Effective January 1, 2016, the City of Chicago enacted a local tax on “nicotine products.” Chicago has always been notorious for its aggressive tactics in cigarette and tobacco tax collection and positions. Chicago joins the list of many states and other local governments in their efforts to tax the growing e-cigarette industry.

The tax was enacted in Chapter 3-47 of the Chicago ordinances. The tax is imposed at a rate of $.80 per “product unit” and an additional $.55 per fluid milliliter of consumable liquid of nicotine product. A “product unit” is simple each individual nicotine product, irrespective of whether its sold as a single unit or within the same package as other units. A “nicotine product” is broadly defined as any e-cig that contains nicotine and any container that contains nicotine.

It is also unsurprising as to the high rate of Chicago’s tax compared to other states. As the nicotine products taxes continue to evolve, they are often ripe for challenge. It is questionable whether many products are encompassed under the nicotine products definition. It is also questionable whether a company, with no property, employees, or inventory within Chicago can be required to pay the high taxes. If you or your business receives an inquiry or assessment that you believe is unfair in Chicago, please do not hesitate to contact us for a free consultation.

Gerald “Jerry” Donnini II is a shareholder of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of state and Federal tax matters, with a heavy emphasis on the tobacco, alcohol, motor fuel and related industries. He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Use Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.  For more information please call us at 888-966-8216.