Current through Register Vol. 49, No. 9, September, 2024
Pursuant to the authority granted by Section 12 of Act 101 of
1951, the Director of the Department of Finance and Administration does hereby
promulgate the following regulation for the enforcement and administration of
Act 101 of 1951.
(a) EFFECTIVE DATE.
This Regulation shall be effective November 6, 1995.
(b) DEFINITIONS. For the purpose of this
Regulation, the following definitions apply:
(1) "Person" means and includes any
individual, firm, association, company, partnership, corporation, joint-stock
company, club, agency, syndicate, the State of Arkansas, county, municipal
corporation, or other political subdivision of this state, receiver, trustee,
fiduciary or trade association;
(2)
"Cigarettes" means and includes any roll for smoking made wholly or in part of
tobacco, irrespective of six or shape and whether or not the tobacco is
flavored, adulterated, or mixed with any other ingredient, the wrapper or cover
of which is made of paper or any other substance or material, except
tobacco.
(3) "Wholesaler" means and
includes (i) any person who brings or causes to be brought into Arkansas
unstamped cigarettes purchased directly from a manufacturer and who sells at
least 75% of such cigarettes to retailers or other wholesalers; (ii) any person
who retails cigarettes to consumers and purchasers at least 75% of such
cigarettes directly from a manufacturer; (iii) any person who purchases
cigarettes, at least 75% of which purchases are for resale to other retailers
in Arkansas, from another person who purchases directly from a manufacturer;
and (iv) any person who operates at least thirty (30) cigarette vending
machines and who acquires cigarettes solely for the purpose of resale in such
vending machines.
(4) "Retailer"
means and includes (i) any person or persons engaged in the business of
reselling cigarettes in Arkansas, except as otherwise defined in this
Regulation; and (ii) any person placing a cigarette vending machine at any
location, except as otherwise defined in this Regulation.
(5) "Sale" or 'Sell" means and includes any
transfer for consideration, exchange, barter, gift, offer for sale,
advertisement for sale, solicitation of any order, and distribution in any
manner.
(6) "Basic cost" means the
lower of the invoice cost or replacement cost of cigarettes, less all trade
discounts, except cash discounts, plus the face value of tax stamps. Said basic
cost will be determined as of a date within thirty(30) days prior to sale and
in accordance with the quantity last purchased by the wholesaler or
retailer.
(7) "Rebate" means and
includes the return "of any part of a payment or the reduction of any
payment.
(8) "Concession" means and
includes any inducement, promise, payment, gift or inventive given or
offered.
(9) "Combination sale"
means and includes every sale of two (2) or more items of property at a single
price where at least one (1) of such items is cigarettes.
(c) DETERMINATION OF BASIC COST.
(1) Basic cost of cigarettes to both
wholesalers and retailers is the lower of the invoice cost or replacement cost
of the cigarettes, less all trade discounts, except cash discounts, plus the
full face value of tax stamps required and
(2) This cost will be determined as of a date
within 30 days prior to date of sale, in the quantity last purchased prior to
sale, and
(3) The Commissioner may,
in his discretion, perform cost surveys, using recognized statistical and cost
accounting practices, including evidence of the normal, customary and
prevailing terms and discounts in connection with similar sales to determine
the basic costs of cigarettes to either a wholesaler or retailer.
(d) WHOLESALER'S MINIMUM PRICE.
(1) As a result of information received by
the Miscellaneous Tax Section, Revenue Division, Arkansas Department of Finance
and Administration, the wholesaler's cost of doing business has been
established to be one-half of one percent (0.5%) of the wholesaler's basic
cost. Therefore, the minimum price which can be charged by a wholesaler for
cigarettes is the sum of the wholesaler's basic cost plus 0.5% of the basic
cost, i.e. basic cost plus 0.5% of basic cost = minimum price.
(2) A wholesaler who can prove to the
satisfaction of the Commissioner of Revenues that the wholesaler's cost of
doing business is less than one-half of one percent (0.5%) may, upon prior
written approval by the Commissioner, charge a lesser price for cigarettes than
that established by the formula in the above paragraph. A wholesaler who
desires to charge a lesser price must first request in writing permission to do
so. Written requests must be delivered to the Miscellaneous Tax Section and
must set forth in detail the accounting standard and methods, computations, and
other relevant information which support the wholesaler's claimed cost of doing
business. Permission to sell cigarettes at a price-less than that established
by the formula in the above paragraph can be obtained only by prior written
approval from the Commissioner.
(3)
If the Commissioner approves a minimum price for a wholesaler, less than the
price set by the formula (cost plus 0.5%), then all wholesalers doing business
in the state can sell at that minimum price.
(e) RETAILER'S MINIMUM PRICE.
(1) The minimum price which can be charged by
a retailer for cigarettes is the sum of the retailer's basic cost plus six
percent (6%) of the basic cost, i.e. basic cost + 6% of basic cost - minimum
price. A retailer may seek approval of a different minimum price by complying
with the same requirements imposed upon wholesalers in the second paragraph of
section (d) of this Regulation.
(2)
If the Commissioner of Revenue approves a price less than formula (cost plus
6%), then all retailers can sell at that minimum price.
