Oregon Cigarette Tax Bond & Other Tobacco Products Tax Bond
The Oregon Department of Revenue (DOR) requires licensed cigarette and other tobacco product distributors to carry a cigarette tax bond and/or other tobacco products tax bond at twice the estimated monthly tax liability. The bond guarantees licensed distributors pay the required tax timely and follow the statutes under cigarette and tobacco product laws under Oregon Revised Statutes chapter 323.
Distributors selling both cigarettes and other tobacco products are required to carry both the cigarette tax bond and other tobacco products tax bond. There are approximately 30 distributors currently holding both bonds.
How Much Is A Cigarette Tax Bond & Other Tobacco Product Tax Bond in Oregon?
The bond rate is based on the required bond amount and personal credit of the business owner. The bond amount varies depending on the estimated monthly tax liability, the Department of Revenue will help you determine that amount. For any bond above $25,000, Jet may require financial statements such as a balance sheet and income statement to provide a quote.
The cigarette tax bond and other tobacco products tax bonds can be as low as $100 for an annual bond or $10 monthly. Below is an example of rates at different bond amounts:
| Bond Limit | Monthly | Annual |
|---|---|---|
| $10,000 | $10 | $100 |
| $25,000 | $25 | $250 |
| $50,000 | $50 | $500 |
We know that cigarette and tobacco products are heavily regulated and it is a thorough and extensive process to become a distributor. Jet has streamlined the bonding process and lowered pricing to make the bond the easiest step in your licensing.
How Is the Cigarette Tax Bond & Other Tobacco Product Tax Bond Filed to the DOR?
Jet files the original bond copy to the Oregon Department of Revenue on your behalf. We will also email a copy of the bond for your records. In the event that you must file a copy of the bond yourself, below are the addresses for filing with the Oregon Department of Revenue:
Oregon Department of Revenue
955 Center St NE
Salem, OR 97301
-or-
Oregon Department of Revenue
PO Box 14630
Salem, OR 97309
Why Is the Cigarette Tax Bond & Other Tobacco Product Tax Bond Required?
The cigarette tax bond and other tobacco products tax bond is required to ensure that licensed cigarette distributors and tobacco products distributors stay in compliance with ORS 323, but mainly to pay the required taxes for product distribution.
Which Cigarette or Tobacco Related License Needs a Bond?
The Department of Revenue has three separate licenses for businesses that sell and distribute cigarette and other tobacco products. There is a cigarette wholesaler license, cigarette distributor license, and tobacco products distributor license.
Cigarette Distributor’s License: for businesses engaging in the sale of untaxed cigarettes. License holders can buy Oregon tax stamps required to be on packaging for cigarette sales.
APPLY FOR CIGARETTE TAX BOND
Tobacco Products Distributor's License: for businesses who engage in the sale of untaxed tobacco products in Oregon. Bond is required per ORS 323.525.
APPLY FOR OTHER TOBACCO PRODUCTS TAX BOND
Please Note, businesses that hold both a tobacco products distributors license and cigarette distributors must hold both bonds. A business must have a license for each location where tobacco products are sold.
Bonds are not required for a Cigarette Wholesaler License, who buy stamped cigarettes from distributors and resell them to other retailers
How Can I Avoid a Claim On My Cigarette Tax Bond or Other Tobacco Product Tax Bond?
A claim is a result of nonpayment of taxes subject to the tobacco tax laws under ORS 323. Understanding the current tax rates and keeping good records will help to avoid any problems around paying the required taxes to the Department of Revenue.
Taxes for tobacco product distributors are required to be reported on form OR-530 quarterly before the last day of January, April, July, and October. Current tax rates on tobacco products can be found at the DOR tobacco tax overview page.
Cigarette distributors must purchase stamps from the DOR and affix a stamp to each package of cigarettes sold in Oregon. In-state cigarette distributors must file reports on form OR-511-IN and out-of-state distributors on OR-511-OUT. These reconciliation reports must be submitted quarterly by the 20th of the month, even if there was no activity in that quarter. The form asks for information on current cigarette stock and unused stamps. All current information for Oregon cigarette tax can be found at the DOR cigarette tax overview page.
Keep in mind that if you do not make the tax payment on time then the DOR will charge a penalty of 5% of the total including interest, and 20% after 30 days. The DOR can also apply a civil penalty up to $1,000 per violation and/or file a warrant delivered by the sheriff to recover the unpaid taxes.
What Happens If I Get a Claim On My Cigarette Tax Bond or Other Tobacco Product Tax Bond?
Contact Jet upon receipt of a claim notice. The cigarette tax bond and other tobacco products tax bonds are required to ensure that license holders follow the Department of Revenue guidelines and pay the appropriate tobacco products taxes on the tobacco products in a timely manner. While Jet’s claims department works diligently on your behalf to protect you, there is not much room to argue against the state about whether or not you paid the tax. Our goal is to educate you and help prevent claims before they occur.
We will contact you once we hear from the Department of Revenue if they file a claim against the bond. Our team is well equipped and will always do what is in your best interest. Keep in mind that if a Surety pays out on a claim, you are responsible to pay back the Surety for that amount. The bond is not like liability insurance that will cover accidental damages, you are responsible for paying Oregon's required cigarette and tobacco tax. The bond is simply a letter of credit showing the state that the tax is guaranteed to be paid by the Surety, if not by you.
How Is the Cigarette Tax Bond or Other Tobacco Product Tax Bond Renewed?
If you are on monthly payments then you don’t have to worry about renewing your bond. So long as the automatic payment comes through the bond will remain current with the DOR. There is a 15 to 46 day grace period where the bond will remain active with the DOR should a monthly installment be missed for any reason.
Distributors paying the bond on an annual basis only need to submit payment before their renewal date. Don’t worry about putting this on your calendar as Jet will get a hold of you in plenty of time to make payment for the bond renewal. Unlike other insurance companies, we do not require any additional paperwork for bond renewal, just an easy payment. We will inform the DOR about the extension of the bond immediately after renewal.
Can I Cancel the Cigarette Tax Bond or Other Tobacco Product Tax Bond and Get a Refund?
Yes you can with Jet! Jet can quickly file a cancellation notice to the Oregon Department of Revenue and return all unearned premium. For monthly payments we will promptly stop the payment process.
The bond has a cancellation provision, so it will not cancel until the 1st of the month after Jet provides a written notice to the DOR. The bond will cancel the following 1st of the month if cancellation is received on or before the 15th of the month. Otherwise if cancellation is not filed until after it will cancel the 1st of the later month. The bond can only be cancelled in a minimum of 15 days, or maximum 46 days. Premium returns at Jet take into account that cancellation period where the bond is still active as Jet is still providing coverage at that time.
If you miss a monthly payment, we will send you a notice before a cancellation is filed to the DOR to give you time to make payment. Life and business can be distracting and Jet’s team is understanding of that fact as we work with you should a payment be missed. Other carriers leave management of payments to third party financing companies who have no control over bond filing, leaving you to chase down who to make payment to, how to get a bond reactivated, and more often than not dealing with people who are indifferent if your bond is cancelled. Most often these are not even the people who sold you the bond!
