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Maryland Alcohol, Tobacco, and Cannabis Commission

TT-63 – Federal floor tax interaction and compliance

Tax Calculation Rules and Edge Cases |

Learn how federal tax changes impact Maryland tobacco tax calculations

This bulletin explains how a federal tobacco floor tax affects how Maryland calculates tax on other tobacco products (OTP). Whether the federal tax is included in the wholesale price determines how much Maryland tax is owed.

What you need to know

  • Federal law increased tobacco taxes and added a floor tax
  • Maryland OTP tax is based on wholesale price
  • Wholesale price may include the federal tax
  • Tax owed depends on how the price is reported

Who This Applies To

  • Other tobacco products (OTP) wholesalers
  • Retailers reporting OTP purchases

What Changed

  • Federal law increased tobacco excise taxes
  • A floor stocks tax was added on certain tobacco products
  • Applies to products held for sale on April 1, 2009

What Is the Floor Tax

  • A federal tax on tobacco inventory held for sale
  • Applies to most tobacco products, cigarette papers, and tubes
  • Does not apply to large cigars

How Maryland Calculates OTP Tax

  • Maryland tax is 15 percent of the wholesale price
  • Wholesale price is what the wholesaler pays
  • This price may include or exclude the federal floor tax

How the Federal Tax Affects Maryland Tax

If federal tax is included in wholesale price:

  • Maryland tax is calculated on the higher amount

If federal tax is not included:

  • Maryland tax is calculated on the lower amount

Examples

If wholesale price includes federal tax:

  • Higher taxable amount
  • Higher Maryland tax owed

If wholesale price excludes federal tax:

  • Lower taxable amount
  • Lower Maryland tax owed

Retailer Reporting

  • Retailers must follow the same rules
  • Report the net invoice amount based on how the price is structured

Effective Date

Federal tax changes effective April 1, 2009

Important Notes

  • Tax calculation depends on how manufacturers price products
  • Wholesalers must understand invoice details
  • Incorrect reporting may lead to errors in tax payments

Need Help?

For questions about these tax changes, contact the Maryland Comptroller’s Office: 410-260-7980

Related files

TT-63 – Federal floor tax interaction and compliance