Illinois little cigar tax Audit

Illinois little cigar tax Audit

“Little cigar” means and includes any roll, made wholly or in part of tobacco, where such roll has an integrated cellulose acetate filter and weighs less than 4 pounds per thousand and the wrapper or cover of which is made in whole or in part of tobacco.

Cigar Association of America v. Hamer, Cook County, 12 L 51033 was decided in December, 2012. That case was centered on a trade association arguing that Illinois’ definition of a cigarette was constitutionally invalid because it was too vague. In Illinois, a cigarette was defined as any roll containing tobacco that is suitable for smoking or if it met two of the following criteria:

(a) the product is sold in packs similar to cigarettes;
(b) the product is available for sale in cartons of ten packs;
(c) the product is sold in soft packs, hard packs, flip-top boxes, clam shells, or other cigarette-type boxes;
(d) the product is of a length and diameter similar to commercially manufactured cigarettes
(e) the product has a cellulose acetate or other integrated filter;
(f) the product is marketed or advertised to consumers as a cigarette or cigarette substitute; or
(g) other evidence that the product fits within the definition of cigarette.

The association argued that this definition was too broad and successfully obtained an injunction.

In response to the case, Illinois has been struggling to redefine the meaning of a “cigarette.” This definition is critical because a tax is levied on the sales price of “cigarettes.” The Illinois Department of Revenue issued numerous bulletins and in July finally reached a consensus of what a “cigarette” was for purposes of Illinois cigarette tax. A cigarette is now defined as it previously was prior to the 2012 amendment.

The Tobacco Products Tax Act provides that any package of little cigars containing 20 or 25 sticks must be affixed with a cigarette tax stamp. The stamping must be done in the same manner as a package of cigarettes under the Cigarette Tax Act and Cigarette Use Tax Act and must be performed by a “stamping distributor.” Little cigars sold in packages containing quantities other than 20 or 25 sticks do not require stamps. Instead, a stamping distributor must pay the tax due using Form RC-55, Unstamped Little Cigar Sticks Tax Return.

Illinois little cigar tax Audit

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