Can a licensed Illinois cigarette distributor affix Illinois tax stamps to unstamped cigarettes that were procured by a commonly-owned affiliate directly from a permitted out-of-state manufacturer?

Plain-English summary

A licensed Illinois cigarette distributor (referred to as COMPANY) asked the Illinois Department of Revenue whether it could affix Illinois cigarette tax stamps to unstamped original packages of cigarettes that its affiliate, PROCUREMENT AFFILIATE, had procured directly from an out-of-state cigarette manufacturer. COMPANY operates a distribution center in Illinois and is licensed as a distributor under 35 ILCS 130/4. PROCUREMENT AFFILIATE operates two consolidation warehouses outside Illinois and is also a licensed distributor (of cigarettes and of other tobacco products). Both COMPANY and PROCUREMENT AFFILIATE are wholly-owned subsidiaries of the same parent, PARENT COMPANY, which holds 100% ownership and ultimate control of both, and which holds the direct distributorship contracts with cigarette manufacturers that govern procurement and distribution for the whole corporate family.

Under the arrangement described, PROCUREMENT AFFILIATE procures cigarettes directly from manufacturers permitted under Section 4b of the Cigarette Tax Act (35 ILCS 130/4b) and obtains title to those cigarettes. COMPANY wanted to bring those unstamped cigarettes into its Illinois distribution center and apply the required Illinois tax stamps there, rather than each entity separately sourcing and stamping cigarettes on its own.

The Department granted the ruling. It explained that the Cigarette Tax Act taxes distributors of cigarettes at $2.98 per package of 20 cigarettes (86 Ill. Adm. Code 440.10), collected up front through the tax-stamp system, and that under Section 3 of the Act (35 ILCS 130/3) a distributor may apply tax stamps only to original packages purchased or obtained directly from an in-state distributor licensed under Section 4 or an out-of-state manufacturer permitted under Section 4b. The key to this ruling is 35 ILCS 130/2(l) and 86 Ill. Adm. Code 440.90, which the Department has long applied to treat two or more distributors that are owned or controlled by the same interests as a single distributor. Because COMPANY and PROCUREMENT AFFILIATE are both licensed distributors wholly owned and controlled by the same parent, the Department treated them as, in effect, one distributor for this purpose: PROCUREMENT AFFILIATE's direct purchase from a Section 4b-permitted out-of-state manufacturer counts as if COMPANY itself had made that direct purchase, so COMPANY may lawfully stamp those packages. The ruling requires that the unstamped cigarettes go straight to COMPANY's Illinois distribution center and never be delivered to a facility where retail sales take place or where a secondary distributor makes sales for resale, and that both COMPANY and PROCUREMENT AFFILIATE file the required returns (35 ILCS 130/9; 86 Ill. Adm. Code 440.100) and keep full records (35 ILCS 130/11; 86 Ill. Adm. Code 440.110) proving the cigarettes were procured by PROCUREMENT AFFILIATE directly from the permitted out-of-state manufacturer before being shipped to COMPANY.

The ruling binds the Department only as to COMPANY, only on the facts as described, and it expires 10 years from the March 7, 2024 letter (or sooner if the law, case law, rules, or the underlying facts change), under 2 Ill. Adm. Code 1200.110(e).

What this means for you

Cigarette distributors with commonly-owned affiliates

If your company is a licensed Illinois cigarette distributor and you have an affiliated, commonly-owned entity that is also a licensed distributor and procures cigarettes directly from out-of-state manufacturers holding a Section 4b permit, this ruling shows the Department's reasoning for why you may be able to stamp those affiliate-procured cigarettes yourself: 35 ILCS 130/2(l) and 86 Ill. Adm. Code 440.90 already treat commonly-owned/controlled distributors as a single distributor for discount purposes, and the Department extended that same logic here to who may lawfully apply tax stamps. But because this is a PLR, it binds the Department only as to COMPANY and only on COMPANY's specific facts (100% common ownership and control through one parent, direct manufacturer contracts held at the parent level, cigarettes shipped straight to a distribution center and never to a retail or resale facility). If your ownership structure, contracts, or shipping pattern differ, you cannot rely on this letter -- you would need your own PLR under 2 Ill. Adm. Code 1200.110.

