PART 440 CIGARETTE TAX ACT : Sections Listing

TITLE 86: REVENUE
CHAPTER I: DEPARTMENT OF REVENUE
PART 440 CIGARETTE TAX ACT

AUTHORITY: Implementing and authorized by the Cigarette Tax Act [35 ILCS 130].

SOURCE: Filed and effective June 17, 1958; amended at 6 Ill. Reg. 2831 and 2834, effective March 3, 1982; codified at 8 Ill. Reg. 17912; amended at 13 Ill. Reg. 10678, effective June 16, 1989; amended at 14 Ill. Reg. 6794, effective April 19, 1990; amended at 15 Ill. Reg. 117, effective December 24, 1990; emergency amendment at 23 Ill. Reg. 9541, effective July 29, 1999, for a maximum of 150 days; amended at 23 Ill. Reg. 14748, effective December 8, 1999; amended at 24 Ill. Reg. 9903, effective June 23, 2000; emergency amendment at 24 Ill. Reg. 10752, effective July 6, 2000, for a maximum of 150 days; amended at 24 Ill. Reg. 17793, effective November 28, 2000; amended at 25 Ill. Reg. 933, effective January 8, 2001; emergency amendment at 26 Ill. Reg. 9021, effective June 10, 2002, for a maximum of 150 days; emergency expired November 5, 2002; amended at 27 Ill. Reg. 1618, effective January 15, 2003; emergency amendment at 27 Ill. Reg. 10524, effective July 1, 2003, for a maximum of 150 days; emergency expired November 27, 2003; amended at 28 Ill. Reg. 3906, effective February 13, 2004; amended at 32 Ill. Reg. 17575, effective October 27, 2008; amended at 39 Ill. Reg. 14719, effective October 22, 2015; amended at 42 Ill. Reg. 23174, effective November 29, 2018; amended at 43 Ill. Reg. 8898, effective July 30, 2019; amended at 44 Ill. Reg. 6061, effective April 3, 2020; amended at 46 Ill. Reg. 6763, effective April 12, 2022; amended at 47 Ill. Reg. 5800, effective April 4, 2023.

 

Section 440.10  Nature and Rate of Tax

 

a)         Through June 30, 2019, the cigarette tax is imposed at the rate of 99 mills per cigarette upon any person who exercises the privilege of engaging in business as a retailer of cigarettes in this State.  Beginning July 1, 2019, the tax is imposed upon any person who exercises the privilege of engaging in business as a retailer of cigarettes in this State at the rate of 149 mills per cigarette sold or otherwise disposed of in the course of business in this State, or $2.98 per package of 20 cigarettes.

 

b)         The impact of these taxes is declared by the Cigarette Tax Act [35 ILCS 130] (Act) to be imposed upon the retailer, with the taxes being required to be prepaid or pre-collected by the distributor for the purpose of convenience and facility only, and the amount of the tax shall be added to the price of the cigarettes sold by the distributor.  Collection of the tax shall be evidenced by a stamp or stamps affixed to each original package of cigarettes, as provided in the Act and in this Part.

 

c)         It shall be the duty of each distributor to collect the tax from the retailer at or before the time of the sale, to affix the required stamps and to remit the tax collected from retailers to the Department of Revenue (Department).  Any distributor who shall fail to properly collect and pay the tax imposed by the Act shall be liable for the tax.

 

d)         The amount of the cigarette tax imposed by the Act shall be separately stated, apart from the price of the goods, by both distributors and retailers, in all advertisements, bills and sales invoices.

 

e)          The taxes so imposed are in addition to all other occupation or privilege taxes imposed by the State of Illinois, political subdivisions of the State or by any municipal corporation.

 

f)         Out of the 149 mills per cigarette tax imposed by subsection (a), the revenues received from 4 mills shall be paid into the Common School Fund each month, not to exceed $9,000,000 per month.  Out of the 149 mills per cigarette tax imposed by subsection (a), all of the revenues received from 7 mills shall be paid into the Common School Fund each month.  Out of the 149 mills per cigarette tax imposed by subsection (a), 50 mills per cigarette each month shall be paid into the Healthcare Provider Relief Fund.

 

g)         All moneys received by the Department under the Act, the Cigarette Use Tax Act [35 ILCS 135] , and the Tobacco Products Tax Act of 1995 [35 ILCS 143] from the additional tax of 50 mills per cigarette imposed by P.A. 101-0031 shall be paid each month into the Capital Projects Fund.

 

h)          Distributions

 

1)         Cigarettes

All of the moneys received by the Department pursuant to the Act and the Cigarette Use Tax Act, other than the moneys that are dedicated to the Common School Fund, Healthcare Provider Relief Fund, and Capital Projects Fund pursuant to subsections (f) and (g), shall be distributed each month as follows: first, there shall be paid into the General Revenue Fund an amount that, when added to the amount paid into the Common School Fund for that month, equals $29,200,000; then, from the moneys remaining, if any amounts required to be paid into the General Revenue Fund in previous months remain unpaid, those amounts shall be paid into the General Revenue Fund; then from the moneys remaining, $5,000,000 per month shall be paid into the School Infrastructure Fund; then, if any amounts required to be paid into the School Infrastructure Fund in previous months remain unpaid, those amounts shall be paid into the School Infrastructure Fund; then the moneys remaining, if any, shall be paid into the Long‑Term Care Provider Fund. 

 

2)         Little Cigars

Except for the distributions provided for in subsection (g), moneys collected from the tax imposed on little cigars under Section 10-10 of the Tobacco Products Tax Act of 1995 shall be included with the moneys collected under the Cigarette Tax Act and the Cigarette Use Tax Act when making distributions to the Common School Fund, the Healthcare Provider Relief Fund, the General Revenue Fund, the School Infrastructure Fund, and the Long-Term Care Provider Fund under Section 2 of the Cigarette Tax Act.  (Section 2(a) of the Act)

 

i)          Any distributor having cigarettes in his or her possession on July 1, 2019 to which tax stamps have been affixed, and any distributor having stamps in his or her possession on July 1, 2019 that have not been affixed to packages of cigarettes before July 1, 2019, is required to pay the additional tax that begins on July 1, 2019 imposed by P.A. 101-0031 to the extent that the volume of affixed and unaffixed stamps in the distributor's possession on July 1, 2019 exceeds the average monthly volume of cigarette stamps purchased by the distributor in calendar year 2018.  This payment, less the discount provided in Section 2(l) of the Act, is due when the distributor first makes a purchase of cigarette stamps on or after July 1, 2019 or on the first due date of a return under the Act occurring on or after July 1, 2019, whichever occurs first.  Those distributors may elect to pay the additional tax on packages of cigarettes to which stamps have been affixed and on any stamps in the distributor's possession that have not been affixed to packages of cigarettes in their possession on July 1, 2019 over a period not to exceed 12 months from the due date of the additional tax by notifying the Department in writing.  The first payment for distributors making such election is due when the distributor first makes a purchase of cigarette tax stamps on or after July 1, 2019 or on the first due date of a return under the Act occurring on or after July 1, 2019, whichever occurs first.  Distributors making such an election are not entitled to take the discount provided in Section 2(l) of the Act on such payments.  (Section 2(l) of the Act)

 

j)          Any retailer having cigarettes in his or her possession on July 1, 2019 to which tax stamps have been affixed is not required to pay the additional 50 mill tax that begins on July 1, 2019 imposed by P.A. 101-0031.  (Section 2 of the Act)

 

(Source:  Amended at 44 Ill. Reg. 6061, effective April 3, 2020)

 

Section 440.20  Tax – How Paid

 

a)         Except as provided in subsection (b), payment of the tax imposed by the Act shall be evidenced by a stamp or alternative tax indicia affixed to each "original package" of cigarettes.  Stamps are sold only to distributors by the Department at a discount (explained in more detail in Section 440.90 of this Part), when purchased according to law, in denominations evidencing payment of the tax on packages of  20 and 25 cigarettes.  

 

b)         Illinois cigarette manufacturers who place their cigarettes in original packages contained inside a sealed transparent wrapper, and similar out-of-state cigarette manufacturers who elect to qualify and are accepted by the Department as distributors under Section 4b of the Act, shall pay the taxes imposed by the Act by remitting the amount of the taxes, less the discount explained in Section 440.90, to the Department by the 5th day of each month, covering cigarettes shipped or otherwise delivered in Illinois to purchasers during the preceding calendar month.  The manufacturers of cigarettes in original packages contained inside a sealed transparent wrapper, before delivering the cigarettes or causing the cigarettes to be delivered in this State to purchasers, shall evidence their obligation to remit the taxes due with respect to the cigarettes by imprinting language to be prescribed by the Department on each original package of cigarettes underneath the sealed transparent outside wrapper of the original package, in a place on the package and in such manner as the Department may designate. The imprinted language shall acknowledge the manufacturer's payment of, or liability for, the tax imposed by the Act with respect to the distribution of those cigarettes.

