State of Illinois
91st General Assembly
Legislation

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91_HB0941ham002

 










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 1                     AMENDMENT TO HOUSE BILL 941

 2        AMENDMENT NO.     .  Amend House Bill  941  by  replacing
 3    everything after the enacting clause with the following:

 4        "Section  1.   Short title.  This Act may be cited as the
 5    Cigarette Sales Act.

 6        Section 5.  Legislative findings.  The  General  Assembly
 7    hereby finds and declares as follows:
 8        (a)  Cigarettes, because of their standardized character,
 9    their  great popularity, their widespread and varied types of
10    markets and methods of distribution, and the  sensitivity  of
11    their  distribution to price fluctuations, possess a distinct
12    marketing character and the economic facts and  circumstances
13    peculiar   to   their   distribution   require   special  and
14    individualized treatment of the problems created by the  sale
15    of cigarettes below cost.
16        (b)  The legislature hereby finds that it is necessary to
17    regulate and control the sales price of cigarettes within the
18    State  at  the wholesale level for the purpose of stabilizing
19    the cigarette industry in Illinois.
20        The legislature finds that predatory pricing by cigarette
21    dealers from states surrounding Illinois has  contributed  to
22    the  destruction  of  the  price structure in Illinois. Those
 
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 1    dealers who are protected in their home states  by  cigarette
 2    sales  price  laws  similar  to  this  Act have had an unfair
 3    advantage  over  Illinois  cigarette  dealers.  This  Act  is
 4    enacted by the legislature to prevent  the  movement  of  the
 5    cigarette distribution industry outside of Illinois, with the
 6    loss  of  jobs  attendant  to such a move and to particularly
 7    prevent not only the  sale  of  untaxed  cigarettes  and  the
 8    evasion  of State and local cigarette and sales taxes, but to
 9    make sure the State of Illinois  retains  its  level  of  tax
10    revenue from the sales taxes.

11        Section 10.  Definitions.  As used in this Act unless the
12    context otherwise requires:
13        (1)  "Person"  means  and  includes any individual, firm,
14    association, company, partnership, corporation,  joint  stock
15    company,  club, agency, syndicate, the State of Illinois, and
16    any municipal corporation or other political  subdivision  of
17    this   State,   trust,   receiver,   trustee,  fiduciary,  or
18    conservator.
19        (2)  "Director"  means  the  Director  of  the   Illinois
20    Department of Revenue.
21        (3)  "Department   of   Revenue"   means   the   Illinois
22    Department of Revenue.
23        (4)  "Cigarette"  means and includes any roll for smoking
24    made wholly or in part of tobacco, irrespective  of  size  or
25    shape   and   whether   or   not  the  tobacco  is  flavored,
26    adulterated, or mixed with any other ingredient, the  wrapper
27    or  cover of which is made of paper or any other substance or
28    material, excepting tobacco.
29        (5)  "Wholesaler" means any person who is licensed by the
30    State of Illinois to affix tax stamps to cigarettes  and  who
31    sells cigarettes at wholesale or distributes cigarettes to be
32    subsequently  sold  at retail, and includes any manufacturer,
33    distributor, jobber, sub-jobber as broker,  agent,  or  other
 
