(i) The department will furnish State of New York cigarette stamps in [75 cent,] $1.50[,] and $1.87½ denominations or the equivalent thereof. In addition, joint stamps of a distinctive color and design will be furnished in $3.00 ($1.50 State tax plus $1.50 city tax per package of 20 cigarettes) and $3.755 ($1.87½ State tax plus $1.88 city tax per package of 25 cigarettes) denominations, or the equivalent thereof, for use on packages of cigarettes to be sold in the City of New York. Such stamps will be of an adhesive and/or heat transfer nature. (Stamps will also reflect prepayment of sales tax on cigarettes imposed under section 1103 of the Tax Law.)

Section 2. Subparagraph (ii) of paragraph (2) of subdivision (b) of section 82.2 of such regulations is amended to read as follows:

(ii) Agent's presumptive minimum markups. In the absence of filing with the Department of Taxation and Finance satisfactory proof of a lesser cost of doing business of the agent making the sale, the cost of doing business by the agent shall presumed to be:

(“a”) ⅞ percent (.875%) of the basic cost of cigarettes plus [1 cent per package of 10 cigarettes,] 2 cents per package of 20 cigarettes and in the case of a package containing more than 20 cigarettes, 2 cents and one-half of a cent for each five cigarettes in excess of 20 cigarettes with respect to sales to CMSA wholesale dealers;

(“b”) 1½ percent (1.5%) of the basic cost of cigarettes plus [1 cent per package of 10 cigarettes,] 2 cents per package of 20 cigarettes and in the case of a package containing more than 20 cigarettes, 2 cents and one-half of a cent for each five cigarettes in excess of 20 cigarettes with respect to sales to chain stores; and

(“c”) 3⅞ percent (3.875%) of the basic cost of cigarettes plus [1 cent per package of 10 cigarettes,] 2 cents per package of 20 cigarettes and in the case of a package containing more than 20 cigarettes, 2 cents and one-half of a cent for each five cigarettes in excess of 20 cigarettes with respect to sales to CMSA retail dealers.

Section 3. Paragraph (2) of subdivision (e) of section 82.2 of such regulations is amended to read as follows:

(2)(i) Agent's sales to other agents (illustrated). A licensed cigarette agent may not sell cigarettes in New York State to any other agent at a price which is less than the basic cost of cigarettes or, using the example in section 80.2 of this Title, $55 per carton. (See section 74.3(a)(3) of this Title for rules pertaining to custom stamping.)

(ii) Agent's sales to CMSA wholesale dealers (illustrated). In the absence of substantiating a lesser actual cost of doing business, a licensed cigarette agent may not sell cigarettes in New York State to any CMSA wholesale dealer at a price which is less than the basic cost of cigarettes plus ⅞ percent of such basic cost plus [1 cent per package of 10 cigarettes,] 2 cents per package of 20 cigarettes and in the case of a package containing more than 20 cigarettes, 2 cents and one-half of a cent for each five cigarettes in excess of 20 cigarettes (the presumed cost of doing business by the agent with respect to such sales) or, using the example in section 80.2, of this Title, $55.69 per carton computed as follows:

(iii) Agent's sales to chain stores (illustrated). A licensed cigarette agent may not sell cigarettes in New York State to a chain store having 15 or more retail outlets, excluding vending machine operators, where such cigarettes are delivered to a central warehouse owned and operated by such chain store and which are then delivered by the chain store to its retail outlets, at a price which is less than the basic cost of cigarettes or, using the example in section 80.2 of this Title, $55.00 per carton. In the case of other chain stores and in the absence of substantiating a lesser actual cost of doing business, a licensed cigarette agent may not sell cigarettes in New York State to such a chain store at a price which is less than the basic cost of cigarettes plus 1½ percent of such basic cost plus [1 cent per package of 10 cigarettes,] 2 cents per package of 20 cigarettes and in the case of a package containing more than 20 cigarettes, 2 cents and one-half of a cent for each five cigarettes in excess of 20 cigarettes (the presumed cost of doing business by the agent with respect to such sales) or, using the example in section 80.2 of this Title, $56.03 per carton computed as follows:

(iv) Agent's sales to CMSA retail dealers (illustrated). In the absence of substantiating a lesser actual cost of doing business, a licensed cigarette agent may not sell cigarettes in New York State to any CMSA retail dealer at a price which is less than the basic cost of cigarettes plus 3⅞ percent of such basic cost plus [1 cent per package of 10 cigarettes,] 2 cents per package of 20 cigarettes and in the case of a package containing more than 20 cigarettes, 2 cents and one-half of a cent for each five cigarettes in excess of 20 cigarettes (the presumed cost of doing business by the agent with respect to such sales) or, using the example in section 80.2 of this Title, $57.34 per carton computed as follows:

(v) Agent's sales to consumers (illustrated). A licensed cigarette agent may not sell cigarettes in New York State at retail, or to any person who cannot prove its status as other than a consumer, at a price which is less than the cost of the CMSA retail dealer or, using the example in section 80.2 of this Title, $61.35 per carton. See section 82.5 of this Part.

