Can an Illinois wholesaler sell unstamped cigarettes and tobacco products to a Missouri-licensed distributor without paying Illinois cigarette tax?

Subject

Cigarette Tax Act

Plain-English summary

An Illinois wholesaler, holding both a Cigarette Tax License and a Tobacco Products license, wrote to the Illinois Department of Revenue about an opportunity to sell unstamped cigarettes and tobacco product to a Missouri-licensed distributor. The wholesaler explained that the Department's own Alcohol & Tobacco Processing Section had advised requesting a "Private Letter Ruling" ("PLR") on the matter, and asked the Department for help, noting that a prospective customer was considering the purchase in the near future.

The Department did not issue the requested PLR. Instead, it responded with a General Information Letter (GIL), explaining that a PLR is binding on the Department only as to the specific taxpayer and only to the extent the facts recited are correct and complete, and that requesting one requires following the procedures in 2 Ill. Adm. Code 1200.110. A GIL, by contrast, simply directs a taxpayer to relevant regulations or other sources of information; it is not a statement of Department policy and is not binding on the Department (2 Ill. Adm. Code 1200.120).

In its actual response, the Department stated that the regulation addressing the sale of unstamped cigarettes to out-of-State distributors can be found at 86 Ill. Adm. Code 440.170, and that the regulation addressing exempt sales of tobacco products to out-of-State purchasers can be found at 86 Ill. Adm. Code 660.30. The letter states these regulations "can be found on the Department's website" — it does not walk through how those regulations apply to the wholesaler's specific proposed sale, and it does not state whether the described sale would or would not require Illinois cigarette tax stamps or would qualify as exempt.

What this means for you

Wholesalers and distributors handling unstamped product

If your business is considering a similar interstate sale of unstamped cigarettes or tobacco products to an out-of-State licensed distributor, this letter tells you where to look — 86 Ill. Adm. Code 440.170 for unstamped cigarette sales to out-of-State distributors, and 86 Ill. Adm. Code 660.30 for exempt tobacco product sales to out-of-State purchasers — but it does not tell you how those rules resolve any particular transaction. You would need to read those regulations yourself (or have a tax professional do so) and apply them to your own facts.

Taxpayers who want a binding answer

The wholesaler in this letter was told by the Department's own Alcohol & Tobacco Processing Section to request a Private Letter Ruling, which would have been binding on the Department as to that taxpayer's specific facts. The Department instead treated the inquiry as requiring a GIL. If you need certainty before completing a transaction, this letter is a reminder that a GIL will not give you that certainty — only a properly requested PLR, filed under 2 Ill. Adm. Code 1200.110, carries binding effect.

Accountants and tax professionals

Note the letter's structure: it recites the taxpayer's facts (an Illinois cigarette/tobacco wholesaler proposing to sell unstamped product to a Missouri-licensed distributor) but the "Department's Response" section contains only citations to regulations, with no application of those regulations to the facts recited. When advising clients on similar cross-border unstamped sales, treat this GIL as a pointer to the controlling regulations, not as authority resolving the tax treatment of any specific sale.

Common questions

Q: Did the Illinois Department of Revenue rule that this wholesaler's sale was taxable or exempt?
A: No. The letter only cites two regulations — 86 Ill. Adm. Code 440.170 and 86 Ill. Adm. Code 660.30 — as the relevant sources of information. It does not state a conclusion about whether the specific proposed sale to the Missouri distributor would require Illinois tax stamps or would be exempt.

Q: Why didn't the Department issue a Private Letter Ruling as the taxpayer requested?
A: The taxpayer said the Department's Alcohol & Tobacco Processing Section had advised requesting a PLR, but the Department's response states that "the nature of your inquiry and the information you have provided require that we respond with a GIL." A PLR requires complying with the specific procedures in 2 Ill. Adm. Code 1200.110, and a GIL is issued when those requirements for a binding ruling are not met or are not the type of request the Department addresses with a PLR.

Q: What is the difference between a GIL and a PLR under this letter?
A: Per the letter, a PLR "is binding on the Department, but only as to the taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR are correct and complete." A GIL, by contrast, is meant only "to direct taxpayers to Department regulations or other sources of information" and "is not a statement of Department policy and is not binding on the Department."

Q: Which regulations does this letter say govern unstamped cigarette and tobacco sales to out-of-State buyers?
A: The letter cites 86 Ill. Adm. Code 440.170 for the sale of unstamped cigarettes to out-of-State distributors, and 86 Ill. Adm. Code 660.30 for exempt sales of tobacco products to out-of-State purchasers.

Q: Can a business rely on this letter as binding precedent for its own sale?
A: No. As a GIL issued under 2 Ill. Adm. Code 1200.120, it is not a statement of Department policy and is not binding on the Department, even for the taxpayer who requested it. A business wanting a binding answer on its own facts would need to submit a proper PLR request under 2 Ill. Adm. Code 1200.110.

Q: Who signed this letter?
A: Richard S. Wolters, Chairman of the Private Letter Ruling Committee, signed the response on behalf of the Department's Taxpayer Information Division.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0028-gil.pdf

Original ruling text

ST 18-0028-GIL 11/19/2018 CIGARETTE TAX ACT
This letter addresses the sale of unstamped cigarettes to out-of-State distributors. See 86 Ill.
Adm. Code 440.170. (This is a GIL.)

November 19, 2018
Dear Xxxxx:
This letter is in response to your letter, in which you requested information. The Department
issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the Department in
response to specific taxpayer inquiries concerning the application of a tax statute or rule to a
particular fact situation. A PLR is binding on the Department, but only as to the taxpayer who is the
subject of the request for ruling and only to the extent the facts recited in the PLR are correct and
complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
COMPANY, located in CITY, IL, is a wholesaler and holds Cigarette Tax License ###
and Tobacco Products license ###. COMPANY has an opportunity to sell unstamped
cigarettes and tobacco product to a Missouri licensed distributor.
II have been advised by our IL Dept. of Revenue – Alcohol & Tobacco Processing
Section to request a “Private Letter Ruling” regarding this matter. Can you help me?
I look forward to hearing from you at your earliest convenience as our potential
customer is considering purchasing product from COMPANY in the very near future.

DEPARTMENT’S RESPONSE:
The regulation that addresses the sale of unstamped cigarettes to out-of-State distributors can
be found at 86 Ill. Adm. Code 440.170. The regulation that addresses exempt sales of tobacco
products to out-of-State purchasers can be found at 86 Ill. Adm. Code 660.30. These regulations can
be found on the Department’s website.

ST 18-0028-GIL
Page 2

I hope this information is helpful. If you have further questions related to the Illinois sales tax
laws, please visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Chairman, Private Letter Ruling Committee
RSW:bkl