Section 450.10  Nature and Rate of Tax

 

a)         The Cigarette Use Tax is imposed upon the privilege of using cigarettes in this State, and the tax rate is 99 mills per cigarette or $1.98 on a package of 20 cigarettes through June 30, 2019; and, beginning July 1, 2019, the tax rate is 149 mills per cigarette or $2.98 on a package of 20 cigarettes.  All moneys received by the Department under the Cigarette Use Tax Act (the Act) shall be distributed as provided in Section 2 of the Cigarette Tax Act (Section 35 of the Act).

 

b)         The tax must be collected by a distributor maintaining a place of business in this State or a distributor authorized by Section 7 of the Act to hold a permit to collect the tax, and the amount of the tax shall be added to the price of the cigarettes sold by the distributor and must be stated on the invoice as a separate item from the selling price of the cigarettes except when the purchaser is a federal or foreign government agency or instrumentality (see Section 450.50).

 

c)         Distributors who are not subject to the Cigarette Tax Act [35 ILCS 130], but who are subject to the Cigarette Use Tax Act [35 ILCS 135], must remit, to the Department of Revenue (the Department), the amount of Cigarette Use Tax to be collected by them through the purchase and affixation of tax stamps or meter impression units (when the use of meters is authorized by the Department) to any original package of cigarettes before delivering the cigarettes (or causing them to be delivered) in this State to any purchaser, or (in the case of manufacturers of cigarettes in original packages that are contained inside a sealed transparent wrapper) by imprinting the language to be prescribed by the Department on the original package of cigarettes beneath the outside wrapper.

 

1)         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 and following), 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 Use Tax Act, the Department shall revoke the license of any distributor that is determined to have violated this subsection (c)(1).  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 (c)(1) that the label or notice has been removed, mutilated, obliterated, or altered in any manner. (Section 3 of the Act)

 

2)         Packages of cigarettes, cigarette papers, wrappers, or tubes stamped or imprinted in a manner not in accordance with subsection (c)(1) 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 Act.

 

3)         Packages of cigarettes, cigarette papers, wrappers, or tubes stamped or imprinted in a manner not in accordance with subsection (c)(1) 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 Act.

 

4)         No stamp or imprint may be affixed to, or made upon, any package of cigarettes (Section 3 of the Act) that:

 

A)        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;

 

B)        does not comply with:

 

i)          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

 

ii)         all federal trademark and copyright laws;

 

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

 

D)        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;

 

E)        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 Cigarette Labeling and Advertising Act (15 USC 1335a); or

 

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

 

i)          any statement, label, stamp, sticker, or notice described in 86 Ill. Adm. Code 440.50(k)(1); or

 

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

 

5)         Packages of cigarettes, cigarette papers, wrappers, or tubes stamped or imprinted in a manner not in accordance with subsection (c)(4) 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 Act.

 

6)         Packages of cigarettes, cigarette papers, wrappers or tubes stamped or imprinted in a manner not in accordance with subsection (c)(4) 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 Act.

 

7)         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.

 

8)         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, Firearms and Explosives.

 

9)         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 such cigarettes, the quantity of each brand style of such cigarettes, the supplier of such cigarettes, and the person or persons, if any, to whom such cigarettes have been conveyed for resale.

 

10)        In addition to the statement required in subsection (c)(9), 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 such cigarettes.

 

11)        In addition to the statement required in subsection (c)(9) and (c)(10), 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 such 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. (Section 3-10 of the Act)

 

12)        The Department may revoke or suspend the license or licenses of any distributor, in the manner provided in Section 6 of the Cigarette Use Tax Act, if the Department determines that the distributor knew or had reason to know that the distributor was committing any of the acts prohibited in subsection (c)(4) of this Section or had failed to comply with any of the requirements of Section 3-10(b) of the Act.  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 $5,000.  Cigarettes acquired, held, owned, possessed, transported in, imported into, or sold or distributed in this State in violation of subsection (c)(4) shall be subject to seizure and forfeiture whether the violation is knowing or otherwise. (See Section 3-10(c)(1) of the Act.)