Out-of-state manufacturers and procurement affiliates

The ruling confirms that a procurement affiliate that itself becomes a licensed Illinois distributor (as PROCUREMENT AFFILIATE did, on the Department's own advice) can buy directly from a Section 4b-permitted out-of-state manufacturer and pass unstamped cigarettes to a related in-state distributor for stamping, without either entity running afoul of the "who may possess and stamp unstamped packages" rule in 35 ILCS 130/3 -- provided the common-ownership condition is met and the goods never reach a retail or resale facility unstamped.

Accountants and tax professionals

Note the recordkeeping and returns obligations this ruling actually imposes, not just the stamping conclusion: both COMPANY and PROCUREMENT AFFILIATE must file returns under 35 ILCS 130/9 and 86 Ill. Adm. Code 440.100, and both must keep records under 35 ILCS 130/11 and 86 Ill. Adm. Code 440.110 sufficient to demonstrate to the Department that the cigarettes were procured by the affiliate directly from the permitted out-of-state manufacturer before being shipped to the stamping distributor. This is a compliance-documentation-heavy ruling, not a blanket exemption.

Common questions

Q: Can a licensed distributor stamp cigarettes that a related company bought from an out-of-state manufacturer?
A: Yes, on these facts. The Department ruled that COMPANY may affix Illinois tax stamps to original packages procured by its affiliate, PROCUREMENT AFFILIATE, directly from an out-of-state manufacturer holding a Section 4b permit, because COMPANY and PROCUREMENT AFFILIATE are both licensed distributors under 100% common ownership and control through the same parent company.

Q: Why does common ownership matter here?
A: The Department relied on 35 ILCS 130/2(l) and 86 Ill. Adm. Code 440.90(c), which already treat two or more distributors owned or controlled by the same interests as a single distributor for purposes of computing the stamp-purchase discount. The Department applied that same "single distributor" treatment to conclude that PROCUREMENT AFFILIATE's direct purchase from the permitted manufacturer satisfies Section 3's requirement that stamps be applied only to packages obtained directly from a Section 4 in-state distributor or Section 4b out-of-state manufacturer.

Q: Does the ruling let the cigarettes go anywhere before being stamped?
A: No. The unstamped original packages must be shipped to COMPANY's Illinois distribution center; none may be delivered to a facility where retail sales of cigarettes take place or where a secondary distributor makes sales for resale.

Q: What records and filings does the ruling require?
A: COMPANY and PROCUREMENT AFFILIATE must file returns under 35 ILCS 130/9 and 86 Ill. Adm. Code 440.100, and both must keep complete books and records under 35 ILCS 130/11 and 86 Ill. Adm. Code 440.110 -- sufficient to show the Department that the cigarettes at issue were procured by PROCUREMENT AFFILIATE directly from the Section 4b-permitted out-of-state manufacturer before delivery or shipment to COMPANY in Illinois.

Q: Can another distributor with a similar-looking affiliate structure rely on this ruling?
A: No. This is a Private Letter Ruling, binding on the Department only as to COMPANY and only to the extent the facts COMPANY described are correct and complete. It expires 10 years after the March 7, 2024 letter, or sooner if the law or the underlying facts change, under 2 Ill. Adm. Code 1200.110(e). A different taxpayer needs its own PLR for a binding answer on its own facts, though this ruling shows how the Department reasons about common-ownership stamping arrangements.

Citations and references

Statutes:

• 35 ILCS 130/1 (definition of "distributor")
• 35 ILCS 130/2(b) (tax not imposed on activity beyond the state's constitutional authority to tax interstate commerce)
• 35 ILCS 130/2(l) (commonly owned/controlled distributors treated as a single distributor)
• 35 ILCS 130/3 (stamping rules; who may possess and stamp unstamped original packages)
• 35 ILCS 130/4 (in-state distributor license)
• 35 ILCS 130/4b (out-of-state manufacturer permit)
• 35 ILCS 130/9 (distributor returns)
• 35 ILCS 130/11 (recordkeeping requirements)
• 765 ILCS 1065/2(d) (Illinois Trade Secrets Act definition of "trade secret")

Regulations:

