AN ACT Relating to cigarette sales; amending RCW 19.91.010 and 19.91.020; repealing RCW 19.91.911; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. Section 3, chapter 2, Laws of 1983 as amended by section 1, chapter 173, Laws of 1984 and RCW 19.91.010 are each amended to read as follows:

When used in this chapter, the following words and phrases shall have the meaning ascribed to them in this section, except where the context clearly indicates a different meaning:

(1) "Person" means and includes any individual, firm, association, company, partnership, corporation, joint stock company, club, agency, syndicate, municipal corporation, or other political subdivision of this state, trust, receiver, trustee, fiduciary and conservator.

(2) "Wholesaler" includes any person who:

(a) Purchases cigarettes directly from the manufacturer, or

(b) Purchases cigarettes from any other person who purchases from or through the manufacturer, for the purpose of bona fide resale to retail dealers or to other persons for the purpose of resale only, or

(c) ((~~Services~~)) Supplies retail outlets by the maintenance of an established place of business for the purchase of cigarettes, including, but not limited to, the maintenance of warehousing facilities for the storage and distribution of cigarettes.

Nothing contained ((~~herein~~)) in this chapter shall prevent a person from qualifying in different capacities as ((~~both~~)) a "wholesaler" ((~~and~~)), "service distributor," or "retailer" under the applicable provisions of this chapter.

(3) "Service distributor" means a person who:

(a)(i) Purchases cigarettes directly from the manufacturer;

(ii) Purchases cigarettes from or through the manufacturer for the purpose of bona fide resale to retail dealers or to other persons for the purpose of resale only; or

(iii) Supplies retail outlets by the maintenance of an established place of business for the purchase of cigarettes, including, but not limited to, the maintenance of warehouse facilities for the storage and distribution of cigarettes; and

(b)(i) Extends credit to the retailer allowing more than ten days for payment of invoices after delivery;

(ii) Provides a representative at the retail place of business for counting inventory and processing cigarette orders; or

(iii) Provides product stocking services.

(4) "Retailer" means and includes any person who operates a store, stand, booth, concession, or vending machine for the purpose of making sales of cigarettes at retail.

((~~(4)~~)) (5) "Cigarettes" means any roll for smoking made wholly or in part of tobacco, irrespective of size or shape and whether or not such 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.

((~~(5)~~)) (6) "Sale" means any transfer for a consideration, exchange, barter, gift, offer for sale and distribution, in any manner, or by any means whatsoever.

((~~(6)~~)) (7) "Sell at wholesale", "sale at wholesale" and "wholesale" sales mean and include any bona fide transfer of title to cigarettes for a valuable consideration, made in the ordinary course of trade or in the usual conduct of the wholesaler's or service distributor's business, to a retailer for the purpose of resale.

((~~(7)~~)) (8) "Sell at retail", "sale at retail" and "retail sales" mean and include any transfer of title to cigarettes for a valuable consideration, made in the ordinary course of trade or usual conduct of the seller's business, to the purchaser for consumption or use.

((~~(8)~~)) (9) "Basic cost of cigarettes" means the invoice cost of cigarettes to the retailer ((or)), wholesaler, or service distributor, as the case may be, or the replacement cost of cigarettes to the retailer ((or)), wholesaler, or service distributor, as the case may be, in the quantity last purchased, whichever is lower, less, but not limited to, all discounts for whatever purpose, however stated, to which shall be added the full face value of any stamps which may be required by any cigarette tax act of this state and by ordinance of any municipality thereof, now in effect or hereafter enacted, if not already included by the manufacturer in his list price. ((The disposition of the manufacturers' cash discount is at the discretion of the wholesaler. Any retailer or wholesaler who actually receives and sells cigarettes with trade or cash discounts shall execute a sworn affidavit and obtain a sworn affidavit from the person granting the discount, whether a manufacturer or wholesaler, which shows: (a) Amount or rate of the discount, (b) date the discount was granted, (c) names of the persons granting and receiving the discount, and (d) whether the discount is for cash or trade purposes. Sworn affidavits under this section are maintained for five years and available for inspection by the department of revenue's request. The department of revenue may impose a civil penalty not to exceed two hundred fifty dollars for each failure to maintain affidavits under this section.

