TOBACCO TAX-REMOTE SELLERS
The legislation broadens the scope of the Tobacco Products Tax Act, affecting remote retail sellers in Illinois and imposing compliance requirements similar to those faced by traditional distributors. This change aims to capture tax revenue from online and out-of-state sellers, which has previously been a gray area in regulation. By implementing these new tax requirements, the state anticipates an increase in tax revenue from tobacco sales, while also attempting to regulate remote sales more effectively and ensure fair competition with in-state sellers.
SB1314 is an amendment to the Tobacco Products Tax Act of 1995 introduced to address taxation on remote retail sellers of tobacco products, specifically cigars and pipe tobacco. Effective January 1, 2026, the bill mandates that remote retail sellers who meet certain sales thresholds are required to collect and remit a tax on sales of tobacco products. This tax will be 36% of the actual cost of the products sold or an equivalent list price if the actual cost cannot be documented. Additionally, for a period from 2026 to 2028, the bill limits the tax on individual cigars to a maximum of $0.75 each, aimed at making the tax structure clearer and more manageable for remote sellers.
Discussion around SB1314 has illustrated notable points of contention, particularly in areas surrounding the fairness and feasibility of age verification processes for online sales. The bill requires remote retailers to utilize third-party age verification services, contributing to concerns among sellers about compliance costs and the practicalities of implementing such systems. Critics of the bill argue it could disproportionately impact smaller remote sellers who may lack the resources to comply with the new regulations, potentially leading to fewer options for consumers and limiting market competition.