• 86 Ill. Adm. Code 440.10 (Cigarette Tax/Cigarette Use Tax imposition and $2.98-per-pack-of-20 rate)
• 86 Ill. Adm. Code 440.20 (tax evidenced by affixed stamp)
• 86 Ill. Adm. Code 440.30 (definitions of "retailer" and "distributor")
• 86 Ill. Adm. Code 440.50 (Department sale of stamps to licensed distributors; penalties for noncompliance)
• 86 Ill. Adm. Code 440.90 (stamp-purchase discount; common ownership/control treated as single distributor)
• 86 Ill. Adm. Code 440.100 (distributor returns)
• 86 Ill. Adm. Code 440.110 (invoice and recordkeeping requirements)
• 2 Ill. Adm. Code 1200.110 (PLR procedures, binding effect, and 10-year expiration)

Cases cited by the taxpayer (constitutional-avoidance argument re: interstate commerce, not resolved or relied on in the Department's response):

• Rust v. Sullivan, 500 U.S. 173, 191 (1991)
• People v. Hollins, 2012 IL 112754
• Napleton v. Village of Hinsdale, 229 Ill. 2d 296 (2008)
• Eden Retirement Center, Inc. v. Department of Revenue, 213 Ill. 2d 273 (2004)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0001-PLR.pdf

Original ruling text

ST 24-0001-PLR 03/07/2024 CIGARETTE TAX ACT
A licensed distributor may affix tax stamps to original packages of cigarettes
purchased or obtained by a procurement affiliate who is a licensed distributor, who
is under the same common ownership, and who purchased or obtained the
cigarettes directly from an out-of-State manufacturer holding a permit under
Section 4b of the Cigarette Tax Act. See 86 Ill. Adm. Code 440.50; 35 ILCS 130/3.
(This is a PLR.)
March 7, 2024
NAME
COMPANY
ADDRESS
Dear XXXX:
This letter is in response to your letter dated February 29, 2024, 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.
Review of your request disclosed that all the information described in paragraphs
1 through 8 of Section 1200.110 appears to be contained in your request. This Private
Letter Ruling will bind the Department only with respect to COMPANY, for the issue or
issues presented in this ruling, and is subject to the provisions of subsection (e) of Section
1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling is
conditioned upon the understanding that neither COMPANY, nor a related taxpayer is
currently under audit or involved in litigation concerning the issues that are the subject of
this ruling request. In your letter you have stated and made inquiry as follows:
This correspondence is written to seek a Private Letter Ruling (“PLR”) from
the Illinois Department of Revenue (“DOR”) concerning a limited aspect of
the Cigarette Tax Act, particularly 35 ILCS 130/3. For purposes of the
request outlined below, “COMPANY” shall mean COMPANY “PARENT
COMPANY” shall mean COMPANY1 “PROCUREMENT AFFILIATE” shall

COMPANY/NAME
March 7, 2024
Page 2
mean COMPANY2. This PLR request is submitted by COMPANY.
[REDACTED]
I.

Complete Statement of Facts and Other Pertinent Information

COMPANY is authorized to do business in Illinois and operates a
distribution center located in CITY, Illinois. COMPANY is a distributor of
cigarettes in this state as defined by 35 ILCS 130/1 being “Any person
engaged in the business of selling cigarettes in this State who brings or
causes to be brought into this State from without this State any original
packages of cigarettes on which original packages there is no authorized
evidence underneath a sealed transparent wrapper showing that the tax
liability imposed by this Act has been paid or assumed by the out-of-State
seller of such cigarettes, for sale or other disposition in the course of such
business.” COMPANY is licensed as a distributor of cigarettes under 35
ILCS 130/4. COMPANY is a wholly-owned subsidiary of PARENT
COMPANY.
PROCUREMENT AFFILIATE is authorized to do business in Illinois and
operates consolidation warehouses, one of which relevant herein is located
in CITY1, STATE1. PROCUREMENT AFFILIATE procures cigarettes from
manufacturers of cigarettes permitted under 35 ILCS 130/4b as well as
other tobacco products and vapor products from manufacturers for
purposes of further providing COMPANY, [REDACTED] with supply of
cigarettes, tobacco products and vapor products.
PARENT COMPANY holds 100 percent ownership interest in its
subsidiaries, COMPANY and PROCUREMENT AFFILIATE. Ultimate
control of COMPANY and PROCUREMENT AFFILIATE is 100 percent
common through PARENT COMPANY. [REDACTED].
PARENT COMPANY holds common direct distributorship contracts with
various manufacturers of cigarettes such that each manufacturer’s direct
distributorship contract governs all procurement and distribution activities
by PARENT COMPANY, COMPANY, and PROCUREMENT AFFILIATE.
The terms and conditions of such direct distributorship contracts with
manufacturers of cigarettes apply to PARENT COMPANY, COMPANY, and
PROCUREMENT AFFILIATE alike.
PROCUREMENT AFFILIATE currently procures, under direct distributor
contracts held under PARENT COMPANY, cigarettes, tobacco products and
vapor products from manufacturers. PROCUREMENT AFFILIATE obtains
title to and receives cigarettes along with other tobacco and vapor products
from each respective manufacturer [REDACTED]. [REDACTED]:

