A 2016 tax on cigars, chewing tobacco and roll-your-own tobacco has been deemed legal by the Illinois Appellate Court after a group of retailers challenged it and the Cook County circuit court ruled against it in early 2017.
The tax, which was spearheaded by Chicago’s mayor, Rahm Emanuel, and approved by the City Council 35-10, adds an additional 20 cents per cigar, $1.80 per ounce of smokeless and roll-your own tobacco and 60 cents for an ounce of pipe tobacco, which goes on top of county’s 30 cent tax and the state’s 10.25 percent sales tax. Collectively, these products are referred to as “other tobacco products” or OTP, which are taxed separately from cigarettes.
A report by the Chicago Tribune indicates that the Appellate Court ruled that the city’s existing cigarette tax means the additional taxes on other tobacco products aren’t considered separate new taxes. It was this point that a group of retailers led by Iwan Ries & Co. had argued that made the law invalid, as the state’s law indicates that a home rule charter city could only adopt an additional tax on cigarettes or tobacco products if it had been enacted as of July 1, 1993. Chicago had a cigarette tax of July 1, 1993 but not a tax on other tobacco products, which the group argued meant it could not add an additional tax.
The city has indicated that it will begin enforcing the new tax as quickly as it can inform retailers about the change, with estimates of revenues being approximately $6 million per year. The city had previously stated that if the tax had been upheld by the circuit court, businesses would have 60 days from the date of the court’s decision to begin collecting the tax. The city decided against enforcing the tax while litigation was ongoing.
Iwan Ries & Co. was joined in the lawsuit by the National Association of Tobacco Outlets (NATO), the Cigar Association of America (CAA), the Illinois Association of Wholesale Distributors, the Illinois Retail Merchants Association, the International Premium Cigar and Pipe Retailers Association (IPCPR), and Arangold Corporation–which is better known as Arango Cigar Co.