 

d)         At the time of purchasing stamps from the Department or any person authorized by the Department, when purchase of the stamps is required by the Cigarette Use Tax Act or at the time when the tax that he or she has collected is remitted by a distributor to the Department without the purchase of stamps from the Department or any person authorized by the Department when that method of remitting the tax that has been collected is required or authorized by the Act, the distributor will be allowed a discount during any year commencing July 1 and ending the following June 30. The discount shall be equal to 1.75% of the amount of the tax payable under the Act up to and including the first $3,000,000.00 paid by the distributor to the Department during any year and 1.5% of the amount of any additional tax paid by the distributor to the Department during that year.

 

e)         This discount is to cover the distributor's cost of collecting the tax.

 

f)         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.

 

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

 

h)         The Cigarette Use Tax collected by a distributor who is liable to collect and remit a like amount of tax with respect to the same cigarettes under the Cigarette Tax Act need not be remitted to the Department under the Act.  In other words, the amount that the distributor is liable to collect and remit under the Cigarette Tax Act with respect to particular cigarettes is offset against the amount collected from the purchaser by the distributor under the Act with respect to the same cigarettes.  Sections 3 and 10 of the Act permit this offset in order to avoid the double remittance of tax to the State on the same transactions in the case of sales of cigarettes in Illinois.

 

i)          In those instances in which a distributor is required to affix tax stamps or meter impressions to original packages of cigarettes under the Act, rather than under the Cigarette Tax Act, the provisions of the Part relating to the Cigarette Tax Act (86 Ill. Adm. Code 440) shall apply.

 

j)          When cigarettes are acquired for use in this State without Illinois tax stamps being affixed to the original packages and without authorized tax imprints placed underneath the sealed transparent wrapper of the original packages, the user is required to remit the amount of the Cigarette Use Tax directly to the Department. Before January 1, 2002, the tax shall be remitted to the Department by the user within 3 days after he acquires the cigarettes.  On and after January 1, 2002,  the tax  shall be remitted to the Department by the user within 30 days after he or she acquires the cigarettes.

 

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

 

l)          Section 1 of the Act provides that the term "distributor" does not include any person 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.

 

m)        Any retailer having cigarettes in its possession on July 1, 2019 to which tax stamps have been affixed is not required to pay the additional tax that begins on July 1, 2019 imposed by PA 101-31 on those stamped cigarettes. 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 PA 101-31 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 3 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 this 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 this election are not entitled to take the discount provided in Section 3 of the Act on those payments. (Section 2 of the Act)

 

(Source:  Amended at 44 Ill. Reg. 6069, effective April 3, 2020)

 

Section 450.20  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 450.30  Licenses and Permits – Bonds

 

a)         Any distributor maintaining a place of business in this State is required to be licensed as a distributor under the Act, provided that the distributor need not obtain the license if a distributor is required to procure a license or allowed to obtain a permit as a distributor under the Cigarette Tax Act.  "Distributor maintaining a place of business in this State" means any distributor having or maintaining within this State, directly or by a subsidiary, an office, distribution house, sales house, warehouse or other place of business, or any agent operating within this State under the authority of the distributor or its subsidiary, irrespective of whether the place of business or agent is located here permanently or temporarily, or whether the distributor or subsidiary is licensed to transact business within this State. (Section 1 of the Act)  The distributor must apply for a license on a form prescribed by the Department and must accompany the application with a joint and several bond.  The amount of the bond shall be $2,500.

 

b)         Except when the applicant is the manufacturer, no distributor's license shall be issued to an applicant unless he or she 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 separate application for license shall be made, and bond filed, for each place of business at or from which the applicant proposes to act as a distributor under the Act and for which the applicant is not required to procure a license or allowed to obtain a permit as a distributor under the Cigarette Tax Act.  Any license issued shall permit the applicant to engage in business as a distributor at or from the place shown in his or her application.  All licenses issued by the Department under the Act shall be valid for not to exceed one year after issuance unless sooner revoked, canceled or suspended as provided in the Act.