COMPANY/NAME
March 7, 2024
Page 3
(a)

[REDACTED]

(b)

[REDACTED]

[REDACTED]. PROCUREMENT AFFILIATE itself does not sell to or
distribute to retailers or customers other than procurement for PARENT
COMPANY and its wholly-owned affiliates.
[REDACTED]
COMPANY desires to participate in the procurement process of cigarettes
through PROCUREMENT AFFILIATE while continuing distributing
cigarettes through the direct distributor contracts held by PARENT
COMPANY. [REDACTED].
In outlining to DOR the intention of COMPANY to obtain its cigarettes
through PROCUREMENT AFFILIATE, DOR advised that PROCUREMENT
AFFILIATE should license as a distributor under 35 ILCS 130/4.
PROCUREMENT AFFILIATE duly complied and obtained licensure as a
distributor of cigarettes and as a distributor of other tobacco products.
II.

Specific Request for Ruling.

The request for ruling by COMPANY is to validate that COMPANY may
obtain unstamped packages from PROCUREMENT AFFILIATE when
purchased by PROCUREMENT AFFILIATE from a permitted manufacturer
under a direct distributor contract held by PARENT COMPANY, and under
which direct distributor contract COMPANY distributes the cigarettes in the
State of Illinois, further recognizing that COMPANY may affix Illinois tax
stamps to such packages of cigarettes as may be required.
III.

Documents Relevant to the Request

No documents are provided or believed necessary for consideration of this
Specific Request for Ruling. It is understood that any ruling issued by DOR
would be limited to the facts set forth herein.
IV.

Tax Period at Issue

All time periods on and after the date of DOR’s private letter ruling granting
this request for ruling. There are no audits or litigations pending with DOR
with regard to this issue.
V.

A Statement That to the Best of the Knowledge of Both the Taxpayer
and the Taxpayer’s Representative DOR has not Previously Ruled

COMPANY/NAME
March 7, 2024
Page 4
on the Same or a Similar Issue for the Taxpayer or a Predecessor, or
Whether the Taxpayer or any Representatives Previously Submitted
the Same or a Similar Issue to DOR but Withdrew it Before a Letter
Ruling was Issued.
To the best of COMPANY’s and its representative’s knowledge and belief,
DOR has not previously ruled on the same or similar issue for COMPANY,
its affiliates, or any predecessor to COMPANY or its affiliates. Nor has
COMPANY or any prior representative of COMPANY previously submitted
the same or a similar issue to DOR that was withdrawn before a letter filing
was issued.
VI.

Statement of Authorities Supporting the Taxpayers’ Views

Statute: 35 ILCS 130/1 defines a distributor as “Any person engaged in the
business of selling cigarettes in this State who brings or causes to be
brought into this State from without this State any original packages of
cigarettes on which original packages there is no authorized evidence
underneath a sealed transparent wrapper showing that the tax liability
imposed by this Act has been paid or assumed by the out-of-State seller of
such cigarettes, for sale or other disposition in the course of such business.”
Statute: 35 ILCS 130/3 provides in part, “A licensed distributor may ship or
otherwise cause to be delivered unstamped original packages of cigarettes
in, into, or from this State. . . . Any licensed distributor that ships or otherwise
causes to be delivered unstamped original packages of cigarettes into,
within, or from this State shall ensure that the invoice or equivalent
documentation and the bill of lading or freight bill for the shipment identifies
the true name and address of the consignor or seller, the true name and
address of the consignee or purchaser, and the quantity by brand style of
the cigarettes so transported, provided that this Section shall not be
construed as to impose any requirement or liability upon any common or
contract carrier.”
Statute: 35 ILCS 130/3 provides in part, “Only distributors licensed under
this Act and transporters, as defined in Section 9c of this Act [35 ILCS
130/9c], may possess unstamped original packages of cigarettes. Prior to
shipment to a secondary distributor or an Illinois retailer, a stamp shall be
applied to each original package of cigarettes sold to the secondary
distributor or retailer. A distributor may apply tax stamps only to original
packages of cigarettes purchased or obtained directly from an in-state
maker, manufacturer, or fabricator licensed as a distributor under Section 4
of this Act [35 ILCS 130/4] or an out-of-state maker, manufacturer, or
fabricator holding a permit under Section 4b of this Act [35 ILCS 130/4b].”

