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91_HB0941eng HB0941 Engrossed LRB9103486LDmb 1 AN ACT to create the Cigarette Sales Act. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 1. Short title. This Act may be cited as the 5 Cigarette Sales Act. 6 Section 5. Legislative findings. The General Assembly 7 hereby finds and declares as follows: 8 (a) Cigarettes, because of their standardized character, 9 their great popularity, their widespread and varied types of 10 markets and methods of distribution, and the sensitivity of 11 their distribution to price fluctuations, possess a distinct 12 marketing character and the economic facts and circumstances 13 peculiar to their distribution require special and 14 individualized treatment of the problems created by the sale 15 of cigarettes below cost. 16 (b) The legislature hereby finds that it is necessary to 17 regulate and control the sales price of cigarettes within the 18 State at the wholesale level for the purpose of stabilizing 19 the cigarette industry in Illinois. 20 The legislature finds that predatory pricing by cigarette 21 dealers from states surrounding Illinois has contributed to 22 the destruction of the price structure in Illinois. Those 23 dealers who are protected in their home states by cigarette 24 sales price laws similar to this Act have had an unfair 25 advantage over Illinois cigarette dealers. This Act is 26 enacted by the legislature to prevent the movement of the 27 cigarette distribution industry outside of Illinois, with the 28 loss of jobs attendant to such a move and to particularly 29 prevent not only the sale of untaxed cigarettes and the 30 evasion of State and local cigarette and sales taxes, but to 31 make sure the State of Illinois retains its level of tax HB0941 Engrossed -2- LRB9103486LDmb 1 revenue from the sales taxes. 2 Section 10. Definitions. As used in this Act unless the 3 context otherwise requires: 4 (1) "Person" means and includes any individual, firm, 5 association, company, partnership, corporation, joint stock 6 company, club, agency, syndicate, the State of Illinois, and 7 any municipal corporation or other political subdivision of 8 this State, trust, receiver, trustee, fiduciary, or 9 conservator. 10 (2) "Director" means the Director of the Illinois 11 Department of Revenue. 12 (3) "Department of Revenue" means the Illinois 13 Department of Revenue. 14 (4) "Cigarette" means and includes any roll for smoking 15 made wholly or in part of tobacco, irrespective of size or 16 shape and whether or not the tobacco is flavored, 17 adulterated, or mixed with any other ingredient, the wrapper 18 or cover of which is made of paper or any other substance or 19 material, excepting tobacco. 20 (5) "Wholesaler" means any person who is licensed by the 21 State of Illinois to affix tax stamps to cigarettes and who 22 sells cigarettes at wholesale or distributes cigarettes to be 23 subsequently sold at retail, and includes any manufacturer, 24 distributor, jobber, sub-jobber as broker, agent, or other 25 person, whether or not enumerated in this item (5), who is so 26 licensed and sells or distributes cigarettes. If a wholesaler 27 also sells or otherwise distributes cigarettes directly to 28 consumers, the wholesaler shall be considered a "retailer" 29 under this Act regarding any such sales or distributions. 30 (6) "Jobber" or "sub-jobber" means any person who sells 31 cigarettes at wholesale or who distributes cigarettes to be 32 subsequently sold at retail, but is not licensed by the State 33 of Illinois to affix tax stamps to cigarettes. If a jobber or HB0941 Engrossed -3- LRB9103486LDmb 1 sub-jobber also sells or otherwise distributes cigarettes 2 directly to consumers, that jobber or sub-jobber shall be 3 considered a "retailer" under this Act regarding any such 4 sales or distributions. 5 (7) "Retailer" means and includes any person who sells 6 cigarettes in this State to a consumer or to any person for 7 any purpose other than resale, and the term includes a 8 wholesaler or jobber or sub-jobber who sells or distributes 9 cigarettes directly to a consumer. 10 (8) "Sale" or "sell" means any transfer for 11 consideration or gift. 12 (9) "Sell at wholesale", "sale at wholesale", or 13 "wholesale sale" means and includes any sale made in the 14 ordinary course of trade or usual conduct of the business of 15 a wholesaler, jobber, or sub-jobber to a retailer for the 16 purpose of resale. 17 (10) "Sell at retail", "sale at retail", or "retail 18 sale" means and includes any sale for consumption or use made 19 in the ordinary course of trade or usual conduct of the 20 seller's business. 21 (11) "Basic cost of cigarettes" means the lowest cost of 22 cigarettes available to the wholesaler, jobber, or 23 sub-jobber, as the case may be, within 7 days prior to the 24 date of sale, less (i) all discounts, except discounts 25 pertaining to Electronic Funds Transfer (EFT) and (ii) any 26 taxes other than federal taxes. 27 (12) (a) "Cost to wholesaler, jobber, or sub-jobber for 28 wholesale sales" means the basic cost of the cigarettes 29 involved plus the cost of doing cigarette business by the 30 wholesaler, jobber, or sub-jobber. In determining the cost of 31 doing cigarette business by the wholesaler, jobber, or 32 sub-jobber, the cost of doing business shall first be 33 determined by applying the generally accepted accounting 34 practices employed by the wholesaler, jobber, or sub-jobber, HB0941 Engrossed -4- LRB9103486LDmb 1 as the case may be, and includes labor costs, including 2 salaries of executives and officers, rent, depreciation, 3 selling costs, maintenance of equipment, delivery costs, all 4 types of licenses, taxes, insurance, and advertising. 