Illinois Supreme Court Hears Chicago OTP

> Founded in 1857, downtown Chicago’s Iwan Ries is America’s oldest tobacco shop.

Illinois Supreme Court Hears Chicago OTP Tax Case

An industry lawsuit to have tax struck down weighs in the balance.

>BY THOMAS BRIANT

On September 17, 2019, the Illinois Supreme Court heard oral arguments on whether the Chicago excise tax on other tobacco products should be upheld or struck down. This litigation began back in 2016 after the Chicago City Council enacted a $1.80 per ounce tax on roll-your-own smoking tobacco and smokeless tobacco, a $.60 per ounce tax on pipe tobacco, and a $.20 per cigar tax on little and large cigars.

The lawsuit seeking to have the Chicago OTP tax rates struck down was filed by NATO, the Cigar Association of America, the International Premium Cigar and Pipe Retailers Association (now the Premium Cigar Association), the Illinois Association of Wholesale Distributors, the Illinois Retail Merchants Association, Arangold Corporation d/b/a Arango Cigar Company, and retailer Iwan Ries & Co.

More than two years ago, the Illinois Circuit Court issued a ruling that struck down the tobacco products excise tax adopted by the Chicago City Council. Specifically, the court found that Illinois Municipal Code Section 6(a)(2) pre-empts a home rule municipality (of which Chicago is one such home rule city) from imposing a tax on other tobacco products.

The language of Illinois Municipal Code Section 6(a)(2) states that a home rule city shall not impose a tax on other tobacco products unless the city had already adopted such a tax before July 1, 1993. Since the City of Chicago had adopted a cigarette tax prior to July 1, 1993 but not a tax on other tobacco products, the court found that state law prohibited the city from adopting the OTP taxes.

However, the City of Chicago proceeded to appeal the Illinois Circuit Court ruling to the Appellate Court of Illinois. Upon appeal, the appellate court overturned the Illinois Circuit Court decision. This case was appealed by NATO and the other plaintiffs to the Illinois Supreme Court because it involves a fundamental tenet of Illinois law that if the plain and ordinary language of a statute is clear it must be interpreted as written.

In this case, the plain language of the 1993 amendment to Section 6a(2) specifically prohibits the imposition of any municipal tobacco products tax when “such a tax” was not enacted prior to July 1, 1993. Nevertheless, the appellate court chose not to follow this fundamental requirement of statutory construction, or even the basic principles of grammar, but rather read into Section 6a(2) additional words and terms in order to interpret Section 6a(2) contrary to its plain and ordinary meaning.

This case is also important since it raises the serious question of whether the appellate court was correct in ignoring the fact that, for 23 years, the City of Chicago itself had interpreted Section 6a(2) consistent with its plain and ordinary meaning by not enacting an OTP excise tax which is directly opposite to the appellate court’s decision and, equally significant, that the City of Chicago attempted on three separate occasions— but failed each time—to convince the Illinois legislature to change Section 6a(2) to give it the power to impose a new excise tax on other tobacco products.

With the oral argument hearing now concluded, the Illinois Supreme Court will take the case under advisement and issue a ruling most likely by the end of this year.

Thomas Briant is executive director of the National Association of Tobacco Outlets (NATO), Toll-free: (866) 869-8888, Web: www.natocentral.org.