Information Release

XT 2017-02 - Excise and Energy Tax Division Information Release – Cigarette – Minimum Pricing of Cigarettes – April 2017, Revised June 2018

This information release is intended to outline a cigarette wholesaler’s ability to use a lower cost of doing business (presumptive markup) when selling cigarette products to licensed retail dealers.

In accordance with R.C. 1333.11, a wholesale dealer of cigarettes must add a three and one-half percent (3.5%) mark-up to cover the cost of doing business prior to selling a cigarette product to a retailer dealer. However, the statute allows a wholesaler to provide proof of a lesser or higher cost of doing business.

The Department of Taxation (“Department”) confirms that a wholesaler recently provided the Department proof of a cost of doing business less than 3.5%.

Pursuant to R.C. 1333.15, a retailer or wholesaler may advertise, offer to sell, or sell any cigarettes at a price made in good faith to meet the price of a competitor who is selling the same article at cost to him as a wholesaler or retailer.

As such, the Department acknowledges that wholesalers selling cigarettes in Ohio may meet this competition by selling cigarettes at or above a price utilizing a markup of .3927% of the cost to the wholesaler in substitution for the 3.5% set forth in R.C. 1333.11(C).

Similarly, a wholesaler that sells cigarettes to a retailer on a cash-and-carry basis may meet competition by selling such cigarettes at or above a price utilizing a markup of .1973% of the cost to the wholesaler.

Please note that the lower percentages contained herein are subject to change and become null and void upon the Department issuing a revised information release or withdrawing this information release.

Please contact the Department at 1-855-466-3921 with any questions regarding this release.

Ohio Department of Taxation
Excise and Energy Tax Division
P.O. Box 530
Columbus, OH 43216-0530
Telephone: (855) 466-3921, option 3
Fax: (206) 350-6722