In September 2020, the California Department of Tax and Fee Administration (CDTFA) revoked previously issued Special Notice L-698 by issuing Special Notice L-778.  Special Notice L-698 was issued in August 2019 and it attempted to impose an excise tax collection requirement on licensed out-of-state tobacco distributors making sales to licensed tobacco wholesalers located in California. 

Special Notice L-698 was controversial when it was issued because the imposition of excise tax on out-of-state distributors required them to collect the excise tax on the non-discounted selling price to its wholesaler customers, contrary to historical […]

In September 2017, the California Department of Tax and Fee Administration (CDTFA) issued Special Notice L-506 which provides guidance on the application of excise tax on sales from out-of-state licensed tobacco distributors to in-state licensed tobacco distributors.  In summary, Special Notice L-506 states that the sale from an out-of-state licensed tobacco distributor to an in-state licensed tobacco distributor is not a distribution and therefore does not constitute a taxable transaction for the out-of-state licensed distributor.

According to discussions we held with representatives from the CDTFA, the special notice was intended to clarify the long-standing interpretation […]