 

c)         The Department may refuse to sell cigarette revenue stamps to any person who does not comply with the provisions of the Cigarette Tax Act.

 

(Source:  Amended at 42 Ill. Reg. 23174, effective November 29, 2018)

 

Section 440.30  Tax − Who Liable For

 

a)         All retailers of cigarettes as defined in Section 1 of the Act are liable for the tax therein imposed.  Distributors of cigarettes are required to prepay the tax and to collect it as a separate item from retailers.

 

b)         The Act defines "retailer" as follows:

 

1)         "Retailer" means any person who engages in the making of transfers of the ownership of, or title to, cigarettes to a purchaser for use or consumption and not for resale in any form, for a valuable consideration.

 

2)         "Retailer" shall be construed to include any person who engages in the making of transfers of the ownership of, or title to, cigarettes to a purchaser, for use or consumption by any other person to whom such purchaser may transfer the cigarettes without a valuable consideration.

 

3)         "Retailer" does not include a person:

 

A)        Who transfers to residents incarcerated in penal institutions or resident patients of a State-operated mental health facility ownership of cigarettes made, manufactured, or fabricated as part of a correctional industries program; or

 

B)        beginning August 27, 2007, who transfers cigarettes to a not-for-profit research institution that conducts tests concerning the health effects of tobacco products and who does not offer the cigarettes for resale. 

 

c)         The Act defines "distributor" as meaning any and each of the following:

 

1)         Any person engaged in the business of selling cigarettes in this State who brings or causes to be brought into this State from without this State any original packages of cigarettes, on which original packages there is no authorized evidence underneath a sealed transparent wrapper showing that the tax liability imposed by this Act has been paid or assumed by the out-of-State seller of such cigarettes, for sale or other disposition in the course of such business.

 

2)         Any person who makes, manufactures or fabricates cigarettes in this State for sale in this State, except a person who makes, manufactures or fabricates cigarettes as a part of a correctional industries program for sale to residents incarcerated in penal institutions or resident patients of a State-operated mental health facility.

 

3)         Any person who makes, manufacturers or fabricates cigarettes outside this State, which cigarettes are placed in original packages contained in sealed transparent wrappers, for delivery or shipment into this State, and who elects to qualify and is accepted by the Department as a distributor under Section 4b of the Act.

 

(Source:  Amended at 32 Ill. Reg. 17575, effective October 27, 2008)

 

Section 440.40  Design

 

The Department shall adopt the design or designs of the tax stamps or alternative tax indicia and shall procure the printing of such stamps or alternative tax indicia in such amounts and denominations as it deems necessary to provide for the affixation of the proper amount of tax stamps or alternative tax indicia to each original package of cigarettes.

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.50  Tax Stamps − When and By Whom Affixed:  License or Permit Required

 

a)         The Department, or any person authorized by the Department, will sell tax stamps only to licensed distributors. It shall be unlawful for any person to engage in the business as a distributor of cigarettes in this State without first having obtained a license or permit from the Department.  Application for a distributor's license shall be made to the Department in form as furnished and prescribed by the said Department and shall be accompanied by a joint and several bond in the amount of $2,500.  Except when the applicant is the manufacturer or when the applicant is a person licensed as a distributor under the Tobacco Products Tax Act of 1995 [35 ILCS 143] applying for a distributor's license under the Act to qualify as a stamping distributor for the purpose of acquiring and possessing untaxed little cigars and affixing tax stamps to unstamped packages of little cigars containing 20 or 25 little cigars, no distributor's license shall be issued to an applicant unless he presents the Department with satisfactory proof in writing that he or she will be able to buy cigarettes directly from at least 3 major cigarette manufacturers.  A person licensed as a distributor under the Tobacco Products Tax Act of 1995 issued a distributor's license under the Act to qualify as a stamping distributor for the purpose of acquiring and possessing untaxed little cigars and affixing tax stamps to unstamped packages of little cigars containing 20 or 25 little cigars is prohibited from acquiring, possessing or affixing stamps to unstamped packages of cigarettes until the distributor presents the Department with satisfactory proof in writing that he or she will be able to buy cigarettes directly from at least 3 major cigarette manufacturers.  Each licensed place of business shall be covered by a separate license.

 

b)         The annual license fee payable to the Department for each distributor's license shall be $250.  The purpose of the annual license fee is to defray the cost, to the Department, of serializing cigarette tax stamps.  Each applicant for license shall pay the fee to the Department at the time of submitting his application for license to the Department.

 

c)         All licenses issued by the Department under the Cigarette Tax Act shall be valid for not to exceed one year after issuance unless sooner revoked, canceled or suspended as in the Act provided.

 

d)         The Department may, in its discretion, upon application, issue permits authorizing the payment of the tax imposed by the Act by out-of-State cigarette manufacturers who are not required to be licensed as distributors of cigarettes in this State, but who elect to qualify under the Act as distributors of cigarettes in this State, and who, to the satisfaction of the Department, furnish adequate security to insure payment of the tax, provided that any permit shall extend only to cigarettes that the permittee manufacturer places in original packages that are contained inside a sealed transparent wrapper.

 

e)         All permits issued by the Department under the Cigarette Tax Act shall be valid for not to exceed one year after issuance unless sooner revoked, canceled or suspended as in the Act provided.

 

f)         The following are ineligible to receive a distributor's license or permit under the Act:

 

1)         A person who is not of good character and reputation in the community in which he resides;

 

2)         A person who has been convicted of a felony under any federal or State law, if the Department, after investigation and a hearing, if requested by the applicant, determines that person has not been sufficiently rehabilitated to warrant the public trust;

 

3)         A corporation, if any officer, manager or director thereof, or any stockholder or stockholders owning in the aggregate more than 5% of the stock of that corporation, would not be eligible to receive a license under the Act for any reason. [35 ILCS 130/4 and 4b(a)]

 

g)         The first distributor who delivers cigarettes or causes them to be delivered in this State to a purchaser must affix proper stamp or stamps to each original package of cigarettes before delivering the cigarettes (or causing them to be delivered) in this State to the purchaser, or (in the case of manufacturers of cigarettes in original packages that are contained inside a sealed transparent wrapper) to imprint the required language on the original package of cigarettes beneath the outside wrapper, as provided in Section 440.20(b).

 

h)         On and after July 22, 1999, no stamp or imprint may be affixed to, or made upon, any package of cigarettes unless that package complies with all requirements of the federal Cigarette Labeling and Advertising Act (15 USC 1331 et seq.) for the placement of labels, warnings, or any other information upon a package of cigarettes that is sold within the United States.  Under the authority of Section 6 of the Cigarette Tax Act, the Department shall revoke the license of any distributor that is determined to have violated this subsection (h).  A person may not affix a stamp on a package of cigarettes, cigarette papers, wrappers, or tubes if that individual package has been marked for export outside the United States with a label or notice in compliance with 27 CFR 290.185.  It is not a defense to a proceeding for violation of this subsection that the label or notice has been removed, mutilated, obliterated, or altered in any manner.  (Section 3 of the Cigarette Tax Act)

 

i)          On and after August 15, 1999, packages of cigarettes, cigarette papers, wrappers, or tubes stamped or imprinted in a manner not in accordance with subsection (h) and found in the possession of a distributor create a rebuttable presumption that the packages of cigarettes, cigarette papers, wrappers or tubes were stamped or imprinted in violation of the Cigarette Tax Act.

 

j)          On and after September 1, 1999, packages of cigarettes, cigarette papers, wrappers or tubes stamped or imprinted in a manner not in accordance with subsection (h) and found in the possession of a retailer create a rebuttable presumption that the packages of cigarettes, cigarette papers, wrappers or tubes were stamped or imprinted by the distributor from whom they were obtained in violation of the Cigarette Tax Act.