~~Nothing in this section may be construed to require any retailer to obtain affidavits from retail purchasers of cigarettes.~~

~~(9)~~)) (10) (a) The term "cost to the wholesaler" or "cost to the service distributor" means the "basic cost of cigarettes" to the wholesaler or service distributor plus the "cost of doing business by the wholesaler" or "cost of doing business by the service distributor" which said cost of doing business amount shall be expressed percentage-wise in the ratio that said wholesaler's or service distributor's "cost of doing business" bears to said wholesaler's or service distributor's dollar volume for all products sold by the wholesaler or service distributor per annum, and said "cost of doing business by the wholesaler" or "cost of doing business by the service distributor" shall be evidenced and determined by the standards and methods of accounting regularly employed by him for the purpose of federal income tax reporting for the total operation of his establishment in his allocation of overhead costs and expenses, paid or incurred, and must include, without limitation, labor costs (including reasonable salaries for partners, executives, and officers), rent, depreciation, selling cost, maintenance of equipment, delivery costs, all types of licenses, taxes, insurance and advertising, expressed as a percentage and applied to the "basic cost of cigarettes". Any fractional part of a cent amounting to one-tenth of one cent or more in cost to the wholesaler or service distributor per carton of ((~~ten packages of~~)) cigarettes as manufactured shall be rounded off to the next higher cent.

(b) For the purposes of this chapter the "cost of doing business" may not be computed using a percentage less than the overall percentage shown in ((~~subsection (9)~~))(a) of this ((~~section~~)) subsection or in the absence of the filing with the department of revenue of satisfactory proof of a lesser or higher cost of doing business by the wholesaler making the sale, the "cost of doing business by the wholesaler" shall be presumed to be ((~~four~~)) two percent of the "basic cost of cigarettes" to the wholesaler, plus cartage to the retail outlet, if performed or paid for by the wholesaler, which cartage cost, in the absence of the filing with the department of revenue of satisfactory proof of a lesser or higher cost, shall be deemed to be one-half of one percent of the "basic cost of cigarettes" to the wholesaler.

(c) For the purposes of this chapter, the "cost of doing business by the service distributor" shall not be computed using a percentage less than the overall percentage shown in (a) of this subsection or, in the absence of the filing with the department of revenue of satisfactory proof of a lesser or higher cost of doing business by the service distributor making the sale, the "cost of doing business by the service distributor" shall be presumed to be four percent of the "basic cost of cigarettes" to the service distributor, plus cartage to the retail outlet, if performed or paid for by the service distributor, which cartage cost, in the absence of the filing with the department of revenue of satisfactory proof of a lesser or higher cost, shall be deemed to be one-half of one percent of the "basic cost of cigarettes" to the service distributor.

((~~(10)~~)) (11) (a) The term "cost to the retailer" means the "basic cost of cigarettes" to the retailer plus the "cost of doing business by the retailer" which said cost of doing business amount shall be expressed percentage-wise in the ratio that said retailers "cost of doing business" bears to said retailers dollar volume per annum, and said "cost of doing business by the retailer" shall be evidenced and determined by the standards and methods of accounting regularly employed by him for the purpose of federal income tax reporting for the total operation of his establishment in his allocation of overhead costs and expenses, paid or incurred, and must include, without limitation, labor (including reasonable salaries for partners, executives, and officers), rent, depreciation, selling costs, maintenance of equipment, delivery costs, all types of licenses, taxes, insurance and advertising, expressed as a percentage and applied to the "basic cost of cigarettes": PROVIDED, That any retailer who, in connection with the retailer's purchase, receives not only the discounts ordinarily allowed upon purchases by a retailer but also, in whole or in part, discounts ordinarily allowed upon purchases by a wholesaler shall, in determining "cost to the retailer", pursuant to this subdivision, add the "cost of doing business by the wholesaler," as defined in ((~~subdivision (9)~~)) subsection (10) of this section, to the "basic cost of cigarettes" to said retailer, as well as the "cost of doing business by the retailer". Any fractional part of a cent amounting to one-tenth of one cent or more in cost to the retailer per carton of ten packages of cigarettes shall be rounded off to the next higher cent.

