Duarte v. Commissioner of Revenue
| Decision Date | 14 May 2008 |
| Docket Number | SJC-09922 |
| Citation | 886 N.E.2d 656,451 Mass. 399 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | Expedito DUARTE v. COMMISSIONER OF REVENUE. |
Kenneth W. Salinger, Assistant Attorney General, for the defendant.
Carlin J. Phillips, Dartmouth (Joseph P. Fingliss, Jr., Fall River, with him) for the plaintiff.
J. Thomas Price & Daniel P. Paradis, for Northeast Association of Wholesale Distributors & another, amici curiae, submitted a brief.
Daniel B. Winslow & Ben N. Kuruvilla, Boston, for Retailers Association of Massachusetts & another, amici curiae, submitted a brief.
Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.
The Commissioner of Revenue (commissioner) appeals from an Appellate Tax Board (board) decision vacating the suspension of a retailer's license to sell cigarettes and declaring the "Fair Pricing of Cigarettes" regulation, 830 Code Mass. Regs. § 64C.14.1 (1993) (§ 64C.14.1), "invalid on its face as inconsistent with the provisions of G.L. c. 64C and the decision of the Supreme Judicial Court in Commissioner of Corps. & Taxation v. Ryan, 323 Mass. 154, 80 N.E.2d 471 (1948)." We affirm the board's decision vacating the retailer's suspension, albeit on different grounds. We also conclude that the board did not have the authority to declare the regulation in question invalid.
1. Background. a. Prohibition on below-cost cigarette sales. An overview of the Massachusetts cigarette pricing laws, G.L. c. 64C, §§ 12-21, and their implementing regulation, § 64C.14.1, is necessary to an understanding of the underlying dispute.
It is unlawful for a retailer to sell or advertise cigarettes at prices below its cost, "with intent to injure competitors [or to] destroy substantially or lessen competition." G.L. c. 64C, § 14 (a).1 Evidence that a retailer has advertised or sold cigarettes at less than cost is "prima facie evidence of intent to injure competitors." Id. at § 14 (b).2 General Laws c. 64C, § 13 (a), defines "cost to the retailer" as "the invoice cost of the cigarettes to the retailer ... to which shall be added the cost of doing business by said retailer." Id. "In the absence of proof of a lesser or higher cost," the "cost of doing business" of the retailer is presumed to be "twenty-five per centum of the invoice cost of the cigarettes to the retailer," G.L. c. 64C, § 13(b). Thus, the presumed "cost to the retailer" is 125 per cent of the invoice cost of the cigarettes it sells.
A retailer may sell cigarettes below its presumed cost if the retailer can establish that its cost of doing business is less than twenty-five per cent of its invoice cost. In any event, G.L. c. 64C, § 16, permits "[a]ny retailer" to advertise and sell cigarettes "at a price made in good faith to meet the prices of a competitor who is selling the same article at cost to him as a ... retailer."3 In other words, a retailer may sell below its cost, either actual or presumed, to meet the prices of a competitor with lower costs.
The commissioner is charged with enforcing the cigarette pricing laws. G.L. c. 64C, § 12. In 1989, the commissioner promulgated a regulation to administer G.L. c. 64C, §§ 12-21.4 See § 64C.14.1. The regulation establishes a "general rule" that no retailer licensed to sell cigarettes "shall advertise, offer to sell, or sell cigarettes at a price that is less than the applicable presumptive cost [also referred to as the "presumptive minimum price"] without obtaining the commissioner's prior written approval." § 64C.14.1(3). Based on periodic inquiries by the commissioner with regard to the current prices charged by cigarette manufacturers, the commissioner establishes presumptive minimum prices for each brand.5 Prior approval for a retailer to sell below these presumptive minimum prices is obtained through a process also set forth in the regulation. § 64C.14.1(4). Such approval is granted only after a hearing, at which the retailer has the burden to show "by a preponderance of the evidence that [its] actual cost is less than the applicable presumptive cost." § 64C.14.1(4)(d). The commissioner's approval is "valid for a period of one year." § 64C.14.1(4)(i). There is no provision in the regulation by which a retailer can obtain prior approval to meet the prices of its competitors, as permitted by G.L. c. 64C, § 16, regardless of its costs.
A retailer that advertises or sells cigarettes below their presumptive costs without the prior approval of the commissioner is subject, on the occasion of its first violation, to a five-day suspension of its license to sell cigarettes. § 64C.14.1(4)(j).6 If the retailer is found to have violated this regulation on a second occasion within a twelve-month period, the commissioner "may summarily revoke" its license. § 64C.14.1(3), (6). On receiving notice of the commissioner's finding of a violation and license suspension, the retailer may request a presuspension hearing to challenge them. § 64C.14.1(5)(a). The scope of the hearing is expressly § 64C.14.1(5)(h). If, after the hearing, the commissioner suspends the retailer's license, the aggrieved retailer can appeal from the commissioner's findings and sanction to the board. § 64C.14.1(7).7,8
b. Facts. Expedito Duarte is a licensed cigarette retailer,9 who owns and operates two convenience stores in New Bedford: Expo's at 332 Brock Avenue, and Expo's II at 390 Dartmouth Street.10 The stores generate approximately $3 million per year from the sale of cigarettes, a substantial portion of their total revenue.
