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Wednesday, December 26, 2018

Court Upholds City's Tax on Tobacco Products

In 2016, the City of Chicago adopted an ordinance imposing a flat tax on non-cigarette tobacco products, including smoking tobacco, smokeless tobacco, pipe tobacco, and cigars. Shortly after enactment, Iwan Ries and various tobacco associations filed a lawsuit against the City challenging the legality of the ordinance, claiming the ordinance was unconstitutional because it was preempted by section 8-11-6a(2) of the Illinois Municipal Code which provides in part as follows:
Notwithstanding the foregoing, this Section does not preempt any home rule imposed tax such as the following...(2) a tax based on the number of units of cigarettes or tobacco products (provided, however, that a home rule municipality that has not imposed a tax based on the number of cigarettes or tobacco products before July 1, 1993, shall not impose such a tax after that date.
The circuit court agreed with the plaintiffs and struck down the City's ordinance, finding that it was preempted by state law because the City had not enacted a tax on tobacco products prior to 1993. The City appealed, and the appellate court ruled in the City's favor, reversing the lower court's decision. Iwan Ries & Co. et al. v. City of Chicago.

Plaintiffs argued that because the City had not enacted a tax on tobacco products prior to 1993, it was preempted from enacting one in 2016. The City countered by arguing that because it had a cigarette tax in place in 1993, it was not preempted from enacting a tobacco product tax. The appellate court agreed with the City's interpretation of the statute based on the statute's use of the word "or". Specifically, the appellate court held that because the City had enacted a tax on cigarettes prior to July 1, 1993, it was not preempted from enacting a tax on either cigarettes or tobacco products after that date. As a result, the appellate court reversed the circuit court's ruling striking down the City's tax.


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