 

c)         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.  The applicant for license shall pay the fee to the Department at the time of submitting the application for license to the Department.

 

d)         A license shall not be transferable or assignable.  Every such license shall be conspicuously displayed at the place of business for which it is issued.  Licenses issued under the Act are subject to suspension, revocation or cancellation under the conditions prescribed in Section 6 of the Act.

 

e)         The Department may, in its discretion, upon application, issue permits authorizing the collection of the tax imposed by those 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 this Act as distributors of cigarettes in this State, and who, to the satisfaction of the Department, furnish adequate security to insure collection and 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, and provided that no permit shall be issued under the Act to a manufacturer who has obtained the permit provided for in Section 4b of the Cigarette Tax Act.  The distributor shall be issued, without charge, a permit to collect the tax in a manner, and subject to reasonable regulations and agreements as the Department shall prescribe.  When so authorized, it shall be the duty of the distributor to collect the tax upon all cigarettes he or she delivers (or causes to be delivered) within this State to purchasers, in the same manner and subject to the same requirements as a distributor maintaining a place of business within this State.  The permit shall be in the form the Department may prescribe and shall not be transferable or assignable.  The authority and permit may be suspended, canceled or revoked when, at any time, the Department considers that the security given is inadequate, or that the tax can more effectively be collected from the person using the cigarettes in this State or through distributors located in this State, or whenever the permittee violates any provision of the Act or this Part, or whenever the permittee shall notify the Department in writing of his or her desire to have the permit canceled.  The Department shall have the power, in its discretion, to issue a new permit after the suspension, cancellation or revocation.

 

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

 

g)         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 or she 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 the 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 the corporation, would not be eligible to receive a license under this Part for any reason.

 

4)         a person, or any person who owns more than 15 percent of the ownership interests in a person or a related party who:

 

A)        owes, at the time of application, any delinquent cigarette taxes that have been determined by law to be due and unpaid, unless the license applicant has entered into an agreement approved by the Department to pay the amount due;

 

B)        had a license under the Act revoked within the past 2 years by the Department for misconduct relating to stolen or contraband cigarettes or has been convicted of a State or federal crime, punishable by imprisonment of one year or more, relating to stolen or contraband cigarettes;

 

C)        manufactures cigarettes, whether in this State or out of this State, and who is neither:

 

i)          a participating manufacturer as defined in subsection II(jj) of the "Master Settlement Agreement" as defined in Section 10 of the Tobacco Products Manufacturers' Escrow Act [30 ILCS 168]; nor

 

ii)         in full compliance with the Tobacco Products Manufacturers' Escrow Act and the Tobacco Products Manufacturers' Escrow Enforcement Act of 2003 [30 ILCS 167];

 

D)        has been found by the Department, after notice and a hearing, to have imported or caused to be imported into the United States for sale or distribution any cigarette in violation of 19 USC 1681a;

 

E)        has been found by the Department, after notice and a hearing, to have imported or caused to be imported into the United States for sale or distribution or manufactured for sale or distribution in the United States any cigarette that does not fully comply with the Federal Cigarette Labeling and Advertising Act (15 USC 1331); or

 

F)         has been found by the Department, after notice and a hearing, to have made a material false statement in the application or has failed to produce records required to be maintained by the Act. (Section 4 of the Cigarette Use Tax Act)

 

(Source:  Amended at 42 Ill. Reg. 23186, effective November 29, 2018)

 