 

k)         On and after June 13, 2000, no stamp or imprint may be affixed to, or made upon, any package of cigarettes that:

 

1)         bears any statement, label, stamp, sticker, or notice indicating that the manufacturer did not intend the cigarettes to be sold, distributed, or used in the United States, including but not limited to labels stating "For Export Only", "U.S. Tax Exempt", "For Use Outside U.S.", or similar wording;

 

2)         does not comply with:

 

A)        all requirements imposed by or pursuant to federal law regarding warnings and other information on packages of cigarettes manufactured, packaged, or imported for sale, distribution, or use in the United States, including but not limited to the precise warning labels specified in the federal Cigarette Labeling and Advertising Act (15 USC 1333); and

 

B)        all federal trademark and copyright laws;

 

3)         is imported into the United States in violation of 26 USC 5754 or any other federal law or implementing federal regulations;

 

4)         the person affixing the stamp or imprint otherwise knows or has reason to know the manufacturer did not intend to be sold, distributed, or used in the United States;

 

5)         for which there has not been submitted to the Secretary of the U.S. Department of Health and Human Services the list or lists of the ingredients added to tobacco in the manufacture of the cigarettes required by the federal Cigarettes Labeling and Advertising Act (15 USC 1335a); or

 

6)         has been altered, prior to sale or distribution to the ultimate consumer, so as to remove, conceal, or obscure:

 

A)        any statement, label, stamp, sticker, or notice described in subsection (k)(1) of this Section; or

 

B)        any health warning that is not specified in, or does not conform with the requirements of, the federal Cigarette Labeling and Advertising Act (15 USC 1333). (Section 3-10 of the Act)

 

l)        On and after July 15, 2000, packages of cigarettes, cigarette papers, wrappers, or tubes stamped or imprinted in a manner not in accordance with subsection (k) and found in the possession of a distributor create a rebuttable presumption that the package of cigarettes, cigarette papers, wrappers, or tubes were stamped or imprinted in violation of the Cigarette Tax Act.

 

m)        On and after July 31, 2000, packages of cigarettes, cigarette papers, wrappers or tubes stamped or imprinted in a manner not in accordance with subsection (k) and found in the possession of a retailer create a rebuttable presumption that the packages of cigarettes, cigarette papers, wrapper or tubes were stamped or imprinted by the distributor from whom they were obtained in violation of the Cigarette Tax Act.

 

n)         On and after June 13, 2000, on the first business day of each month, each person licensed to affix the State tax stamp to cigarettes shall file with the Department, for all cigarettes imported into the United States to which the person has affixed the tax stamp in the preceding month:

 

1)         a copy of:

 

A)        the permit issued pursuant to the Internal Revenue Code (26 USC 5713) to the person importing the cigarettes into the United States allowing the person to import the cigarettes; and

 

B)        the customs form containing, with respect to the cigarettes, the internal revenue tax information required by the U.S. Bureau of Alcohol, Tobacco and Firearms;

 

2)         a statement, signed by the person under penalty of perjury, which shall be treated as confidential by the Department and exempt from disclosure under the Freedom of Information Act [5 ILCS 140], identifying the brand and brand styles of all the cigarettes, the quantity of each brand style of the cigarettes, the supplier of the cigarettes, and the person or persons, if any, to whom the cigarettes have been conveyed for resale;

 

3)         in addition to the statement required in subsection (n)(2), a separate statement, signed by the individual under penalty of perjury, which shall not be treated as confidential or exempt from disclosure, separately identifying the brands and brand styles of the cigarettes;

 

4)         in addition to the statement required in subsections (n)(2) and (n)(3), a separate statement, signed by an officer of the manufacturer or importer under penalty of perjury, certifying that the manufacturer or importer has complied with:

 

A)        the package health warning and ingredient reporting requirements of the federal Cigarette Labeling and Advertising Act (15 USC 1333 and 1335a) with respect to the cigarettes; and

 

B)        the provisions of Exhibit T of the Master Settlement Agreement entered in the case of People of the State of Illinois v. Philip Morris, et al. (Circuit Court of Cook County, No. 96-L13146), including a statement indicating whether the manufacturer is, or is not, a participating tobacco manufacturer within the meaning of Exhibit T.

 

o)         The Department may revoke or suspend the license or licenses of any distributor, in the manner provided in Section 6 of the Cigarette Tax Act, if the Department determines that the distributor knew or had reason to know that the distributor was committing any the acts prohibited in subsection (k) or had failed to comply with any of the requirements of subsection (l).  In addition, the Department may impose on the distributor a civil penalty in an amount not to exceed the greater of 500% of the retail value of the cigarettes involved or $5000.  Cigarettes acquired, held, owned, possessed, transported in, imported into, or sold or distributed in this State in violation of subsection (k) shall be subject to seizure and forfeiture whether the violation is knowing or otherwise. (Section 3-10 of the Act)

 

(Source:  Amended at 39 Ill. Reg. 14719, effective October 22, 2015)

 

Section 440.60  Tax Stamps – How Affixed

 

a)         Adhesive tax stamps furnished and sold by the Department must be physically "affixed" to original packages of cigarettes. 

 

b)         Adhesive tax stamps shall be securely attached to each original package of cigarettes so as to be clearly visible.  If the cigarettes are sold through vending machines the stamps shall be affixed so that if any packages are visible in the machine, the stamps affixed thereto shall also be visible.

 

c)         If original packages of cigarettes are wrapped in some substance to which stamps do not readily adhere, such substance must be roughened or treated to assure the proper adherence of stamps.

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.70  Tax Stamps – Affixed Out of State

 

Nothing in the Act prevents any licensed distributor engaged in the sale of cigarettes in this State, who purchases such cigarettes outside this State and brings or causes the same to be brought within this State for sale or other disposition, from affixing proper tax stamps to original packages of cigarettes before such cigarettes are brought within the State.

 

Section 440.75  Cigarette Package Sizes; Sale of Individual or Loose Cigarettes Prohibited; Penalties

 

a)         Cigarettes may only be sold in packages of 20 or 25 cigarettes.  The sale of individual or loose cigarettes is prohibited.  If an authorized agent of the Department finds open packages of cigarettes and empty packages of cigarettes at or behind the sales counter, a prima facie presumption shall arise that the person is selling individual or loose cigarettes in violation of the Act.  A person who is unable to rebut this presumption is in violation of the Act and is subject to the penalties provided in this Section.

 

b)         Any person who violates subsection (a) is liable to pay to the Department, for deposit in the Tax Compliance and Administration Fund, a penalty of $1,000 for the first violation and $3,000 for any subsequent violation.  The Department cannot assess more than one penalty under this Section on a person in a 24-hour period.

 

c)         Any person who violates subsection (a) shall be guilty of a Class 4 felony.  [35 ILCS 130/18d]

 

(Source:  Added at 43 Ill. Reg. 8898, effective July 30, 2019)

 

Section 440.80  Transporter Permits

 

a)         Persons transporting within this State unstamped original packages containing more than 2,000 cigarette in any single lot or shipment and who are not otherwise excepted under Section 9C of the Cigarette Tax Act must obtain a Cigarette Transporter Permit from the Department.

 

b)         The transporter shall have the permit in the transporting vehicle during the period of transportation of the cigarettes.

 

1)         Single Trip Transporter Permit

 

A)        A Transporter Permit may be obtained for the transportation of a single load or shipment of unstamped cigarettes within this State. Application for a single trip Transporter Permit should be made on Form IDR-169.  Such permit will be valid only for the single load or shipment specified on the permit.

 

B)        Persons transporting into Illinois for use or consumption, more than 2,000 cigarettes in unstamped original packages must, in addition to obtaining a Transporter Permit, file a Declaration of Possession of cigarettes pursuant to Section 12 of the Cigarette Use Tax Act and transmit the cigarette use tax due to the Department.

 

2)         Multiple Trip Transporter Permits

 

A)        Out-of-State retailers who are purchasing unstamped original packages of cigarettes for resale outside of the State of Illinois and who anticipate the transportation, on a frequent and recurring basis, of unstamped original packages containing more than 2,000 cigarettes in any single lot or shipment and who are not otherwise excepted under Section 9C of the Cigarette Tax Act shall obtain a Multiple Trip Transporter Permit. Such permit shall be valid for a period of one year from the date of issuance.

 

B)        Application for a Multiple Trip Transporter Permit shall be made on Form IDR-169 or a form approved by the Department that contains the same information as required in Form IDR-169.

 

C)        Out-of-State retailers who are purchasing unstamped original packages of cigarettes for resale outside of the State of Illinois must submit proof of their current out-of-State tobacco retailer's license upon application for a Transporter Permit.

 

D)        A Transporter Permit does not relieve a transporter of cigarettes of any tax liability which may be due under the Cigarette Tax Act or Cigarette Use Tax Act (Ill. Rev. Stat. 1983, ch. 120, pars. 453.31 et seq.).

