N.Y. Comp. Codes R. & Regs. tit. 20 § 82.3

Current through Register Vol. 46, No. 25, June 18, 2024

Section 82.3 - Unlawful acts of a CMSA wholesale dealer

Tax Law, §§ 483, 484(a) and 485(c)

(a) Notwithstanding any other provision of law and except as specifically provided for in subdivision (c) of this section with respect to sales of cigarettes to other CMSA wholesale dealers, it shall be unlawful and a violation of article 20-A of the Tax Law for any CMSA wholesale dealer:

(1) to induce or attempt to induce or to procure or attempt to procure the purchase of cigarettes at a price which is less than the cost of the agent with respect to sales to CMSA wholesale dealers (see section 82.2 of this Part);

(2) to induce or attempt to induce or to procure or attempt to procure any rebate or concession of any kind or nature whatsoever in connection with the purchase of cigarettes (see Part 84 of this Title for rebates and concessions); or

(3) with the intent to injure competitors or to destroy or substantially lessen competition, or with the intent to avoid the collection or paying over of any taxes as may be required by law, to advertise, offer to sell or sell cigarettes in New York State at less than the cost of the CMSA wholesale dealer (see Part 83 of this Title relating to prima facie evidence of such intentions).

(b)

(1) Cost of the CMSA wholesale dealer. The term cost of the CMSA wholesale dealer means the basic cost of cigarettes (as defined in section 80.2 of this Title) plus the cost of doing business by the agent with respect to sales of cigarettes to CMSA wholesale dealers plus the cost of doing business by the CMSA wholesale dealer. There shall be determined a separate cost of the CMSA wholesale dealer:

(i) for sales of cigarettes by the CMSA wholesale dealer to chain stores; and

(ii) for sales of cigarettes by the CMSA wholesale dealer to CMSA retail dealers.

In the case of sales of cigarettes at retail by a CMSA wholesale dealer, the cost of the CMSA wholesale dealer shall be the same as the cost of the CMSA retail dealer, as such a wholesale dealer is considered to be a CMSA retail dealer for purposes of its sales of cigarettes to consumers (see section 82.5 of this Part).

(2)

(i) The cost of doing business by the CMSA wholesale dealer as used in this subdivision shall mean the CMSA wholesale dealer's cost of doing business as evidenced by the accounting standards and methods regularly employed by the CMSA wholesale dealer in determining costs for purposes of Federal income tax reporting for the total operation of the dealer's establishment. The cost of doing business must include, without limitation, labor (including salaries of executives and officers), rent, depreciation, selling costs, maintenance of equipment, delivery costs, interest payable, all types of licenses, taxes, insurance and advertising, and must be expressed as a percentage and applied to the basic cost of cigarettes. A CMSA wholesale dealer who wishes to use the actual cost of doing business by the CMSA wholesale dealer pursuant to this subparagraph in determining the cost of the CMSA wholesale dealer, rather than using the presumptive cost of doing business by the CMSA wholesale dealer pursuant to subparagraph (ii) of this paragraph, must first establish such actual cost of doing business to the satisfaction of the Department of Taxation and Finance.

(ii) "CMSA wholesale dealer's presumptive minimum markups". In the absence of filing with the Department of Taxation and Finance satisfactory proof of a lesser cost of doing business of the CMSA wholesale dealer making the sale, the cost of doing business by the CMSA wholesale dealer shall be presumed to be:

(a) 5/8 percent (.625%) of the basic cost of cigarettes with respect to sales to chain stores; and

(b) 3 percent (3%) of the basic cost of cigarettes with respect to sales to CMSA retail dealers.

(3) Any fractional part of a cent in the cost of the CMSA wholesale dealer per carton of cigarettes must be rounded off to the next higher cent.

(4) In accord with section 80.2(a)(3) of this Title, the Department of Taxation and Finance will periodically publish a separate cost of the CMSA wholesale dealer for sales to chain stores and to CMSA retail dealers based on the presumed costs of doing business by the CMSA wholesale dealer. Such costs will be for standard brands and may be used to comply with this section with respect to standard brands.

