Bulletin Number
VTB 84-18
Tax Type
Cigarette Tax
Description
Cigarette Sales Below Wholesale Cost Act
Topic
Collection of Tax
Property Subject to Tax
Date Issued
07-06-1984
Cigarette Sales Below Wholesale Cost Act
The 1984 Session of the General Assembly passed House Bill 698 which repeals Title 59.1, Chapter 2, the Unfair Sales Act, and amends the Code of Virginia, Title 59.1 by adding Chapter 23, Cigarette Sales Below Wholesale Cost Act. The effective date of the legislation is July 1, 1984. However, the Department is in process of promulgating regulations for enforcement of the Act which will be effective upon adoption. Furthermore, on July 2, 1984 the Circuit Court for the City of Hampton (Wometco Vending Inc. vs. Commonwealth of Virginia and State Tax Commissioner entered an injunction restraining the Department from enforcing the Act until regulations are adopted.
The Cigarette Sales Below Wholesale Cost Act applies to the wholesale sales of cigarettes and prohibits the sale of cigarettes by a wholesaler at a price below "cost to the wholesaler" as defined by the Act. The Act defines cost to the wholesaler as: invoice cost of the cigarettes to the wholesaler or the replacement cost of the cigarettes to the wholesalers within thirty days prior to date of sale, in the quantity last purchased, whichever is lower, less all trade discounts except customary discounts for cash ant anticipation discounts, to which shall be added: (i) state and local sales taxes paid by the wholesaler with respect to such cigarettes, (ii) freight charges not otherwise included in the cost of the cigarettes, (iii) such cartage to the retail outlet as is actually paid by the wholesaler, or in the case of cartage performed by the wholesaler such cartage cost shall be presumed to be no less than three-fourths of one percent of the cost of the cigarettes to the wholesaler, and (iv) a markup to cover in part the cost of doing business, which markup shall be not less than two percent of the total cost of the cigarettes at a wholesale warehouse or outlet.
The new law allows a wholesaler or any individual the rights of injunctive civil relief against anyone violating this Act and gives the plaintiff the right to recover cost as well as reasonable attorney fees. This right is not affected by the injunction entered July 2, 1984. The Act also provides criminal penalties for violation of pricing requirements and provides for administrative hearings by the State Tax Commissioner for suspension of a violating wholesaler's tax stamping permit during the period of violation.
Anyone having questions regarding this bulletin should contact the Department of Taxation, P.O. Box 6-L, Richmond, Virginia 23282.
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