 

(Source:  Amended at 6 Ill. Reg. 2834, effective March 3, 1982)

 

Section 440.90  Tax Stamps − Purchase of:  Cost:  Discount

 

a)         Sales of stamps shall be made by the Department, or any person authorized by the Department, to licensed distributors in proper denominations, subject to discounts as explained in subsection (b).  The discount shall be allowed at the time of purchase of the stamps, when purchase is required by the Act.

 

b)         The discount allowable to distributors at the time of purchasing stamps during any year commencing July 1 and ending the following June 30 shall be equal to 1.75% of the amount of the tax payable under the Cigarette Tax Act up to and including the first $3,000,000 paid by the distributor to the Department during any such year and 1.5% of the amount of any additional tax paid by the distributor to the Department during any such year. (Section 2 of the Act)

 

c)         Two or more distributors that use a common means of affixing revenue tax stamps or that are owned or controlled by the same interests shall be treated as a single distributor for the purpose of computing the discount.

 

d)         All payment for revenue tax stamps must be made by means of electronic funds transfer.  (Section 3 of the Act)

 

e)         The Department may refuse to sell cigarette tax stamps to any person who does not comply with the provisions of the Cigarette Tax Act.  (Section 3 of the Act)

 

(Source:  Amended at 42 Ill. Reg. 23174, effective November 29, 2018)

 

Section 440.100  Returns Required:  When Filed

 

a)         Filing by Non-manufacturers

 

1)         Every distributor who is required to procure a license under the Act, but who is not a manufacturer of cigarettes in original packages that are contained in a sealed transparent wrapper, shall, on or before the 15th day of each calendar month, file a return with the Department, showing:

 

A)        the quantity of cigarettes manufactured during the preceding calendar month;

 

B)        the quantity of cigarettes brought into this State or caused to be brought into this State from outside this State during the preceding calendar month without authorized evidence on the original packages of cigarettes underneath the sealed transparent wrapper that the tax liability imposed by the Act has been assumed by the out-of-state seller of cigarettes;

 

C)        the quantity of cigarettes purchased tax-paid during the preceding calendar month either within or outside this State; and

 

D)        the quantity of cigarettes sold or otherwise disposed of during the preceding calendar month. 

 

2)         The return shall be filed on forms furnished and prescribed by the Department and shall contain other information the Department may reasonably require.

 

3)         Computer generated returns and schedules or returns and schedules filed on forms that have not been approved by the Department are considered non-processable and may subject the filer to penalties and interest for failure to file a proper return.

 

b)         Illinois manufacturers of cigarettes in original packages that are contained inside a sealed transparent wrapper shall file a return by the 5th day of each month covering the preceding calendar month.  Each return shall show the quantity of cigarettes manufactured during the period covered by the return, the quantity of cigarettes sold or otherwise disposed of during the period covered by the return, and other information the Department may lawfully require.  Returns shall be filed on forms prescribed and furnished by the Department.  Computer generated returns and schedules or returns and schedules filed on forms that have not been approved by the Department are considered non-processable and may subject the filer to penalties and interest for failure to file a proper return.

 

c)         Each out-of-state manufacturer, who is granted a permit by the Department under Section 4b of the Act, shall file a return with the Department on a form to be prescribed and furnished by the Department and shall disclose the information as the Department may lawfully require. The return shall be filed by the 5th day of the month and shall cover the preceding calendar month.  Computer generated returns and schedules or returns and schedules filed on forms that have not been approved by the Department are considered non-processable and may subject the filer to penalties and interest for failure to file a proper form.

 

d)         The returns filed by both distributors required to procure a license under the Act who have 30 or more transactions per month, and by Illinois manufacturers having 30 or more transactions per month, must be accompanied by appropriate computer-generated magnetic media supporting schedule data in the format required by the Department (Section 9 of the Act).    Distributors and manufacturers who voluntarily file returns and schedules electronically are not subject to this requirement.

 

(Source:  Amended at 42 Ill. Reg. 23174, effective November 29, 2018)

 

Section 440.110  Books and Records; Invoices; Penalties

 

a)         Books and Records

 

1)         Distributors.  Every distributor of cigarettes, who is required to procure a license under the Act, shall keep within Illinois, at his or her licensed address, complete and accurate records of cigarettes held, purchased, manufactured, brought in or caused to be brought in from without the State, and sold or otherwise disposed of, and shall preserve and keep within Illinois at his licensed address all invoices, bills of lading, sales records, copies of bills of sale, inventory at the close of each period for which a return is required of all cigarettes on hand and of all cigarette revenue stamps, both affixed and unaffixed, and other pertinent papers and documents relating to the manufacture, purchase, sale or disposition of cigarettes.  A distributor's records of a particular purchase from a manufacturer or distributor shall include:

 

A)        A copy of the distributor's purchase order (if any) to the manufacturer or distributor;

 

B)        the manufacturer's or distributor's invoice to the distributor in duplicate (see subsection (b)(1));

 

C)        a bill of lading or waybill pertaining to the shipment covered by the invoice;

 

D)        the receiving record showing the date when the cigarettes were received by the distributor; and

 

E)        evidence of payment by the distributor to the manufacturer or distributor.

 

2)         Secondary Distributors.  Every secondary distributor of cigarettes who is required to procure a license under the Act shall keep within Illinois, at his or her licensed address, complete and accurate records of cigarettes held, purchased, brought in from without the State, and sold, or otherwise disposed of, and shall preserve and keep within Illinois at his or her licensed address all invoices, bills of lading, sales records, copies of bills of sale, inventory at the close of each period for which a report is required of all cigarettes on hand, and other pertinent papers and documents relating to the purchase, sale, or disposition of cigarettes.  [35 ILCS 130/11a] 

 

3)         Manufacturers with Manufacturer Representatives.  Every manufacturer with authority to maintain manufacturer representatives under Section 4f of the Act shall keep within Illinois, at his or her business address identified under Section 4f of the Act, complete and accurate records of cigarettes purchased, sold, or otherwise disposed of, and shall preserve and keep within Illinois at his or her business address all invoices, sales records, copies of bills of sale, inventory at the close of each period for which a report is required of all cigarettes on hand, and other pertinent papers and documents relating to the purchase, sale, or disposition of cigarettes.  At all times during the usual business hours of the day, any duly authorized agent or employee of the Department may enter any place of business of the manufacturers with authority to maintain manufacturer representatives under Section 4f of the Act and their manufacturer representatives, or inspect any motor vehicle used by a manufacturer representative in the course of business, without a search warrant and may inspect the premises, motor vehicle, and any packages of cigarettes therein contained to determine whether any of the provisions of the Act are being violated.  [35 ILCS 130/11b]

 

4)         Retailers.  Every retailer who is required to procure a license under the Act shall keep within Illinois complete and accurate records of cigarettes purchased, sold, or otherwise disposed of.  It shall be the duty of every retail licensee to make sales records, copies of bills of sale, and inventory at the close of each period for which a report is required of all cigarettes on hand available upon reasonable notice for the purpose of investigation and control by the Department. 

 

A)        The books and records need not be maintained on the licensed premises, but must be maintained in the State of Illinois. However, all original invoices or copies thereof covering purchases of cigarettes must be retained on the licensed premises for a period of 90 days after purchase, unless the Department has granted a waiver in response to a written request in cases in which records are kept at a central business location within the State of Illinois. Prior to removing the books and records from the licensed premises, the retailer must notify the Department that the books and records will be kept at another location in Illinois and identify the location.  Under these circumstances, books and records may be kept at that location in Illinois, but the taxpayer must, within a reasonable time after notification by the Department, make all pertinent books, records, papers and documents available at some point within Illinois for the purpose of inspection and audit as the Department may deem necessary.

 

B)        Books and records may be maintained out of state if access is available electronically.  However, all original invoices or copies thereof covering purchases of cigarettes must be retained on the licensed premises for a period of 90 days after purchase, unless the Department has granted a waiver in response to a written request when records that are available electronically are maintained out of state.  [35 ILCS 130/11c]

 

C)        The Department will grant a written waiver under subsections (a)(4)(A) and (B) when the retailer submits a letter to the Department containing:

 

1)         the retailer's license number and FEIN;

 

2)         the address or addresses of the licensed premises where records are currently maintained;

 

3)         the address of the central location or out-of-state location where the retailer intends to maintain the records;

 

4)         if the records are maintained out-of-state, an explanation of the process and system that will enable the Department or its duly authorized agents or employees to electronically access the records from the licensed premises on demand; and

 

5)         an acknowledgement by the retailer that the Department, upon 30 days written notice, may revoke the waiver of the retailer for one or more licensed premises if the retailer:

 

A)        fails to provide access in accordance with the requirements of the written waiver;

 

B)        transfers or sells the licensed premises to another person; or

 

C)        changes the process or system for providing access to the records electronically.

