Chapter ATCP 105

ATCP 105.007(1)(b) (b) The invoice cost of cigarettes and other tobacco products, fermented malt beverages, intoxicating liquor, wine, or motor vehicle fuel, whether sold at wholesale or retail, shall be calculated by examining the cost shown on the invoices of the product actually being sold. Invoices of product purchased more than 30 days before the date of sale may not be used. For the purposes of this paragraph, wholesalers and retailers of these products shall use the first-in first-out accounting method when determining what product is actually being sold.

ATCP 105.007 Note Note: Section 100.30 (2) (am) 1. and (c) 1. a, Stats., calculate the retail and wholesale cost of cigarettes and other named products according to the “invoice cost of the merchandise... within 30 days prior to the date of sale.” Some of these products, however, turn over and change prices so rapidly that a 30-day old invoice may not reasonably compare to the cost of product actually being sold. For example, a tanker load of motor vehicle fuel may sell within three to four days. In periods of rising prices, using a 30-day old invoice would create an artificially low price for motor vehicle fuel and would not be a “bona fide cost”, as required by s. 100.30 (2) (b), Stats.

ATCP 105.007 Note If a retailer of cigarettes or other named products has not purchased merchandise within 30 days before the date of sale, the retailer must use “replacement cost” as the basis for determining prices.

ATCP 105.007(3) (3) Trade discounts.

ATCP 105.007(3)(a) (a) In this subsection, “trade discount”means a manufacturer’s or wholesaler’s payment or allowance, either deducted from the purchase price or subsequently paid.

ATCP 105.007(3)(b) (b) A trade discount may be considered as a reduction from invoice or replacement cost if all of the following exist:

ATCP 105.007(3)(b)1. 1. The trade discount is not a customary discount for cash.

ATCP 105.007(3)(b)2. 2. The trade discount is calculated on the basis of the quantity or dollar amount of merchandise actually purchased or sold.

ATCP 105.007(3)(b)3. 3. The trade discount is fully earned and determinable at the time of sale.

ATCP 105.007(3)(b)4. 4. In the case of retail sales of fermented malt beverages, intoxicating liquor, or wine, the trade discount is not in the form of cash, a check, or other equivalent in ready money or merchandise.

ATCP 105.007 Note Note: The trade discount provisions in this subsection apply only to calculations of the cost of merchandise, not calculations of the cost of doing business. Section ATCP 105.08 specifies rules for using discounts when cigarette jobbers or distributors calculate the cost of doing business. The following examples describe the effect of this subsection:

ATCP 105.007 Note (1) An advertising allowance of 20¢ per unit purchased may be considered a cost reduction. An advertising allowance of a flat $1,000 is not a cost reduction.

ATCP 105.007 Note (2) A trade allowance calculated on the basis of quantity sold between April 1 and September 30 may not be used as a cost reduction until September 30, unless the retailer earns the full allowance prior to that date.

ATCP 105.007 Note Section ATCP 105.007 (3) (b) 4. incorporates the provisions of 63 OAG 516, interpreting s. 100.30 (2) (k), Stats.

ATCP 105.007 History History: Cr. Register, August, 1990, No. 416, eff. 9-1-90; r. (2), Register, May, 1999, No. 521, eff. 6-1-99.

ATCP 105.009 ATCP 105.009 Meeting competition.

ATCP 105.009(1) (1) Existing price. A price for merchandise meets an existing price of a competitor under s. 100.30 (6) (a) 7., Stats., only if the merchandise in question is sold on a day when the competitor’s price is in effect and is offered under the same terms and conditions as the competitor’s offer.

ATCP 105.009 Note Note: Under this subsection, if a merchant offers a price reduction with the redemption of a coupon, another merchant can meet this competition with a similar coupon promotion — simply dropping the price of the product, without any coupon redemption, would not be an offer under “the same terms and conditions.”

ATCP 105.009(2) (2) Holders of cigarette permits. A person who holds a cigarette permit under subch. II of ch. 139, Stats., and who also sells merchandise other than cigarettes may reduce the price of the other merchandise to meet a competitor’s existing price, in accordance with the exemption specified in s. 100.30 (6) (a) 7., Stats. Section 100.30 (6) (c) and (d), Stats., which prohibit persons holding these cigarette permits from claiming this exemption, apply only to the sale of cigarettes.

