Illinois Cigarette Sales Tax

Chicago, Illinois: Cigarette Sales Tax
By:  Mansoor Ansari Attorney at Law
Beginning July 1, 2012, the definition of  “cigarette” was expanded to include “Any roll for smoking made wholly or in part of tobacco labeled as anything other than a cigarette or not bearing a label”, if it meets two or more of the following criteria:

1. The product is sold in packs similar to cigarettes; [i.e., sold in packs of 20/25]
2. The product is available for sale in cartons of ten packs;
3. The product is sold in soft packs, hard packs, flip-top boxes, clam shells, or other cigarette-type boxes;
4. The product is of a length and diameter similar to commercially-manufactured cigarettes; [i.e., 125 millimeters or less in length and 10 millimeters or less in diameter]
5. The product has a cellulose acetate or other integrated filter;
6. The product is marketed or advertised to consumers as a cigarette or cigarette substitute; or
7. Any other evidence that the product fits within the definition of cigarette.

The Cigarette Use Tax Act imposes a tax on the privilege of using cigarettes in Illinois. This act duplicates the provisions of the Cigarette Tax Act The Cigarette Tax Act imposes a tax on the occupation of selling cigarettes at retail. Licensed distributors prepay the tax through the purchase of stamps, which are affixed to each cigarette package. The distributor collects the tax from the retailer at or before the time of sale. The retailer passes the tax on to the consumer in the cigarette sale price.
The Cigarette Use Tax Act imposes a tax on the privilege of using cigarettes in Illinois. This act duplicates the provisions of the Cigarette Tax Act.
NOTE: Tobacco products other than cigarettes are also taxed.
Some tobacco products previously regulated and taxed under the Tobacco Products Tax Act, meet the new definition of “cigarette” and will be regulated and taxable under the Cigarette Tax Act and the Cigarette Use Tax Act effective July 1, 2012.
Allowable Deductions

• sales out-of-state;
• cigarettes returned to manufacturers;
• cigarettes lost through fire, theft, etc., that is supported by proper documentation;
• sales of cigarettes to residents incarcerated in penal institutions and to resident patients of state-operated mental health facilities that have been manufactured as part of a correctional industries program;
• sales to U.S. military personnel through officially recognized agencies physically located at military bases; and
• direct sales to U.S. veteran’s hospitals.

Secondary distributors must also be licensed. A secondary distributor is any person engaged in the business of selling cigarettes, who purchases stamped original packages of cigarettes from a licensed distributor under the Cigarette Tax Act or the Cigarette Use Tax Act, sells 75% or more of those cigarettes to retailers for resale, and maintains an established business where a substantial stock of cigarettes is available to retailers for resale.  Cigarette taxes may exist in both home rule and non-home rule municipalities. The Department of Revenue does not collect locally imposed cigarette taxes.
MANSOOR ANSARI J.D., LL.M. (TAX)