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Illinois Responds to Prior Tobacco Tax Court Ruling

iStock_000013235100XSmallWhat is meant by a “cigarette” in Illinois? This question has been circulating through the tax community since December 2012. In August, 2013, it was reported that Illinois officially changed the definition of a “cigarette” and a “little cigar” for purposes of the Illinois tobacco tax regime. This is a major victory for tobacco products manufacturers and tobacco distributors in the state of Illinois.

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

(a) the product is sold in packs similar to cigarettes;

(b) the product is available for sale in cartons of ten packs;

(c) the product is sold in soft packs, hard packs, flip-top boxes, clam shells, or other cigarette-type boxes;

(d) the product is of a length and diameter similar to commercially manufactured cigarettes

(e) the product has a cellulose acetate or other integrated filter;

(f) the product is marketed or advertised to consumers as a cigarette or cigarette substitute; or

(g) other evidence that the product fits within the definition of cigarette.

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

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

A prime example of the importance of a definition has also been highlighted by recent litigation in Florida regarding transaction taxes on tobacco products. In Florida, the DBPR takes the position that cigar wrappers, also known as blunt wraps, are subject to the Florida tobacco tax. Under any taxing regime, the item has to be within the four corners of taxing statute to be taxable, and any ambiguities are to be resolved against the agency and in favor of the taxpayer. With that in mind, section 210.01, F.S., defines a cigarette to mean:

any roll for smoking, except one of which the tobacco is fully naturally fermented, without regard to the kind of tobacco or other substances used in the inner roll or the nature or composition of the material in which the roll is wrapped, which is made wholly or in part of tobacco irrespective of size or shape and whether such tobacco is flavored, adulterated or mixed with any other ingredient.

Similarly, section 201.25, F.S., defines a tobacco product as

loose tobacco suitable for smoking; snuff; snuff flour; cavendish; plug and twist tobacco; fine cuts and other chewing tobaccos; shorts; refuse scraps; clippings, cuttings, and sweepings of tobacco, and other kinds and forms of tobacco prepared in such manner as to be suitable for chewing; but “tobacco products” does not include cigarettes, as defined by s. 210.01(1), or cigars.

Similar to the disputes in Illinois whether an item is subject to tax turns on the statutory definition of what the tax applies to. If the item not spelled out within the four corners of the statute it’s not taxable. Further, as Illinois has taught us, if the statute is overly vague, then challenging the definition itself is a viable avenue for change. While this is often an overlooked area of the law, it is important to know there are tobacco attorneys out there to help.

In accordance with Circular 230 Disclosure


Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm Moffa, Gainor, & Sutton, PA , based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU.

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