ATCP 105.009(3) (3) Surveys. A wholesaler or retailer who conducts a survey of competitor’s prices in the following manner may rely on the survey of competitor’s existing prices as proof of sale under s. 100.30 (6) (a) 7., Stats., if the department finds the survey to be accurate. Such a survey shall include:

ATCP 105.009(3)(a) (a) The name and address of the person conducting the survey.

ATCP 105.009(3)(b) (b) A description of the product being surveyed.

ATCP 105.009(3)(c) (c) The competitor’s name, address, and selling price.

ATCP 105.009(3)(d) (d) The date and time of the survey.

ATCP 105.009(3)(e) (e) The date and time the wholesaler or retailer met a competitor’s price.

ATCP 105.009(3)(f) (f) Any other elements the department requires.

ATCP 105.009 Note Note: Section 100.30 (6) (a) 7., Stats., also permits merchants to substantiate a competitor’s price by having in their possession an advertisement, proof of sale, or receipted purchase.

ATCP 105.009(4) (4) Pricing to meet competition. A seller may not claim to be meeting competition if the seller’s price is less than the competitor’s price.

ATCP 105.009(5) (5) Credit card promotions; meeting competition.

ATCP 105.009(5)(a) (a) Pursuant to s. 100.30 (6) (a) 7., Stats., a motor fuel retailer may in good faith offer a credit card promotion to meet, but not beat, a credit card promotion that any person offers on credit card purchases of motor fuel from a competing retailer. A retailer may not claim to be meeting competition if the retailer offers the credit card promotion for more than 180 days after the competing credit card promotion is discontinued.

ATCP 105.009(5)(b) (b) If a motor fuel retailer competes in this state with retailers who benefit from a statewide or regional credit card promotion, the retailer may offer a credit card promotion under par. (a) at any or all of its retail locations in that statewide or regional market, regardless of whether the competition occurs at every one of its retail locations in that market.

ATCP 105.009(5)(c) (c) A retailer offering a credit card promotion under par. (a) shall give the department written notice of that promotion, and of any material change in the general terms of that promotion. The retailer notice shall include all the following:

ATCP 105.009(5)(c)1. 1. The retailer’s name, and any trade name under which the retailer offers the credit card promotion.

ATCP 105.009(5)(c)2. 2. The general terms, conditions, and geographic scope of the credit card promotion.

ATCP 105.009(5)(c)3. 3. A description of the credit card promotion that the retailer is purporting to meet, including the person offering the promotion, the general terms of the promotion, and the identity and geographic distribution of competing motor fuel retailers who are benefiting from the promotion.

ATCP 105.009 History History: Cr. Register, August, 1990, No. 416, eff. 9-1-90; cr. (4), Register, May, 1999, No. 521, eff. 6-1-99; cr. (5), Register, March, 2000, No. 531, eff. 4-1-00; CR 16-012: am. (4) Register August 2016 No. 728, eff. 9-1-16.

subch. II of ch. ATCP 105 Subchapter II — Cigarette Pricing

ATCP 105.01 ATCP 105.01 Purpose. The purpose of this subchapter is to interpret the provisions of s. 100.30 (2) (c) 1., Stats. This statute requires cigarette or other tobacco product wholesalers to mark up the price of cigarettes or other tobacco products at least 3%. A wholesaler may sell at a lower markup if the wholesaler can prove a lesser cost of doing business. This subchapter creates a uniform accounting system for establishing that proof. The subchapter governs 2 types of cigarette or other tobacco product wholesalers licensed to do business in this state, jobbers, and distributors. Multiple retailers, whom the statute also includes in its definition of “wholesaler”, are not covered by this subchapter because multiple retailers must include both the wholesaler’s and the retailer’s markups in the prices of their cigarettes and other tobacco products.

ATCP 105.01 History History: Cr. Register, October, 1988, No. 394, eff. 11-1-88; am. Register, August, 1990, eff. 9-1-90.

ATCP 105.02 ATCP 105.02 Definitions. In this subchapter:

ATCP 105.02(1) (1) “Cigarette” has the meaning specified in s. 139.30 (1m), Stats.