 

5)         For purposes of this Section, "records" means all data maintained by distributors, secondary distributors, manufacturers with manufacturer representatives, and retailers, including data on paper, microfilm, microfiche or any type of machine sensible data compilation.  [35 ILCS 130/11, 11a, 11b and 11c]

 

6)         All books and records and other papers and documents which are required by the Act to be kept shall be kept in the English language, and shall, at all times during the usual business hours of the day, be subject to inspection by the Department or its duly authorized agents and employees.  At all times during the usual business hours of the day, any duly authorized agent or employee of the Department may enter any place of business of the distributor, secondary distributor, manufacturer with authority to maintain a manufacturer representative, manufacturer representative's vehicle, or retailer without a search warrant and inspect the premises and the stock or packages of cigarettes and any vending devices in the premises to determine whether any of the provisions of the Act are being violated.  If the agent or employee is denied free access or is hindered or interfered with in making the examination, the license of the distributor, secondary distributor, manufacturer representative or retailer shall be subject to revocation by the Department.  [35 ILCS 130/11, 11a, 11b and 11c]

 

7)         The books, records, papers and documents shall be preserved for a period of at least 3 years after the date of the documents, or the date of the entries appearing in the records, whichever is later, unless the Department, in writing, authorizes their destruction or disposal at an earlier date.  [35 ILCS 130/11, 11a, 11b and 11c]

 

b)         Invoices 

 

1)         Every distributor who is required to procure a license under the Act and who purchases cigarettes for shipment into Illinois from a point outside this State shall procure invoices in duplicate covering each shipment, shall make the invoices available for inspection upon demand by a duly authorized agent or employee of the Department, and shall, if the Department so requires, furnish one copy of each invoice to the Department upon request.

 

2)         Every sales invoice issued by a licensed distributor to a retailer in this State shall contain the distributor's cigarette distributor license number unless the distributor has been granted a waiver by the Department.  The distributor shall file a written request with the Department, and, if the Department determines that the distributor meets the conditions for a waiver, the Department will grant the waiver. The Department will grant a waiver in response to a written request when:

 

A)        the distributor sells cigarettes only to licensed retailers that are wholly-owned by the distributor or owned by a wholly-owned subsidiary of the distributor;

 

B)        the licensed retailer obtains cigarettes only from the distributor requesting the waiver; and

 

C)        the distributor affixes the tax stamps to the original packages of cigarettes sold to the licensed retailer.  [35 ILCS 130/11]

 

3)         Any licensed distributor that ships or otherwise causes to be delivered unstamped original packages of cigarettes into, within, or from this State shall ensure that the invoice or equivalent documentation and the bill of lading or freight bill for the shipment identifies the true name and address of the consignor or seller, the true name and address of the consignee or purchaser, and the quantity by brand style of the cigarettes so transported, provided that this subsection (b)(3) shall not be construed as to impose any requirement or liability upon any common or contract carrier.  [35 ILCS 130/3]

 

4)         Each Illinois manufacturer of cigarettes in original packages that are contained inside a sealed transparent wrapper shall keep a copy of each invoice rendered by the manufacturer to any purchaser to whom the manufacturer delivered cigarettes (or caused cigarettes to be delivered) during the period covered by the manufacturer's return.  Copies of invoices must be furnished to the Department upon request.

 

5)         Each manufacturer who holds a permit under Section 4b of the Act shall keep a copy of each invoice rendered by the permittee to any purchaser to whom the permittee delivered cigarettes of the type covered by the permit (or caused cigarettes of the type covered by the permit to be delivered) in Illinois during the period covered by the return.  Copies of invoices must be furnished to the Department upon request.

 

6)         When a distributor who is licensed or has a permit under the Cigarette Tax Act sells cigarettes to a federal or foreign government agency or instrumentality under circumstances causing Illinois cigarette tax liability to be incurred (see Section 440.180), the distributor shall print, stamp or otherwise write substantially the following legend on the original and all copies of the invoice covering the cigarettes:  "Illinois cigarette tax paid".

 

7)         When a distributor who is licensed or has a permit under the Cigarette Tax Act sells Illinois tax-stamped or tax-imprinted original packages of cigarettes to any purchaser other than a federal or foreign government agency or instrumentality, the distributor's invoice not only shall state that the cigarette tax has been paid by the distributor, but also shall state the amount of the tax to the purchaser as a separate item from the selling price of the cigarettes.

 

8)         When a permit holder or licensee under the Cigarette Use Tax Act (as distinguished from a licensee or permit holder under the Cigarette Tax Act) sells Illinois tax-stamped or tax-imprinted cigarettes to anyone other than a federal or foreign government agency or instrumentality, the distributor's invoice shall state the amount of the cigarette use tax to the purchaser as a separate item from the selling price of the cigarettes. (See Section 440.50.)  However, when a person sells cigarettes to a federal or foreign government agency or instrumentality, the invoice should omit any reference to the cigarette use tax.

 

c)         Penalties

 

1)         Any person required by the Act to keep records of any kind whatsoever, who shall fail to keep the records so required or who shall falsify those records, shall be guilty of a Class 4 felony.  If a person fails to produce the records for inspection by the Department upon request, a prima facie presumption shall arise that the person has failed to keep the records so required.  A person who is unable to rebut this presumption is in violation of the Act and is subject to the penalties provided in this subsection (c). [35 ILCS 130/14].

 

2)         Any person who shall fail to safely maintain and preserve the records required by Sections 11, 11a, 11b, and 11c of the Act for a period of 3 years, as required in the Act, in such manner as to insure permanency and accessibility for inspection by the Department, shall be guilty of a business offense and may be fined up to $5,000. [35 ILCS 130/15]  (See subsection (a) for the requirements to maintain books and records.)

 

3)         The Department may, after notice and hearing as provided for by the Act, revoke, cancel or suspend the license of any distributor, secondary distributor, or retailer for any noncompliance with this subsection (c).  No license so revoked shall be reissued to any such distributor, secondary distributor, or retailer within a period of 6 months after the date of the final determination of the revocation.  Any distributor, secondary distributor, or retailer aggrieved by any decision of the Department under this Section may, within 20 days after notice of the decision, protest and request a hearing.  Upon receiving a request for a hearing, the Department shall give notice in writing to the distributor, secondary distributor, or retailer requesting the hearing of the time and place fixed for the hearing.  If a distributor, secondary distributor, or retailer protests the revocation, cancellation or suspension of a license and requests a hearing, the notice also shall contain a statement of the charges preferred against the distributor, secondary distributor or retailer.  The Department shall hold the hearing in conformity with the provisions of the Act and then issue its final administrative decision in the matter to the distributor, secondary distributor, or retailer. In the absence of a protest and request for a hearing within 20 days, the Department's decision shall become final without any further determination being made or notice given.  [35 ILCS 130/6]

 

4)         Any person who fails to keep books and records or fails to produce books and records for inspection, as required by Sections 11, 11a, 11b, and 11c of the Act, is liable to pay to the Department, for deposit in the Tax Compliance and Administration Fund, a penalty of $1,000 for the first failure to keep books and records or failure to produce books and records for inspection, as required by Sections 11, 11a, 11b, and 11c, and $3,000 for each subsequent failure to keep books and records or failure to produce books and records for inspection, as required by Sections 11, 11a, 11b, and 11c. [35 ILCS 130/15a]  (See subsections (a) and (b) for the requirements to maintain books and records.)

 

A)        All books and records and other papers and documents that are required to be kept by the Act shall, at all times during the usual business hours of the day, be subject to inspection by the Department or its duly authorized agents and employees.  (See subsection (a)(6).)  A person that prohibits a duly authorized agent of the Department from inspecting books and records during usual business hours of the day has failed to produce books and records to the Department for inspection as required by this Section.  The Department may issue a notice of penalty to that person pursuant to this subsection (c)(4).  The Department is not required to provide the retailer with a written document request pursuant to this subsection (c)(4)(A) or provide additional time for the retailer to allow the inspection of the premises and the books and records at the location.

 

B)        Except for retailers that are permitted to maintain books and records at another location pursuant to subsection (a)(4), distributors, secondary distributors, manufacturers with manufacturer representatives, and retailers must have a person at their place of business at all times during the usual business hours of the day who is authorized to produce books and records for inspection by the Department.  It is presumed that a person working at a place of business has authority to permit the Department to inspect the books and records at the business location.  If a retail establishment has only one employee working at the time of the request for the books and records who has no ownership interest in the establishment and is not authorized to produce books and records, the employee is required to advise the Department he or she does not have authority to provide books and records for inspection.  The Department will not issue a notice of penalty to a retailer for failure to produce books and records if a person who is authorized to produce the books and records can be contacted by the employee and arrives at the place of business within 2 hours and produces the books and records.  The Department may extend the period either on verbal or written request for good cause shown or on its own motion.

