Electronic Cigarettes FAQ

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    If you have additional inquiries, you may submit them to the Excise Tax Division.

    Who is considered a retailer of electronic cigarettes? Who is considered a distributor of electronic cigarettes?

    Retailers are persons engaged in the business of selling electronic cigarettes at retail, and filing returns and remitting the Retailers' Occupation Tax, commonly referred to as sales tax, to Illinois Department of Revenue (IDOR). A Cigarette and Tobacco Products Retailer License must be obtained by retailers making sales of electronic cigarettes.

    Distributors are responsible for filing tax returns and remitting Tobacco Products Tax.

    Distributors mean any of the following:

    1. any manufacturers or wholesalers in Illinois in the business of selling, exchanging, or distributing tobacco products to retailers or consumers in Illinois,
    2. out-of-state manufacturers or wholesalers in the business of selling, distributing, shipping, or transporting tobacco products to retailers or consumers in Illinois, as long as they maintain a place of business in Illinois, or
    3. any retailer who receives tobacco products on which the tax has not been or will not be paid by a distributor, which means some registered retailers will need to register as distributors also.

    A Tobacco Products Distributor's License must be obtained if your business activities fall into one of these three categories.

    I am a retailer that sells electronic cigarettes and liquid used to refill electronic cigarettes. I am presently registered to remit Retailers' Occupation Tax. Do I need to obtain any other licenses from IDOR?

    Yes. Beginning July 1, 2019, you need to obtain a Cigarette and Tobacco Products Retailer License (commonly referred to as a CT or CTR license) to sell electronic cigarettes. Retailers must pay an annual license fee of $75 per retail location. This fee must be submitted electronically with your initial license application. The annual renewal fee of $75 also must be submitted electronically using MyTax Illinois.

    Do I need to obtain a Cigarette and Tobacco Products Retailer License even if I don't sell cigarettes or tobacco products? 

    Yes. Effective July 1, 2019, electronic cigarettes are considered tobacco products and are taxable under the Tobacco Products Tax Act of 1995.

    How do I obtain a Cigarette and Tobacco Products Retailer License?

    By law, you must register electronically to receive your license. If you are presently selling electronic cigarettes at retail, you should already be registered with IDOR as a retailer. You can log on to your MyTax Illinois account at mytax.illinois.gov to apply for a license.

    Corporations, S-Corps, Partnerships, or LLC organization types, with active MyTax Illinois accounts can register for new tax types, or licenses, by simply logging into their MyTax Illinois account and clicking on "Register for New Tax Accounts" to complete the registration.

    Sole Proprietorships can register electronically at MyTax Illinois by selecting "Registration" in the upper right corner of the MyTax home page and then selecting "Register a New Business."

    Retailers without active MyTax Illinois Accounts will need to sign up for a MyTax Illinois account by selecting "Sign Up Now" from the MyTax Illinois home page.

    Retailers that are not yet registered with IDOR for any tax types can register their business by selecting "Registration" from the MyTax Illinois home page and then selecting "Register a New Business."

    Contact our Central Registration Division at 217 785-3707 for information or assistance with registering your business.

    Who is liable for the Tobacco Products Tax on electronic cigarettes?

    Distributors of electronic cigarettes are liable for reporting and paying the Tobacco Products Tax. The last distributor who sells the electronic cigarette to the retailer is responsible for paying the tax and filing returns. 86 Ill. Adm. Code 660.5(a). Distributors are permitted to pass the cost of the tax on to the retailer.  

    I am a retailer and buy my electronic cigarettes and other products from out-of-state suppliers. Am I liable for the Tobacco Products Tax?

    Yes. A retailer that buys electronic cigarettes from out-of-state suppliers or from persons that have not paid the Tobacco Products Tax on the electronic cigarettes must obtain a Tobacco Products Distributor's License and pay the tax on the electronic cigarettes to IDOR. 86 Ill. Adm. Code 660.28. Contact our Central Registration Division at 217 785-3707 for information or assistance with registering your business.  

    I have several vape stores. Each store buys electronic cigarettes from out-of-state suppliers. Does each store need a Tobacco Products Distributor's License? 

    Yes. A separate Tobacco Products Distributor's License is required for each location where product is received from an unlicensed distributor. You can opt to have one store obtain a distributor's license and receive all shipments and then self-distribute to each vape store you own.

    I manufacture liquid for use in electronic cigarettes and sell the liquid directly to consumers. What license or licenses do I need? How do I determine the wholesale price when I calculate my tobacco tax liability?

