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Nebraska Department of Revenue

Nebraska Department of Revenue

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Dear Cigarette Wholesaler and Retailer:

Cigarette Price Increase

Effective December 28, 2003, Philip Morris changed its standard terms rate (cash discount) to 2.0% (.02). This change in the cash discount required the Department to recalculate the wholesale and retail minimum selling prices of cigarettes manufactured and sold by Philip Morris. The new minimum cigarette selling prices are posted on our website. Any additional payments reviewed by a wholesaler or retailer because of their participation in the accelerated payment program, growth program, or participation in PM’s selling presentation cannot be used in determining the wholesale or retail minimum selling prices of cigarettes.

Effective December 29, 2003, RJ Reynolds Tobacco Company announced a price decrease for their Monarch, Best Value, and private label cigarettes. They also implemented a cost-based delivery charge. The delivery charge is part of the invoice cost of cigarettes to the wholesaler. Because of these changes, the Department recalculated the wholesale and retail minimum selling prices. The cost-based delivery charge of twenty cents per thousand cigarettes was added to the invoice cost. The delivery charge is based on the minimum number of cases that can be purchased by any wholesaler. The new minimum cigarette selling prices for cigarettes manufactured and sold by RJR can be found on our website.

Nebraska Revised Statutes section 59-1511(2) prohibits the use of payments made to retailers or wholesalers by a manufacturer for display, advertising, or promotional purposes, or otherwise, in the determination of the cost of cigarettes to the retailer or wholesaler.

In addition, the cigarette minimum price list reflects the only allowable discounts that can be used in determining the minimum wholesale and retail selling prices of cigarettes sold in Nebraska. Manufacturers, wholesalers, and retailers are prohibited from using manufacturer rebates and any other special, extraordinary, or anticipatory discounts to further reduce the minimum selling price of cigarettes.

Flex Funds - Contracted Stores

Retailers and wholesalers are prohibited from using flex funds or other similar funds to increase the lowest buy down amount allowed by the manufacturer or to extend a designated promotion period. The use of such funds does not allow the retailer to sell cigarettes below the established retail minimum selling price as computed according to the Unfair Cigarette Sales Act.

Buy Down Promotions

It is the Department’s determination that cigarette buy down amounts (promotions) must be handled in the same manner as a manufacturer’s coupon for sales and use tax purposes. Retailers selling cigarettes in Nebraska must calculate the appropriate Nebraska and city sales tax on the full retail selling price of the cigarettes prior to the allowance for any buy down amount.

Cigarette Tax Regulation 57-016

Cigarette Tax Regulation 57-016, Coupons For A Reduction In Price, states that the coupon will be invalid if used by the retailer in the retailer’s advertising. Therefore, the rules that apply to coupon promotions also apply to buy down promotions. Therefore, buy down amounts will be invalid and cannot be given to the purchaser if used by the retailer in the retailer’s advertising regardless of whether the selling price after the allowance for the coupon or buy down is above or below the statutorily established retailer’s cost as evidenced by the cigarette minimum pricing list published by the Department.

Cigarette Price Advertising                                                                                            

The Department of Revenue has determined that retailers participating in a buy-down promotion may use promotional signs and displays to advertise the value of a manufacturer’s buy-down or the selling price of the cigarettes after allowance for the buy-down amount. Advertising the selling price net of the buy-down amount is permissible even when the

buy-down amount reduces the sales price below the legal minimum retail selling price.

The promotional signs and displays must identify the full retail selling price prior to the buy-down amount and indicate that the sales tax is computed on the full retail selling price prior to the allowance for the buy-down amount. Please refer to Revenue Ruling 57-02-1 on our website.

Cigarette Tax Regulation 57-013

Cigarette Tax Regulation 57-013, Intent to Injure Competition, states that a sale, offer of sale or advertisement by a retailer, wholesaler, or cigarette manufacturer, of cigarettes at less than cost or an offer of a rebate or concession for the sale of cigarettes or a promotional offer made by cigarette manufacturers for any purpose which is made available to retailers or wholesalers on a localized basis, is prima facie evidence of an intent to injure competition.

Retailers who are in violation of the above regulations, after notice and hearing, could have their local license suspended or revoked. Retailers whose license has been suspended or revoked cannot sell cigarettes or permit cigarettes to be sold during the period of such suspension or revocation.

MSA Compliance

It is very important to routinely check our website to keep updated on changes made to the Manufacturer’s Cigarette Directory. Cigarette brands that are listed in the Directory or included in the alphabetic listing are the only cigarettes brands approved to be sold in Nebraska.

Web Site Address

The Manufacturer's Cigarette Brand Directory, minimum selling prices of cigarettes, and other information can be found on our website at www.revenue.nebraska.gov.

If you have any questions, please contact me or Karen Barrett. I can be reached by calling 402-471-5676 or email, Cliff.Thomas@nebraska.gov. Karen can be reached by calling 402-471-5980 or email, Karen.Barrett@nebraska.gov.


Cliff Thomas
Tax Law Conferee
Legal Services

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