Tobacco Luxury Tax

Please see Publication 541 for general information regarding current laws impacting the distribution, sale and taxation of tobacco products in Arizona.

The Tobacco Luxury Tax FAQs are also available for answers to frequently asked questions regarding tobacco luxury tax.

Please see the attached letter for additional information on how the PACT Act may apply to Electronic Nicotine Delivery Systems.

Taxpayers may also contact the Tobacco Tax Unit at (602) 716-7808 for more information or for assistance.

 

Go to Arizona Luxury Tax Online (ALTO)

 

Reminder Regarding Classification and Reporting of Heat-Not-Burn Products Under Arizona Tobacco Tax Law

The Arizona Department of Revenue (“Department”) hereby provides notice regarding the classification and reporting obligations associated with Heat-Not-Burn tobacco products (“HNB”) under Arizona law.

Heat-Not-Burn products typically consist of two components:

  1. A reusable electronic device designed to heat tobacco; and
  2. Disposable tobacco sticks that contain processed tobacco material, typically referred to as “Heatsticks” or “HEETS.”

As explained in Arizona Luxury Tax Ruling 20-1 (“LTR 20-1”), the U.S. Food and Drug Administration (FDA) has issued an order concluding that a Heatstick meets the definition of a cigarette and thus must adhere to all restrictions and regulations for such. Similarly, Heatsticks are classified as cigarettes for purposes of Arizona tobacco taxes, the Arizona Escrow and Directory statutes, delivery sales ban and any other applicable state laws.

Before any product that meets the statutory definition of a cigarette may be sold in Arizona, the manufacturer and applicable brand must be listed in the Arizona Cigarette Directory. Some HNB products have now been formally included in the Arizona Cigarette Directory.

Only the disposable tobacco sticks are subject to Arizona cigarette tax laws. Accordingly:

  • Each package of Heatsticks must be stamped with the appropriate Arizona cigarette tax stamp prior to distribution for retail sale in the state, in accordance with statutory requirements found in Arizona Revised Statutes Title 42, Chapter 3.
  • Sales and transfers of such packages must be identified as taxable or nontaxable cigarette sales or transfers on all tax returns, reports, and other required filings submitted to the Department.

Tobacco distributors are advised that noncompliance with these requirements—including failure to affix stamps or improper reporting—may result in license revocation, civil penalties, or other enforcement actions as authorized by law.

For further information, please consult LTR 20-1.

Questions regarding compliance may be directed to the Department’s Tobacco Tax Unit at (602) 716-7808 or [email protected].

 

Notice for Licensed Tobacco Distributors regarding Manufacturers’ Invoice Numbers

Pursuant to Arizona Revised Statutes (A.R.S.) § 42-3462(A)(3) and (4), Arizona licensed tobacco distributors are required to reference not only invoice numbers from invoices documenting shipments of cigarettes to their customers but also invoice numbers corresponding to the invoices documenting cigarette shipments by manufacturers to them. 

The Department issues this reminder to all licensed distributors that manufacturers’ invoice numbers must be provided for all cigarette transactions reported on Arizona Luxury Tax Online (ALTO).  Beginning with the February 2020 monthly return that is due on March 20, 2020, the Department will reject returns filed lacking manufacturers’ invoice numbers, and may additionally assess penalties associated with the failure to timely file this data.  The Department also recommends that distributors review monthly returns before the February 2020 return and amend filings that are missing manufacturers’ invoice numbers to avoid additional penalties. 

Please contact the Department’s Tobacco Tax Unit at (602) 716-7808 or [email protected] for additional information or assistance.

 

Reminder of Statewide Prohibition Against Single Cig Sales

The Department has issued Arizona Luxury Tax Notice 20-1, reminding all businesses (retailers, restaurant and bar/lounge operators) that Arizona law prohibits the sale of single cigarettes (loosies) taken out from 20- and 25-cigarette packs.

 

Tax Treatment of “Heat-Not-Burn” Products

The Department has issued Arizona Luxury Tax Ruling 20-1, finding that Heatsticks will be classified as cigarettes for the purposes of Arizona tobacco tax and the state’s Escrow and Directory statutes.

 

Tobacco 21 Legislation

Please be advised, the federal “Tobacco 21” legislation, Pub. L. No. 116-94, § 603 (codified as amended at 21 U.S.C. § 387f) signed by President Trump on December 20, 2019, raises the federal minimum legal age for purchasing tobacco products from 18 to 21.  

For additional guidance on how to comply with the new laws as a tobacco retailer, please consult the U.S. Food and Drug Administration's website at www.fda.gov/tobacco-products/retail-sales-tobacco-products/selling-tobacco-products-retail-stores.  The Department of Revenue, as well as other agencies that have a role in enforcing state tobacco laws, will seek to provide updated guidance to the public should any change to Arizona law occur.

 

Tobacco Distributor Roundtable Meeting

The Arizona Department of Revenue Tobacco Unit invites you to join the semi-annual Tobacco Distributor Roundtable Meeting:

Tuesday, January 28, 2025
9:00 a.m. | Arizona | 30 mins

Join the video meeting at meet.google.com/ckr-hhqc-dgh
To join by phone, dial 1 563-562-6286‬‬ PIN: 270 716 765‬#

 

Roundtable Discussion

July 2022

January 2021

 

 

Distributor Licensing

State law requires distributors that acquire or possess tobacco products for the purpose of making the initial sale or distribution in Arizona to apply for and obtain a tobacco distributor license from the Department.

 

New Applications:

Applications for a tobacco distributor license must be submitted electronically through Arizona Luxury Tax Online (ALTO). The Department may only consider applications that comply with this requirement.

 

License Renewals: 

Licensed distributors are required to renew their license annually. A tobacco distributor license is valid for one year and must be renewed prior to the expiration date.

A license renewal notice will be sent to the distributor two months prior to the license expiration date. The license fee will post to the license account on Arizona Luxury Tax Online (ALTO) at that time. Payment for the license renewal fee must be submitted online. Requests for license renewals are subject to review by the Department to determine continued eligibility.

 

Directory of Arizona Licensed Tobacco Distributors:

ADOR publishes a directory of licensed tobacco distributors, including any trade names or business names used by the licensee. The directory is updated each month to reflect active licensees.

View Directory of Arizona Licensed Tobacco Distributors

Internet and Delivery Sales of Cigarettes and Most Other Tobacco Products are Prohibited.

The sale of cigarettes and most other tobacco products over the internet to any person in Arizona other than a licensed tobacco distributor or retailer is illegal.

For more information, please see the Arizona Attorney General’s website.

Additional Resources

For more information or for assistance, please contact the Tobacco Tax Unit at (602) 716-7808.