 

EXAMPLE 1:  An authorized agent of the Department attempts to inspect the books and records of a cigarette retailer.  The person at the store states the books and records are at the store but refuses to provide access to the books and records because the owner of the store told him not to let anyone have access to the records.  The person states the owner is unavailable and cannot be contacted.  The Department issues a notice of penalty.

 

EXAMPLE 2:  An authorized agent of the Department attempts to inspect the books and records of a cigarette retailer.  The person at the store states the books and records are at the store but refuses to provide access to the books and records because the owner of the store told him not to let anyone have access to the records.  The person states he can call a person responsible for making the records available to the agent.  The employee calls the person and the person arrives at the store in less than 2 hours and makes the books and records available to the agent.  The Department will not issue a notice of penalty.

 

EXAMPLE 3:  An authorized agent of the Department enters a retailer's place of business and requests to see the books and records.  The person at the store states the books and records are maintained at another business location in Illinois.  The agent cannot issue a notice of penalty unless the retailer failed to notify the Department that the books and records are located at another location pursuant to subsection (a)(4).  However, the authorized agent of the Department does have authority to inspect the premises pursuant to subsection (a)(6).

 

C)        If a person fails to produce books and records for inspection by the Department upon request, a prima facie presumption shall arise that the person has failed to keep the books and records so required.  A person who is unable to rebut this presumption is subject to the penalty provided in this subsection (c)(4).  Except as otherwise provided by subsection (c)(4)(A), if a request for the production of books and records has been made and not honored, prior to issuing a notice of penalty for a failure to maintain books and records or a failure to produce books and records, the Department must provide the taxpayer with a document request in writing.  The written document request shall contain:

 

i)          the name of the person receiving the request;

 

ii)         the name of the business;

 

iii)        the date of the original request or requests;

 

iv)        the books and records requested;

 

v)         the books and records that the person failed to produce;

 

vi)        the number of days the person has to produce the books and records; and

 

vii)       the name of the Department agent or employee and his or her contact information. 

 

D)        The Department agent or employee shall sign and date the written document request and personally provide or mail a copy of the written document request to the business at its last known address.  The person shall have 30 days from the date of the written document request to produce the books and records the person has failed to produce.  The Department may extend the period either on written request for good cause shown or on its own motion.  If the person fails to produce the books and records within the time allotted, the Department may issue a notice of penalty pursuant to this subsection (c)(4) to the business at its last known address.

 

EXAMPLE:  An authorized agent of the Department enters a convenience store and requests to see all the invoices for cigarettes purchased by the store in the last 60 days and all cash register receipts for sales made in the last 60 days.  The person at the store produces the cash register receipts but states that they have no invoices for cigarettes purchased in the last 60 days.  The agent completes a written document request, provides a copy to the person, and provides the person 30 days to produce the invoices.  The agent returns 30 days later and requests the invoices.  The person at the store cannot produce the invoices.  The Department will issue a notice of penalty to the business at its last known address. 

 

E)        Any person receiving a notice of penalty may, within 20 days after the date on the notice, protest and request a hearing.  Upon receiving a request for a hearing, the Department shall give notice to the person requesting the hearing of the time and place fixed for the hearing and shall hold a hearing in conformity with the provisions of the Act and then issue its final administrative decision in the matter to that person.  If the request is made during an audit, the Department shall postpone the hearing until completion of the audit or inspection.  In the absence of a protest and request for a hearing within 20 days, the Department's decision shall become final without any further determination being made or notice given. 

 

F)         The Department cannot impose more than one penalty for failure to produce books and records for a calendar month.

 

EXAMPLE 1:  An authorized agent of the Department inspects a cigarette retailer and requests the records for the first week in April.  The retailer does not produce the records.  The agent subsequently requests the records for the remaining 3 weeks in April.  The retailer does not produce the records.  The agent can assess only one penalty for the month of April.

 

EXAMPLE 2:  An authorized agent of the Department inspects a cigarette retailer and requests all purchase invoices for cigarettes for March.  The invoices are not provided by the retailer and the Department issues a notice of penalty.  The agent returns in May and ask to see all the cigarette sales receipts for March.  The retailer fails to produce the sales receipts for March.  The Department cannot issue a penalty for failure of the retailer to provide sales receipts for March because the agent has previously issued a notice of penalty for failure to produce the invoices for March.

 

G)        A records request can cover multiple periods.  The Department is authorized to issue a separate penalty for each period; e.g., for a taxpayer that files returns monthly, the period is one month.

 

EXAMPLE:  An authorized agent of the Department inspects a cigarette retailer and requests the books and records for the months of January through July.  The retailer cannot produce the books and records for any of the months.  The agent fills out a written document request, provides a copy of  the document request to the person, and provides the person 30 business days to produce the invoices.  The agent returns 30 business days later and requests the invoices.  The person at the store cannot produce the invoices.  The Department will issue a notice of penalty in the amount of $1,000 for the month of January and $3,000 for each of the months February through July, for a total penalty of $19,000.

 

(Source:  Amended at 43 Ill. Reg. 8898, effective July 30, 2019)

 

Section 440.120  Unused Stamps:  Sale of:  Notice to Department

 

a)         Sales and transfers of Illinois cigarette revenue stamps by one licensed cigarette distributor to another licensed cigarette distributor are not permitted unless authorization is given in writing by the Department to make the sale and transfer.

 

b)         Cigarettes sold by licensed distributors to other licensed distributors must not be accompanied by loose stamps.

 

c)         When, at the time of terminating his or her business as a licensed distributor in this State, a licensed distributor has on hand unaffixed Illinois cigarette revenue stamps, he or she may transfer or sell the unaffixed stamps to some other licensed distributor, provided that, prior to the sale or transfer, the licensee shall request and receive from the Department, in writing, authority to so sell or transfer the stamps.  At the time of requesting authority to sell and transfer stamps to some other distributor licensed under the Act, the distributor making the request must submit the name and address of the distributor to whom he or she intends to sell the stamps, together with the exact number of stamps in each series to be sold or transferred.

 

(Source:  Amended at 42 Ill. Reg. 23174, effective November 29, 2018)

 

Section 440.130  Mutilated Stamps

 

Where stamps have become mutilated or otherwise unfit for use, distributors shall file a claim with the Department, and if an investigation discloses that the stamps have not evidenced a taxable transaction, a credit will be issued.

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.140  Tax Meters (Repealed)

 

(Source:  Repealed at 14 Ill. Reg. 6794, effective April 19, 1990)

 

Section 440.150  Tax Meter Machine Settings (Repealed)

 

(Source:  Repealed at 14 Ill. Reg. 6794, effective April 19, 1990)

 

Section 440.160  Vending Machines

 

Operators of cigarette vending machines, who are not distributors as defined by the Act, must obtain tax-stamped or tax-imprinted original packages of cigarettes from duly licensed distributors.  Such cigarettes shall be "loaded" in vending machines so that if any packages are visible while in the machine, the stamps affixed thereto, or other authorized evidence of tax payment, will be clearly visible.

 

Section 440.170  Sales Out of Illinois

 

a)         The tax imposed by the Act does not apply to cigarettes that are shipped by the selling distributor from within this State to a point outside the State, not to be returned to a point within this State, unless the cigarettes bear evidence underneath the sealed transparent wrapper of the original package indicating that the tax has been paid. Distributors need not affix tax stamps to the original packages of cigarettes that they sell and ship outside the State.  Manufacturers who are distributors of cigarettes in original packages that are contained inside a sealed transparent wrapper are not required to imprint evidence of cigarette tax liability and payment underneath a sealed transparent wrapper if the manufacturer-distributor ships the cigarettes to the purchaser at a point outside this State, not to be returned to a point within this State.  The burden of proof, however, is at all times upon the distributor to show that the cigarettes actually went into interstate commerce.

 

b)         Illinois distributors claiming exemption from the tax on cigarettes on the ground that shipments or deliveries were made in interstate commerce shall provide the Department with the name and address of the persons receiving the shipments or deliveries in foreign states; and must keep in their books and records the following:

 

1)         A waybill, bill of lading or other evidence of shipment issued by a common carrier; or

 

2)         an insurance receipt or registry receipt issued by the United States Postal Department, or a Post Office Department receipt form 3817; or

 

3)         a copy of the seller's invoice covering the sale, showing delivery by the seller or his agent at a designated out-of-State address (which shall be the address of premises owned, leased or otherwise legally possessed by the purchaser), and certified to and signed by the purchaser or his agent. However, if, upon investigation, the out-of-State premises to which the delivery allegedly is made, are found not to have been premises which were owned, leased or otherwise legally possessed by the purchaser at the time of such delivery, the transaction will not be regarded as a tax-free sale.

