ATO ID 2009/118: Excise: meaning of tobacco plant
Date of decision: 14 October 2009
Business line: Indirect Tax

Issue
What plant species are tobacco plants for the purposes of the Excise Act 1901 (Excise Act)?

Decision
Species of the Nicotiana genus where the leaves of that species are generally used for smoking, chewing or snuff are considered to be tobacco plants for the purposes of the Excise Act. Nicotiana tabacum, Nicotiana rusticum and Nicotiana sylvestris are tobacco plants for the purposes of the Excise Act. Should varieties of other species of Nicotiana be developed where the leaves are generally used for smoking, chewing or as snuff then those species would also be considered tobacco plants for the purposes of the Excise Act.

Facts
An entity grows a commercial crop of Nicotiana tabacum, Nicotiana rusticum or Nicotiana sylvestris .

Reasons for decision
Summary: Parts III, IV, IVA and X of the Excise Act refer, in various sections, to tobacco seed, tobacco plant or tobacco leaf. For example Part III section 28 of the Excise Act provides that it is an offence for a person who does not have a producer licence to produce tobacco seed, tobacco plant or tobacco leaf. Part IV subsection 39D(1) of the Excise Act refers to tobacco seed, tobacco plant and tobacco leaf in relation to licence conditions. Part IVA section 44 of the Excise Act provides that permission may be given for a person to move tobacco seed, tobacco plant or tobacco leaf from one place to another place. Part X section 117C of the Excise Act provides that it is an offence for a person to unlawfully possess tobacco seed, tobacco plant or tobacco leaf. The Excise Act, however, does not provide a definition of tobacco seed, tobacco plant or tobacco leaf. The Excise Tariff Act 1921 (Excise Tariff Act) is incorporated and read as one with the Excise Act by virtue of section 6 of the Excise Act and the definition of Excise Acts in subsection 4(1) of the Excise Act. The Schedule to the Excise Tariff Act contains the following definition of tobacco: tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant. Item 5 of the Schedule to the Excise Tariff Act includes 'tobacco, cigars, cigarettes and snuff'. Section 68 of the Excise Act states: No person shall be deemed to manufacture merely because he or she cures tobacco leaf as stripped from the plant so as to convert it into leaf tobacco. There is no specific definition of which species of plant are tobacco plants. Therefore to determine which species are tobacco plants, and therefore which seeds, plants and leaf are subject to the controls imposed by the Excise Act requires an examination of the context in which these controls operate. The references to tobacco seed, tobacco plant or tobacco leaf were inserted by the Excise Amendment (Compliance Improvement) Act 2000 . In the Explanatory Memorandum to the Excise Amendment (Compliance Improvement) Bill 2000 the purpose of the amendments is described as: 1.2 The amendments will address deficiencies in existing provisions of the Excise Act that regulate the production, dealing, manufacturing and storage of tobacco. The amendments will create a more robust statutory framework to support the compliance initiatives of the Australian Taxation Office (ATO). They are designed to protect the excise revenue base from the illicit trade in tobacco, and from arrangements prone to duty evasion and deferral in relation to excisable goods generally. Thus the changes made by the Excise Amendment (Compliance Improvement) Act 2000 , including the insertion in various sections of the phrase tobacco seed, tobacco plant and tobacco leaf, were directed at ensuring that excise duty collected on excisable tobacco was not eroded. It can be seen references to tobacco seed, tobacco plants and tobacco leaf are references to those seeds, plants and leaves that can be manufactured into tobacco products such as cigarettes, cigars and smoking or chewing tobacco. In relation to the types of plants the Australian Oxford Dictionary , 2004, 2nd edn, Oxford University Press, Melbourne defines tobacco as: 1. a solanaceous plant of the genus Nicotiana , of American origin, with narcotic leaves used for smoking, chewing, or snuff. 2. its leaves, especially as prepared for smoking The Australian Oxford Dictionary further explains that: Tobacco was originally used by some North American indigenous peoples as a narcotic drink, but by the time that Christopher Columbus (1451-1506) (see Nicotiana) arrived they were smoking it. They used it for ceremonial purposes and believed it to have medicinal properties, which was the main reason for taking it back to Europe. The diplomat Jean Nicot is said to have introduced it to France in 1556. Tobacco was originally smoked mainly in pipes and cigars; cigarettes did not become socially acceptable until the late 18th century. It is usually made from the leaves of common tobacco ( Nicotiana tabacum ) and sometimes from wild tobacco ( N. rusticum ); many varieties have been developed and a number of different additives and preparation techniques are used... The Commissioner considers that the ordinary meaning of tobacco plant in the context of the Excise Act and the Excise Tariff Act is a species of the Nicotiana plant that is used to produce material for smoking, chewing or as snuff. Under this view, there are two aspects that need to be satisfied: Whether material from the plant is to be used to produce material for smoking, chewing or as snuff will depend largely on the physical properties of the plant and how the material produced from the leaf of the plant is used. Historically the Nicotiana species grown for the leaves of the plant to be used for smoking, chewing or as snuff are Nicotiana tabacum and Nicotiana rusticum . Accordingly, a relevant consideration in determining whether other Nicotiana plants are tobacco for the purposes of the Excise Act and the Excise Tariff Act is whether the physical properties of the plant are sufficiently similar to Nicotiana tabacum and Nicotiana rusticum (for example, nicotine content) such that the material produced from the leaf of the plant may be used for smoking, chewing or as snuff. In determining how the material produced from the Nicotiana plant is to be used, it is reasonable for the Commissioner to consider whether there is evidence of the material being used for smoking, chewing or as snuff and whether there are any viable commercial markets for non-tobacco products that use the material. The commercial production of material produced from the leaf of the Nicotiana plant in the absence of viable commercial markets for non-tobacco products may indicate that material derived from those varieties of plants is for smoking, chewing or as snuff. It is well accepted that Nicotiana tabacum and Nicotiana rusticum are tobacco plants that produce tobacco for the purposes of the Excise Act and the Excise Tariff Act. Nicotiana sylvestris has similar physical properties to Nicotiana tabacum and Nicotiana rusticum which makes it suitable for use as material to be smoked, chewed or as snuff or to be blended with tobacco sourced from tabacum or rusticum to produce material for smoking, chewing or as snuff. The Commissioner has identified websites that promote the use of Nicotiana sylvestris for smoking. In relation to viable commercial markets for non-tobacco products, the Commissioner has only identified a relatively small market for the sale of Nicotiana sylvestris seeds to grow ornamental plants. There is no evidence to suggest that the identified seed market is capable of absorbing the produce from the commercial crop of Nicotiana sylvestris . In the context of the commercial crop grown, the Commissioner considers that it is reasonable to conclude that material derived from Nicotiana sylvestris is to be used to produce tobacco. Therefore Nicotiana tabacum, Nicotiana rusticum and Nicotiana sylvestris are tobacco plants for the purposes of the Excise Act. Should varieties of other species of Nicotiana be developed where the leaves are used for smoking, chewing or as snuff then those species would also be considered tobacco plants for the purposes of the Excise Act.

Legislative references: Excise Act 1901 Part III Part IV Part IVA Part X subsection 4(1) section 6 section 28 subsection 39D(1) section 44 section 68 section 117C
Related ATO interpretative decisions: ATO ID 2008/104
Other references: Excise Amendment (Compliance Improvement) Act 2000 Explanatory Memorandum to the Excise Amendment (Compliance Improvement) Bill 2000 The Australian Oxford Dictionary, 2004, 2nd edn, Oxford University Press, Melbourne
Subject references: Tobacco leaf Tobacco plant Tobacco seed