S-3895 _______________________________________________
SENATE BILL NO. 5041
_______________________________________________
State of Washington 49th Legislature 1986 Regular Session
By Senators Moore, Sellar and Wojahn
Read first time 1/24/86 and referred to Committee on Commerce & Labor.
AN ACT Relating to the unfair cigarette sales below cost act; amending RCW 19.91.010, 19.91.020, 19.91.040, and 19.91.050; adding new sections to chapter 19.91 RCW; creating a new section; repealing RCW 19.91.030, 19.91.060, 19.91.080, 19.91.090, 19.91.100, and 19.91.911; and providing an expiration date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. It is the intent of the legislature to hereby continue the regulation of the retail pricing practices of cigarettes. This action is taken with recognition of predatory pricing practices often used with respect to this product in the absence of such regulation and that such unregulated practices may promote increased consumption or over consumption of cigarettes, dramatically affect the competitive balance between retailers in the state, decrease state tax revenues, and otherwise adversely affect the interests of the citizens of the state.
Although the legislature in the past has also regulated wholesale pricing practices, the legislature no longer recognizes the need for such a complete scheme of price regulation.
Sec. 2. 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 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 shall prevent a person from qualifying in different capacities as both a "wholesaler" and "retailer" under the applicable provisions of this chapter.
(3) "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) "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) "Sale" means any transfer for a consideration, exchange, barter, gift, offer for sale and distribution, in any manner, or by any means whatsoever.
(6) "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 business, to a retailer for the purpose of resale.
(7) "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) (("Basic
cost of cigarettes" means the invoice cost of cigarettes to the retailer
or wholesaler, as the case may be, or the replacement cost of cigarettes to the
retailer or wholesaler, as the case may be, in the quantity last purchased,
whichever is lower, 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) (a) The
term "cost to the wholesaler" means the "basic cost of
cigarettes" to the wholesaler plus the "cost of doing business by the
wholesaler" which said cost of doing business amount shall be expressed
percentage-wise in the ratio that said wholesalers "cost of doing
business" bears to said wholesalers dollar volume for all products sold by
the wholesaler per annum, and said "cost of doing business by the
wholesaler" 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 per carton of ten packages of cigarettes
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 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 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.
(10) (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) 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".
(11))) "Manufacturers invoice price" means the
cost charged by the manufacturer to a wholesaler or retailer without reduction
as a result of any customary cash, anticipatory volume, or other discounts
which may by federal or state law be allowed, to which shall be added the full
face value of any stamps which may be required by any cigarette tax act of this
state, by the federal government, and by ordinance of any municipality, now in
effect or hereafter enacted, if not already included in the price charged by
the manufacturer.
(9) "Business day" means any day other than a Sunday or a legal holiday.
(((12)))
(10) "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.
NEW SECTION. Sec. 3. A new section is added to chapter 19.91 RCW to read as follows:
The price charged for cigarettes to all retail consumers in the state of Washington shall be not less than the manufacturer's invoice price plus seventeen percent. In computing this price, 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.
NEW SECTION. Sec. 4. A new section is added to chapter 19.91 RCW to read as follows:
Each retailer licensed to sell cigarettes in this state shall maintain at his or her place of business records which clearly show the manufacturer's invoice price. The records shall be available during all regular business hours for inspection by the state department of revenue, its employees, agents, or designees, or upon request by any member of the public. The retailer shall obtain such documents as may be needed to prove the manufacturer's invoice price, and all wholesalers or manufacturers selling cigarettes to retailers in the state of Washington, or which ultimately are sold to retailers in the state of Washington, shall provide the retailer with such documentation as may be needed by the retailer to comply with this section.
Sec. 5. 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)) 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, 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.
(((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))) (c) 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)))
(2) Any retailer ((or wholesaler)) 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)) section
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)))
(3) Evidence of advertisement, offering to sell, or sale of cigarettes
by any retailer ((or wholesaler)) 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.
Sec. 6. Section 4, chapter 286, Laws of 1957 and RCW 19.91.040 are each amended to read as follows:
(1) In all
advertisements, offers for sale or sales involving two or more items, at least
one of which items is cigarettes, at a combined price, and in all
advertisements, offers for sale, or sales, involving the giving of any gift or
concession of any kind whatsoever (whether it be coupons or otherwise), the
retailer's ((or wholesaler's)) combined selling price shall not be below
the (("))cost to the retailer((" or the "cost to the
wholesaler", respectively,)) of the total costs of all articles,
products, commodities, gifts and concessions included in such transactions.
(2) In all
advertisements, offers for sale, or sales wherein there is accepted as part of
the purchase price any coupon, discount slip, trading stamp, or similar device,
the net purchase price after deducting the value of said coupon, discount slip,
or trading stamp, shall be not less than the retailers((, or the wholesalers,
as the case may be, as defined by this chapter, as being "cost of the
retailer", or "cost of the wholesaler", respectively)) cost.
Sec. 7. Section 5, chapter 286, Laws of 1957 and RCW 19.91.050 are each amended to read as follows:
The
provisions of this chapter shall not apply to sales at retail ((or sales at
wholesale)) made:
(1) As an isolated transaction and not in the usual course of business;
(2) Where cigarettes are advertised, offered for sale, or sold in bona fide clearance sales for the purpose of discontinuing trade in such cigarettes and said advertising, offer to sell, or sale shall state the reason therefor and the quantity of such cigarettes advertised, offered for sale, or to be sold;
(3) Where cigarettes are advertised, offered for sale, or sold as imperfect or damaged, and said advertising, offer to sell, or sale shall state the reason therefor and the quantity of such cigarettes advertised, offered for sale, or to be sold;
(4) Where cigarettes are sold upon the final liquidation of a business; or
(5) Where cigarettes are advertised, offered for sale, or sold by any fiduciary or other officer acting under the order or direction of any court.
NEW SECTION. Sec. 8. A new section is added to chapter 19.91 RCW to read as follows:
This chapter shall be reviewed under the process provided in chapter 43.131 RCW before December 1, 1995. Unless extended by law, this chapter shall be terminated on June 30, 1996.
NEW SECTION. Sec. 9. The following acts or parts of acts are each repealed:
(1) Section 3, chapter 286, Laws of 1957 and RCW 19.91.030;
(2) Section 6, chapter 286, Laws of 1957 and RCW 19.91.060;
(3) Section 8, chapter 286, Laws of 1957, section 13, chapter 278, Laws of 1975 1st ex. sess. and RCW 19.91.080;
(4) Section 9, chapter 286, Laws of 1957 and RCW 19.91.090;
(5) Section 10, chapter 286, Laws of 1957 and RCW 19.91.100; and