COMPANY/NAME
March 7, 2024
Page 5
Informational Bulletin 2012-09: Issued in June of 2012, Information Bulletin
2012-01 expressly states “Stamped or unstamped cigarette packages may
be sold or transferred between licensed cigarette distributors.”
Analogous Statute: In considering stamping between distributors owned or
controlled by the same interests, 86 Ill. Adm. Code 440.90(c) provides, “Two
or more distributors that use a common means of affixing revenue tax
stamps or that are owned or controlled by the same interests shall be
treated as a single distributor for the purpose of computing the discount.”
See also, 35 ILCA 130/2(l).
Constitutional Considerations: The requirements imposed by the Cigarette
Tax Act shall not apply where such application would be contrary to the
Constitution and laws of the United States. Specifically relevant herein,
Article I, Section 8, Clause 3 to the United States Constitution not only
empowers Congress to pass federal laws, but it also limits state authority to
regulate interstate commerce. 35 ILCS 130/2(b) clarifies that the cigarette
tax imposed under that section “are not imposed upon any activity in such
business in interstate commerce or otherwise, which activity may not under
the Constitution and statutes of the United States be made subject of
taxation by this State.” Because the legislature “legislates in the light of
constitutional limitations,” constitutional avoidance should be applied,
except to the point of disingenuous evasion. Rust v. Sullivan, 500 U.S. 173,
191 (1991). When it is reasonably possible to construe a challenged statute
in a manner that preserves its constitutionality, there is a duty to do so.
People v. Hollins, 2012 IL 112754, ¶ 13. See also, Napleton v. Village of
Hinsdale, 229 Ill. 2d 296, 306-07 (2008), Eden Retirement Center, Inc. v.
Department of Revenue, 213 Ill. 2d 273, 291-92 (2004).
VII.

Statement of Authorities Contrary to the Taxpayer’s Views

COMPANY is not aware of contrary authority interpreting 34 ILCS 130/3
[sic].
VIII.

Statement Regarding Trade Secrets

“Trade secret” means “information, including but not limited to, technical or
non-technical data, a formula, pattern, compilation, program, device,
method, technique, drawing, process, financial data, or list of actual or
potential customers or suppliers, that:
(1)

is sufficiently secret to derive economic value, actual or
potential, from not being generally known toother persons
who can obtain economic value from its disclosure or use; and

COMPANY/NAME
March 7, 2024
Page 6
(2)

is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality.”

765 ILCS 1065/2(d).
[REDACTED]
However, the mere facts that COMPANY would purchase unstamped
cigarettes from an out-of-state affiliate, PROCUREMENT AFFILIATE,
whereby COMPANY would then stamp the cigarettes for ultimate
distribution on the State of Illinois would not invoke trade secrets. Nor would
disclosure that COMPANY and PROCUREMENT AFFILIATE being wholly
owned subsidiaries of PARENT COMPANY necessarily raise sensitivity
questions.
If you have any questions or require further information, please do not
hesitate to contact me.
DEPARTMENT’S RESPONSE:
The Cigarette Tax Act imposes a tax upon persons engaged in business as a
retailer of cigarettes in this State at the rate of $2.98 per package of 20 cigarettes. See
86 Ill. Adm. Code 440.10. The Cigarette Use Tax Act imposes a tax upon the privilege of
using cigarettes in this State at the rate of $2.98 per package of 20 cigarettes. Payment
of the tax must be evidenced by a stamp affixed to each original package of cigarettes.
See 86 Ill. Adm. Code 440.20. The Cigarette Tax is collected up front from retailers by
licensed distributors. It is the duty of each distributor to collect the tax from the retailer at
or before the time of sale, to affix the required stamps and to remit the tax collected from
retailers to the Department. See 86 Ill. Adm. Code 440.10. Severe penalties may be
incurred for noncompliance. See 86 Ill. Adm. Code 440.50.
Under the Cigarette Tax Act, a “Retailer” means any person who engages in the
making of transfers of the ownership of, or title to, cigarettes to a purchaser for use or
consumption and not for resale in any form, for a valuable consideration. “Distributor”
includes any person engaged in the business of selling cigarettes in this State who brings
or causes to be brought into this State from without this State any original packages of
cigarettes, on which original packages there is no authorized evidence underneath a
sealed transparent wrapper showing that the tax liability imposed by this Act has been
paid or assumed by the out-of-State seller of such cigarettes, for sale or other disposition
in the course of such business. See 86 Ill. Adm. Code 440.30. The Department will sell
tax stamps only to licensed distributors. See 86 Ill. Adm. Code 440.50. Prior to shipment
to a secondary distributor or an Illinois retailer, a stamp shall be applied to each original
package of cigarettes sold to the secondary distributor or retailer. 35 ILCS 130/3. Section
3 of the Cigarette Tax Act provides:

