Does a licensed tobacco distributor owe Illinois Tobacco Products Tax on a sale to another licensed distributor, and can it be held liable if that second distributor never remits the tax?

Plain-English summary

The Illinois Department of Revenue confirmed that when one licensed tobacco products distributor sells tobacco products to another licensed distributor, that sale is not subject to the Illinois Tobacco Products Tax. Under the Tobacco Products Tax Act of 1995, the tax is imposed on a distributor only when it sells or otherwise disposes of tobacco products to a retailer or consumer located in Illinois -- at $0.30 per ounce for moist snuff, 36% of the wholesale price for most tobacco products, or 15% of the wholesale price for electronic cigarettes (little cigars are taxed at the same rate, and revenue is distributed the same way, as cigarettes under the Cigarette Tax Act).

Because the tax attaches at the last distributor-to-retailer (or distributor-to-consumer) step, a sale from one licensed distributor/wholesaler to another licensed distributor/wholesaler -- who will resell rather than sell to a retailer or consumer -- is not a taxable event. The same goes for sales delivered outside Illinois. To document that a sale was properly untaxed, the selling distributor must obtain a resale/delivery-outside-Illinois certification from the purchaser (names and addresses, purchase date, purchaser's signature, tobacco products tax license number if applicable, and a statement of the basis for the exemption) and retain it for at least three and a half years, since the Department can ask for that proof later.

The letter does not address the taxpayer's specific liability question -- whether the selling distributor could be held responsible if the downstream licensed distributor fails to remit tax on its own later sale to a retailer or consumer -- because a GIL only points to the relevant rules rather than resolving a particular fact pattern; that kind of binding, fact-specific answer would require a Private Letter Ruling request instead.

What this means for you

Tobacco products distributors and wholesalers

Sales you make to another licensed distributor or wholesaler (for resale, not to a retailer or consumer) are outside the Tobacco Products Tax, as are sales delivered outside Illinois. The tax is triggered only by the last distributor's sale into the retail/consumer chain. Little cigars are the exception noted in the statute, taxed like cigarettes.

Documentation and recordkeeping

To support a nontaxable, no-tax-charged sale to another distributor or wholesaler, get a proper exemption certification at the time of sale (seller and purchaser name/address, date, purchaser signature, tobacco products tax license number if applicable, and a statement that the purchase is for resale other than to consumers, or for delivery outside Illinois) and keep it on file for at least three and a half years, since the Department may request it as proof no tax was due.

If you're worried about a downstream distributor's non-payment

This GIL does not resolve whether an upstream distributor can be held liable for a second licensed distributor's failure to remit tax on its subsequent taxable sale. The Department only restated the general rules on when tax attaches and how to document exempt sales; taxpayers wanting a binding answer on that specific liability scenario need to request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110, since a GIL is not binding on the Department.

Common questions

Q: Do I owe Tobacco Products Tax when I sell to another licensed distributor?
A: No. Tax under the Tobacco Products Tax Act of 1995 applies only when a distributor sells to a retailer or consumer located in Illinois, not on distributor-to-distributor (or wholesaler) sales made for resale.

Q: What if the buyer is a licensed distributor but later doesn't pay the tax on its own sale?
A: This letter does not decide that liability question. It only explains when the tax is imposed (on the last distributor selling to a retailer or consumer) and how to document a nontaxable resale; a binding answer about liability for someone else's non-remittance would require a Private Letter Ruling.

Q: What paperwork do I need to keep to prove a sale wasn't taxable?
A: A certification from the purchaser with the seller's and purchaser's name and address, the purchase date, the purchaser's signature, the purchaser's tobacco products tax license number (if applicable), and a statement that the purchase is for resale (other than to consumers) or for delivery outside Illinois. Keep it for at least three and a half years.

Q: Are little cigars treated the same as other tobacco products?
A: No -- little cigars are taxed at the same rate as cigarettes under the Cigarette Tax Act (since July 1, 2013), and the exemption for sales to other distributors/wholesalers for resale or for out-of-state delivery specifically excludes little cigars from that particular exemption language quoted in the ruling.