(c) When a CMSA wholesale dealer sells cigarettes to another CMSA wholesale dealer, the dealer making such sale shall not be required to include in the selling price, the cost of the CMSA wholesale dealer as defined herein. However, no such sale shall be made at a price which is less than the cost of the agent with respect to sales to CMSA wholesale dealers. Upon resale of cigarettes to any CMSA retail dealer, the CMSA wholesale dealer who purchased the cigarettes for resale shall be deemed to be the CMSA wholesale dealer governed by this section.

(d)

(1) A CMSA wholesale dealer may not purchase cigarettes in New York State at a price which is less than the cost of the agent with respect to sales to CMSA wholesale dealers. A CMSA wholesale dealer who wishes to purchase cigarettes at a price which is less than the cost of the CMSA retail dealer, must furnish its supplier with a copy of its New York State certificate of license as a wholesale dealer, which must be applicable to both articles 20 and 20-A of the Tax law. Just as the supplier must have knowledge of its purchaser, so too must a purchasing CMSA wholesale dealer have knowledge of its supplier. A CMSA wholesale dealer must be capable of demonstrating to the satisfaction of the Department of Taxation and Finance that it purchased cigarettes at a price which was not less than the cost of the agent with respect to sales to CMSA wholesale dealers. In doing so, such dealer may ultimately need to call upon its supplier to help establish such cost.

(2) A CMSA wholesale dealer, who has no reason to believe otherwise, may assume that it has not violated any provisions of article 20-A of the Tax Law, where such dealer purchases standard brand cigarettes in this State at a price which is greater than or equal to the cost of the agent for sales to CMSA wholesale dealers, as periodically published by the department in accordance with section 82.2(b)(4) of this Part.

(e)

(1) A CMSA wholesale dealer may not advertise the sale of cigarettes in New York State at a price which is less than the cost of the CMSA retail dealer, unless the advertisement specifies the class of trade eligible to purchase at such price (i.e., CMSA wholesale dealers, chain stores and/or CMSA retail dealers). A CMSA wholesale dealer may not offer to sell cigarettes in this State to any person at a price which is less than the cost of the CMSA retail dealer, unless the CMSA wholesale dealer believes in good faith that such person is eligible to purchase cigarettes as a CMSA wholesale dealer, chain store or CMSA retail dealer. A CMSA wholesale dealer may not sell cigarettes in this State to any person at a price which is less than the cost of the CMSA retail dealer, unless the CMSA wholesale dealer has been furnished with, and accepts in good faith, proof of such person's status as a licensed CMSA wholesale dealer, as a registered chain store or as a CMSA retail dealer.

(2)

(i) In the case of sales of cigarettes to other CMSA wholesale dealers at a price which is less than the cost of the CMSA retail dealer, the selling CMSA wholesale dealer must receive from the purchaser a copy of the purchaser's valid New York State certificate of license as a wholesale dealer of cigarettes which does not, on its face, indicate that it is only applicable to article 20 of the Tax Law. Such price shall not be less than the cost of the agent with respect to sales of cigarettes to CMSA wholesale dealers.

(ii) In the case of sales of cigarettes to chain store at a price which is less than the cost of the CMSA retail dealer, the CMSA wholesale dealer must receive from the purchaser a copy of the purchaser's valid New York State certificate of registration as a chain store. Such price shall not be less than the cost of the CMSA wholesale dealer with respect to sales of cigarettes to chain stores.

(iii) In the case of sales of cigarettes to CMSA retail dealers at a price which is less than the cost of the CMSA retail dealer, the CMSA wholesale dealer must receive from the purchaser a copy of such purchaser's valid New York State certificate of registration as a retail dealer. Such prices shall not be less than the cost of the CMSA wholesale dealer with respect to sales of cigarettes to CMSA retail dealers.