The Department of Taxation and Finance submitted for publication in the Rule Review section of the January 3, 2007, State Register summaries of rules that were adopted by the Commissioner of Taxation and Finance in 1997 and 2002, and a notice of the Department's intent to review such rules pursuant to section 207 of the State Administrative Procedure Act. This information was also posted to the Department's Web site (http://www.tax.state.ny.us/rulemaker/regulations/fiveyearrev.htm) on January 2, 2007. Comments from the public concerning the continuation or modification of these rules were invited until February 20, 2007.

The 2002 rule amended sections 70, 74, 79, 80 and 82 of the Cigarette Tax and Cigarette Marketing Standards regulations, as published in Subchapter I of Chapter I of Title 20 NYCRR. The rule, which reflected the statutory increase in the rate of New York State cigarette excise tax that was effective on April 3, 2002; provided for commissions allowable to cigarette tax agents; effectuated the floor tax on cigarettes and unaffixed stamps in inventory; and more realistically reflected the basic cost of cigarettes, was adopted by the Commissioner on March 14, 2002, and published in the State Register on March 27, 2002, (I.D. # TAF-13-02-00010-A).

As a result of its 2007 review, the Department determined that some of the sections that were amended in 2002 are dated and should not be continued without modification. The rule updates sections 74.2 and 82.2 of the regulations by deleting obsolete references to the 75 cent cigarette tax stamp and packages of 10 cigarettes to conform to section 1399-gg of the Public Health Law, which was amended in 2004 to prohibit the sale or distribution of cigarettes in New York State in packages containing fewer than 20 cigarettes. As a result, the Department discontinued the 75 cent cigarette tax stamp that was applicable to packages of 10 cigarettes. The rule also adds a statutory cross-reference to the prepaid sales tax on cigarettes imposed under Tax Law section 1103 and a regulatory cross-reference to custom stamping.

Other than the change made to sections 74.2 and 82.2, the 2002 rule remains valid and is continued without modification.

Assessment of Public Comment

A written comment was received from Daniel T. Warren of West Seneca, NY, in response to TAF-13-02-00010-A, which amended 20 NYCRR Parts 70, 74, 79, 80 and 82, and was part of the listing of rules to be reviewed by the Department in 2007, as published in the State Register on January 3, 2007.

Mr. Warren's comment does not directly pertain to the modification of the rule but, rather, urges our agency to adopt, with certain modifications, a 2003 proposal regarding sales on Indian reservations (TAF-38-03-00017-P) that was allowed to expire. Mr. Warren's suggestion is beyond the scope of this rule which reflected the statutory increase in the rate of New York State cigarette excise tax that was effective on April 3, 2002; provided for commissions allowable to cigarette tax agents; effectuated the floor tax on cigarettes and unaffixed stamps in inventory; and more realistically reflected the basic cost of cigarettes. No changes have been made to the 2002 rule as a result of Mr. Warren's comment.

The Department of Taxation and Finance has determined that no person is likely to object to the adoption of this rule as written because the amendments merely reflect statutory changes that are not controversial in nature. The rule merely updates the Cigarette Tax and Cigarette Marketing Standards regulations by deleting obsolete references to the 75 cent cigarette tax stamp and packages of 10 cigarettes to conform to section 1399-gg of the Public Health Law, which prohibits the sale or distribution of cigarettes in New York State in packages containing fewer than 20 cigarettes. The rule also adds statutory and regulatory cross-references.

A Job Impact Statement is not being submitted with this rule because it is evident from the subject matter of the rule that it would have no impact on jobs and employment opportunities. The rule merely updates the Cigarette Tax and Cigarette Marketing Standards regulations by deleting obsolete references to the 75 cent cigarette tax stamp and packages of 10 cigarettes to conform to section 1399-gg of the Public Health Law, which prohibits the sale or distribution of cigarettes in New York State in packages containing fewer than 20 cigarettes. The rule also adds statutory and regulatory cross-references.