aside a portion of the inventory for South Carolina only. This inventory set aside
for South Carolina does not need to be located in a separate warehouse. It can be located
at the delivery seller’s warehouse that contains the delivery seller’s inventory for other
states, whether such warehouse is located in or out of South Carolina, but must be
maintained separately within that warehouse from the inventory for other states.
(3) Pay on a monthly return the South Carolina cigarette and smokeless tobacco excise
tax on the portion of the inventory that was set aside for South Carolina OR purchase
South Carolina tax paid cigarettes and smokeless tobacco from a licensed South Carolina
distributor for the portion of the inventory to be set aside for South Carolina.
(4) Ship South Carolina tax paid product that is being maintained in a separate inventory
only to South Carolina consumers upon receiving orders from South Carolina consumers.
Specific cigarettes and smokeless tobacco in this South Carolina inventory will only be
considered tax paid either after the monthly return and advanced tax payments are mailed
for those specific cigarettes and smokeless tobacco set aside for South Carolina OR the
cigarettes and smokeless tobacco were purchased tax paid from a licensed South Carolina
distributor for the South Carolina inventory.
(5) Continue advance payments of the South Carolina tax, or purchase tax paid inventory
from a licensed South Carolina distributor, as needed, with respect to additions to the
South Carolina inventory to ensure a separately maintained South Carolina tax paid
inventory is always available for future shipments in or into South Carolina.
Compliance with South Carolina Cigarette and Tobacco Tax Laws:
If a direct seller maintains a tax paid South Carolina inventory as described above, or the direct
seller uses some other advance payment method, so as to ensure the South Carolina cigarette or
smokeless tobacco excise tax has been paid in advance of the sale, delivery or tender to the
common carrier or delivery service, then the delivery seller must comply with the following:

1. Delivery sellers must obtain a cigarette and tobacco tax license in accordance with Code
   Section 12-21-660. This is the same license issued to distributors.
2. Delivery sellers must submit a bond (cash or surety) or statement of financial stability in
   accordance with Code Section 12-21-735 to cover possible losses resulting from the
   delivery seller’s failure to remit taxes. This is the same bond/financial statement
   requirement imposed upon distributors. The minimum bond requirement established by
   the Department is $5,000.00.

3

3. The cigarette and tobacco excise taxes must be paid in advance of the sale, delivery or
tender to the common carrier or delivery service. (This is a federal requirement, but is
noted here for completeness.)

4. Delivery seller must file a monthly cigarette and tobacco tax return (Form L-922) by the
   20th of the month.
5. Delivery sellers must be licensed for sales and use tax purposes and must remit the state
   and local sales or use tax on sales of cigarettes, smokeless tobacco and other items into
   South Carolina by the 20th of the month following the month in which the sale took place.
6. Delivery sellers must file with the Department by the 10th of each calendar month a
   memorandum or a copy of each and every invoice covering every shipment of cigarettes
   and smokeless tobacco made in the prior month into SC. This information must be mailed
   to:
   South Carolina Department of Revenue
   PACT Act Shipment Information
   Miscellaneous Tax Section
   Columbia, South Carolina 29214-0138
   The memo or invoice in each case must include the name and address of the person
   receiving the shipment; the brand and quantity thereof; and the name, address, and phone
   number of the person delivering the shipment to the recipient on behalf of the delivery
   seller. All memo and invoice information relating to specific customers must be
   organized by city, town or zip code. 15 U.S.C. Section 376(a)(2). (This is a federal
   requirement, but is noted here for completeness.) This information must be filed separate
   from, and cannot be combined with, the cigarette and tobacco tax return that is due by the
   20th of the month (see Item #4 above) or the sales tax return that is due by the 20th of the
   month (See Item #5 above).
   As such, delivery sellers must make three monthly filings with the Department: (1) the
   memorandum or invoice copies that are due by the 10th of the month that concern sales into
   South Carolina (as required under federal law); (2) the cigarette and tobacco tax return due by
   the 20th of the month (whether the return includes an “advance payment” as described above or is
   only an “informational return” noting the sale of tax paid inventory); and (3) the sales tax return
   due by the 20th of the month. 1
   Note: The cigarette and tobacco tax returns, and the sales tax returns, must be filed each month
   whether or not any sales were made into South Carolina during the month. However, the
   memorandums or copies of invoices required, under 15 U.S.C. Section 376(a)(2), to be filed with
   the Department by the 10th of each calendar month are only required if shipments of cigarettes or
   smokeless tobacco were made into South Carolina during the applicable month.

1

Code Section 12-21-785 allows the Department to require the cigarette and tobacco tax return to be filed for other
than monthly periods (e.g., quarterly). Code Section 12-36-2580 authorizes quarterly sales and use tax returns if a
retailer’s tax liability does not exceed $100 for any month. In addition, Code Section 12-36-2590 allows the
Department to require the sales and use tax return to be filed for other than monthly periods. Contact the
Department’s License and Registration Section to determine if your business is eligible to file cigarette and tobacco
tax returns and sales and use tax returns for periods other than monthly (e.g., quarterly).

4