Where did the cigarette tax stamp belong when clove cigarettes were individually sealed but also sold in a self-contained box of twenty?

Plain-English summary

South Carolina Private Letter Ruling 87-9 held that the required cigarette tax stamp belonged on the smallest self-contained package actually sold as a unit.

XYZ's clove cigarettes were each sealed in an individual container, and twenty of those containers also could be packaged in a larger box.

• If the cigarettes were sold separately, each individual sealed container needed its own stamp.
• If twenty cigarettes were sold together as one self-contained package, only the larger outer box needed the stamp.

The packaging arrangement

XYZ marketed clove cigarettes. Every cigarette was individually packaged in a sealed container.

Twenty individually sealed containers were then placed into a larger box. XYZ could sell the cigarettes either as a package of twenty or one at a time.

XYZ requested permission to stamp only the outer box rather than every individual container.

The stamping statutes

Section 12-21-720 required cigarette license taxes to be paid by affixing stamps in the statutory manner and time.

Section 12-21-730 required stamps to be affixed to "each individual package" of cigarettes.

The statutes did not define that phrase, so the Commission used dictionary meanings of each, individual, package, and unit.

The smallest self-contained unit test

The Commission defined each individual package as the smallest self-contained entity to which the stamp applied.

It gave an ordinary-cigarette example: for a carton, the smallest self-contained unit was the twenty-cigarette pack, not each cigarette and not the entire carton.

For XYZ's product, the smallest self-contained sale unit changed with the way the cigarettes were sold:

• one sealed cigarette container when sold separately; or
• the larger box when the full twenty-count package was sold as one unit.

What this means for you

Tobacco manufacturers and distributors

PLR 87-9 tied stamping to the packaged unit offered and sold, not simply to the existence of inner and outer packaging.

Tobacco retailers

Breaking a larger package into separately sold sealed units changed which packages required stamps under the ruling.

Packaging teams

The Commission focused on whether a package was a distinct, uniformly wrapped or sealed product unit and the smallest self-contained entity sold.

Excise-tax teams

The same physical product required different stamp placement depending on whether sales occurred by individual sealed cigarette or by the full box of twenty.

Readers applying the ruling today

PLR 87-9 applied historical cigarette-package and stamp provisions and contains an apparent date inconsistency in the official PDF. Current tobacco-product definitions, flavor restrictions, packaging rules, stamp denominations, licensing, and rates must be checked independently.

Common questions

Q: Could XYZ always put one stamp on the outer box?

A: No. That worked only when the box of twenty was sold as one self-contained package.

Q: What if cigarettes were sold one at a time?

A: Each individually sealed cigarette container required a stamp.

Q: What did "each individual package" mean?

A: The smallest self-contained entity sold as the relevant unit.

Q: Did every cigarette in an ordinary pack need a stamp?

A: No. The ruling's example treated the twenty-cigarette pack as the smallest unit, rather than each cigarette.

Q: Why is the issued date 1978 for a ruling numbered 87-9?

A: The official PDF is labeled SC Private Letter Ruling 87-9 and cites Revenue Procedure 87-3, but its signature block states October 7, 1978. This page records that literal source date without correcting it.

Q: Can another tobacco company rely on PLR 87-9?

A: No. The ruling states that it applied only to XYZ's specific facts, had no precedential value, and was not intended for general distribution.

Citations and references

• S.C. Code section 12-21-720 — cigarette license tax paid through stamps
• S.C. Code section 12-21-730 — stamps on each individual package
• Hay v. South Carolina Tax Commission, 255 S.E.2d 837; Fennell v. South Carolina Tax Commission, citation reported in the ruling; and Etiwan Fertilizer Co. v. South Carolina Tax Commission, 60 S.E.2d 682 — dictionary-use authorities cited in the ruling
• S.C. Code section 12-3-170 and SC Revenue Procedure 87-3 — private-letter-ruling authority

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR87-9.pdf

Original ruling text

SC PRIVATE LETTER RULING #87-9

TO:

XYZ, Inc.

SUBJECT:

Clove Cigarettes

REFERENCE:

S.C. Code Sections 12-21-720 and 12-21-730

AUTHORITY:

S.C. Code Section 12-3-170
S.C. Revenue Procedure #87-3

SCOPE:

A Private Letter Ruling is a temporary document issued to a
taxpayer, upon request, and it applies only to the specific facts or
circumstances related in the request. Private Letter Rulings have
no precedential value and are not intended for general distribution.

Question:
What is the definition of the phrase "each individual package" as used in S.C. Code Section 1221-730?
Facts:
S.C. Code Section 12-21-720 reads, "The license taxes imposed on cigarettes by this article shall
be paid by affixing stamps in the manner and at the time set forth in this article." Further, Code
Section 12-21-730 reads, in part, "In the case of cigarettes,.....the stamps shall be affixed to each
individual package......" (emphasis added)
XYZ, Inc. markets a cigarette which contains cloves. Each cigarette is packaged individually, in
a sealed container. In turn, twenty (20) such containers are packaged in a larger box. The
cigarettes may be sold as a package of twenty (20) or separately.
The company requests permission to affix a stamp to the larger, outer box; as opposed to each
cigarette's container.

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Discussion:
Our statutes are silent as to what is meant by the phrase "each individual package," as found at
Code Section 12-21-730. Therefore, one must look to other sources for a definition. It is
accepted practice in South Carolina to resort to the dictionary to determine the meaning of words
used in statutes. For cases where this has been done, see Hay v. S.C. Tax Commission, 255
SE2d 837; Fennell v. S.C. Tax Commission, 102 SE2d 4245; Etiwan Fertilizer Co. v. S.C. Tax
Commission, 60 SE2d 682. Webster's Seventh New Collegiate Dictionary defines the word
"each" as, "being one of two or more distinct individuals having a similar relation and often
constituting an aggregate."
The word "individual" is defined as, "a particular being or thing as distinguished from a class,
species, or collection: as (1) a single human being as contrasted with a social group or institution;
(2) a single organism as distinguished from a group." "Package" is defined as, "a commodity or a
unit of a product uniformly wrapped or sealed; a preassembled unit." A "unit" is "a single
thing.... that is a constituent of a whole."
Based upon the foregoing, the phrase "each individual package," as contained in Code Section
12-21-730, refers to the smallest self-contained entity upon which the stamp is to be applied. For
example - the smallest self-contained entity (unit) of a carton of "regular" cigarettes is the
twenty-cigarette pack; not each individual cigarette, nor the carton.
Conclusion:
It is our determination that the stamps required at Code Section 12-21-720 should be affixed to
each individual cigarette's package if the cigarettes are sold separately. However, if sold as a
self-contained package of twenty (20), then such stamp shall be affixed only to the larger box.
Such shall be accomplished pursuant to the provisions of Code Section 12-21-730.
SOUTH CAROLINA TAX COMMISSION

s/S. Hunter Howard Jr.
S. Hunter Howard, Jr., Chairman

s/John M Rucker
John M. Rucker, Commissioner

s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Commissioner
Columbia, South Carolina
October 7
, 1978

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