Section 450.40  Reports and Returns

 

a)         When cigarettes are acquired for use in this State by a person (including a distributor as well as any other person), who did not pay the cigarette use tax to a distributor, the person, within 30 days after acquiring the cigarettes, shall file a return with the Department and shall transmit with the return to the Department the tax imposed by the Act.  Computer generated returns or returns 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)         Every distributor, who is required or authorized to collect tax 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 15^th day of each calendar month, file a return with the Department showing the information the Department may reasonably require.  Computer generated returns and schedules or returns and schedules 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)         Every distributor who is a manufacturer of cigarettes in original packages  contained inside a sealed transparent wrapper, and who is required or authorized to collect tax under the Act, shall file a return by the 5^th day of each month covering the preceding calendar month.  Each return shall be accompanied by the appropriate remittance for tax as provided in Sections 3 and 7 of the Act.  Each return shall disclose the information the Department may lawfully require.  Computer generated returns and schedules or returns and schedules filed on forms that have not been approved by the Department are considered to be non-processable and may subject the filer to penalties and interest for failure to file a proper return.

 

d)         No distributor shall be required to return information to the extent to which the reporting of that information would be a duplication of the distributor's reporting of information in any return he or she is required to file with the Department under the Cigarette Tax Act.  Returns shall be filed on forms prescribed 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.

 

e)         The returns filed by both distributors required or authorized to collect tax 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 11 of the Act)  Distributors and manufacturers who voluntarily file returns and schedules electronically are not subject to this requirement.  A taxpayer who has an annual tax liability of $20,000 or more shall make all payments of that tax to the Department by electronic funds transfer.  Before August 1 of each year, the Department shall notify all taxpayers required to make payments by electronic funds transfer. [20 ILCS 2502/2505-200].

 

(Source:  Amended at 42 Ill. Reg. 23186, effective November 29, 2018)

 

Section 450.50  Books and Records; Invoices; Penalties

 

a)         Books and Records

 

1)         Distributors and Persons that Have Not Paid the Tax Due Under the Act.  Every distributor required or authorized to collect taxes imposed by the Cigarette Use Tax Act and every person using, in this State, cigarettes purchased on or after the effective date of this Act without Illinois cigarette tax stamps affixed to the original packages and without authorized tax imprints placed underneath the sealed transparent wrapper of the original packages, shall keep the records, receipts, invoices and other pertinent books, documents, memoranda and papers as the Department shall require, in a form as the Department shall require.  The books, records, papers, memoranda and documents of a distributor pertaining to business done by him or her at or from a licensed place of business, or at or from a place of business for which he or she holds a permit issued by the Department, shall be kept by the distributor at the place of business.  A distributor's records of a particular purchase from a manufacturer or other distributor shall, at a minimum, include:

 

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

 

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

 

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

 

D)        receiving record  (the receiving record should show the date when the cigarettes were received by the distributor);

 

E)        evidence of payment by the other distributor to the manufacturer; and

 

F)         other records as the Department may reasonably require.

 

2)         Secondary Distributors.  Every secondary distributor of cigarettes who is required to procure, or is allowed to procure, a license under the Act shall keep, 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 135/15a]

 

3)         For purposes of this Section, "records" means all data maintained by the secondary distributors, including data on paper, microfilm, microfiche or any type of machine sensible data compilation.  (See 35 ILCS 135/15 and 15a.)

 

4)         All books, records, papers, memoranda and documents that are required to be kept under the Act shall be kept in the English language and shall, at all times during 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 secondary distributor without a search warrant and may inspect the premises and the stock or packages of cigarettes in those 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 secondary distributor at the premises shall be subject to revocation by the Department.  [35 ILCS 135/15 and 15a]

 

5)         The books, records, papers, memoranda and documents that are required to be kept 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, unless the Department, in writing, authorizes their destruction or disposal at an earlier date.  (See 35 ILCS 135/15 and 15a.)

 

6)         It is not the purpose of this subsection (a) to require distributors to keep duplicate sets of books and records.  Consequently, to the extent to which a distributor is required by the Cigarette Tax Act and by the Cigarette Use Tax Act to keep the same books and records, the distributor's compliance with the requirement under the Cigarette Tax Act shall be deemed to be a compliance with the same requirement under the Cigarette Use Tax Act.

 

b)         Invoices

 

1)         Every person who purchases cigarettes for shipment into Illinois from a point outside this State, and who is required to file a return with the Department with respect to the cigarettes, shall procure invoices covering each shipment and shall furnish one copy of each invoice to the Department upon request.

