TREASURY DECISION 6262
AMENDING 26 CFR PARTS 270 AND 275
Manufacturers of tobacco, cigars, and cigarettes:
Purpose. The purpose of this industry circular is to advise you of the
amendment of regulations in 26 CFR Parts 270 and 275 by Treasury Decision
6262, published in the Federal Register of November 2, 1957 (22 F. R. 8851),
effective January 1, 1958, and to acquaint you with some of its provisions.
Background. You were advised in Industry Circular No. 57-24, dated
August 20, 1957, regarding the notice of proposed rulemaking, published in
the Federal Register of August 14, 1957 (22 F. R. 6513), to amend sections
270.142, relating to cigars and cigarettes, and 275.132, relating to manufactured tobacco, in order to provide for the utilization of commercial records,
in lieu of the prescribed internal revenue records, by manufacturers of
tobacco products. No objections to the proposed rulemaking were received
during the 30-day period prescribed in the notice, and the amendments so
proposed were adopted by Treasury Decision 6262.
General Comments. Sections 270.142 and 275.132, as amended, specify the
information concerning those operations and transactions which manufacturers
of tobacco, cigars, and cigarettes are required to record. Such information
may be recorded on commercial records or on the presently prescribed
internal revenue records, Form 2141, Record To Be Kept By Manufacturer
Of Tobacco; Form 2142, Record To Be Kept By Manufacturer Of Large
Cigars; and Form 2143, Record To Be Kept By Manufacturer Of Small Cigars
And Large And Small Cigarettes. The entries for each day in the records,
whether in commercial records or in the prescribed internal revenue forms,
will continue to be considered timely if made by the close of the business day
following that on which the operations or transactions occur. Similarly, the
records must be retained by the manufacturer for two years following the
close of the year covered, and must be made available for inspection by any
internal revenue officer upon his request.
Utilization of Commercial Records. The manufacturer whose commercial records reflect the required information concerning his operations and
transactions may, in accordance with amended sections 270.142 and 275.132,
utilize such records, in lieu of maintaining Form 2141, 2142, or 2143, as the
case may be. The regulations do not prescribe any particular form of commercial records, but do require that the prescribed information be readily
ascertainable from the commercial records maintained by the manufacturer.
Use of Internal Revenue Record, Form 2141, 2142, or 2143. If a manufacturer of tobacco products does not maintain and utilize commercial records
which reflect the required information, such manufacturer must, under the
amended regulations, keep the appropriate internal revenue record, Form
2141, 2142, or 2143, as well as the auxiliary and supplemental records of
individual operations and transactions from which such record is compiled.
The two-year retention period also applies to these auxiliary and supplemental records. If you intend to continue to use Form 2141, 2142, or 2143,
you should so advise the assistant regional commissioner (alcohol and tobacco
tax), since he will not furnish supplies of such forms unless requested.
Accounting for Taxpaid Tobacco Products Received into the Factory.
Manufacturers of cigars and cigarettes are required to enter in their records
the number of all taxpaid small cigars, large cigars (itemized by class), small
cigarettes, and large cigarettes, received into the factory (whether withdrawn
from the market or otherwise received) and disposed of. Similarly, manufacturers of tobacco are required to enter in their records the quantity (in pounds)
of all taxpaid manufactured tobacco received into the factory and disposed of,
without itemizing by kinds. You will note that the amendment requires that taxpaid tobacco products received into the factory shall now be timely recorded and
accounted for in the account of taxpaid tobacco products received, irrespective
of the intended disposition of such products. The entries must show the total
number or quantity (itemized by class in the case of large cigars) of such
products received each day. Appropriate entry must be made in this account
of the disposition of such products, such as "reshipped as is" (that is, in the
same packages as received, without reworking or rehandling), "converted to
untaxpaid status" (that is, in connection with a claim or by reworking or
rehandling), "reduced to materials," or "destroyed." The entries must show
separately the total number or quantity (itemized by class in the case of
large cigars) of such products that have been disposed of, each day, in each
such manner. Of course, if such products are converted to an untaxpaid status
in connection with a claim or by reworking or rehandling, entry must also be
made of such products under "received without payment of tax." Similarly,
if such products are reduced to materials, entry must also be made of the
resultant tobacco materials appropriately under "tobacco materials received."
Entries in the records are not required to be made of taxpaid cigars and
cigarettes received into a tobacco factory, or of taxpaid manufactured tobacco
received into a cigar and cigarette factory. However, all taxpaid tobacco
products received into any tobacco products factory must be stored, segregated,
or earmarked in such a manner as to make them readily identifiable as taxpaid products received, for inspection and accounting purposes. Please note
that the entries of receipt and disposition in this accounting of taxpaid tobacco
products received into the factory should not be included in the summary
entries in the monthly reports, Form 2134 or 2136.
Accounting for Untaxpaid Tobacco Products Received into the Factory.
Manufacturers of cigars and cigarettes are required to enter in their records
the number of all untaxpaid small cigars, large cigars, small cigarettes, and
large cigarettes, and manufacturers of tobacco are required to enter in their
records the quantity (in pounds) of all untaxpaid plug, twist and other forms of
leaf, fine-cut chewing, scrap chewing, smoking tobacco, and snuff, received
from another factory, an export warehouse, customs custody, and by withdrawal
from the market (withdrawals in this instance cover only tobacco products
removed for tax-exempt purposes and returned to the factory, and cigars
removed subject to tax payable by return and returned to the factory prior to
the time for payment of such tax). In recording the receipt of such products,
the total number or quantity, as the case may be, of small cigars, large
cigars, small cigarettes, large cigarettes, and manufactured tobacco (itemized
by kind), received each day will be entered in the account of products "received
without payment of tax."
Effect on Prior Instructions. Any prior instructions relative to the keeping
of tobacco products factory records, which are inconsistent or in conflict with
the instructions contained in this industry circular, are hereby amended or
superseded.
Effective Date. Sections 270.142 and 275.132, as amended by Treasury
Decision 6262, and the instructions issued in this industry circular relative
to records required to be maintained under such sections are effective
January 1, 1958.
Inquiries. Inquiries in regard to this industry circular should refer to the
number thereof and should be directed to the appropriate assistant regional
commissioner (alcohol and tobacco tax).
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division
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