(b) In the absence of the filing with the department of revenue of satisfactory proof of a lesser or higher cost of doing business by the retailer making the sale, the "cost of doing business by the retailer" shall be presumed to be twelve and five-tenths percent of the "basic cost of cigarettes" to the retailer.

(c) In the absence of the filing with the department of revenue of satisfactory proof of a lesser or higher cost of doing business, the "cost of doing business by the retailer", who, in connection with the retailer's purchase, receives not only the discounts ordinarily allowed upon purchases by a retailer but also, in whole or in part, the discounts ordinarily allowed upon purchases by a wholesaler, shall be presumed to be twelve and five-tenths percent of the sum of the "basic cost of cigarettes" and the "cost of doing business by the wholesaler".

(d) The minimum retail price shall be established by adding fifteen percent to the manufacturer's invoice plus the cost of legally required tax stamps to the manufacturer's invoice cost plus the cost of legally required tax stamps.

(e) If a retailer's actual cost of doing business plus the actual or presumed cost of doing business by the wholesaler or service distributor plus the cost of legally required tax stamps is less than fifteen percent of the manufacturer's invoice cost, a filing of such proof as shall be evidenced and determined by the standards and methods of accounting regularly employed by the retailer for the purpose of federal income tax reporting for the total operation of the retailer's establishment in the allocation of overhead costs and expenses, paid or incurred, and must include, without limitation, labor (including reasonable salaries for partners, executives, and officers), rent, depreciation, selling costs, maintenance of equipment, all types of licenses, taxes, insurance and advertising, expressed as a percentage of manufacturer's invoice and applied to the manufacturer's invoice cost may be presented to the department of revenue and, when approved, a lower retail price can be offered to the retail consumer. The retail price shall not be less than the manufacturer's invoice cost plus the cost of legally required tax stamps plus fifteen percent or the percent cost of doing business as approved by the department of revenue.

((~~(11)~~)) (12) "Business day" means any day other than a Sunday or a legal holiday.

((~~(12)~~)) (13) "Master license system" means the mechanism established by chapter 19.02 RCW by which master licenses, endorsed for individual state-issued licenses, are issued and renewed utilizing a master application and a master license expiration date common to each renewable license endorsement.

Sec. 2. Section 2, chapter 286, Laws of 1957 and RCW 19.91.020 are each amended to read as follows:

It shall be unlawful and a violation of this chapter:

(1) For any retailer ((or)), wholesaler, or service distributor with intent to injure competitors or destroy or substantially lessen competition:

(a) To advertise, offer to sell, or sell, at retail or wholesale, cigarettes at less than cost to such a retailer ((or)), wholesaler, or service distributor, as said cost is defined in this chapter, as the case may be;

(b) To offer a rebate in price, to give a rebate in price, to offer a concession of any kind, or to give a concession of any kind or nature whatsoever in connection with the sale of cigarettes not authorized by this chapter.

(2) For any retailer with intent to injure competitors or destroy or substantially lessen competition:

(a) To induce or attempt to induce or to procure or attempt to procure the purchase of cigarettes at a price less than "cost to wholesalers" as defined in this chapter;

(b) 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.

(3) Any retailer ((or)), wholesaler, or service distributor who violates the provisions of this section shall be guilty of a misdemeanor and shall be prosecuted and punished by a fine of not more than five hundred dollars for each such offense. Any individual who as a director, officer, partner, member, or agent of any person violating the provisions of this act assists or aids, directly or indirectly in such violation, shall equally with the person for whom he acts, be responsible therefor and subject to the punishment and penalties set forth herein.

(4) Evidence of advertisement, offering to sell, or sale of cigarettes by any retailer ((or)), wholesaler, or service distributor at less than cost to him, or evidence of any offer of a rebate in price, or the giving of a rebate in price or an offer of a concession, or the inducing, or attempt to induce, or the procuring, or the attempt to procure the purchase of cigarettes at a price less than cost to the wholesaler or the retailer, shall be prima facie evidence of intent to injure competitors and to destroy or substantially lessen competition.

NEW SECTION. Sec. 3. Section 2, chapter 173, Laws of 1984 and RCW 19.91.911 are each repealed.

NEW SECTION. Sec. 4. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.