An Act Relating to Uncollectible Cigarette and Tobacco Taxes
Maine Legislature, Session 123, LD 1169
Committee: Taxation
Sponsors: MITCHELL, CROCKETT, PERRY
Amends: 36 MRSA §4366-A

Legislative Document 
No. 1169 
S.P.417 
March 7, 2007 
An Act Relating to Uncollectible Cigarette and Tobacco Taxes 
Reference to the Committee on Taxation suggested and ordered printed. 
JOY J. O'BRIEN 
Secretary of the Senate 
Presented by Senator MITCHELL of Kennebec. 
Cosponsored by Representative CROCKETT of Augusta and Senator: PERRY of Penobscot, 
Representative: PlOTT! of Unity. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §4366-A, sub-§4-B is enacted to read: 
4-B. Credit for worthless account. Tax paid by a licensed distributor pursuant to 
this section with regard to stamps affixed to cigarettes sold to a retailer on credit for 
which payment has not been received may, if and to the extent that the account is charged 
off as uncollectible on the books of the distributor, be credited against the amount of tax 
due for stamps purchased subsequently by the distributor. 
The credit allowed by this subsection is allowed only for debts charged off on or after 
July 1, 2007 and the credit must be claimed within one year of the charge-off. If a 
licensed distributor subsequently collects all or part of a debt with respect to which the 
distributor has claimed a credit under this subsection, the distributor shall remit the 
amount collected, to the extent of the credit, to the assessor within 60 days or upon the 
distributor's next purchase of cigarette tax stamps, whichever occurs sooner. 
For the purposes of determining eligibility for a credit under this subsection, a partial 
payment by a payor to a distributor must be chronologically applied to the earliest debt 
arising from taxes imposed under this chapter and chapter 704 that is owed by that payor 
before the payment is applied to any other debt owed by the payor to the distributor. 
A credit claimed pursuant to this subsection must be made on a form prescribed and 
furnished by the assessor and must include: 
A. A copy of the original invoice documenting the sale of cigarettes to the retailer; 
B. Evidence acceptable to the assessor that the cigarettes described in the invoice 
were delivered to the retailer that ordered them; 
C. Evidence acceptable to the assessor that the retailer who ordered and received the 
cigarettes did not pay the distributor for the cigarettes and that the distributor used 
commercially reasonable collection practices in attempting to collect the debt; and 
D. Any other information reasonably required by the assessor. 
Sec. 2. 36 MRS A §4404, as amended by PL 2005, c. 627, § 1 0, is repealed and the 
following enacted in its place: 
§4404. Returns; payment of tax and penalty; credits 
1. Generally; monthly reports; records. Every distributor subject to the licensing 
requirement of section 4402 shall on or before the last day of each month submit, on a 
form prescribed and furnished by the State Tax Assessor, a report together with payment 
of the tax due under this chapter stating the quantity and the wholesale sales price of all 
tobacco products held, purchased, manufactured, brought in or caused to be brought in 
from outside the State or shipped or transported to retailers within the State during the 
preceding calendar month. The monthly report must contain such further information as 
the assessor may require. Every distributor shall keep complete and accurate records at 
its principal place of business to substantiate all receipts and sales of tobacco products. 
2. Credits allowed. A licensed distributor is entitled to a credit against tobacco 
taxes paid as follows. 
A. A licensed distributor that has paid tax on tobacco products that are returned to a 
manufacturer because they have become unfit for use, sale or consumption is entitled 
to a credit for that tax on a subsequent return upon receipt of the credit notice from 
the original supplier. The credit allowed by this paragraph must be claimed on a 
form prescribed and furnished by the assessor and must be submitted to the assessor 
within 90 days of the return of the unsalable tobacco products to the manufacturer. 
B. A licensed distributor that has paid tax on tobacco products that are sold to a 
retailer on credit for which payment has not been received is entitled to a credit for 
that tax to the extent that the account is charged off as uncollectible on the books of 
the distributor. The credit allowed by this paragraph is allowed only for debts charged 
off on or after July 1, 2007 and the credit must be claimed within one year of the 
charge-off. If a licensed distributor subsequently collects all or part of a debt with 
respect to which the distributor has claimed a credit under this paragraph, the 
distributor must remit the amount collected, to the extent of the credit, to the assessor 
on its next monthly return. For the purposes of determining eligibility for a credit 
under this paragraph, a partial payment by a payor to a distributor must be 
chronologically applied to the earliest debt arising from taxes imposed under chapter 
and this chapter that is owed by that payor before the payment is applied to any 
other debt owed by the payor to the distributor. 
A credit claimed pursuant to this paragraph must be made on a form prescribed and 
furnished by the assessor and must include: 
( I) A copy of the original invoice documenting the sale of tobacco products to 
the retailer; 
(2) Evidence acceptable to the assessor that the tobacco products described in the 
invoice were delivered to the retailer that ordered them; 
(3) Evidence acceptable to the assessor that the retailer who ordered and received 
the tobacco products did not pay the distributor for the tobacco products and that 
the distributor used commercially reasonable collection practices in attempting to 
collect the debt; and 
(4) Any other information reasonably required by the assessor. 
3. Unlicensed distributors. A person who is not a distributor licensed pursuant to 
this chapter who imports, receives or otherwise acquires tobacco products for use or 
consumption in the State from a person other than a licensed distributor shall file, on or 
before the last day of the month following each month in which tobacco products were 
acquired, a return on a form prescribed by the assessor together with payment of the tax 
imposed by this chapter at the rate provided in section 4403. The return must report the 
quantity of tobacco products imported, received or otherwise acquired from a person 
other than a licensed distributor or retailer during the previous calendar month and 
additional information the assessor may require. 
SUMMARY 
This bill provides a mechanism for distributors of tobacco products and cigarettes 
who pay the cigarette tax up front to receive a credit for the tax paid by them on products 
for which the distributor is not paid and the distributor has been unable to reclaim.