COMPANY/NAME
March 7, 2024
Page 7
Each distributor of cigarettes, before delivering or causing to be delivered
any original package of cigarettes in this State to a purchaser, shall firmly
affix a proper stamp or stamps to each such package, or (in case of
manufacturers of cigarettes in original packages which are contained inside
a sealed transparent wrapper) shall imprint the required language on the
original package of cigarettes beneath such outside wrapper, as hereinafter
provided.
The Department has stated in the past that the term “purchaser” used in this
context is the end user and not another distributor who intends to resell the cigarettes.
When a manufacturer sells cigarettes to a licensed distributor, it is not required to imprint
the required language beneath the outside sealed wrapper or affix a tax stamp to each
original package of cigarettes. This interpretation is consistent with additional provisions
contained in Section 3:
A licensed distributor may ship or otherwise cause to be delivered
unstamped original packages of cigarettes in, into, or from this State. A
licensed distributor may transport unstamped original packages of
cigarettes to a facility, wherever located, owned or controlled by such
distributor; however, a distributor may not transport unstamped original
packages of cigarettes to a facility where retail sales of cigarettes take place
or to a facility where a secondary distributor makes sales for resale.
A discount is allowable to distributors at the time of purchasing stamps during any
year commencing July 1 and ending the following June 30 equal to 1.75% of the amount
of the tax payable under the Cigarette Tax Act up to and including the first $3,000,000
paid by the distributor to the Department during any such year and 1.5% of the amount
of any additional tax paid by the distributor to the Department during any such year. Two
or more distributors that are owned or controlled by the same interests shall be treated
as a single distributor for the purpose of computing the discount. See 86 Ill. Adm. Code
440.90; 35 ILCS 130/2(l).
Every distributor who is required to procure a license under the Act and who
purchases cigarettes for shipment into Illinois from a point outside this State shall procure
invoices in duplicate covering each shipment, shall make the invoices available for
inspection upon demand by a duly authorized agent or employee of the Department, and
shall, if the Department so requires, furnish one copy of each invoice to the Department
upon request. See 86 Ill. Adm. Code 440.110.
Any licensed distributor that ships or otherwise causes to be delivered unstamped
original packages of cigarettes into . . . this State shall ensure that the invoice or
equivalent documentation and the bill of lading or freight bill for the shipment identifies
the true name and address of the consignor or seller, the true name and address of the
consignee or purchaser, and the quantity by brand style of the cigarettes so transported.

COMPANY/NAME
March 7, 2024
Page 8
See 35 ILCS 130/3.
Administrative and criminal penalties are available for
noncompliance with these record keeping provisions. See 86 Ill. Adm. Code 440.110.
Every distributor of cigarettes must keep within Illinois, at his or her licensed
address, complete and accurate records of cigarettes held, purchased, manufactured,
brought in or caused to be brought in from without the State, and sold or otherwise
disposed of, and shall preserve and keep within Illinois at his licensed address all
invoices, bills of lading, sales records, copies of bills of sale, inventory at the close of each
period for which a return is required of all cigarettes on hand and of all cigarette revenue
stamps, both affixed and unaffixed, and other pertinent papers and documents relating to
the manufacture, purchase, sale or disposition of cigarettes. 35 ILCS 130/11. These
books and records must be preserved for a period of at least 3 years after the date of the
documents, or the date of the entries appearing in the records, whichever is later. A
distributor’s records of a particular purchase from a manufacturer or distributor shall
include:
A)
or

