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Illinois Supreme Court Strikes Down Chicago Tax on Tobacco Products

The following is an update from the National Association of Tobacco Outlets (NATO) sourced through their December 19th online bulletin. Reposted with permission.

Today, the Illinois Supreme Court issued a ruling striking down a Chicago, Illinois ordinance that imposed local excise taxes on numerous tobacco products including cigars, smokeless tobacco, pipe tobacco, and roll-your-own cigarette tobacco. Originally passed by the Chicago City Council in 2016, the ordinance sought to impose local excise taxes of $.20 per cigar, $1.80 per ounce on smokeless tobacco products, $.60 per ounce on pipe tobacco, and $1.80 per ounce on roll-your-own cigarette tobacco.

A broad cross section of the industry commenced litigation seeking to have the Chicago tobacco product taxes ordinance overturned by the courts. The plaintiffs included NATO, the Cigar Association of America, Iwan Ries & Co. (a Chicago tobacco and cigar store), the Illinois Association of Wholesale Distributors, the Illinois Retail Merchants Association, the International Premium Cigar and Pipe Retailers Association, and Arangold Corporation, dba Arango Cigar Co.

In the ruling, the Illinois Supreme Court held that Illinois state law specifically precludes a home rule city such as Chicago from adopting an excise tax on either cigarettes or other tobacco products unless the city had already adopted such a tax before July 1, 1993. While the City of Chicago had adopted a local tax on cigarettes prior to July of 1993, the city had not adopted a local excise tax on any other kind of tobacco product.

As the Illinois Supreme Court states in the opinion, “we agree with plaintiffs that the statute allows only those municipal taxes on cigarettes or other tobacco products enacted prior to July 1, 1993” and that “allowing unlimited future taxes on all tobacco-based products for those municipalities that merely imposed a single tax on one tobacco product prior to July 1, 1993, as the City [of Chicago] argues, undermines the legislative purpose [to prevent additional taxes on tobacco products].”