KRS 138.146 — Evidence of cigarette tax payments -- When payment for units of cigarette tax evidence shall be made -- Consequence of failure to make timely payment

(1) The cigarette tax shall be due when any licensed wholesaler or unclassified acquirer
takes possession within this state of untax-paid cigarettes.
(2) (a) The cigarette tax shall be paid by the purchase of stamps by a resident
wholesaler within forty -eight (48) hours after the wholesaler receives the
cigarettes.
(b) A stamp shall be affixed t o each package of an aggregate denomination not
less than the amount of the cigarette tax on the package.
(c) The affixed stamp shall be prima facie evidence of payment of the cigarette
tax.
(d) Unless stamps have been previously affixed, they shall be aff ixed by each
resident wholesaler prior to the delivery of any cigarettes to a retail location or
any person in this state.
(e) The evidence of cigarette tax payment shall be affixed to each individual
package of cigarettes by a nonresident wholesaler prior to the introduction or
importation of the cigarettes into the territorial limits of this state.
(f) The evidence of cigarette tax payment shall be affixed by an unclassified
acquirer within twenty-four (24) hours after the cigarettes are received by the
unclassified acquirer.
(3) (a) The department shall by regulation prescribe the form of cigarette tax
evidence, the method and manner of the sale and distribution of cigarette tax
evidence, and the method and manner that tax evidence shall be affixed to the
cigarettes.
(b) All cigarette tax evidence prescribed by the department shall be designed and
furnished in a fashion to permit identification of the person that affixed the
cigarette tax evidence to the particular package of cigarettes, by means of
numerical rolls or other mark on the cigarette tax evidence.
(c) The department shall maintain for at least three (3) years information
identifying the person that affixed the cigarette tax evidence to each package
of cigarettes. This information shall not be ke pt confidential or exempt from
disclosure to the public through open records.
(4) (a) Units of cigarette tax evidence shall be sold at their face value, but the
department shall allow as compensation to any licensed wholesaler an amount
of tax evidence equ al to a proportionate rate of one and one -half cents
($0.015) on each twenty (20) cigarettes.
(b) The department shall have the power to withhold compensation as provided in
paragraph (a) of this subsection from any licensed wholesaler for failure to
abide by any provisions of KRS 138.130 to 138.205 or any administrative
regulations promulgated thereunder. Any refund or credit for unused cigarette
tax evidence shall be reduced by the amount allowed as compensation at the
time of purchase.
(5) (a) Payment for units of cigarette tax evidence shall be made at the time the units
are sold, unless the licensed wholesaler:
1. Has filed with the department a bond, issued by a corporation authorized
to do surety business in Kentucky, in an amount:
a. Determined by the department; or
b. i. Not less than the monthly average of payments by the
wholesaler for the units of cigarette tax evidence purchased
in the immediately preceding calendar year, which may be
delayed under paragraph (b) of this subsection; and
ii. No greater than ten million dollars ($10,000,000); and
2. Has registered and agrees to make the payment of tax to the department
electronically.
At no time shall the licensed wholesaler be allowed to delay any payment for
units of cigarette tax eviden ce, including tax, penalty, interest, or collection
fees, which would exceed the amount of bond filed with the department.
(b) Except as provided in paragraph (c) of this subsection, if the licensed
wholesaler qualifies under paragraph (a) of this subsecti on, the licensed
wholesaler shall have ten (10) days from the date of purchase to remit
payment of cigarette tax, without the assessment of civil penalties under KRS
131.180 or interest under KRS 131.183 during the ten (10) day period.
(c) 1. The ten (10) day payment period under paragraph (b) of this subsection
shall not apply to the payment for units of cigarette tax evidence during
the last ten (10) days of the month of June during each fiscal year.
2. All payments for units of cigarette tax evidence mad e under paragraph
(b) of this subsection during the month of June shall be made the earlier
of:
a. The ten (10) day period; or
b. June 25.
(d) If the licensed wholesaler does not make the payment of cigarette tax within
the ten (10) day period, or within t he period of time under paragraph (c) of
this subsection, the department shall:
1. Revoke the license required under KRS 138.195;
2. Issue a demand for payment in an amount equal to the cigarette tax
evidence purchased, plus all penalties, interest, and co llection fees
applicable, up to the amount of the required bond; and
3. Require immediate payment of the bond.
(6) (a) The bond required under subsection (5) of this section shall be on a form and
with a surety approved by the department.
(b) The licensed wholesaler shall be named as the principal obligor and the
department shall be named as the obligee within the bond.
(c) The bond shall be conditioned upon the payment by the licensed wholesaler of
all cigarette tax imposed by the Commonwealth.
(d) The pro visions of KRS 131.110 shall not apply to the demand for payment
required under subsection (5)(c)2. of this section.
(7) (a) No tax evidence may be affixed, or used in any way, by any person other than
the person purchasing the evidence from the department.
(b) Tax evidence may not be transferred or negotiated, and may not, by any
scheme or device, be given, bartered, sold, traded, or loaned to any other
person.
(c) Unaffixed tax evidence may be returned to the department for credit or refund
for any reason satisfactory to the department.
(8) (a) In the event any retailer receives into his possession cigarettes to which
evidence of Kentucky tax payment is not properly affixed, the retailer shall,
within twenty-four (24) hours, notify the department of the receipt.
(b) The notification to the department shall be in writing, stating the name of the
person from whom the cigarettes were received and the quantity of those
cigarettes.
(c) The written notice may be:
1. Given to any field agent of the department; or
2. Directed to the commissioner of the Department of Revenue, Frankfort,
Kentucky.
(d) If the notice is given by means of the United States mail, it shall be sent b y
certified mail.
(e) Any such cigarettes shall be retained by the retailer, and not sold, for a period
of fifteen (15) days after giving the notice provided in this subsection.
(f) The retailer may, at his option, pay the tax due on those cigarettes according to
administrative regulations prescribed by the department, and proceed to sell
those cigarettes after the payment.
(9) (a) Cigarettes stamped with the cigarette tax evidence of another state shall at no
time be commingled with cigarettes on which the Kentucky cigarette tax
evidence has been affixed.
(b) Any licensed wholesaler, licensed sub -jobber, or licensed vending machine
operator may hold cigarettes stamped with the tax evidence of another state
for any period of time, subsection (2) of this section notwithstanding.