It has come to the Division’s attention that New Jersey cigarette retailers may not be complying with the minimum pricing law as it applies to the collection of sales tax. The minimum pricing law is set forth in the Unfair Cigarette Sales Act at N.J.S.A. 56:7-1 et seq. A minimum pricing list is drafted and issued by the Director of the Division of Taxation which is available at: Minimum Legal Prices on Cigarettes
Any promotional payments made to a retailer or wholesaler shall not be considered in determining the cost of cigarettes to the retailer or wholesaler as set forth at N.J.S.A. 56:7-28(b), which states that: "Merchandise given gratis or payment made to a retailer or wholesaler by the manufacturer thereof for display, or advertising, or promotion purposes, or otherwise, shall not be considered in determining the cost of cigarettes to the retailer or wholesaler."
The regulations that support the Unfair Cigarette Sales Act state that any sales tax that is assessed on cigarettes will be based on the minimum price or the price for which the pack was sold, whichever is higher.
A specific reference to this rule is set forth at N.J.A.C. 18:6-4.8 which states that: “A vendor shall collect and remit sales tax and/or use tax on the sales price, as defined at N.J.A.C. 18:24-1.2 (which sales price shall include any manufacturer's reimbursable coupon supplied by the purchaser to the vendor) connected with the sale, purchase, exchange or transfer of cigarettes in a promotional transaction. Such taxable sales price connected with the promotional distribution of cigarettes shall in no event be less than the minimum resale price pursuant to N.J.A.C. 18:6-3.1.”
Thus, New Jersey sales tax is due based on at least the minimum price for any sale of cigarettes, regardless of whether a promotion is applied to reduce the cost to the customer in the absence of proof of a lesser or higher cost of doing business.
In establishing the cost of doing business in a promotional transaction, a retailer may provide documentation to the Director establishing that the retailer’s actual costs were wholly or partially reimbursed by the manufacturer, which would reduce the tax base.