Starting Tuesday, Illinois residents will see an increase in the cost of several tobacco products, including alternative nicotine products. The Illinois General Assembly on June 1 passed the $55.1 billion state fiscal year 2026 budget, which included changes to how some nicotine products are taxed.
House Bill 2755, which is part of the budget bill, expands the definition of tobacco products to include nicotine pouches. Nicotine pouches will be taxed at 45% of the wholesale price due to the definition change. Previously, they were not taxed.
Vapor products move from 36% to 45% tax of wholesale price, and moist snuff, previously taxed at 30 cents per ounce, will be 45% of the wholesale price.
“Illinois convenience-store and gas station operators are disappointed the state is increasing and expanding the tax on tobacco and vapor products rather than working on full enforcement of the current law,” Illinois Fuel & Retail Association (IFRA) CEO Nate Harris told CSP in a statement. “Retailers understand the taxes paid play an import role in funding state operations, but they fear foreign manufacturers, importers and disreputable sellers will not comply with the new law, putting the tax paying retailers and wholesalers at a disadvantage."
Harris said IFRA is fully committed to working through this issue with the Illinois Department of Revenue, the attorney general’s office and the various states’ attorneys around Illinois.
“IFRA believes a more robust enforcement of the current law would have paid for itself and generated more revenue for the state than increasing the tax on law abiding retailers,” said Harris.
There is no tax increase on cigarettes, cigars, pipe tobacco or chew, but the annual license fee for retailers who sell tobacco products will double from $75 to $150, Harris said.
The American Lung Association welcomed the tax hike and said Illinois last raised the tax rate on other tobacco products (OTP) in 2012 and established a tax on e-cigarettes in 2019.
Kristina Hamilton, Illinois advocacy director for the ALA, said the association applauds the Illinois General Assembly for voting to expand “vital state funding to help curb and prevent tobacco use across the state in addition to increasing taxes on tobacco products.”
Illinois isn’t the only Midwest state that is seeing a hike in tobacco taxes. C-store retailers in the Hoosier state are bracing for a $2 per pack increase in the state cigarette tax. The increase starts Tuesday as well, bringing Indiana’s cigarette tax rate to just under $3 per pack. Indiana’s cigarette tax will go from $0.995 to $2.99, which is a percentage increase of just over 200%.
“This tax increase will continue to put financial strain on our adult tobacco consumers,” said Damian Wyatt, vice president of retail, purchasing and merchandising for Greenfield, Indiana-based Leo’s Market & Eatery. Leo’s has convenience stores in Lafayette, Greenfield, Noblesville, McCordsville and Indianapolis, Indiana.
Want to learn more about tobacco? Sign up for CSP’s Tobacco+ Forum in September here.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.