Under the Massachusetts tobacco excise tax statute, G.L. c. 64C, it is unlawful for any retailer, with intent to injure competitors, to destroy substantially or lessen competition, to advertise, offer to sell or sell at retail cigarettes at less than cost to the retailer, or for any wholesaler, with intent to injure competitors, to destroy substantially or lessen competition, to advertise, offer to sell or sell at wholesale cigarettes at less than cost to the wholesaler.

In Duarte v. Commissioner Of Revenue, the Appellate Tax Board ("Board") concluded that the Department's regulation, 830 CMR 64C.14.1, "Fair Pricing of Cigarettes," which implements the statutory fair pricing mandate, was invalid. The Board opined that the regulation conflicted with the provisions of G.L. c. 64C and violated due process under the federal and state constitutions.

The Commissioner of Revenue disagrees with the conclusions of the Board and has filed a notice of appeal of the Duarte decision. Until there is a final decision in the case, the Commissioner directs tobacco licensees to continue to seek the prior approval of the Commissioner if they wish to advertise, offer to sell or sell cigarettes at a price that is less than the applicable statutory presumptive cost. See G.L. c. 64C, §§ 13 - 21; 830 CMR 64C.14.1(4).

Tobacco licensees that advertise, offer to sell, or sell cigarettes at a price that is less than the applicable statutory presumptive cost without the prior approval of the Commissioner may be subject to penalties as provided in G.L. c. 64C and G.L. c. 62C, up to and including the revocation of their licenses to sell tobacco products in Massachusetts.

 

/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue

 

AL:MTF:jet

July 25, 2006

TIR 06-12