Md. Code Regs. 14.23.02.08

Current through Register Vol. 52, No. 1, January 10, 2025

Section 14.23.02.08 - Wholesaler's Cost of Doing Business

A. Cost of Doing Business.

(1) The cost of doing business is presumed to be 5 percent of the basic cost of cigarettes to the wholesaler.

(2) Unless approved for a lower cost of doing business or meeting legal competition, as provided by this regulation, a wholesaler may not sell cigarettes to a retailer at less than a 5 percent markup.

(3) "Cost of doing business" means the wholesaler's cost of doing business in cigarettes as evidenced by the accounting standards and methods regularly employed by the wholesaler in determining costs for purposes of federal income tax reporting for the total operation of the wholesaler's establishment.

(4) The cost of doing business in cigarettes shall include, without limitation, allocations for:

(a) Labor, including salaries of executives and officers;

(b) Rent;

(c) Depreciation;

(d) Selling costs;

(e) Maintenance of equipment;

(f) Delivery costs;

(g) Interest payable;

(h) All types of licenses, taxes, insurance, and advertising; and

(i) All other direct and indirect costs.

(5) The cost of doing business shall be expressed as a percentage and applied to the basic cost of cigarettes.

(6) A wholesaler who wishes to use the actual cost of doing business to the wholesaler pursuant to §A(3)-(4) of this regulation rather that the presumptive cost of doing business to the wholesaler pursuant to §A(1)-(2) of this regulation shall first establish satisfactory proof of a lesser cost of doing business.

B. When to File Application. A wholesaler who wishes to be approved for a lower cost of doing business shall submit an application to the Executive Director:

(1) If not currently approved for a lesser cost, at least 60 days before the desired effective date;

(2) If currently approved, not later than April 1 annually to be effective with the license year beginning May 1; and

(3) At other times as may be requested by the Executive Director.

C. Application to Contain Certain Information.

(1) An application for permission to sell at less than 5 percent markup shall contain:

(a) A summary of total income and expenses associated with the licensee's entire business, and a summary of total income and expenses associated with cigarettes on a form to be provided by the Comptroller, and using the information set forth in the most recently filed federal income tax reurn;

(b) A certification statement signed by the owner, partner, or responsible corporate officer indicating that the summary of income and expenses as contained on the form required by §C(1)(a) of this regulation is true and accurate;

(c) A statement signed by a certified public accountant indicating the CPA hass reviewed the information provided and that it reasonable reflects the information shown in all material respects;

(d) A copy of the most recently filed federal income tax return form with all associated schedules and attachments;

(e) A copy of any filing by the licensee seeking approval from the revenue authority of Delaware, Pennsylvania, New Jersey, or New York for a lower cost of doing business during the 12 months immediately preceding the application;

(f) A release executed by the owner, partner, or responsible corporate officer authorizing the Comptroller to obtain copies of any documents or data in the possession of any federal, state, or local agency concerning the applicant's request to sell cigarettes at a lower cost of doing business; and

(g) Any other information requested by the Executive Director as may be necessary to review the application.

(2) If the wholesaler regularly engages the services of an independent accounting firm, the statement provided under §C(1)(c) of this regulation shall be signed by a CPA associated with that firm.

D. Review and Determination. The Executive Director shall review and evaluate the information provided by the wholesaler and shall determine he allowable markup. The Executive Director shall notify the wholesaler of the final action on the application, and the specified percentage cost of doing business approved shall remain in effect until the next application and approval or until withdrawn by the Executive Director. If a person with permission to sell at less than a 5 percent markup fails to submit a new application by April 1, then the permission previously given shall be automatically withdrawn on May 1 of the same year.

E. Meeting Lawful Competition. In order to meet lawful competition, any wholesaler may sell to any customer, or offer to sell to any potential customer, at the lowest markup approved for any wholesaler in the State. The Executive Director shall maintain a current list of the lowest currently approved markup which shall be released to wholesalers upon request.

F. Remedy. Notwithstanding approval by the Executive Director of a lower cost of doing business, an affected party who claims to be injured may pursue remedies in a court of competent jurisdiction as provided by Commercial Law Article, § 11-508, Annotated Code of Maryland.

Md. Code Regs. 14.23.02.08

Regulation .08 amended and recodified from 03.02.03.07 effective 49:26 Md. R. 1080, eff. 12/26/2022