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Ezel / Tax Rulings / NE
NE 57-02-1 Cigarette Tax 2002-03-14

Can a cigarette retailer advertise a manufacturer buy-down price, and how must sales tax be shown?

Short answer: Yes, with conditions. Under Revenue Ruling 57-02-1, a cigarette retailer taking part in a manufacturer's buy-down promotion may use promotional signs and displays to advertise either the manufacturer's buy-down amount or the selling price after the buy-down allowance -- even if the buy-down drops the price below the legal minimum retail selling price under the Unfair Cigarette Sales Act. The advertisement must also identify the full retail selling price before the buy-down and indicate that sales tax is computed on that full retail selling price before the allowance for the buy-down. A buy-down is a promotional payment a cigarette manufacturer makes to a retailer on a particular brand to reduce the retail price to consumers.

Apply this to your situation

This page answers the general question as of 2002. Ezel answers yours, under current Nebraska tax law, with citations.

Currency note: this ruling is from 2002
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Revenue Ruling of the Nebraska Department of Revenue, a guidance document stating the Department's interpretation of how Nebraska tax law applies. Each Nebraska guidance document carries the notice that it 'is advisory in nature but is binding on the Nebraska Department of Revenue until amended.' Unlike a private letter ruling, a Revenue Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it. Nebraska's local option sales and use taxes are administered by the Department, not self-collected by home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Nebraska tax professional about your situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

Cigarette manufacturers often run "buy-down" promotions — a manufacturer pays a retailer a set amount on a particular brand so the retailer can lower the shelf price to consumers. This ruling answers whether a Nebraska retailer may advertise that promotional price, given that Nebraska's Unfair Cigarette Sales Act sets a legal minimum retail selling price for cigarettes.

What the retailer may advertise. The Department says a retailer in a buy-down promotion may use promotional signs and displays to advertise either:

  • the value of the manufacturer's buy-down, or
  • the selling price after the buy-down allowance.

Advertising the price net of the buy-down is allowed even when the buy-down drops the price below the legal minimum retail selling price.

The two conditions. The promotional signs and displays must:

  1. identify the full retail selling price before the buy-down amount; and
  2. indicate that sales tax is computed on the full retail selling price before the allowance for the buy-down.

In other words, the customer can be shown the discounted price, but the sign has to make clear what the full price is and that sales tax is calculated on the full price, not the reduced one.

What this means for you

A cigarette retailer running a manufacturer buy-down

You can advertise the discounted (net-of-buy-down) price on your signage — even below the usual minimum price — as long as the sign also shows the full retail price and states that sales tax is figured on that full price before the buy-down.

A customer buying discounted cigarettes

The sale price you pay may reflect the buy-down, but the sales tax on the purchase is calculated on the full retail price before the manufacturer's discount, not on the lower advertised price.

Common questions

Q: Can a retailer advertise a cigarette price below the state minimum during a buy-down?
A: Yes — advertising the price net of a manufacturer's buy-down is permissible even when it is below the legal minimum retail selling price, provided the sign meets the two conditions.

Q: What must the promotional sign show?
A: The full retail selling price before the buy-down, and a statement that sales tax is computed on that full price before the buy-down allowance.

Q: Is sales tax charged on the discounted price or the full price?
A: On the full retail selling price before the buy-down allowance.

Citations and references

  • Unfair Cigarette Sales Act (Nebraska) — establishes the legal minimum retail selling price for cigarettes that the buy-down advertising is measured against.
  • Buy-down — a promotional payment a cigarette manufacturer makes to a retailer on a particular brand to reduce the retail price to consumers.

Source

Original ruling text

Revenue Ruling 57-02-1
March 14, 2002
Unfair Cigarette Sales Act - Advertising. A RETAILER PARTICIPATING IN A BUY-DOWN
PROMOTION MAY ADVERTISE THE MANUFACTURER’S BUY-DOWN AMOUNT OR
THE SELLING PRICE AFTER THE ALLOWANCE FOR THE BUY-DOWN AS LONG AS
THE ADVERTISEMENT ALSO INDICATES THAT SALES TAX IS COMPUTED ON THE
FULL RETAIL SELLING PRICE BEFORE THE BUY-DOWN.
Advice has been requested as to whether a cigarette retailer participating in a cigarette
manufacturer’s buy-down promotion is permitted to advertise a promotional buy-down amount
that is funded by the cigarette manufacturer. A buy-down is a form of promotional payment
specifically made by a cigarette manufacturer to a retailer on a particular brand of cigarettes to
reduce the retail price to consumers.
The Department of Revenue has determined that retailers participating in a buy-down promotion
may use promotional signs and displays to advertise the value of a manufacturer’s buy-down
or the selling price of the cigarettes after allowance for the buy-down amount. Advertising the
selling price net of the buy-down amount is permissible even when the buy-down amount reduces
the sales price below the legal minimum retail selling price.
The promotional signs and displays must identify the full retail selling price prior to the buydown amount and indicate that the sales tax is computed on the full retail selling price prior to the
allowance for the buy-down amount.
APPROVED:

Mary Jane Egr
State Tax Commissioner
March 14, 2002

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

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