 

c)         The Department reserves the right to require additional proof as it deems necessary in any particular case.

 

d)         Distributors who make shipments or deliveries of cigarettes in interstate commerce and claim cigarette tax exemption shall record each shipment on a Schedule accompanying their cigarette revenue return for the month in which the shipments were made.  The total number of cigarettes recorded on the Schedule may be entered as a claimed exemption from the tax on the cigarette revenue return.

 

e)         Except as provided in Section 440.220 of this Part, the sale may not be made tax-free if the cigarettes are delivered in Illinois to the purchaser or his representative, notwithstanding the fact that the purchaser or his representative may then take or send the cigarettes outside Illinois for use outside Illinois.

 

f)         Subject to the conditions stated in subsections (g) and (h), Illinois licensed distributors of cigarettes may make tax-free sales of cigarettes to out-of-State retailers who can certify that the cigarettes are to be removed immediately from the State of Illinois for resale outside of Illinois in a state in which that purchaser is registered as a licensed tobacco retailer.

 

g)         Illinois distributors claiming exemption from the tax on the grounds that sales are made to an out-of-State retailer for resale outside of this State shall maintain in their records as proof of exemption:

 

1)         A certification from the purchaser that the cigarettes are purchased by him for resale outside of the State of Illinois and will be immediately transported out of this State,

 

2)         Proof of the purchasing retailer's valid out-of-State tobacco retailer's license, and

 

3)         A copy of the purchasing retailer's Illinois Transporter Permit issued under Section 440.170 of this Part.

 

h)         Distributors who make sales of unstamped cigarettes to certifying out-of-State retailers shall record each sale on a Schedule accompanying their cigarette revenue return for the month in which the sales are made.

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.180  Sales to Governmental Bodies

 

In general, a distributor making sales or other disposition of cigarettes to governmental bodies (whether such governmental body is the United States Government, a foreign government, a state government or a local government), their departments, agencies and instrumentalities, incurs tax liability with respect to such sales or other disposition of cigarettes and must affix tax stamps to original packages of cigarettes so sold or otherwise disposed of (or sell cigarettes which bear evidence underneath the sealed transparent wrappers of the original packages thereof that the tax has been paid with respect to such cigarettes), if such cigarettes are delivered in Illinois (including any Federal area located within the external boundaries of the State of Illinois) to the purchaser.  However, direct sales to U.S. Veterans' Hospitals and sales  to U.S. Military personnel through officially recognized agencies physically located at military bases may be made without affixation of Illinois cigarette tax stamps and without evidence of tax payment being imprinted underneath the sealed transparent wrapper of the original package of such cigarettes.

 

Section 440.190  Sample Packages of Cigarettes:  Stamps or Other Evidence of Tax Payment Affixed

 

Sample packages of cigarettes may not be distributed in this State without Illinois cigarette tax stamps of the proper denominations being affixed, or without evidence imprinted underneath the sealed transparent wrapper of the original package of such cigarettes showing that the tax has been paid. The package containing said sample packages shall not be destroyed until all sample cigarettes therein have been dispensed.

 

Section 440.200  Credit for Stamps that Are Damaged, Unused, Destroyed or on Packages Returned to the Manufacturer

 

a)         Where a distributor wishes to receive credit for stamps that have been affixed to original packages of cigarettes, the distributor shall file a claim on a form provided by the Department.

 

b)         Upon receipt by the Department of a properly completed and executed claim, the Department may send its representative or representatives to the distributor's place of business to witness destruction of cigarette revenue stamps affixed to packages of cigarettes.  Credit for the stamps will be given when an affidavit made by a representative of the Department is supported by other documents required by the Department, or, when no affidavit is made because the Department did not send a representative to witness destruction of the stamps, the claim is supported by the documents required by the Department.

 

c)         If the Department sends one or more of its representatives to witness the destruction of the stamps, the Department may charge as it deems necessary and reasonable because of that expense to the Department.

 

d)         If a greater number of stamps in a certain series of stamps is destroyed than is included in the claim for credit, the excess number of stamps destroyed in that series of stamps will not be credited.  If a lesser number of stamps in a certain series of stamps is destroyed than is included in the claim for credit, the actual number of stamps destroyed in that series will be credited.  If stamps are destroyed in a certain series of stamps not listed in the claim for credit, credit for stamps in that series will not be made.

 

e)         Claims for credit of cigarette revenue stamps will be approved only when the claim indicates that the cigarettes involved are unsalable and are to be shipped by the claimant in interstate commerce, by a common carrier or through the United States mails, to a designated consignee outside Illinois, or when the claim indicates that the cigarettes involved are unsalable and are to be destroyed by claimant,  when the claim indicates that the packages of cigarettes involved have been improperly stamped (e.g., overstamped, understamped) or when the claimant returns unused or damaged stamps.

 

f)         It is mandatory upon a distributor to destroy (in the presence of a Department representative or representatives if the Department so requires) Illinois cigarette revenue stamps that are affixed to packages of cigarettes in connection with his claim to the Department for credit of stamps, if the distributor has improperly stamped packages of cigarettes by affixing Illinois cigarette revenue stamps in an amount that is insufficient to evidence full payment of the tax.

 

g)         Claims for credit of cigarette revenue stamps affixed to packages of cigarettes will not be approved unless the distributor filing the claim has title to the cigarettes covered by the claim and is carrying Illinois tax-stamped cigarettes in his physical, book and Cigarette Revenue Return inventories.

 

h)         If a claim discloses that, subsequent to the destruction of the stamps, the unstamped packages of cigarettes are to be shipped in interstate commerce to a designated out-of-State consignee, credit for the stamps will not be made unless and until the claimant-licensee submits to the Department, to support his claim, an affidavit from the manufacturer that receives and destroys the stamps.  If an affidavit cannot be obtained, a waybill, freight bill or bill of lading, issued by a common carrier, or an insurance receipt or registry receipt issued by the United States Postal Department, or a Post Office Department receipt form 3817, proving that the cigarettes have actually been shipped by the claimant in interstate commerce, by common carrier or through the United States mails, to the out-of-State consignee designated in the claim, will be accepted.

 

i)          Subsequent to the destruction of cigarette revenue stamps affixed to packages of cigarettes, credit for the stamps will not be made if a review of pertinent Cigarette Revenue Return or Returns filed by the claimant-licensee reveals that the stamps scheduled in the claim have not been included in the claimant-licensee's inventories.

 

j)          In connection with any claim for credit of Illinois cigarette revenue stamps, in addition to the types of proof specified, the Department reserves the right to require additional proof in support of any claim as may appear to be necessary.

 

k)         If the Department approves a claim for credit for cigarette tax stamps, the Department (subject to the same limitations as those provided for in Section 440.230 of this Part) may issue an assignable credit memorandum or refund to the claimant or to the claimant's legal representative.  Under no circumstances will a claim for credit be approved in an amount that exceeds the amount paid by the claimant for the stamps that are the subject of the claim.

 

l)          When any tax imposed by the Cigarette Tax Act terminates or has terminated, distributors who have bought stamps while the tax was in effect and who paid the tax, but who can show, to the Department's satisfaction, that they sold the cigarettes to which they affixed the stamps after the tax had terminated and did not recover the tax or its equivalent from purchasers, shall be allowed by the Department to take credit for the absorbed tax against subsequent tax stamp purchases from the Department by the distributor.

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.210  Sale of Forfeited Cigarettes and Vending Machines

 

When any original packages of cigarettes or any cigarette vending device has been declared forfeited to the State by the Department, as provided in Section 18a of the Act, and when all proceedings for the judicial review of the Department's decision have terminated, the Department shall, to the extent that its decision is sustained on review, destroy or maintain and use that property in an undercover capacity.  The Department may, prior to any destruction of cigarettes, permit the true holder of the trademark rights in the cigarette brand to inspect the contraband cigarettes in order to assist the Department in any investigation regarding those cigarettes. [35 ILCS 130/21]

 

(Source:  Amended at 42 Ill. Reg. 23174, effective November 29, 2018)

 

Section 440.220  Tax-Free Sales of Cigarettes for Use Aboard Ships Operating in Foreign Commerce Outside The Continental Limits of the United States

 

a)         Subject to the conditions stated in this Section, Illinois licensed distributors of cigarettes may make tax-free sales of cigarettes to operators of ships docked in the Port of Chicago where cigarettes will be used aboard ships operating in foreign commerce outside the continental limits of the United States. However, sales of cigarettes may not be made tax-free for use on ships operating exclusively on the Great Lakes or the St. Lawrence Seaway between the United States and Canadian ports.