Q: Is a GIL the same as a binding ruling?
A: No. A General Information Letter merely points to relevant Department regulations and other sources; it is not a statement of Department policy and is not binding on the Department. A Private Letter Ruling, requested under 2 Ill. Adm. Code 1200.110, is binding on the Department as to the requesting taxpayer if the facts given are complete and correct.

Citations and references

Statutes and rules:

• 35 ILCS 143/10-10 (Tobacco Products Tax Act of 1995 -- tax imposed on distributors selling to retailers/consumers)
• 35 ILCS 143/10-15 (documentation required for nontaxable sales)
• 86 Ill. Adm. Code 660.5 (tax imposition/definitions)
• 86 Ill. Adm. Code 660.30 (nontaxable sales; exemption certification requirements)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0031-gil.pdf

Original ruling text

ST 25-0031-GIL 05/28/2025 TOBACCO PRODUCTS
Sales of tobacco products from a licensed distributor to another licensed distributor
are not subject to tax under the Tobacco Products Tax Act of 1995. Tax is imposed
upon the last distributor who sells tobacco products to a retailer or consumer
located in Illinois. 86 Ill. Adm. Code 660.5. (This is a GIL.)
May 28, 2025
NAME
COMPANY
EMAIL
Dear NAME:
This letter is in response to your letter dated May 5, 2025, 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
https://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:
On behalf of COMPANY, I am writing to request a private letter ruling by the
Illinois Department of Revenue regarding (35 ILCS 143/10-10) Sec. 10-10. Tax
imposed.
COMPANY understands that we must keep in our books and records to
support the sale with no tax to licensed second distributors. The private letter
ruling COMPANY is requesting is if COMPANY sold untaxed tobacco products
to a licensed second distributor in the state of Illinois, and it happened that
the licenses [sic] second distributor in the state of Illinois did not remit the
proper tobacco tax to the state of Illinois. The state of Illinois would not hold

COMPANY/NAME
Page 2
May 28, 2025
COMPANY liable for those non-tax paid tobacco products on behalf of the
licensed second distributor.
If you have any questions regarding this manner, please feel free to contact
me.
Thank you.
DEPARTMENT’S RESPONSE:
Under the Tobacco Products Tax Act of 1995 (Act), a tax is imposed on any person
engaged in business as a distributor of tobacco products, at the rate of $0.30 per ounce for
moist snuff, 36% of the wholesale price of tobacco products, or 15% of the wholesale price
of electronic cigarettes sold or otherwise disposed of to retailers or consumers located in
this State. Beginning July 1, 2013, the tax on little cigars shall be imposed at the same rate,
and the proceeds shall be distributed in the same manner, as the tax imposed on cigarettes
under the Cigarette Tax Act. The tax is not imposed upon any activity in that business, in
interstate commerce or otherwise, to the extent to which that activity may not, under the
Constitution and Statutes of the United States, be made the subject of taxation by this State.
The tax is also not imposed on sales made to the United States or any entity thereof. 35 ILCS
143/10-10. Tax is imposed on a distributor making sales of tobacco products to a retailer or
consumer.
Not all sales of tobacco products by distributors or wholesalers are subject to tax.
Purchases of tobacco products, other than little cigars, by distributors or wholesalers who
sell the product to other licensed distributors or wholesalers and not to retailers or
consumer are not subject to the tax imposed by this Act. Purchases of tobacco products,
other than little cigars, by wholesalers and retailers for delivery of the product outside Illinois
are not subject to the tax imposed by this Act. Sales of tobacco products sold to retailers or
consumers are taxable sales. 86 Ill. Adm. Code 660.30.
A person making a nontaxable sale of tobacco products, other than little cigars, to a
wholesaler or a retailer must document the exemption by obtaining a certification from the
purchaser containing the seller's name and address, the purchaser's name and address, the
date of purchase, the purchaser's signature, the purchaser's tobacco products tax license
number, if applicable, and a statement that the purchaser is purchasing for resale, other
than for sale to consumers, or is purchasing for delivery outside of Illinois. 35 ILCS 143/1015; 86 Ill. Adm. Code 660.30(g). The seller must keep the documentation of the nontaxable
sale in their records for a period of not less than three and one-half years. The Department
may request such documentation as proof that no tax was due on the sale.

COMPANY/NAME
Page 3
May 28, 2025
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,
Kimberly Rossini
Associate Counsel
KAR:slc