SN 2005(8)

2005 Legislation Affecting the Cigarette Taxes

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Definitions: As used in this Special Notice:

Prior to July 1, 2005, any person making an initial application to be issued a cigarette distributor’s license by DRS who purchased the business of a licensed distributor, or who was the operator or franchisor of five or more Connecticut retail establishments, was exempt from the three-affidavit requirement.

On or after July 1, 2005, a person making an initial application to be issued a cigarette distributor’s license by DRS will not be exempt from the three-affidavit requirement unless the person purchased the business of a licensed distributor or is the operator of five or more retail stores in Connecticut with common ownership and control. A person who is a franchisor of retail stores will not be considered to be an operator of those stores with common ownership and control.

Note: As indicated in Announcement 2005(13), The Connecticut Tobacco Directory, the tobacco product manufacturers listed in the Connecticut Tobacco Directory shall constitute, for purposes of Conn. Gen. Stat. §12-286(a)(2), the recognized manufacturers of cigarettes.

For Cigarette Minimum Pricing Law Purposes, Sales to Franchisors No Longer Treated as Sales to Chain Store Distributors: Under the Connecticut cigarette minimum pricing laws (Conn. Gen. Stat. §§12-326a to 12-326h, inclusive), stampers are prohibited from selling cigarettes below cost to subjobbers, chain stores, or licensed dealers. Cost means the basic cost of cigarettes plus the cost of doing business. In the absence of filing with DRS of satisfactory proof of a lesser or higher cost of doing business, the Connecticut cigarette minimum pricing laws set a presumed cost of doing business for stampers selling cigarettes to subjobbers, chain stores, or licensed dealers.

When a stamper sells cigarettes to a subjobber or chain store, the stamper’s presumed cost of doing business is 7/8 of 1% of the basic cost of the cigarettes to the stamper, plus the cost of cartage to the subjobber or chain store, if performed or paid for by the stamper (with the cost of cartage being presumed to be 3/4 of 1% of the basic cost of cigarettes to the stamper).

When a stamper sells cigarettes to a licensed dealer, the stamper’s presumed cost of doing business is 5 3/4% of the basic cost of the cigarettes to the stamper, plus the cost of cartage to the dealer, if performed or paid for by the stamper (with the cost of cartage being presumed to be 3/4 of 1% of the basic cost of cigarettes to the stamper).

On or after July 1, 2005, stampers shall treat as sales to chain stores, for Connecticut minimum pricing law purposes, only the following sales:

• Sales to any licensed distributor that operates or services 25 or more cigarette vending machines in Connecticut and is buying cigarettes for sale exclusively in such vending machines.
• Sales to any licensed distributor that operates at least five retail stores with common ownership and control. A person who is a franchisor of retail stores will not be considered to be an operator of those stores with common ownership and control.

On or after July 1, 2005, stampers shall treat as sales to licensed dealers, for Connecticut minimum pricing law purposes, any sales made to a person who is a franchisor of retail stores.

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Penalties for Dealers and Distributors Violating Connecticut Laws Prohibiting the Sales of Cigarettes Below Cost: Effective October 1, 2005, the penalties for a licensed dealer who violates the prohibition on selling cigarettes below cost are changed as follows:

• For the first violation, the dealer’s license shall be suspended for not less than seven days, and the dealer shall be assessed a penalty of not less than $1000.
• For a second or subsequent violation within a five-year period, the dealer’s license shall be suspended for not less than 30 days, and the dealer shall be assessed a penalty of not less than $5,000.

Effective October 1, 2005, the penalties for a licensed distributor who violates the prohibition on selling cigarettes below cost are changed as follows:

• For the first violation, the distributor’s license shall be suspended for not less than seven days, and the distributor shall be assessed a penalty of not more than $10,000.
• For a second violation within a five-year period, the distributor’s license shall be suspended for not less than 30 days, and the distributor shall be assessed a penalty of not more than $25,000.
• For subsequent violations within a five-year period, the distributor’s license shall be revoked, and the distributor shall be assessed a penalty of not more than $50,000.

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Excluding Certain Manufacturers From the Connecticut Tobacco Directory: Effective July 1, 2005, DRS shall not include or retain in the Connecticut Tobacco Directory the name or cigarette brand families of any cigarette manufacturer who has failed to secure and retain a cigarette manufacturer’s license under Conn. Gen. Stat. §12-285b.  For more information, see Announcement 2005(13), The Connecticut Tobacco Directory, and Announcement 2004(8.1), Applying for a Cigarette Manufacturer’s License.

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For Further Information: Call DRS during business hours, Monday through Friday:

TTY, TDD, and Text Telephone users only may transmit inquiries anytime by calling 860-297-4911.

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SN 2005(8)
Cigarette Tax
Issued:  11/01/2005