 

2)         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 must be furnished to the Department upon request.

 

3)         Each manufacturer who holds a permit under Section 7 of the Cigarette Use Tax 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 must be furnished to the Department upon request.  Subsections (a)(1) through (a)(3) shall not apply to a transaction in which the same requirement applies by virtue of the provisions of 86 Ill. Adm. Code 440.110 (Cigarette Tax Act rules).

 

4)         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 Section shall not be construed as to impose any requirement or liability upon any common or contract carrier.  [35 ILCS 135/3]

 

5)         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, 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. 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 maintain or 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 Section.  This subsection (c)(1) shall not apply if the violation in a particular case also constitutes a criminal violation of the Cigarette Tax Act. [35 ILCS 135/22]

 

2)         Any person who shall fail to safely preserve the records required by Sections 15 and 15a of the Act for the period of 3 years, as required in those Sections, 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.  This subsection (c)(2) shall not apply if the violation in a particular case also constitutes a criminal violation of the Cigarette Tax Act. [35 ILCS 135/23]

 

3)         The Department may, after notice and hearing as provided for by the Act, revoke, cancel or suspend the license of any distributor or secondary distributor for any noncompliance with this Section.  No license so revoked shall be reissued to any such distributor or secondary distributor within a period of 6 months after the date of the final determination of the revocation.  (See 35 ILCS 135/6.)  Any distributor or secondary distributor 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 or secondary distributor requesting the hearing of the time and place fixed for the hearing.  If a distributor or secondary distributor 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 or secondary distributor.  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 or secondary distributor. 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.

 

4)         Any person who fails to keep books and records or fails to produce books and records for inspection, as required by Sections 15 and 15a 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 15 and 15a, 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 15 and 15a. [35 ILCS 135/23a]  The provisions of 86 Ill. Adm. Code 440.110(c) (Cigarette Tax Act Regulations) that are not inconsistent with the Cigarette Use Tax Act shall apply, as far as practicable, to the subject matter of this Part to the same extent as if those provisions were included in this Part.

 

(Source:  Amended at 43 Ill. Reg. 8915, effective July 30, 2019)

 

Section 450.60  Unused Stamps – Sale of – Notice to Department – Mutilated Stamps

 

The provisions of 86 Ill. Adm. Code 440.120, 440.130 and 440.140 (Cigarette Tax Act rules) apply when the distributor who is involved holds a permit or is licensed under the Act, as distinguished from being a licensee or permit holder under the Cigarette Tax Act.

 

(Source:  Amended at 42 Ill. Reg. 23186, effective November 29, 2018)

 

Section 450.70  Cigarettes Used Outside Illinois

 

The cigarette use tax does not apply to cigarettes sold for use outside Illinois, but this conclusion has no effect upon the question of the taxability or exemption of a distributor who is licensed or who holds a permit to act as a distributor under the Cigarette Tax Act, when such a distributor sells cigarettes to purchasers outside this State.  Insofar as this subject in relation to the Cigarette Tax Act is concerned, see 86 Ill. Adm. Code 440.170 of the Rules relating to the Cigarette Tax Act.

 

Section 450.80  Purchase of Cigarettes by Governmental Bodies for Use

 

No exemption from the cigarette use tax can be claimed merely because of the fact that the purchaser for use is a State or local governmental body. Under the doctrine of intergovernmental immunity, the cigarette use tax cannot be imposed upon Federal or foreign governmental bodies, but this conclusion has no effect on the question of the taxability or exemption of a distributor who is licensed or who holds a permit to act as a distributor under the Cigarette Tax Act, when such a distributor sells cigarettes to the Federal Government or to a foreign government or to an agency or instrumentality of either.  Insofar as this subject in relation to the Cigarette Tax Act is concerned, see 86 Ill. Adm. Code 180 of the Rules relating to the Cigarette Tax Act.