    You will need to obtain a Tobacco Products Distributor's License and a Cigarette and Tobacco Retailers' License under the Tobacco Products Tax Act. You must also register under the Retailers' Occupation Tax Act.

    When a distributor purchases electronic cigarettes from a manufacturer, the distributor is liable for tax on the established list price paid of the manufacturer. In the case where a manufacturer sells directly to a consumer, the manufacturer is liable for the tax based on what it paid for the products used in the tobacco product sold to the consumer. For purposes of computing your tax as a distributor, the wholesale price is the invoice price paid by you for electronic cigarettes (i.e., batteries, components, liquids, nicotine) to an unlicensed distributor or other supplier of electronic cigarettes before the allowance of any discounts, trade allowances, rebates or other reductions. Surcharges added by manufacturers, distributors or other suppliers are considered part of the wholesale price subject to tax.

    How do I register to become a Tobacco Products Distributor?

    Register with IDOR electronically using MyTax Illinois, available at mytax.illinois.gov.

    Corporations, S-Corps, Partnerships, or LLC organization types, with active MyTax Illinois accounts can register for new tax types by simply logging into their MyTax Illinois account and clicking on "Register for New Tax Accounts" to complete the registration.

    Sole Proprietorships can register electronically at MyTax Illinois by selecting "Registration" in the upper right corner of the MyTax home page and then selecting "Register a New Business."

    If your business is not yet registered with IDOR for any tax types, register electronically by selecting "Registration" from the My Tax Illinois home page.

    Contact our Central Registration Division at 217 785-3707 for information or assistance with registering your business.

    Are there any additional registration and bonding requirements to obtain a Tobacco Products Distributor's License?

    For the first year, distributors must file a bond of at least $1,000, the minimum bond amount. This is in addition to filing Form REG-1, Illinois Business Registration Application, electronically using MyTax Illinois at mytax.illinois.gov, or by paper. After the first year, the bond amount is equal to three times the distributor's average monthly tobacco tax liability or $50,000, whichever is less. IDOR reviews bonds while completing license renewals and on a biannual basis. You will be notified if your bond requirement changes.

    As a retailer licensed as a Tobacco Products Distributor, how do I calculate the amount of tax?  

    The tax rate for electronic cigarettes under the Tobacco Products Tax Act is 15% of the wholesale price of products sold or otherwise disposed of during the month. For purposes of computing your tax as a distributor on purchases of electronic cigarettes on which the tax has not been paid or will not be paid by another licensed distributor, the wholesale price is the invoice price paid by you to an unlicensed distributor or other supplier of electronic cigarettes before the allowance of any discounts, trade allowances, rebates or other reductions. Surcharges added by manufacturers, distributors or other suppliers are considered part of the wholesale price subject to tax. 86 Ill. Adm. Code 660.5(d)(1). Note that retail sales of electronic cigarettes are also subject to Illinois Retailers' Occupation Tax.

    What form is used to report the Tobacco Products Tax on electronic cigarettes?

    Form TP-1, Tobacco Products Tax Return, is used to report and pay Tobacco Products Tax. Form TP-1 must be filed electronically and the tax must be paid electronically. Distributor license holders can use MyTax Illinois, available at mytax.illinois.gov, to file Form TP-1 and pay the tax. IDOR also has the ability to receive and process Form TP-1 via third party software.

    When is Form TP-1, Tobacco Products Tax Return, due?

    Form TP-1 is due on the 15th of the month following the month the product was sold. If the due date falls on a weekend or a state observed holiday, your return and payment are due the next business day.

    What "electronic cigarettes" are subject to the Tobacco Products Tax?

    "Electronic cigarette" means:

        (1) any device that employs a battery or other mechanism to heat a solution or substance to produce a vapor or aerosol intended for inhalation;

        (2) any cartridge or container of a solution or substance intended to be used with or in the device or to refill the device; or

        (3) any solution or substance, whether or not it contains nicotine, intended for use in the device.

    "Electronic cigarette" includes, but is not limited to, any electronic nicotine delivery system, electronic cigar, electronic cigarillo, electronic pipe, electronic hookah, vape pen, or similar product or device, and any component or part that can be used to build the product or device.

    "Electronic cigarette" does not include: cigarettes, as defined in Section 1 of the Cigarette Tax Act; any product approved by the United States Food and Drug Administration for sale as a tobacco cessation product, a tobacco dependence product, or for other medical purposes that is marketed and sold solely for that approved purpose; any asthma inhaler prescribed by a physician for that condition that is marketed and sold solely for that approved purpose; or any therapeutic product approved for use under the Compassionate Use of Medical Cannabis Act.

    Essentially, the device, juice, and cartridges or pods are all taxable.

