(1)
Cost to retailers or cost to wholesalers. The "cost to the
retailer" and "cost to wholesaler" are defined in Iowa Code section
421B.2. The formulas for
determining the cost to a wholesaler or retailer are not conclusive. The
retailer, wholesaler, or the department may prove that the cost is either
higher or lower.
(2)
Proving higher or lower than statutory presumption.
a. The statutory presumptive cost must be
used in determining minimum price until approval of the request to utilize
another figure is granted by the department. If the requester continues to sell
cigarettes at less than the presumptive cost, the department may revoke the
requester's permit or seek an injunction pursuant to Iowa Code section
421B.10 to prevent such
action.
b. Any wholesaler or
retailer who desires to prove that the wholesaler's or retailer's cost is less
than the statutory presumptive cost computed according to Iowa Code chapter
421B may submit a petition for approval of a lower cost along with actual cost
data to the department.
c. Any
requester making sales of cigarettes in or into Iowa for more than 12 months
shall submit cost data for the 12-month period ending no more than 30 days
prior to the submission of the petition. Any requester making sales of
cigarettes in or into Iowa for less than 12 months shall submit cost data for
the period beginning with the start of business and ending no more than 30 days
prior to the submission of the petition.
d. The department will notify the wholesaler
or retailer of the acceptance or rejection of the petition. If the requester
disagrees with the department's determination, the requester may file an appeal
within 60 days of the department's decision in accordance with provisions of
the "appeals" rule contained in 701-Chapter 7.
(3)
Costs of doing business.
a. Costs of doing business include but are
not limited to freight charges, labor, and equipment costs to affix stamps,
ink, glue, permit fees, management fees, labor costs (including salaries of
officers), rents, depreciation, selling costs, maintenance expenses, interest
expenses, delivery costs, taxes, insurance, advertising expenses, and any other
operational and administrative costs. The requester shall set forth the basis
for allocated costs.
b. When the
computed cost amounts to any fractional part of a cent, the cost must be
rounded up to at least the next higher whole cent.
c. Sales made between wholesalers as provided
for in Iowa Code section
421B.5, sales described in Iowa
Code section 421B.6, and sales outside of the
ordinary channels of trade as provided in Iowa Code section
421B.9 shall not be required to
adhere to the minimum pricing requirements set forth in Iowa Code section
421B.3 and this rule.
(4)
Discounts.
For purposes of determining the basic cost of cigarettes for wholesalers or
retailers, trade or cash discounts may be deducted, if available, even though
not taken. The discount taken or available must be clearly specified on the
invoice or it will not be allowed as a reduction in the basic cost of
cigarettes. Any financial incentive given to a wholesaler or retailer by a
manufacturer at a later date will not reduce the basic cost of
cigarettes.
(5)
Example. The following example will demonstrate the
application of Iowa Code chapter 421B and this rule.
Per thousand cigarettes:
|
Manufacturer cost
|
$149.9500
|
|
Minus 2% discount
|
- 2.9990
|
|
Plus 1/2 of the tax
|
+ 34.0000
|
|
=
|
|
Basic cost of cigarettes
|
$180.9510
|
|
Plus 4% of basic cost
|
+ 7.2380
|
|
=
|
|
Retailer's basic cost
|
$188.1890
|
|
Plus 1/2 of the tax
|
+ 34.0000
|
|
Per 1,000 cigarettes: Wholesaler Minimum price to
retailer
|
=
|
|
Per carton (10 packs of 20 cigarettes):
|
$222.1890
|
|
Wholesaler Minimum Price to Retailer
|
$44.44
|
|
Minus 1/2 state tax
|
-6.80
|
|
Retailer's basic cost
|
$37.6400
|
|
Plus 8% of basic cost
|
+ 3.0112
|
|
Plus 1/2 of state tax
|
+ 6.8000
|
|
=
|
|
Minimum cost per carton to retailer
|
$47.4600
|
|
$4.75/
|
|
Per pack
|
pack
|
This rule is intended to implement Iowa Code sections
421B.2,
421B.3,
421B.5,
421B.6 and
421B.9.