 

Section 450.90  Credit for Stamps that Are Damaged, Unused, Destroyed or on Packages Returned to the Manufacturer

 

Holders of permits and distributors who are licensed under the Cigarette Use Tax Act, rather than under the Cigarette Tax Act, may file claims for credit with the Department for cigarette stamps that are damaged, unused, destroyed or for packages returned to manufacturers. Claims shall be subject to the same terms and conditions as claims made under 86 Ill. Adm. Code 440.200.  For that purpose, the provisions of 86 Ill. Adm. Code 440.200 are enforceable under this Section.

 

(Source:  Amended at 27 Ill. Reg. 1647, effective January 15, 2003)

 

Section 450.100  Sample Packages of Cigarettes--Stamps or Other Evidence of Tax Collection Affixed

 

Sample packages of cigarettes may not be distributed in this State without Illinois cigarette use 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 cigarette use tax is being collected, provided that the requirements for cigarette use tax stamping or cigarette use tax imprinting shall not apply if the same cigarettes are tax-stamped or tax-imprinted under, and in accordance with, the provisions of the Cigarette Tax Act.  The package containing said sample packages shall not be destroyed until all sample cigarettes therein have been dispensed.  However, if an out-of-state person who does not hold a permit to collect the cigarette use tax, or who is not licensed to collect the cigarette use tax, ships sample packages of cigarettes directly to users in this State, and if such cigarettes are not subject to the requirement of tax stamping or tax imprinting under the Cigarette Tax Act or are not tax-stamped or tax-imprinted in accordance with that Act, such users will be required to remit the tax applicable to such cigarettes directly to the Department as provided in the last paragraph of Section 450.10 of this Part.

 

Section 450.110  Forfeited Cigarettes and Vending Machines

 

When any original packages of cigarettes or an cigarette vending device shall have been declared forfeited to the State by the Department, as provided in Section 25 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. (Section 27 of the Cigarette Use Tax Act)

 

(Source:  Amended at 42 Ill. Reg. 23186, effective November 29, 2018)

 

Section 450.120  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 Use Tax Act, whether as the result of a mistake of fact or an error of law, except as hereinafter 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 the person’s 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 Use Tax Act or under the Cigarette Tax Act from the person entitled to the credit or refund.  For this purpose, if proceedings are pending to determine whether or not any tax or penalty is due under the Cigarette Use Tax Act or under the Cigarette Tax Act from the 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 Use Tax Act or under the Cigarette 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 the 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) 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 Use Tax Act or the Cigarette Tax Act, and the amount thereof shall be applied by the Department against any tax or penalty due or to become due under the Cigarette Use Tax Act or under the Cigarette Tax Act from the assignee.  [35 ILCS 135/14a]

 

d)         As to any claim filed under this Section 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 135/14a].

 

f)         In case the Department determines that the claimant is entitled to a refund, the refund shall be made only from the 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 the 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 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 regulation) 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, that are not inconsistent with the Cigarette Use Tax Act, shall apply, as far as practicable, to the subject matter of this Part to the same extent as if such provisions were included in the Cigarette Use Tax Act.

 

(Source:  Amended at 47 Ill. Reg. 5806, effective April 4, 2023)

 

Section 450.130 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 Hearing 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 Hearing 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 4 of the Act)

 

c)         Any person aggrieved by a decision of the Department under Section 13 or 13a 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 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 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 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. (Section 13 and 13a of the Act)

 

(Source:  Amended at 27 Ill. Reg. 1647, effective January 15, 2003)

 

Section 450.140  Criminal Investigations

 

a)         All information received by the Department from returns or reports filed under this Act [Cigarette Use 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 135/20.

 

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 Use Tax Act or another tax act administered by the Department, it is an official purpose within the meaning of Section 20 of the Cigarette Use Tax Act for the Department to furnish information it receives in administering the Cigarette Use Tax Act with the law enforcement authority. The information shall be provided subject to all confidentiality provisions of Section 20 of the Cigarette Use 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. 6768, effective April 12, 2022)