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 1    person, whether or not enumerated in this item (5), who is so
 2    licensed and sells or distributes cigarettes. If a wholesaler
 3    also  sells  or  otherwise distributes cigarettes directly to
 4    consumers, the wholesaler shall be  considered  a  "retailer"
 5    under this Act regarding any such sales or distributions.
 6        (6)  "Jobber"  or "sub-jobber" means any person who sells
 7    cigarettes at wholesale or who distributes cigarettes  to  be
 8    subsequently sold at retail, but is not licensed by the State
 9    of Illinois to affix tax stamps to cigarettes. If a jobber or
10    sub-jobber  also  sells  or  otherwise distributes cigarettes
11    directly to consumers, that jobber  or  sub-jobber  shall  be
12    considered  a  "retailer"  under  this Act regarding any such
13    sales or distributions.
14        (7)  "Retailer" means and includes any person  who  sells
15    cigarettes  in  this State to a consumer or to any person for
16    any purpose other  than  resale,  and  the  term  includes  a
17    wholesaler  or  jobber or sub-jobber who sells or distributes
18    cigarettes directly to a consumer.
19        (8)  "Sale"   or   "sell"   means   any   transfer    for
20    consideration or gift.
21        (9)  "Sell   at   wholesale",  "sale  at  wholesale",  or
22    "wholesale sale" means and includes  any  sale  made  in  the
23    ordinary  course of trade or usual conduct of the business of
24    a wholesaler, jobber, or sub-jobber to  a  retailer  for  the
25    purpose of resale.
26        (10)  "Sell  at  retail",  "sale  at  retail", or "retail
27    sale" means and includes any sale for consumption or use made
28    in the ordinary course of  trade  or  usual  conduct  of  the
29    seller's business.
30        (11)  "Basic cost of cigarettes" means the lowest cost of
31    cigarettes   available   to   the   wholesaler,   jobber,  or
32    sub-jobber, as the case may be, within 7 days  prior  to  the
33    date  of  sale,  less  (i)  all  discounts,  except discounts
34    pertaining to Electronic Funds Transfer (EFT)  and  (ii)  any
 
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 1    taxes other than federal taxes.
 2        (12) (a)  "Cost  to wholesaler, jobber, or sub-jobber for
 3    wholesale sales" means  the  basic  cost  of  the  cigarettes
 4    involved  plus  the  cost  of doing cigarette business by the
 5    wholesaler, jobber, or sub-jobber. In determining the cost of
 6    doing  cigarette  business  by  the  wholesaler,  jobber,  or
 7    sub-jobber,  the  cost  of  doing  business  shall  first  be
 8    determined by  applying  the  generally  accepted  accounting
 9    practices  employed by the wholesaler, jobber, or sub-jobber,
10    as the case may  be,  and  includes  labor  costs,  including
11    salaries  of  executives  and  officers,  rent, depreciation,
12    selling costs, maintenance of equipment, delivery costs,  all
13    types of licenses, taxes, insurance, and advertising.
14        (b)  In  the  absence of proof of a lesser or higher cost
15    of doing cigarette business  by  the  wholesaler  making  the
16    sale,  the cost of doing cigarette business by the wholesaler
17    as to sales to jobbers and sub-jobbers shall be  presumed  to
18    be 1% of the basic cost of cigarettes and as to sales made to
19    retailers shall be presumed to be 3 1/2% of the basic cost of
20    cigarettes if cartage is provided by the wholesaler and 3% if
21    no  cartage  is  so  provided.  In  the absence of proof of a
22    lesser or higher cost of  doing  cigarette  business  by  the
23    jobber  or  sub-jobber  making  the  sales, the cost of doing
24    cigarette business by  the  jobber  or  sub-jobber  shall  be
25    presumed  to be 2 1/2% of the basic cost of the cigarettes if
26    cartage is provided by the jobber or sub-jobber and 2% if  no
27    cartage is provided.

28        Section 15.  Sale at less than cost prohibited.
29        (a)  It  shall be unlawful for any wholesaler, jobber, or
30    sub-jobber to sell, at wholesale,  cigarettes  at  less  than
31    cost  to  the  wholesaler, jobber, or sub-jobber, as the case
32    may  be,  as  defined  in  Section  10  for  the  purpose  of
33    destroying    competition    or    substantially    lessening
 
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 1    competition.
 2        (b)  It shall be unlawful for any retailer:
 3             (1)  to induce or attempt to induce or to procure or
 4        attempt to procure the purchase of cigarettes at a  price
 5        less   than  the  cost  to  the  wholesaler,  jobber,  or
 6        sub-jobber; or
 7             (2)  to induce or attempt to induce  or  procure  or
 8        attempt  to  procure any rebate or commission of any kind
 9        or nature whatsoever in connection with the  purchase  of
10        cigarettes.
11        (c)  Sale  of  cigarettes  by  any wholesaler, jobber, or
12    sub-jobber at less than cost to that person  shall  be  prima
13    facie  evidence  of intent to destroy or substantially lessen
14    competition.