A copy of the distributor’s purchase order (if any) to the manufacturer
distributor;

B)

the manufacturer’s or distributor’s invoice to the distributor in
duplicate (see subsection (b)(1));

C)
a bill of lading or waybill pertaining to the shipment covered by the
invoice;
D)

the receiving record showing the date when the cigarettes were
received by the distributor; and

E)
evidence of payment by the distributor to the manufacturer or
distributor.
See 86 Ill. Adm. Code 440.110.
Section 3 of the Cigarette Tax Act further provides that a “distributor may apply tax
stamps only to original packages of cigarettes purchased or obtained directly from an instate maker, manufacturer, or fabricator licensed as a distributor under Section 4 of this
Act or an out-of-state maker, manufacturer, or fabricator holding a permit under Section
4b of this Act.”
Company is a licensed distributor of cigarettes operating a distribution center in
Illinois. Company is acting as a distributor in that it is in the business of selling cigarettes
in this State and is bringing or causing to be brought into this State from without this State
original packages of unstamped cigarettes for sale or other disposition in the course of
their business of selling cigarettes. Company affixes the required tax stamps prior to sale
to a secondary distributor or a retailer for sale to a purchaser for use or consumption.

COMPANY/NAME
March 7, 2024
Page 9
Procurement Affiliate is in the business of bringing or causing to be brought into
this State from without this State original packages of unstamped cigarettes for sale or
other disposition in the course of their business and is a licensed distributor in this State.
Procurement Affiliate operates two consolidation warehouses, both located outside of this
State. Procurement Affiliate procures cigarettes from manufacturers of cigarettes that are
permitted under 35 ILCS 130/4b.
Parent Company controls and owns 100 percent ownership interest in its
subsidiaries, Company and Procurement Affiliate. The Cigarette Tax Act contemplates,
and the Department has treated, two or more distributors that are owned or controlled by
the same interests as a single distributor. See 86 Ill. Adm. Code 440.90; 35 ILCS 130/2(l).
Because of this common ownership, when Procurement Affiliate procures cigarettes
directly from an out-of-State manufacturer permitted under Section 4b of the Cigarette
Tax Act, it may sell and transfer those cigarettes to Company for proper stamping in
Illinois.
In compliance with Section 3 of the Cigarette Tax Act, Company will apply tax
stamps only to original packages of cigarettes purchased or obtained directly from an outof-State manufacturer holding a permit under Section 4b of this Act under the presented
arrangement. Company and Procurement Affiliate, both 100% owned by Parent
Company, will ship or otherwise cause to be delivered unstamped original packages of
cigarettes into this State and transport unstamped original packages of cigarettes to
Company’s distribution center in Illinois. None of the unstamped original packages of
cigarettes will be delivered to a facility where retail sales of cigarettes take place or to a
facility where a secondary distributor makes sales for resale.
Company and Procurement Affiliate must file returns in accordance with 86 Ill.
Adm. Code 440.100 and 35 ILCS 130/9. Company and Procurement Affiliate must also
keep complete books and records in accordance with 86 Ill. Adm. Code 440.110 and
provide these books and records to any duly authorized agent or employee of the
Department upon request. These books and records must demonstrate to the
Department that the cigarettes at issue were procured by the Procurement Affiliate directly
from the out-of-State manufacturer permitted under Section 4b before delivery or shipping
to Company in Illinois.
The factual representations upon which this ruling is based are subject to review
by the Department during the course of any audit, investigation, or hearing and this ruling
shall bind the Department only if the factual representations recited in this ruling are
correct and complete. This Private Letter Ruling is revoked and will cease to bind the
Department 10 years after the date of this letter under the provisions of 2 Ill. Adm. Code
1200.110(e) or earlier if there is a pertinent change in statutory law, case law, rules or in
the factual representations recited in this ruling.

COMPANY/NAME
March 7, 2024
Page 10
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,

Samuel J. Moore
Chairman, Private Letter Ruling Committee
SJM:AKO