In response to anonymous complaints that Duarte was selling cigarettes below their presumptive costs, a Department of Revenue (department) tax examiner conducted an investigation of both retail stores on June 9, 2003. During the course of that investigation, the tax examiner provided Duarte with a list of the presumptive minimum prices as established by the commissioner,11 and informed him that his prices for packs of cigarettes were below those pricing levels. The tax examiner warned Duarte to raise his prices at both locations or he would face an enforcement action.
Four months later, the tax examiner returned to the stores. On October 15, 2003, the tax examiner visited Expo's II, and found that the prices for cigarette packs again fell below the presumptive minimum prices. Duarte was in the store at the time, and explained to the tax examiner that his prices were in line with those of a competitor—specifically, B.J.'s Wholesale Club—and therefore in compliance with the law. Duarte also informed the examiner that the prices charged at both his store locations were the same, a fact confirmed by the tax examiner when he visited Expo's I on October 17.
On October 27, 2003, the commissioner informed Duarte by letter that Expo's I and II were selling cigarettes below their presumptive costs without his prior written approval. The letter served as notification pursuant to § 64C.14.1(5), that Duarte's conduct violated G.L. c. 64C, § 14, and § 64C.14.1(3), and that the commissioner intended to suspend his cigarette retailer license for five days. The letter offered Duarte the opportunity for a presuspension hearing, which he requested.
The hearing took place on December 18, 2003. It was limited to the issues whether Duarte had sold or advertised cigarettes below their presumptive costs, and if so, whether he had obtained prior approval to do so. Duarte was precluded by the regulation from establishing that his prices were set in good faith to meet the prices of his competitors. Following the hearing, the commissioner found that "the Licensee failed to demonstrate that no advertisements, offers to sell, or sales were made at prices below the presumptive minimum cost," and that there was no question that Duarte had not sought prior written approval to sell cigarettes below those presumptive costs. Consequently, the commissioner suspended Duarte's licenses for five days effective January 19, 2004.
c. Further proceedings. Duarte appealed from the commissioner's decision to the board. In that appeal, Duarte did not challenge the commissioner's finding that he advertised and sold cigarettes below their presumptive costs; rather, he contended that his cigarette prices were set "in good faith to meet the prices of a competitor who [was] selling the same article," G.L. c. 64C, § 16, and therefore were not in violation of G.L. c. 64C, § 14. In addition, he claimed that because the department's regulation precluded him from demonstrating his compliance with G.L. c. 64C, § 16, at his suspension hearing, the regulation was inconsistent with and in excess of the statutory language on which they were purportedly based, and that their application to his case denied him due process.
On March 16, 2005, the board held a hearing at which Duarte was permitted to offer evidence that he set his cigarette prices to meet the prices of competitors in the New Bedford area. He introduced in evidence receipts from other New Bedford stores dated between November 11, 2003, and March 15, 2005, establishing that those retailers sold cigarettes below the presumptive costs set by the commissioner, at least during the period after the enforcement action was brought against Duarte and through the date of the board's hearing. In addition, Duarte testified that it was his practice during 2003 to keep track of the sales of the top ten retail sellers of cigarettes in New Bedford, and to match their prices in his stores.12
Duarte also testified that in the months following his receipt of the October 27, 2003, notice of violation and suspension, he filed ...
To continue reading
Request your trial
-
Costa v. Fall River Housing Authority
...fiscal and administrative burdens that the additional or substitute procedural requirement would entail." Duarte v. Commissioner of Revenue, 451 Mass. 399, 412, 886 N.E.2d 656 (2008), quoting Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 47 L.Ed.2d 18 With respect to the private int......
-
Vincent Gillespie & Another 1 v. City of Northampton.2
...and administrative burdens that the additional or substitute procedural requirement would entail.” See Duarte v. Commissioner of Revenue, 451 Mass. 399, 412, 886 N.E.2d 656 (2008). In this case, the balance weighs against the plaintiffs. First, as to the private interest at stake, alleged p......
-
Doe v. Sex Offender Registry Bd. & Others.2
...a particular statute or regulation that the agency is charged with enforcing is constitutional. See Duarte v. Commissioner of Revenue, 451 Mass. 399, 413–414, 886 N.E.2d 656 (2008); Telles v. Commissioner of Ins., 410 Mass. 560, 566, 574 N.E.2d 359 (1991) (Abrams, J., concurring). See also ......
-
Noe v. Sex Offender Registry Bd., SJC-12447
...Retirement Sys. v. Contributory Retirement Appeal Bd., 466 Mass. 292, 301, 994 N.E.2d 355 (2013), quoting Duarte v. Commissioner of Revenue, 451 Mass. 399, 408, 886 N.E.2d 656 (2008).The board urges us to interpret G. L. c. 6, § 178L (3), as providing the right to counsel in "board-initiate......