 

b)         In order for the exemption to apply where the cigarettes will be used aboard ships operating in foreign commerce outside the continental limits of the United States, the sale must be made by an Illinois licensed cigarette distributor who has a United States Government permit to maintain an export warehouse at the licensee's place of business for the purpose of selling cigarettes and supplies to vessels that are docked in the Port of Chicago.  A distributor must keep in his books and records the name of the ship to which the distributor delivers the cigarettes and the name of the shipping line operating the ship.  Only cigarettes that are delivered from a bonded warehouse and that are exempt from the Federal tax can qualify for the exemption provided in this Section.

 

c)         In addition, to sustain a claim to the exemption, the distributor must attach a schedule to his return for the month in which the exemption is claimed, showing the following information:

 

1)         The name of the distributor making the sale;

 

2)         the number of cigarettes delivered to such purchaser;

 

3)         the date and invoice number for delivery; and

 

4)         the reason for the exemption, e.g., a statement that the cigarettes are to be used aboard a ship in foreign commerce outside the continental limits of the United States.

 

d)         This deduction or claimed exemption must be substantiated by the records that the distributor keeps to comply with customs' requirements of the Federal Government, and the records must be made available to the Department on request for examination at any time during the usual business hours of the day.

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.230  Claims for Credit or Refund

 

a)         If it appears, after claim is filed with the Department, that an amount of tax or penalty has been paid that was not due under the Cigarette Tax Act, whether as the result of a mistake of fact or an error of law, except as provided, then the Department shall issue a credit memorandum or refund to the person who made the erroneous payment or, if that person has died or become incompetent, to its legal representative.

 

b)         If it is determined that the Department should issue a credit or refund under the Act, the Department may first apply the amount against any amount of tax or penalty due under the Cigarette Tax Act or under the Cigarette Use Tax Act from the person entitled to a credit or refund.  For this purpose, if proceedings are pending to determine whether or not any tax or penalty is due under the Cigarette Tax Act or under the Cigarette Use Tax Act from a person, the Department may withhold issuance of the credit or refund pending the final disposition of the proceedings and may apply the credit or refund against any amount found to be due to the Department under the Cigarette Tax Act or under the Cigarette Use Tax Act as a result of the proceedings.  The balance, if any, of the credit or refund shall be issued to the person entitled.

 

c)         If no tax or penalty is due and no proceeding is pending to determine whether a taxpayer is indebted to the Department for tax or penalty, the credit memorandum or refund shall be issued to the claimant; or (in the case of a credit memorandum) the credit memorandum may be assigned and set over by the lawful holder, subject to reasonable rules of the Department, to any other person who is subject to the Cigarette Tax Act or the Cigarette Use Tax Act, and the amount shall be applied by the Department against any tax or penalty due or to become due under the Cigarette Tax Act or under the Cigarette Use Tax Act from any assignee. [35 ILCS 130/9d]

 

d)         As to any claim filed with the Department on and after each January 1 and July 1, no amount of tax or penalty erroneously paid (either in total or partial liquidation of a tax or penalty under the Act) more than 3 years prior to January 1 and July 1, respectively, shall be credited or refunded.

 

e)         Beginning June 25, 2021, for any period included in a claim for credit or refund for which the statute of limitations for issuing a notice of tax liability under this Act will expire less than 6 months after the date a taxpayer files the claim for credit or refund, the statute of limitations is automatically extended for 6 months from the date it would have otherwise expired.  [35 ILCS 130/9d].

 

f)         In case the Department determines that the claimant is entitled to a refund, such refund shall be made only from an appropriation as may be available for that purpose.  If it appears unlikely that the amount appropriated would permit everyone having a claim allowed during the period covered by an appropriation to elect to receive a cash refund, the Department will make refunds only in hardship cases (i.e., in cases in which the claimant cannot use a credit memorandum).  The two most likely situations where this would be the case are the situation in which the claimant has discontinued business and the situation in which the claimant will have a small volume of liability to the Department in the foreseeable future, but receives a large credit memorandum which it therefore might take the claimant a long time to liquidate by using it to pay current taxes.  In these instances, the claimant probably would have to sell the credit memorandum at a loss in order to realize anything from it within any reasonable period of time.

 

g)         If the Department approves a claim for credit for cigarette tax stamps, the Department (subject to the same limitations as those provided for in this Section) may issue an assignable credit memorandum or refund to the claimant or to the claimant's legal representative.

 

h)         The provisions of Sections 6a, 6b, and 6c of the Retailers' Occupation Tax Act [35 ILCS 120/6a, 6b and 6c] that are not inconsistent with the Cigarette Tax Act shall apply, as far as practicable, to the subject matter of this Section to the same extent as if the provisions were included in the Cigarette Tax Act.

 

(Source:  Amended at 47 Ill. Reg. 5800, effective April 4, 2023)

 

Section 440.240 Protest Procedures

 

a)         Any person aggrieved by any decision of the Department under Section 4 of the Act (denial of distributor's license) may, within 20 days after notice of the decision, file a written protest  and  request a hearing. (See 86 Ill. Adm. Code 200, Practice and Procedure for Hearings Before the Illinois Department of Revenue.) Upon receiving a  written request for a hearing, the Department shall give notice to the person requesting the hearing of the time and place fixed for the hearing and shall hold a hearing in conformity with the provisions of the Act and then issue its final administrative decision in the matter to that person.  In the absence of a written protest and request for a hearing within 20 days, the Department's decision shall  become  final  without any further determination being made or notice given.  (Section 4 of the Act)

 

b)         Any distributor aggrieved by any decision of the Department under Section 6 of the Act (revocation or suspension of license) may, within 20 days after notice of the decision, file a written protest and request a hearing. (See 86 Ill. Adm. Code 200, Practice and Procedure for Hearings Before the Illinois Department of Revenue.) Upon receiving a written request for a hearing, the Department shall give notice in writing to the distributor requesting the hearing that contains a statement of the charges preferred against the distributor and that states the time and place fixed for the hearing.   The Department shall hold the hearing in conformity with the provisions of the Act and then issue its final administrative decision in the matter to the distributor.   In the absence of a written protest and request for a hearing within 20 days, the Department's decision shall become final without any further determination being made or notice given. (Section 6 of the Act)

 

c)         Any person aggrieved by a decision of the Department under Section 9a or 9b of the Act (examination and correction of returns and failure to file a return) may, within 60 days after a notice of tax liability, file a written protest and request a hearing (see 86 Ill. Adm. Code 200, Practice and Procedure for Hearing Before the Illinois Department of Revenue). Upon receiving a request for a hearing, the Department shall give notice in writing to the distributor that states the time and place fixed for the hearing.  The Department shall hold the hearing in comformity with the provisions of the Act and then issue its final administrative decision in the matter to the distributor. In the absence of a written protest and request for a hearing within 60 days after the issuance of a notice of  tax liability, the notice of tax liability shall become final without any further determination being made or notice given. (Sections 9a and 9b of the Act)

 

(Source:  Amended at 27 Ill. Reg. 1618, effective January 15, 2003)

 

Section 440.250  Criminal Investigations

 

a)         All information received by the Department from returns or reports filed under this Act [Cigarette Tax Act], or from any investigation conducted under this Act, shall be confidential, except for official purposes, and any person who divulges any such information in any manner, except in accordance with a proper judicial order or as otherwise provided by law, shall be guilty of a Class A misdemeanor. 35 ILCS 130/10b.

 

b)         When the Department is engaged in a joint investigation with a law enforcement authority, including, but not limited to, State agency law enforcement, federal agency law enforcement, county sheriffs or municipal police, to enforce the Cigarette Tax Act or another tax act administered by the Department, it is an official purpose within the meaning of Section 10b of the Cigarette Tax Act for the Department to furnish information it receives in administering the Cigarette Tax Act with the law enforcement authority. The information shall be provided subject to all confidentiality provisions of Section 10b of the Cigarette Tax Act. A person receiving information pursuant to an official purpose who divulges any such information in any manner, except in accordance with a proper judicial order or as otherwise provided by law, shall be guilty of a Class A misdemeanor.

 

(Source:  Added at 46 Ill. Reg. 6763, effective April 12, 2022)