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Chicago's OTP Tax Deferred Due to Lawsuit Filed By Cigar Retailers

A few weeks ago, the International Premium Cigar and Pipe Retailers Association (IPCPR), the National Association of Tobacco Outlets (NATO), Iwan Ries & Co., the Cigar Association of America (CAA), the Illinois Association of Wholesale Distributors, the Illinois Retail Merchants Association, and Arangold Corporation d/b/a Arango Cigar Co., filed a lawsuit against the City of Chicago in the Circuit Court of Cook County, regarding an other tobacco products (OTP) tax, which is in violation of Illinois’ home rule statute.

The OTP tax, adopted by the City Council in March, includes a tax of $0.20 per large cigar tax and $.60 per ounce tax on pipe tobacco. The additional tax burden, on top of existing Cook County and State taxes, would be devastating to 22 IPCPR members’ businesses located in Chicago. In Illinois, the tobacco products tax is 36% of the wholesale price of tobacco products sold or otherwise disposed of to retailers or consumers located in the state. The lawsuit’s claim is that Chicago is pre-empted by Illinois state law from adopting an OTP tax. As such, the plaintiffs are seeking a preliminary and permanent injunction against the enforcement of the OTP tax, which was supposed to take place effective July 1, 2016.

The City of Chicago has agreed to defer the implementation of the tax from July 1 until the 60th day after the Circuit Court enters a decision on whether the city is indeed pre-empted from adopting such a tax. This order is positive news for IPCPR’s 22 members in Chicago, who will not be required to collect or pay the tax beginning July 1.

Updates on this lawsuit are forthcoming...

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