(1) All agents who have been open for business on a regular and continuous basis for the three most recent calendar years may petition the department for an increase to their commission percentage discount rate by sending a completed application and required documentation to the department by May 1, 2013, and by May 1 of every succeeding three years thereafter. Upon review of the application, including any additional information requested, such as the agency liquor store's financial records and supporting documentation, the department may increase the agent's commission percentage discount rate.

(2) An agent's commission percentage may be increased to a percentage greater than the commission percentage discount rate received under ARM 42.11.306, if the following criteria are met:

(a) the agent has experienced an increase in the average two-year allowable costs compared to the base year in operating the business. Allowable costs include but are not limited to:

(i) labor costs commensurate with statutory wage and benefits provided for state employees. Labor costs include but are not limited to:

(A) wages;

(B) employer portion of Social Security and Medicare;

(C) unemployment insurance;

(D) workers compensation insurance; and

(E) retirement plans;

(ii) rental, lease, or real estate costs commensurate with retail standards for rent or lease costs that have been established using local/market area retail space rent data provided to the department for property assessment by local business entities. If this data is not available for a specific community, then rent for retail space in similar market areas will be used. If market conditions in a local area experience a dramatic change, the agent may provide current rental listings and/or current rental lease agreements from the immediate market area. The department will review this new data provided by the agent to determine an allowable increase to rental or lease costs;

(iii) utilities for the designated agency liquor store premises only;

(iv) health, comprehensive general liability, property, and liquor liability insurance premiums;`

(v) case lot discount;

(vi) phone services;

(vii) city/county services;

(viii) regulatory fees; and

(ix) taxes and governmentally mandated fees.

(b) the agent has incurred the allowable cost continuously through the three calendar years of the review period. Agent's allowable costs can be distorted by changes which occur in the ordinary course of business. This distortion could potentially result in allowable costs which do not accurately reflect their costs. If extenuating or unique circumstances occur in the ordinary course of business, the department may, if sufficient data exists, estimate the allowable cost for the base year;

(c) the agent considered all reasonable mitigation measures; and

(d) the agent's average two-year net income is not commensurate with the net income experienced in the base year. Net income, as it applies to this rule, equals the agent's gross sales of liquor, less liquor cost of goods sold, less allowed costs. Liquor cost of goods sold equals the beginning inventory of liquor, plus the liquor purchases at cost by invoice date, less the ending inventory of liquor.

(3) If the agent meets all the requirements in (1) and (2), the department will determine the lesser of:

(a) the base year net income less the average two-year net income; or

(b) the average two-year allowable costs less the base year allowable costs.

(4) A percentage is then calculated by dividing the lesser dollar amount in (3) by the agent's average two-year gross sales reported.

(5) The agent's commission percentage discount rate received according to ARM 42.11.306, is then subtracted from the percentage in (4). If the difference is:

(a) greater than zero, the difference is added to the agent's commission percentage discount rate according to ARM 42.11.306; or

(b) less than zero, the agent does not receive a commission percentage discount rate adjustment under this rule.

(6) If the agent qualifies for an adjustment, the adjustment will be effective on July 1, or retroactive to July 1, of the year of application following the review period.