    I sell batteries, coils, and cotton that are used in vape devices. Are these items taxable under the Tobacco Products Tax Act?  

    If items sold by a vape shop to consumers are generally available from other retailers and can be used for purposes other than for use in a device, the items would not be taxable under the Tobacco Products Tax Act. For example, if the same cotton product sold at a vape store is sold by a drug store for general use, it would not be taxable under the Act. If the same batteries or coils you sell at a vape store can be purchased from a hardware store for general use and other application, they are not taxable under the Act. However, if the packaging or product description states the items are for use in a vape device, or the products are designed, produced and marketed by the manufacturer for use in a specific device and cannot be used in other products or for other purposes, they are taxable under the Act.

    I sell electronic cigarettes at retail to persons in Illinois. I also sell electronic cigarettes to persons outside of Illinois. Are all these sales taxable under the Tobacco Products Tax Act?

    The Tobacco Products Tax is imposed on the distributor, not the retailer. The distributor is liable for tobacco tax on all sales made to Illinois retailers. The distributor remits the tax to IDOR. Generally, the distributor passes the tax on to the retailer. The retailer may seek reimbursement of the tax from the consumer.

    Sales of electronic cigarettes by retailers to persons in Illinois are taxable under the Retailers' Occupation Tax Act. Sales of electronic cigarettes by retailers to out-of-state customers are not taxable under the Retailers' Occupation Tax Act if the electronic cigarettes are shipped by you to an address outside of Illinois. If the electronic cigarettes are picked up by an out-of-state retailer, the electronic cigarettes are taxable under the Retailers' Occupation Tax Act unless the out-of-state retailer provides a resale certificate.

    Sales by distributors to out-of-state retailers are not taxable under the Tobacco Products Tax Act if the electronic cigarettes are shipped by the distributor to an address outside of Illinois or are picked up by an out-of-state retailer. 86 Ill. Adm. Code 660.30(b),660.30(c).

    I also sell electronic cigarettes to other persons for resale. Are these sales taxable under the Tobacco Products Tax Act?  

    No. However, you must obtain a resale certificate from the purchaser. See 86 Ill. Adm. Code 660.30(g) for the requirements of a resale certificate.

    All of my sales of electronic cigarettes are to persons who in turn resell them. I do not make retail sales to consumers. Do I need to obtain a Tobacco Products Distributor's License or file returns?

    No. Wholesalers that are not registered and licensed as distributors with IDOR but claim to only sell electronic cigarettes in such a way that their sales are not taxable under The Tobacco Products Tax Act (e.g., resale or to exempt purchasers) are advised to apply to IDOR for a resale number so that those wholesalers are able to provide distributors with resale certificates when purchasing the electronic cigarettes that will be resold. 86 Ill. Adm. Code 660.15(c).

    I donate and make sales of electronic cigarettes to military organizations. Are these sales and donations exempt from the Tobacco Products Tax?

    The Tobacco Products Tax Act does not apply to sales or other disposition of electronic cigarettes to the United States Government or any entity of the United States Government. For instance, sales of tobacco products to U.S. Veterans' Hospitals and U.S. Military personnel through officially recognized agencies physically located at military bases are exempt from the tax imposed by the Act. 86 Ill. Adm. Code 660.30(d). Other dispositions are subject to tax.

    Are samples of electronic cigarettes subject to the Tobacco Products Tax?

    Yes. The Tobacco Products Tax is imposed on electronic cigarettes sold or otherwise disposed of. This includes samples. 86 Ill. Adm. Code 660.20.

    I am an out-of-state wholesaler and sell electronic cigarettes to Illinois retailers. Do I need to obtain a Tobacco Products Distributor's License?

    If you have a physical presence in Illinois, yes. Any manufacturer or wholesaler engaged in the business of selling tobacco products from outside of Illinois who sells, exchanges, distributes, ships, or transports tobacco products to retailers or consumers located in Illinois must register to become a distributor if the manufacturer or wholesaler has or maintains within Illinois, directly or by subsidiary, an office, sales house, or other place of business, or any agent or other representative operating within Illinois under the authority of the person or subsidiary, irrespective of whether the place of business or agent or other representative is located here permanently or temporarily.

    I sell electronic cigarettes at retail. Can I get reimbursed from IDOR for the tax I paid to the distributor for electronic cigarette inventory I have destroyed?

    No. The tax is imposed on the distributor. You did not remit tax. You reimbursed the distributor for the tax the distributor paid. The distributor may file for a credit for electronic cigarettes on which it paid tax and subsequently destroys. This can include merchandise returned to the distributor by the retailer.  

     

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