BOSTON – The Massachusetts Appellate Tax Board has ruled against state Department of Revenue regulations intended to prevent below cost sales of cigarettes, spawning confusion about what regulations may be enforceable and leading the Boston Globe to report that retailers may be left to “charge whatever they want.”

The newspaper writes that a 60-year-old state law has barred retailers from “selling cigarettes below cost to drive rivals out of business.” However, when the state set a minimum price in 2003 for every brand of cigarettes sold in the state at $4.78 a pack, some retailers were forced to raise their prices by as much as 90 cents a pack.

In 2003, the Department of Revenue suspended Expedito Duarte’s license to sell cigarettes at his two New Bedford Expo convenience stores after a complaint was filed against him for selling cigarettes below the state-mandated minimum price. Duarte appealed the suspension to the Appellate Tax Board on grounds that he had to reduce his prices to remain competitive.  

“His [Duarte’s] pricing caused him to lose substantial revenue from the sale of cigarettes and threatened the survival of his two small convenience stores,” the Tax Board wrote in its ruling.

The newspaper notes that in its ruling, the Tax Board found the Department of Revenue’s enforcement of the state’s cigarette pricing regulations in Duarte’s case to be “arbitrary, unconstitutional, and not in compliance with the state law prohibiting sales below cost.” The board also found the department’s cigarette price regulations to be “invalid and of no legal effect.”

A CVS Corp. spokesman told the Globe that the company was not aware of the ruling and had “no plans” for changing its current cigarette pricing system. Meanwhile, a Hess Inc. official said the company will match the lowest cigarette price in the market at its convenience stores and gasoline stations.

“People are going to start shopping for the lowest-price cigarettes the same way they shop for anything else,” said Joseph P. Fingliss Jr., the attorney representing Duarte, adding, “The state has no right to set the price of tobacco products.”

The newspaper notes that Department of Revenue spokesperson Timothy Connolly said the agency believes the state’s cigarette pricing regulations remain in effect and that the agency will ask the state attorney general to appeal the Tax Board’s decision.

Connolly declined to comment on what actions the department would take against retailers who begin selling cigarettes below the state-mandated minimum price of $4.78 a pack.

“I don't know how that would play out,” said Connolly, adding, “We don't consider this a precedent-setting decision.”