15        Section 20. Combination of sales.  In all sales involving
16    2 or more items, at least one of which items  is  cigarettes,
17    at a combined price, and in all sales involving the giving of
18    any  gift or concession of any kind, whether it be coupons or
19    otherwise,  the  wholesaler's,  jobber's,   or   sub-jobber's
20    combined  selling  price  shall  not be below the cost to the
21    wholesaler, jobber, or sub-jobber, respectively, of the total
22    of  all   articles,   products,   commodities,   gifts,   and
23    concessions  included  in the transactions, and for articles,
24    products, commodities, gifts, or  concessions  that  are  not
25    cigarettes,  the  basic  cost  thereof shall be determined in
26    like manner as provided  in  subsections  (11)  and  (12)  of
27    Section 10.

28        Section 25.  Sales by wholesaler to any other wholesaler.
29    When one wholesaler sells cigarettes to any other wholesaler,
30    the  seller  shall  not be required to include in his selling
31    price to the buyer, the "cost to the wholesaler", as provided
32    in Section 10, but the buyer wholesaler,  upon  resale  to  a
 
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 1    jobber,  sub-jobber,  or  a retailer, shall be subject to the
 2    provisions of Section 10.

 3        Section 30.  Sales excluded from  provisions  of  Section
 4    15.   The  provisions of Section 15 shall not apply to a sale
 5    at wholesale:
 6        (1)  if cigarettes are sold in a bona fide clearance sale
 7    for the purpose of discontinuing trade in the cigarettes;
 8        (2)  if cigarettes are sold as imperfect or damaged;
 9        (3)  if cigarettes are sold upon the final liquidation of
10    a business; or
11        (4)  if cigarettes are sold by  any  fiduciary  or  other
12    officer acting under the order or direction of any court.

13        Section   35.   Transactions  permitted  to  meet  lawful
14    competition.
15        (a)  Any  wholesaler,  jobber,  or  sub-jobber  may  sell
16    cigarettes to a regular customer at  a  price  made  in  good
17    faith to meet the price of a competitor whether a wholesaler,
18    jobber, or sub-jobber selling to the same customer. The price
19    of  cigarettes sold under the exceptions specified in Section
20    30 shall not be considered the  price  of  a  competitor  and
21    shall  not  be  used as a basis for establishing prices below
22    cost, nor shall the price established at a bankruptcy sale be
23    considered the price of a competitor within  the  purview  of
24    this Section.
25        (b)  In  the  absence  of proof of the actual cost to the
26    competing wholesaler, jobber, or sub-jobber, as the case  may
27    be,  the  cost  may  be presumed to be the lowest cost to the
28    wholesaler, jobber, or sub-jobber, as the  case  may  be,  as
29    provided in subsection (12)(b) of Section 10.

30        Section 40.  Sales contract made in violation of this Act
31    void.   Any  contract, express or implied, made by any person
 
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 1    in violation of any the provisions of this Act shall be  void
 2    and no recovery shall be had thereon.