(3) In the case of any retail dealer who in
connection with the retail dealer's purchase of any cigarettes shall receive
not only the discounts ordinarily allowed upon purchases by a retail dealer but
also in whole or in part the discounts ordinarily allowed upon purchases by a
wholesale dealer, the cost of doing business by the retail dealer with respect
to the said cigarettes shall be, in the absence of proof of a lesser or higher
cost of doing business by the retail dealer, the sum of the cost of doing
business by the retail dealer and, to the extent that he shall have received
the full discounts ordinarily allowed to a wholesale dealer, the cost of doing
business by a wholesale dealer as defined in subdivision (d)(1) of this
Regulation.
(f)
PROHIBITED ACTS.
(1) All wholesalers and all
retailers are prohibited from selling cigarettes at less than minimum
price.
(2) All wholesalers and all
retailers are prohibited from giving or offering rebates or concessions in
connection with sales of cigarettes.
(3) All retailers are prohibited from
inducing or procuring, and attempting to induce or procure, the purchase of
cigarettes for a price less than the wholesaler's minimum price.
(4) All retailers are prohibited from
inducing or procuring, and attempting to induce or procure, any rebate or
concession in connection with the purchase of cigarettes.
(5) Every retailer and wholesaler, when
making any combination sale, is prohibited from selling at a price less than
his cost of all items sold. With respect to cigarettes sold, "cost" means
minimum price as defined in this Regulation. With respect to items other than
cigarettes, "cost" means invoice cost. Therefore, no wholesaler or retailer
will be allowed to reduce a price, offer a rebate or offer free property in
return for a purchase of cigarettes.
(6) Any person committing any of the above
mentioned acts will be presumed to have acted with the purpose of damage or
injure competition.
(g)
SALES EXEMPT FROM REGULATION. Conditioned upon prior approval by the
Commissioner of Revenues, the provisions of this Regulation will not apply to a
sale at wholesale or retail made:
(1) In an
isolated transaction and not in the usual course of business; or
(2) Where cigarettes are sold in a genuine,
good faith clearance sale for the purpose of discontinuing trade in such
cigarettes; or
(3) Where cigarettes
are sold as imperfect or damaged; or
(4) Where cigarettes are sold upon the final
liquidation of a business; or
(5)
Where cigarettes are sold by any fiduciary or other officer pursuant to a Court
order.
(h) LICENSE
REQUIREMENTS. No person shall engage in or conduct the business of wholesaling
or retailing cigarettes without having first obtained every license required by
the Arkansas Tobacco Products Tax Act [Ark. Code Ann. §§
26-57-201
through
26-57-254
(1987)]. A separate license must be obtained for each place of business from
which a wholesaler or retailer sells or intends to sell cigarettes. No licensed
wholesaler can operate as a retailer until a retailer's license is first
secured, and no licensed retailer can operate as a wholesaler until a
wholesaler's license is first secured.
(i) CRIMINAL PUNISHMENT. Any wholesaler or
retailer who commits any act which is prohibited by section (f)(1) through
(f)(4) of this Regulation will be subject to a misdemeanor criminal charge
punishable by a fine of up to five hundred dollars ($500.00) and will be
immediately referred to the appropriate prosecuting attorney for the county
where the offense occurred.
(j)
REVOCATION OR SUSPENSION OF LICENSE. "Any wholesaler or retailer who fails or
refuses to comply with any of the provisions of this Regulation will have his
license revoked or suspended by the following procedure:
(1) The Commissioner will give the person
notice, in writing and
(2) The
notice will advise the person as to the specific allegations against him,
and
(3) The notice will provide the
time and place of a hearing, and
(4) The notice will explain that the person
must appear at the hearing and show cause why their license should not be
suspended or revoked, and
(5) The
notice will explain that failure to appear will result in immediate suspension
or revocation of the license.
(k) CIVIL LIABILITY. Any wholesaler or
retailer who fails or refuses to comply with any provision of this Regulation
will be subject to being sued by the Commissioner of Revenues to prevent,
restrain or enjoin any violation or threatened violation by the wholesaler or
retailer.
(I) FINDING OF IMMINENT
PERIL AND STATEMENT OF REASONS. Pursuant to the authority granted by Act 101 of
1951, the Director has reduced the minimum wholesale price for cigarettes. This
change will directly affect all cigarette wholesalers and indirectly affect
cigarette retailers and the public. Accordingly, their exists an imminent peril
to the welfare of the State of Arkansas. In order to ensure understanding and
compliance with Act 101 of 1951, it is necessary that this emergency regulation
become effective November 6, 1995.
EXPLANATION OF MISCELLANEOUS TAX REGULATION 1995-5
This regulation replaces Miscellaneous Tax Regulation -1988-2.
This regulation reduces the wholesalers minimum price for selling cigarettes.
Currently the minimum price is four percent (4%) above the basic cost, and
after this regulation the minimum price will be reduced to one-half of one
percent (0.5%) above the basic cost. This reduction in the minimum price is due
to a request and information provided by a licensed wholesaler, pursuant to
Regulation 1 988-2. The other changes in the regulation were necessary to bring
the regulation into conformance with the existing language of the
statute.
