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Monday, January 13, 2020

Illinois Supreme Court Strikes Down Chicago Tax on "Other Tobacco Products"

Chicago received a lump of coal days before Christmas as the Illinois Supreme Court invalidated a 2016 city-wide tax on "other tobacco products" (such as e-cigarettes) in Iwan Ries & CO. v. City of Chicago. 

The Illinois Municipal Code allows not preempt a home rule municipality to impose a tax 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 units of cigarettes or of units of cigarettes or tobacco products before July 1, 1993, shall not impose such a tax after that date). 65 ILCS 5/8-11-6a
A group of plaintiffs with ties to the tobacco-product industry filed a complaint against the City for levying the tax. The circuit court ruled in favor of the plaintiffs,  finding that the tax violated state statute, specifically Section 8-11-6a of the Illinois Municipal Code. 

On appeal to the Illinois Supreme Court, plaintiffs argued that the City's tax exceeded its statutory powers because the Illinois Municipal Code preempts the imposition of new taxes on tobacco products after July 1, 1993 after the General Assembly passed section 8-11-6a as an amendment to the municipal code to consolidate tax revenue from tobacco and other tobacco products into the state's coffers. The General Assembly did, however, carve an exception for existing tobacco taxes passed by municipalities with home rule authority but Plaintiffs argued that the City's tax on "other tobacco products" was a new tax in violation of this statute.

The City argued that section 8-11-6a "grandfathers certain municipalities—those that previously imposed taxes based on the number of units of cigarettes or tobacco products sold—and not certain taxes."  In the City's view, the General Assembly tried to strike a balance between collection of revenue by state tobacco taxes and home rule authority under state law.

Although sympathetic to the public policy ramifications of the loss of potential tax revenue from growing demand in other tobacco products, the Illinois Supreme Court sided with the plaintiff's argument, finding that the plain statutory language demonstrates the "legislative intent to prohibit future municipal taxes on cigarettes or other tobacco products unless the tax was enacted before July 1, 1993."

Post Authored by Mike Halpin and Julie Tappendorf, Ancel Glink


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