A. A retailer or wholesaler may pass on to a purchaser or consumer any reduction in cost which results from:
(1) Payment or compensation given by a manufacturer of cigarettes on a uniform and nondiscriminatory basis for promotional services; or
(2) Any coupon issued and ultimately redeemed by a cigarette manufacturer.
B. A coupon may be issued by a manufacturer or a wholesaler acting as an agent of the manufacturer in the following ways:
(1) A separate coupon not affixed to a pack of cigarettes which, upon satisfactory proof of purchase, is redeemed after the purchase with a direct payment to the consumer by the manufacturer; or
(2) An instant rebate coupon or allowance having the effect of a price reduction at the time of the consumer's purchase from the retailer (commonly referred to as a "buydown").
C. Buydown Options. To ensure accountability and compliance with the Cigarette Sales Below Cost Act, three mutually exclusive optional methods of providing future cigarette buydowns apply, as described in §§DF of this regulation.
D. Option 1 Buydown GuidelinesExisting Retail Inventories.
(1) A buydown shall be based on existing inventory on the retailer's premises. Allowances based on future purchases by the retailer are prohibited.
(2) A retailer shall be reimbursed for a buydown simultaneous with or within a reasonable time following the affixing of an "instant" rebate sticker to a pack of cigarettes on the retailer's premises. The amount of reimbursement to the retailer may not exceed the full face value of the number of stickers affixed for any given program.
(3) A manufacturer shall assume all costs related to the buydown program, either through direct payment to the retailer or through a wholesaler acting as the manufacturer's agent.
(4) To ensure there are no excessive payments resulting in a violation of the Cigarette Sales Below Cost Act, if a wholesaler acts as an agent of a manufacturer for a buydown program, the wholesaler shall be reimbursed by the manufacturer in a timely manner.
(5) Any retailer who wishes to participate in a buydown program offered under this option shall be afforded the opportunity to do so by the manufacturer.
E. Option 2 Buydown GuidelinesRebate Stickers.
(1) Rebate stickers shall be:
(a) Affixed by the manufacturer before delivery to the wholesaler; or
(b) Provided by the manufacturer to the wholesaler who shall affix them to packs of cigarettes on the wholesaler's premises before delivery to the retailer.
(2) The retailer shall be reimbursed for the buydown by:
(a) Direct credit on the wholesale to retail invoice; or
(b) Prompt and timely direct payment from the manufacturer.
(3) A manufacturer shall assume all costs related to the buydown program, including reimbursement of the wholesaler's expenses in affixing the rebate stickers.
F. Option 3 Buydown GuidelinesOn-Premise Signage.
(1) A manufacturer may provide one or more signs on the retailer's premises. These signs shall be conspicuously and prominently displayed for the duration of the program and shall at least include the following:
(a) Name of the manufacturer;
(b) Name of the brand;
(c) Period of the buydown, that is, from/to (an additional notation, "while supplies last," may also be included); and
(d) Spaces for the following items:
(i) Retailer's selling price (to be completed by the retailer),
(ii) Manufacturer's discount (buydown), and
(iii) Final selling price (to be completed by the retailer).
(2) A signed buydown agreement shall be executed between the manufacturer and any retailer who engages in this buydown option. The agreement shall include the:
(a) Name of the manufacturer;
(b) Name of the retailer;
(c) Name of the brand or brands designated for buydown;
(d) Specific period of the buydown; and
(e) Amount of manufacturer's discount (buydown).
(3) A manufacturer shall promptly reimburse retailers, either directly or through a wholesaler acting as a manufacturer's agent, for all costs related to the buydown program in accordance with the buydown agreement.
(4) A retailer who does not display the sign or honor the buydown agreement for the duration of the buydown may be prohibited from participating in additional buydowns under this option.
(5) A manufacturer, or wholesaler acting as an agent of a manufacturer, who acts contrary to this section may be prohibited from participating in this option or buydowns in general.
G. Records and DocumentationAll Options.
(1) If a manufacturer maintains an office in the State, the manufacturer shall keep a central file which is available for inspection at that location.
(2) If a manufacturer does not maintain an office in the State, then the central file may be maintained outside the State. However, the manufacturer shall agree to make the records available to the Alcohol and Tobacco Tax Bureau within 48 hours of a request.
(3) Files shall contain complete details on each buydown program identified under any of the buydown options described in §§DF of this regulation. Documentation shall include:
(a) The name and address of all retailers provided a buydown;
(b) The amount of payment;
(c) The method of payment pursuant to one of the options; and
(d) A copy of each signed buydown agreement if option 3 in §F of this regulation is selected.
(4) Records pertaining to each buydown agreement shall be maintained for at least 2 years after the conclusion of the particular program.
(5) Each manufacturer that uses buydowns in the State shall file with the Alcohol and Tobacco Tax Bureau a letter designating where the required records are maintained and the person responsible. The letter shall be updated as conditions and circumstances warrant.