Section 105.07. Factors for allocating expenses.

  Under the average expense allocation method, all expenses incurred in the operation of the business shall be allocated to the sale of cigarettes and other tobacco products using the following methods:

(1)   Sales allocation.

(a) The expenses listed in par. (b) , plus any other expenses incurred in the operation of the business that are not listed elsewhere in this section, shall be allocated according to the percentage that the sale of cigarettes and other tobacco products comprises of total sales.

(b) The sales allocation factor applies to the following expenses:

1. Bad debts.

2. Data processing.

3. Depreciation on buildings, except as allocated under sub. (2) (b) 1.

4. Depreciation on lease improvements on the wholesaler's general facilities, other than its warehouse.

5. Depreciation on office equipment.

6. Non-delivery vehicles.

7. Dues, subscriptions, and licenses. Wholesale cigarette sales permit expenses shall be allocated entirely as overhead associated with the sale of cigarettes and other tobacco products. No permit or license expenses required to sell other specific commodities may be allocated to the sale of cigarettes and other tobacco products.

8. Miscellaneous expenses.

9. Insurance on inventory. If a wholesaler's inventory insurance is based on the value of inventory these expenses may be allocated based on the percentage that cigarettes and other tobacco product inventory value comprises of total inventory value, rather than on sales. The inventory valuation reports required by the insurer shall be used as the basis of allocation according to inventory value.

10. Insurance, except as allocated under subd. 9. and subs. (2) (b) 6. and (3) (b) 2. b.

11. Interest, except as allocated under sub. (2) (b) 7.

12. Office expenses and supplies.

13. Professional fees, except as allocated under sub. (2) (b) 12.

14. Promotion and advertising.

15. Retirement and employee welfare.

16. Salaries, fringe benefits, and other remuneration, including officers' salaries and payroll taxes, except as allocated under subs. (2) (b) 13. and (3) (b) 1. and 2. a.

17. Telephone.

18. Rent and real estate taxes, except as allocated under sub. (2) (b) 8.

(2)   Warehouse space allocation.

(a) The expenses listed in par. (b) shall be allocated according to the percentage that the cubic feet of warehouse space used to store cigarettes and other tobacco products comprises of total warehouse space used for the storage of goods for sale. All other space in the warehouse shall be excluded from this percentage calculation, although expenses associated with this space shall be allocated.

(b) The space allocation factor applies to the following expenses:

1. Depreciation on warehouse buildings.

2. Depreciation on lease improvements on warehouses.

3. Depreciation on warehouse equipment.

4. Warehouse equipment rental.

5. Heat, light, power, and water. If any of these items is separately metered for warehouse areas not serving cigarettes and other tobacco products, such as freezers or coolers, these expenses may not be allocated to the sale of cigarettes and other tobacco products. If any of these items is separately metered for warehouse areas serving only cigarettes and other tobacco products, such as humidity-controlled rooms, these expenses shall be allocated entirely to the sale of cigarettes and other tobacco products.

6. Insurance on warehouse equipment and buildings.

7. Interest on real estate.

8. Warehouse rent and warehouse property taxes.

9. Repairs, maintenance, and groundskeeping.

10. Garbage pickup.

11. Security.

12. Fees of professionals whose work is principally associated with the wholesaler's warehouses.

13. Salaries, fringe benefits, and other remuneration of warehouse employees.

14. Warehouse supplies.

(3)   Delivery vehicle space allocation.

(a) The expenses listed in par. (b) shall be allocated according to the percentage that the cubic feet of space in vehicles used for transporting cigarettes and other tobacco products comprises of total space used for the transportation of goods in delivery vehicles. All other space in the delivery vehicles shall be excluded from this percentage calculation, although expenses associated with this space shall be allocated.

(b) The delivery vehicle space allocation factor applies to the following expenses:

1. Salaries, fringe benefits, and other remunerations of delivery vehicle drivers.

2. Garage expenses for the housing and maintenance of vehicles, including:

a. Salaries, fringe benefits, and other remuneration of garage employees.

b. Depreciation and insurance on garage equipment.

c. Noncapitalized expendable tools.

d. Garage supplies.

e. Purchased parts.

f. Purchased repairs to vehicles.

3. Gas, oil, tires and licenses.

4. Delivery vehicle insurance and depreciation.

5. Delivery vehicle lease payments.

(4)   Direct assignment of expenses. Upon approval of the department, a wholesaler that maintains sufficient sub-records may assign expenses directly to cigarettes and other tobacco products instead of using the indirect allocation methods listed in this section.

History: Cr. Register, October, 1988, No. 394 , eff. 11-1-88; correction in (1) (b) 16. made under s. 13.93 (2m) (b) 6., Stats., Register October 2004 No. 586 ; CR 06-028 : am. (1) (b) 16. Register November 2006 No. 611 , eff. 12-1-06.