ATCP 105.02(2) (2) “Distributor” has the meaning specified in s. 139.30 (3), Stats.

ATCP 105.02(3) (3) “Jobber” has the meaning specified in s. 139.30 (6), Stats.

ATCP 105.02(4) (4) “Multiple retailer” has the meaning specified in s. 139.30 (8), Stats.

ATCP 105.02(5) (5) “Tobacco products” has the meaning specified in s. 139.75 (12), Stats.

ATCP 105.02(6) (6) “Wholesaler” means any person engaged in the business of selling cigarettes or other tobacco products at wholesale in this state, including any person holding a permit as a distributor or jobber but excluding any person holding a permit as a multiple retailer.

ATCP 105.02 History History: Cr. Register, October, 1988, No. 394, eff. 11-1-88; am. (intro.), r. (2), Register, August, 1990, No. 416, eff. 9-1-90; renum. (3) to (7) to be (2) to (6) under s. 13.93 (2m) (b) 1., Stats., Register, August, 1990, No. 416; correction in (1) made under s. 13.93 (2m) (b) 7., Stats., Register November 2006 No. 611.

ATCP 105.03 ATCP 105.03 Determining the cost of doing business.

ATCP 105.03(1) (1) Proof of lesser cost required. Every wholesaler shall mark up cigarette and other tobacco products at least 3% over the cost to wholesaler unless it has in its possession, at the time a sale at a reduced markup is made, written proof of a lesser cost of doing business. The proof shall be in a form that permits a reasonable determination of the cost of doing business, in accordance with the methods specified in this subchapter. The proof shall refer to business records and shall include balance sheets, profit and loss statements, all expense items incurred that appear or should appear on profit and loss statements, and supporting documents and records. Each wholesaler shall use the accrual method of accounting in its proof of a lesser cost of doing business.

ATCP 105.03(2) (2) Reporting requirements. Pursuant to s. 93.15 (1), Stats., the department may require a wholesaler to file copies of its proof of a lesser cost of doing business with the department. The proof shall be submitted within 10 days after the department requests its production. An authorized representative of the wholesaler shall swear that the proof submitted is a factual, accurate representation of the wholesaler’s cost of doing business at the time the sale was made.

ATCP 105.03 Note Note: Failure to comply with s. ATCP 105.03 (2) is subject to the penalty listed in s. 93.21 (4), Stats. Failure to justify a reduced markup by proving a lesser cost of doing business is subject to the penalties listed in s. 100.30 (4) and (5), Stats.

ATCP 105.03 History History: Cr. Register, October, 1988, No. 394, eff. 11-1-88; am. Register, August, 1990, No. 416, eff. 9-1-90.

ATCP 105.04 ATCP 105.04 Period of time to compute expenses. Expense data used to prove a wholesaler’s cost of doing business shall be computed for a 12-month period. This period shall end on the fiscal quarter that the wholesaler most recently completed prior to the date it sells cigarettes or other tobacco products at less than the minimum 3% markup.

ATCP 105.04 History History: Cr. Register, October, 1988, No. 394, eff. 11-1-88; am. Register, August, 1990, No. 416, eff. 9-1-90.

ATCP 105.05 ATCP 105.05 Allocation methods. In order to prove a lesser cost of doing business, a wholesaler shall either use the average expense allocation method specified in ss. ATCP 105.06 and 105.07 or the specific expense allocation method specified in s. ATCP 105.09.

ATCP 105.05 History History: Cr. Register, October, 1988, No. 394, eff. 11-1-88.

ATCP 105.06 ATCP 105.06 Average expense allocation. The average expense allocation method for calculating a wholesaler’s cost of doing business shall allocate a portion of the wholesaler’s expenses incurred in the operation of the business to the sale of cigarettes and other tobacco products, as provided in s. ATCP 105.07, and shall establish the percentage relationship between this portion of total expenses and the cost to wholesaler, calculated over the same 12-month period as used in s. ATCP 105.04, for cigarette and other tobacco products.

ATCP 105.06 History History: Cr. Register, October, 1988, No. 394, eff. 11-1-88.