(3) The certificates described in paragraph (2) of this subdivision must be given to the CMSA wholesale dealer and accepted in good faith at the time of the first sale of cigarettes to the respective purchasers. The certificates must be retained by the dealer and all applicable subsequent transactions must be associated with such certificates. A certificate is accepted in good faith when the CMSA wholesale dealer has no knowledge or reason to believe that the certificate given by the purchaser is false or fraudulently presented. Additionally, in the case of sales to other CMSA wholesale dealers and chain stores, the dealer making the sale must, at the time of each sale, verify that the name of the purchaser appears on the applicable current listing of CMSA wholesale dealers or chain stores, as periodically published by the Department of Taxation and Finance.

(f)Illustrations.

(1) The following illustrations exemplify the provisions of this section with respect to purchases and sales of cigarettes by CMSA wholesale dealers. Such illustrations are a continuance of section 82.2(e)(2)(ii) of this Part and will be referred to throughout this Part in further explanation of the cigarette marketing standards.

(2) Purchases by the CMSA wholesale dealer (illustrated). A CMSA wholesale dealer may not purchase cigarettes in New York State at a price which is less than the cost of the agent with respect to sales to CMSA wholesale dealers or, using the cited example in section 82.2 of this Part, $86.96 per carton.

(3)

(i) CMSA wholesale dealer's sales to other CMSA wholesale dealers (illustrated). A CMSA wholesale dealer may not sell cigarettes in New York State to any other CMSA wholesale dealer at a price which is less than the cost of the agent with respect to sales to CMSA wholesale dealers or, using the cited example in section 82.2 of this Part, $86.96 per carton.

(ii) CMSA wholesale dealer's sales to chain stores (illustrated). In the absence of substantiating a lesser actual cost of doing business, a CMSA wholesale dealer may not sell cigarettes in New York State to any chain store at a price which is less than the basic cost of cigarettes plus the cost of doing business by the agent with respect to sales to CMSA wholesale dealers plus 5/8 percent of the basic cost (the presumed cost of doing business by the CMSA wholesale dealer with respect to such sales) or, using the cited example in section 82.2 of this Part, $87.49 per carton. Such amount is computed as follows:

Basic cost of cigarettes	$86.00
Agent's presumed cost of doing business
Percentage mark-up (.875% of $86.00)	+.7525
2 cents/package of 20 cigarettes multiplied by
10 packages/carton	+ .20
Wholesaler's presumed cost of doing business
(.625% of $86.00)	+ .5375
Cost of the CMSA wholesale dealer for sales to chain stores	$87.49

(iii) CMSA wholesale dealer's sales to CMSA retail dealers (illustrated). In the absence of substantiating a lesser actual cost of doing business, a CMSA wholesale dealer may not sell cigarettes in New York State to any CMSA retail dealer at a price which is less than the basic cost of cigarettes plus the cost of doing business by the agent with respect to sales to CMSA wholesale dealers plus 3 percent of the basic cost (the presumed cost of doing business by the CMSA wholesale dealer with respect to such sales) or, using the cited example in section 82.2 of this Part, $89.54 per carton. Such amount is computed as follows:

Basic cost of cigarettes	$86.00
Agent's presumed cost of doing business
Percentage mark-up (.875% of $86.00)	+.7525
2 cents/package of 20 cigarettes multiplied by
10 packages/carton	+ .20
Wholesaler's presumed cost of doing business (3% of $86.00)	+ 2.58
Cost of the CMSA wholesale dealer for sales to CMSA retail dealers
(rounded to next higher cent)	$89.54

(iv) CMSA wholesale dealer's sales to consumers (illustrated). A CMSA wholesale dealer may not sell cigarettes in New York State at retail, or to any person who cannot prove its status as other than a consumer, at a price which is less than the cost of the CMSA retail dealer or, using the cited example in section 82.2 of this Part, $95.80 per carton. See section 82.5 of this Part.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 82.3