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Illinois Explains New Sales Tax on Little Cigars

  • Oct 12, 2012 | Gail Cole

On September 20, 2012, Illinois released ST 12-0036-GIL, a General Interest Letter pertaining to the Cigarette Tax Act and the taxation of "little cigars." The letter is dated July 23 of this year. At issue is the grace period allowed for the sale of unstamped Little Cigars. The Department of Revenue decided that retailers were allowed sufficient time to dispose of their old, unstamped inventory.

The General Interest Letter referenced P.A. 097-0688 and Illinois Senate Bill 2194.

Little Cigars, Redefined

Public Act 097-0688 expands the definition of cigarettes to "include Tobacco Products Commonly Known as Little Cigars… ." Little cigars--small, tightly rolled bundles of dried and fermented tobacco, wrapped in tobacco leaves--have traditionally been taxed at a different rate than cigarettes--small rolls of cut tobacco wrapped in paper.

An informational bulletin released by the Illinois Department of Revenue in June delineates the issue. It states that "[s]ome tobacco products previously regulated and taxed under the Tobacco Products Tax Act, meet the new definition of 'cigarette' and will be regulated and taxable under the Cigarette Tax Act and the Cigarette Use Tax Act effective July 1, 2012." Little cigars fall under the new definition.

Little Cigar Defined as Cigarette

Since July 1, 2012, a little cigar in Illinois is defined as "cigarette" if it meets two or more of the following criteria:

  1. "the product is sold in packs similar to cigarettes
  2. the product is available for sale in cartons of ten packs
  3. the product is sold in soft packs, hard packs, flip-top boxes, clam shells, or other cigarette-type boxes
  4. the product is of a length and diameter similar to commercially manufactured cigarettes
  5. the product has a cellulose acetate or other integrated filter
  6. the product is marketed or advertised to consumers as a cigarette or cigarette substitute
  7. other evidence that the product fits within the definition of cigarette"

In addition, beginning July 1, 2012, "all packages of little cigars meeting the definition of cigarette must be stamped prior to being sold or used." Businesses "must be licensed as a cigarette distributor under the Cigarette Tax Act or Cigarette Use Tax Act to purchase cigarette stamps."

Retailers had until August 1, 2012, to sell their old, unstamped inventory of little cigars.  The informational bulletin reminded retailers that as of August 1, 2012, "unstamped little cigars meeting the definition of cigarettes that are in their inventory will be considered contraband cigarettes and will be subject to seizure and forfeiture."

Little cigars meeting the new definition of cigarettes and purchased on or after July 1, 2012, "must have a cigarette tax stamp affixed."

Read about how increased cigarette taxes in Illinois impacts smokers and retailers in Indiana.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.