taxes

Audit Procedures for Cigarette Tax

Revised 09/2010

Disclaimer: This manual has been written for the purposes of a training tool and as a reference guide for the auditor. Any references to taxability, administrative policies, laws, and rules are subject to change due to administrative hearings and actions of the courts or legislature. While the content of the manual is current as of the revision date, the reader is responsible for any changes occurring after this date and should verify the current status of any information by contacting the Comptroller of Public Accounts toll free at 1-800-252-5555.

Table of Contents

• Chapter 1 – Permits, Records and Reports
• Chapter 2 – Pre-audit Research
• Chapter 3 – Entrance Conference
• Chapter 4 – Audit Procedures for Texas Distributors
• Chapter 5 – Audit Procedures for Out-of-State Distributors
• Chapter 6 – Audit Write-Up
• Appendix: Statute, Rules, and Examples

Introduction

The Texas legislature enacted the cigarette and tobacco tax laws in 1931. The tax on cigarettes in 1931 was $0.03. Effective January 1, 2007, the tax increased to $1.41. Revenues from cigarette tax are allocated to the general and foundation school fund.

The Comptroller was originally charged with the enforcement of the cigarette tax. The Texas State Treasury handled this responsibility from September 1989 until it was abolished in 1997. The Comptroller again took over the responsibility. Currently the Comptroller is responsible for tax collections, account maintenance, enforcement, and audit of cigarette permit holders.

This audit procedure manual has been written for the auditor, to be used as a training tool and reference guide. The information is current as of the date this manual was published. The reader is responsible for any changes that occur after that date.