# COMAR Title 14 — Independent Agencies

## Subtitle 23 — Alcohol, Tobacco, and Cannabis Commission

### Chapter 02 — Maryland Cigarette Sales Below Cost Act

**Authority:** Business Regulation Article, §§16-205(a) and 16-209(b); Commercial Law Article, §§11-501(e)(1)(ii), 11-502(a)(5), and 11-507; Annotated Code of Maryland

**Administrative History:** Effective date:

**Administrative History:** Transferred from COMAR 03.02.03 to COMAR 14.23.02 effective December 26, 2022 (49:26 Md. R. 1080)

**Administrative History:** Regulation .01B amended effective April 13, 2026 (53:7 Md. R. 328)

#### Regulation .01 Definitions.

*COMAR 14.23.02.01*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Alcohol and Tobacco Tax and Trade Bureau” means the Tax and Trade Bureau of the United States Department of the Treasury.

  (2) “Cigarette” means any size or shaped roll for smoking that is made of tobacco or tobacco mixed with another ingredient and wrapped in paper or in any other material except tobacco.

  (3) “Commission” means the Alcohol, Tobacco, and Cannabis Commission.

  (4) “Comptroller” means the Comptroller of Maryland or the Comptroller’s designee.

  (5) “County” means a county of the State of Maryland or Baltimore City.

  (6) “Executive Director” means the Executive Director of the Alcohol, Tobacco, and Cannabis Commission for the State of Maryland or the Executive Director’s designee.

  (7) “Retailer” means any person engaged in the business of making retail sales of cigarettes within the State at a store, stand, booth, or concession, through vending machines, or otherwise, and only applies to the retail sales of cigarettes portion of the person’s business.

  (8) “Sell” includes advertise, offer to sell, or offer for sale.

  (9) Wholesaler.

    (a) “Wholesaler” means a person who purchases cigarettes directly from a manufacturer and only applies to the wholesale sales of cigarettes portion of the person’s business.

    (b) “Wholesaler” includes a person, who, as a sub-wholesaler:

      (i) Purchases cigarettes from another wholesaler solely for the purpose of bona fide resale to retailers other than those directly or indirectly owned, affiliated, or controlled by the wholesaler; and

      (ii) Services the retailers by maintaining an established place of business for the sale of cigarettes, including warehouse facilities, adequate inventory, proper accounting records, and necessary equipment and vehicles for the storage and distribution of cigarettes.

#### Regulation .02 Transportation Costs Calculated as Part of the Basic Cost of Cigarettes.

*COMAR 14.23.02.02*

A. Transportation cost is the expense to ship or deliver cigarettes from a premise other than the retail license location to the retailer's location for final sale.

B. The transportation cost shall be calculated as part of the “basic cost of cigarettes” to the retailer, as provided in Commercial Law Article, § 11-501(e), Annotated Code of Maryland.

C. Section B of this regulation applies when a retailer receives wholesale discounts as provided in the Commercial Law Article, § 11-503(b).

#### Regulation .03 Notice That Wholesaler is Unlicensed.

*COMAR 14.23.02.03*

A licensee who purchases cigarettes at wholesale for the purpose of resale in Maryland at wholesale or retail as defined in the Maryland Cigarette Sales Below Cost Act, from a person not having a license as provided in Business Regulation Article, §16-210, Annotated Code of Maryland shall be deemed not to have had notice and knowledge the wholesaler was unlicensed, if:

A. The licensee making the purchase had no actual notice or knowledge that the wholesaler was not licensed;

B. The licensee making the purchase demanded and received from the unlicensed wholesaler an invoice with each purchase stating affirmatively that the wholesaler was currently licensed; and

C. The invoice shows the identification number of the license issued by the Executive Director.

#### Regulation .04 Applications for Cigarette Licenses.

*COMAR 14.23.02.04*

A. Applications for a retailer's cigarette license or licenses shall show the name and address of the place where cigarettes are sold.

B. Applications for more than one cigarette license shall be accompanied by a list of locations stating names and addresses where cigarettes are sold.

