Opinion: Tobacco Battleground: Local, State Case Studies

Thomas A. Briant, NATO Executive Director

The new battleground for restrictive tobacco proposals has shifted to the local level, with hundreds of restrictions and bans already being proposed this year. But the war over tobacco sales continues to be fought on the state level, as well.

Prime examples of these local and state battles are the enactment of a new excise tax on other tobacco products by the city of Chicago, and a legislative bill that would have banned the sale of all tobacco and vapor products in California, except in stores that primarily sell tobacco products.

Chicago OTP Tax

Despite industrywide efforts to oppose a new OTP tax sponsored by Mayor Rahm Emanuel, the Chicago City Council voted to pass the new tax levies, and the mayor signed the measure into law. The Chicago ordinance includes various tax rates on tobacco products, including:

  • Smoking and smokeless tobacco: $1.80 per ounce
  • Pipe tobacco: 60 cents per ounce
  • Little and large cigars: 20 cents per cigar

The main argument the industry relied on to oppose the Chicago OTP tax was an Illinois state law that prohibits a home rule charter city from adopting a tax on cigarettes or tobacco products unless the city had already adopted such a tax prior to July 1, 1993. Chicago enacted a cigarette tax before July 1, 1993, but not an OTP tax. This means Chicago was pre-empted or barred from adopting an OTP tax.

As a part of the industry’s continuing efforts to overturn the Chicago OTP tax, NATO, Iwan Ries & Co. (a Chicago retail store), the Cigar Association of America, the Illinois Association of Wholesale Distributors, the Illinois Retail Merchants Association, the International Premium Cigar and Pipe Retailers Association and Arangold Corp., dba Arango Cigar Co., filed a lawsuit against the city of Chicago in the Circuit Court of Cook County seeking a preliminary and permanent injunction against the enforcement and imposition of the tax on OTP. The lawsuit’s primary claim is that the new Chicago tax on OTP is pre-empted by Illinois state law.

After the lawsuit was fi led, the lawyers for the plaintiffs and the city of Chicago signed and filed with the court an agreement that delays the collection and payment of the new excise tax on OTP until 60 days after the Circuit Court judge issues a decision on whether the OTP tax is pre-empted by state law. This means the Chicago OTP tax did not go into effect July 1, 2016, and that no retailer, manufacturer, wholesaler, purchaser or consumer would be required to collect and/or pay the OTP tax during this time. A hearing on the lawsuit is scheduled for Sept. 14, 2016.

With the Illinois statute provision clearly prohibiting a city from adopting an OTP tax unless it had done so by July 1, 1993, the industry had no alternative except to file a lawsuit to strike down the Chicago OTP tax.

California Sales Ban

In a first-of-its-kind proposed statewide ban on tobacco sales, California Senate Bill 1400 would have allowed the sale of tobacco and vapor products only in stores that generate more than 60% of their gross revenue from the sale of tobacco products and tobacco accessories and do not permit anyone under the age of 18 to be present in the store.

This means tobacco and vapor product sales would have been banned in convenience stores, gas stations, grocery stores, liquor stores and drug stores.

NATO and industry members took numerous steps to oppose this legislation. These actions were taken because the effect of Senate Bill 1400 would have been financially devastating to many kinds of retailers that sell tobacco products, especially convenience stores, in which tobacco sales make up as much as 40% of in-store sales.

The full California Senate passed Senate Bill 1400. However, when the California Assembly Business and Professions Committee held a hearing on the bill, a motion made by the bill’s author for the committee to consider the bill did not receive a second by another committee member. The bill essentially died in committee. Approximately 200 retailers attended that committee hearing to voice their concerns about the legislation.

The Chicago and California proposals are only two examples of the kind of restrictions that continue to be debated by lawmakers and demonstrate the continued need for the industry to be on alert to protect the right to sell legal tobacco products.

Thomas Briant is executive director of the National Association of Tobacco Outlets (NATO). Reach him at [email protected].