 3        Section   45.    Actions  for  violations  or  threatened
 4    violations; remedies; costs.
 5        (a)  The Department  of  Revenue  shall  have  the  prime
 6    responsibility  of  enforcing  the provisions of this Act and
 7    shall adopt rules pertaining to this Act.
 8        (b)  Upon a first violation of any of the  provisions  of
 9    this  Act  by  a wholesaler, jobber, or sub-jobber, after due
10    notice and opportunity  for  a  hearing,  the  Department  of
11    Revenue may impose a civil fine not to exceed $15,000.
12        (c)  Upon  a  second  or subsequent violation of this Act
13    committed by a wholesaler, jobber, or  sub-jobber,  within  3
14    years  following  a  prior  finding  of  violation, after due
15    notice and opportunity  for  a  hearing,  the  Department  of
16    Revenue may impose a civil fine not to exceed $25,000.
17        (d)  Any fines collected by the Department of Revenue for
18    violations  of  this Act shall be disbursed to the Prevention
19    of Tobacco Use by Minors Fund, which is created as a  special
20    Fund  in  the  State  Treasury.   Moneys in the Fund shall be
21    used, subject to appropriation, for the purpose of  education
22    to prevent underage use of tobacco products.
23        (e)  The  Department of Revenue, or any person injured by
24    any violation of this Act, or who may suffer injury from  any
25    threatened  violation  of this Act, may maintain an action in
26    any court of competent jurisdiction to prevent, restrain,  or
27    enjoin  the violation or threatened violation. If a violation
28    or threatened violation of this Act is established, the court
29    shall enjoin and restrain or otherwise prohibit the violation
30    or threatened violation. In addition, the court shall  assess
31    in  favor of the plaintiff and against the defendant the cost
32    of the suit, including reasonable attorney's fees.  It  shall
33    not  be  necessary  that  actual  damages to the plaintiff be
 
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 1    alleged or proved, but if alleged and proved,  the  plaintiff
 2    in the action, in addition to injunctive relief, the costs of
 3    the  suit,  and reasonable attorney's fees, shall be entitled
 4    to recover from the defendant the actual damages sustained by
 5    him or her.
 6        (f)  Any person injured by a violation of  this  Act  may
 7    maintain  an  action for damages and the costs of suit in any
 8    court of general jurisdiction, and if  successful,  shall  be
 9    entitled  to 3 times the amount of actual damages, plus costs
10    and reasonable attorney fees.

11        Section 50. Evidence admissible in  determining  cost  to
12    wholesaler. In determining cost to the wholesaler, jobber, or
13    sub-jobber,  the  court shall receive and consider as bearing
14    on the proof of the cost, evidence tending to show  that  any
15    person complained against under any of the provisions of this
16    Act  purchased  the cigarettes involved in the complaint at a
17    fictitious price, or upon terms, or in  a  manner,  or  under
18    such  invoices,  as  to  conceal the true cost, discounts, or
19    terms of the purchase, and shall also receive and consider as
20    bearing on  proof  of  the  cost,  evidence  of  the  normal,
21    customary,  and  prevailing terms and discounts in connection
22    with other sales of a similar nature in  the  trade  area  or
23    state.

24        Section 55.  Powers and duties of Department of Revenue.
25        (a)  The   Department   of   Revenue   shall   promulgate
26    administrative rules for the enforcement of this Act.
27        (b)  All  of  the  powers  vested  in the Director of the
28    Department of  Revenue  and  Department  of  Revenue  by  the
29    provisions  of  the  Cigarette Tax Act shall be available for
30    the enforcement of this Act.

31        Section  60.   Application  of  Illinois   Administrative
 
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 1    Procedure  Act.  The Illinois Administrative Procedure Act is
 2    hereby   expressly   adopted   and   shall   apply   to   all
 3    administrative  rules  and   procedures   of   the   Illinois
 4    Department of Revenue under this Act.

 5        Section 65.  Nothing in this Act shall be construed to in
 6    any  way limit or restrict the ability of a retailer to price
 7    cigarettes as that retailer chooses.

 8        Section 95.  The State Finance Act is amended  by  adding
 9    Section 5.490 as follows:

10        (30 ILCS 105/5.490 new)
11        Sec.  5.490.   The  Prevention  of  Tobacco Use by Minors
12    Fund.".

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