C. Applications by vending machine operators as defined in Commercial Law Article, §11-501(k), for a vending machine operator's cigarette license shall be accompanied by a list showing:

  (1) Names and addresses where cigarette vending machines are located;

  (2) The number of machines at each location; and

  (3) The address of the established place of business maintained by the applicant for the purchase of cigarettes, including but not limited to, the maintenance of warehousing facilities for the storage and distribution of cigarettes.

#### Regulation .05 Applications for Cigarette Licenses.

*COMAR 14.23.02.05*

A. Holders of any cigarette license shall keep and maintain available for inspection during business hours, for a period of 2 years, the following:

  (1) All invoices and bills of lading;

  (2) All records covering all purchases and sales of cigarettes; and

  (3) All records of merchandise sold in connection with cigarettes.

B. The records in §A of this regulation shall be maintained and available for inspection at the license location.

C. Wholesale Sale of Cigarettes.

  (1) Each sale of cigarettes shall be accompanied by an invoice showing the following:

    (a) The date, name, and address of the seller;

    (b) The name and address of the buyer;

    (c) The quantity and brands sold;

    (d) The price charged for each of the brands of cigarettes covered by the invoices;

    (e) The license number of the cigarette license of the seller; and

    (f) The method of delivery (whether delivered by the seller to the buyer's place of business or picked up by the buyer).

  (2) Licensed wholesalers shall maintain a record of the current retailer's cigarette license numbers of all persons to whom they sell cigarettes at wholesale.

  (3) All cash sales made under the provisions of Commercial Law Article, §11-503(a), shall indicate cash sale on the invoice.

  (4) A sale shall be presumed to have been made on other than a cash basis unless otherwise indicated.

D. Cigarette Vending Machine Requirements.

  (1) A licensee who sells cigarettes at retail through a vending machine shall display on each machine:

    (a) A label that indicates the licensee's name, address, and telephone number; and

    (b) The label provided by the Comptroller that states the:

      (i) Age requirement for the purchase of cigarettes, and

      (ii) Penalty as provided by Criminal Law Article, §10-107, Annotated Code of Maryland.

  (2) Operators of cigarette vending machines not covered in §D(1)(a) shall display the retailer's cigarette license on the machines they operate.

E. Other holders of retailer's cigarette licenses shall visibly display the license on the premises where cigarettes are sold.

F. A person selling cigarettes both at wholesale and at retail as provided in Commercial Law Article, §11-501 (m)(3), shall purchase both a wholesaler's cigarette license and a retailer's cigarette license or retailer's cigarette licenses.

G. The licensee described in §F shall maintain the following records:

  (1) All purchases in which the licensee received discounts ordinarily allowed to wholesalers by other wholesalers; and

  (2) Records reflecting which of the licensee's sales were wholesale sales.

H. A vending machine operator holding a cigarette license shall notify the Comptroller within 10 days of the following:

  (1) Discontinuance of a location; or

  (2) Addition of a new location.

#### Regulation .06 Cost to Wholesaler" Eliminated From Certain Purchases.

*COMAR 14.23.02.06*

A person who is a seller at both retail and wholesale as provided in Commercial Law Article, §11-501(m)(3), may:

A. Purchase cigarettes from another wholesaler eliminating the “cost to the wholesaler” from the price paid for the cigarettes, as provided in Commercial Law Article, §11-503(c), only on those cigarettes purchased that are sold at wholesale; and

B. Not purchase cigarettes pursuant to the provisions of Commercial Law Article, §11-503(c), which are sold at retail by the seller who is authorized to sell at both retail and wholesale.

#### Regulation .07 Sales by Manufacturers' Representatives.

*COMAR 14.23.02.07*

A manufacturer's representative who sells cigarettes to a retailer may do so only:

A. As the duly authorized representative of a licensed wholesaler; and

B. On behalf of that wholesaler.

#### Regulation .08 Wholesaler's Cost of Doing Business.

*COMAR 14.23.02.08*

A. Cost of Doing Business.

  (1) The cost of doing business is presumed to be 5 percent of the basic cost of cigarettes to the wholesaler.