ATCP 105.07 ATCP 105.07 Factors for allocating expenses. Under the average expense allocation method, all expenses incurred in the operation of the business shall be allocated to the sale of cigarettes and other tobacco products using the following methods:

ATCP 105.07(1) (1) Sales allocation.

ATCP 105.07(1)(a) (a) The expenses listed in par. (b), plus any other expenses incurred in the operation of the business that are not listed elsewhere in this section, shall be allocated according to the percentage that the sale of cigarettes and other tobacco products comprises of total sales.

ATCP 105.07(1)(b) (b) The sales allocation factor applies to the following expenses:

ATCP 105.07(1)(b)1. 1. Bad debts.

ATCP 105.07(1)(b)2. 2. Data processing.

ATCP 105.07(1)(b)3. 3. Depreciation on buildings, except as allocated under sub. (2) (b) 1.

ATCP 105.07(1)(b)4. 4. Depreciation on lease improvements on the wholesaler’s general facilities, other than its warehouse.

ATCP 105.07(1)(b)5. 5. Depreciation on office equipment.

ATCP 105.07(1)(b)6. 6. Non-delivery vehicles.

ATCP 105.07(1)(b)7. 7. Dues, subscriptions, and licenses. Wholesale cigarette sales permit expenses shall be allocated entirely as overhead associated with the sale of cigarettes and other tobacco products. No permit or license expenses required to sell other specific commodities may be allocated to the sale of cigarettes and other tobacco products.

ATCP 105.07(1)(b)8. 8. Miscellaneous expenses.

ATCP 105.07(1)(b)9. 9. Insurance on inventory. If a wholesaler’s inventory insurance is based on the value of inventory these expenses may be allocated based on the percentage that cigarettes and other tobacco product inventory value comprises of total inventory value, rather than on sales. The inventory valuation reports required by the insurer shall be used as the basis of allocation according to inventory value.

ATCP 105.07(1)(b)10. 10. Insurance, except as allocated under subd. 9. and subs. (2) (b) 6. and (3) (b) 2. b.

ATCP 105.07(1)(b)11. 11. Interest, except as allocated under sub. (2) (b) 7.

ATCP 105.07(1)(b)12. 12. Office expenses and supplies.

ATCP 105.07(1)(b)13. 13. Professional fees, except as allocated under sub. (2) (b) 12.

ATCP 105.07(1)(b)14. 14. Promotion and advertising.

ATCP 105.07(1)(b)15. 15. Retirement and employee welfare.

ATCP 105.07(1)(b)16. 16. Salaries, fringe benefits, and other remuneration, including officers’ salaries and payroll taxes, except as allocated under subs. (2) (b) 13. and (3) (b) 1. and 2. a.

ATCP 105.07(1)(b)17. 17. Telephone.

ATCP 105.07(1)(b)18. 18. Rent and real estate taxes, except as allocated under sub. (2) (b) 8.

ATCP 105.07(2) (2) Warehouse space allocation.

ATCP 105.07(2)(a) (a) The expenses listed in par. (b) shall be allocated according to the percentage that the cubic feet of warehouse space used to store cigarettes and other tobacco products comprises of total warehouse space used for the storage of goods for sale. All other space in the warehouse shall be excluded from this percentage calculation, although expenses associated with this space shall be allocated.

ATCP 105.07(2)(b) (b) The space allocation factor applies to the following expenses:

ATCP 105.07(2)(b)1. 1. Depreciation on warehouse buildings.

ATCP 105.07(2)(b)2. 2. Depreciation on lease improvements on warehouses.

ATCP 105.07(2)(b)3. 3. Depreciation on warehouse equipment.

ATCP 105.07(2)(b)4. 4. Warehouse equipment rental.

ATCP 105.07(2)(b)5. 5. Heat, light, power, and water. If any of these items is separately metered for warehouse areas not serving cigarettes and other tobacco products, such as freezers or coolers, these expenses may not be allocated to the sale of cigarettes and other tobacco products. If any of these items is separately metered for warehouse areas serving only cigarettes and other tobacco products, such as humidity-controlled rooms, these expenses shall be allocated entirely to the sale of cigarettes and other tobacco products.

ATCP 105.07(2)(b)6. 6. Insurance on warehouse equipment and buildings.