  (2) Unless approved for a lower cost of doing business or meeting legal competition, as provided by this regulation, a wholesaler may not sell cigarettes to a retailer at less than a 5 percent markup.

  (3) “Cost of doing business” means the wholesaler's cost of doing business in cigarettes as evidenced by the accounting standards and methods regularly employed by the wholesaler in determining costs for purposes of federal income tax reporting for the total operation of the wholesaler's establishment.

  (4) The cost of doing business in cigarettes shall include, without limitation, allocations for:

    (a) Labor, including salaries of executives and officers;

    (b) Rent;

    (c) Depreciation;

    (d) Selling costs;

    (e) Maintenance of equipment;

    (f) Delivery costs;

    (g) Interest payable;

    (h) All types of licenses, taxes, insurance, and advertising; and

    (i) All other direct and indirect costs.

  (5) The cost of doing business shall be expressed as a percentage and applied to the basic cost of cigarettes.

  (6) A wholesaler who wishes to use the actual cost of doing business to the wholesaler pursuant to §A(3)(4) of this regulation rather that the presumptive cost of doing business to the wholesaler pursuant to §A(1)(2) of this regulation shall first establish satisfactory proof of a lesser cost of doing business.

B. When to File Application. A wholesaler who wishes to be approved for a lower cost of doing business shall submit an application to the Executive Director:

  (1) If not currently approved for a lesser cost, at least 60 days before the desired effective date;

  (2) If currently approved, not later than April 1 annually to be effective with the license year beginning May 1; and

  (3) At other times as may be requested by the Executive Director.

C. Application to Contain Certain Information.

  (1) An application for permission to sell at less than 5 percent markup shall contain:

    (a) A summary of total income and expenses associated with the licensee's entire business, and a summary of total income and expenses associated with cigarettes on a form to be provided by the Comptroller, and using the information set forth in the most recently filed federal income tax return;

    (b) A certification statement signed by the owner, partner, or responsible corporate officer indicating that the summary of income and expenses as contained on the form required by §C(1)(a) of this regulation is true and accurate;

    (c) A statement signed by a certified public accountant indicating the CPA has reviewed the information provided and that it reasonable reflects the information shown in all material respects;

    (d) A copy of the most recently filed federal income tax return form with all associated schedules and attachments;

    (e) A copy of any filing by the licensee seeking approval from the revenue authority of Delaware, Pennsylvania, New Jersey, or New York for a lower cost of doing business during the 12 months immediately preceding the application;

    (f) A release executed by the owner, partner, or responsible corporate officer authorizing the Comptroller to obtain copies of any documents or data in the possession of any federal, state, or local agency concerning the applicant's request to sell cigarettes at a lower cost of doing business; and

    (g) Any other information requested by the  Executive Director as may be necessary to review the application.

  (2) If the wholesaler regularly engages the services of an independent accounting firm, the statement provided under §C(1)(c) of this regulation shall be signed by a CPA associated with that firm.

D. Review and Determination. The  Executive Director shall review and evaluate the information provided by the wholesaler and shall determine he allowable markup. The  Executive Director shall notify the wholesaler of the final action on the application, and the specified percentage cost of doing business approved shall remain in effect until the next application and approval or until withdrawn by the Executive Director. If a person with permission to sell at less than a 5 percent markup fails to submit a new application by April 1, then the permission previously given shall be automatically withdrawn on May 1 of the same year.

E. Meeting Lawful Competition. In order to meet lawful competition, any wholesaler may sell to any customer, or offer to sell to any potential customer, at the lowest markup approved for any wholesaler in the State. The Executive Director shall maintain a current list of the lowest currently approved markup which shall be released to wholesalers upon request.

F. Remedy. Notwithstanding approval by the Executive Director of a lower cost of doing business, an affected party who claims to be injured may pursue remedies in a court of competent jurisdiction as provided by Commercial Law Article, §11-508, Annotated Code of Maryland.