5 (b) In the absence of proof of a lesser or higher cost 6 of doing cigarette business by the wholesaler making the 7 sale, the cost of doing cigarette business by the wholesaler 8 as to sales to jobbers and sub-jobbers shall be presumed to 9 be 1% of the basic cost of cigarettes and as to sales made to 10 retailers shall be presumed to be 3 1/2% of the basic cost of 11 cigarettes if cartage is provided by the wholesaler and 3% if 12 no cartage is so provided. In the absence of proof of a 13 lesser or higher cost of doing cigarette business by the 14 jobber or sub-jobber making the sales, the cost of doing 15 cigarette business by the jobber or sub-jobber shall be 16 presumed to be 2 1/2% of the basic cost of the cigarettes if 17 cartage is provided by the jobber or sub-jobber and 2% if no 18 cartage is provided. 19 Section 15. Sale at less than cost prohibited. 20 (a) It shall be unlawful for any wholesaler, jobber, or 21 sub-jobber to sell, at wholesale, cigarettes at less than 22 cost to the wholesaler, jobber, or sub-jobber, as the case 23 may be, as defined in Section 10 for the purpose of 24 destroying competition or substantially lessening 25 competition. 26 (b) It shall be unlawful for any retailer: 27 (1) to induce or attempt to induce or to procure or 28 attempt to procure the purchase of cigarettes at a price 29 less than the cost to the wholesaler, jobber, or 30 sub-jobber; or 31 (2) to induce or attempt to induce or procure or 32 attempt to procure any rebate or commission of any kind 33 or nature whatsoever in connection with the purchase of HB0941 Engrossed -5- LRB9103486LDmb 1 cigarettes. 2 (c) Sale of cigarettes by any wholesaler, jobber, or 3 sub-jobber at less than cost to that person shall be prima 4 facie evidence of intent to destroy or substantially lessen 5 competition. 6 Section 20. Combination of sales. In all sales involving 7 2 or more items, at least one of which items is cigarettes, 8 at a combined price, and in all sales involving the giving of 9 any gift or concession of any kind, whether it be coupons or 10 otherwise, the wholesaler's, jobber's, or sub-jobber's 11 combined selling price shall not be below the cost to the 12 wholesaler, jobber, or sub-jobber, respectively, of the total 13 of all articles, products, commodities, gifts, and 14 concessions included in the transactions, and for articles, 15 products, commodities, gifts, or concessions that are not 16 cigarettes, the basic cost thereof shall be determined in 17 like manner as provided in subsections (11) and (12) of 18 Section 10. 19 Section 25. Sales by wholesaler to any other wholesaler. 20 When one wholesaler sells cigarettes to any other wholesaler, 21 the seller shall not be required to include in his selling 22 price to the buyer, the "cost to the wholesaler", as provided 23 in Section 10, but the buyer wholesaler, upon resale to a 24 jobber, sub-jobber, or a retailer, shall be subject to the 25 provisions of Section 10. 26 Section 30. Sales excluded from provisions of Section 27 15. The provisions of Section 15 shall not apply to a sale 28 at wholesale: 29 (1) if cigarettes are sold in a bona fide clearance sale 30 for the purpose of discontinuing trade in the cigarettes; 31 (2) if cigarettes are sold as imperfect or damaged; HB0941 Engrossed -6- LRB9103486LDmb 1 (3) if cigarettes are sold upon the final liquidation of 2 a business; or 3 (4) if cigarettes are sold by any fiduciary or other 4 officer acting under the order or direction of any court. 5 Section 35. Transactions permitted to meet lawful 6 competition. 7 (a) Any wholesaler, jobber, or sub-jobber may sell 8 cigarettes to a regular customer at a price made in good 9 faith to meet the price of a competitor whether a wholesaler, 10 jobber, or sub-jobber selling to the same customer. The price 11 of cigarettes sold under the exceptions specified in Section 12 30 shall not be considered the price of a competitor and 13 shall not be used as a basis for establishing prices below 14 cost, nor shall the price established at a bankruptcy sale be 15 considered the price of a competitor within the purview of 16 this Section. 17 (b) In the absence of proof of the actual cost to the 18 competing wholesaler, jobber, or sub-jobber, as the case may 19 be, the cost may be presumed to be the lowest cost to the 20 wholesaler, jobber, or sub-jobber, as the case may be, as 21 provided in subsection (12)(b) of Section 10. 22 Section 40. Sales contract made in violation of this Act 23 void. Any contract, express or implied, made by any person 24 in violation of any of the provisions of this Act shall be 25 void and no recovery shall be had thereon. 26 Section 45. Actions for violations or threatened 27 violations; remedies; costs. 28 (a) The Department of Revenue shall have the prime 29 responsibility of enforcing the provisions of this Act and 30 shall adopt rules pertaining to this Act. 31 (b) Upon a first violation of any of the provisions of HB0941 Engrossed -7- LRB9103486LDmb 1 this Act by a wholesaler, jobber, or sub-jobber, after due 2 notice and opportunity for a hearing, the Department of 3 Revenue may impose a civil fine not to exceed $15,000. 4 (c) Upon a second or subsequent violation of this Act 5 committed by a wholesaler, jobber, or sub-jobber, within 3 6 years following a prior finding of violation, after due 7 notice and opportunity for a hearing, the Department of 8 Revenue may impose a civil fine not to exceed $25,000. 9 (d) Any fines collected by the Department of Revenue for 10 violations of this Act shall be disbursed to the Prevention 11 of Tobacco Use by Minors Fund, which is created as a special 12 Fund in the State Treasury. Moneys in the Fund shall be 13 used, subject to appropriation, for the purpose of education 14 to prevent underage use of tobacco products. 15 (e) The Department of Revenue, or any person injured by 16 any violation of this Act, or who may suffer injury from any 17 threatened violation of this Act, may maintain an action in 18 any court of competent jurisdiction to prevent, restrain, or 19 enjoin the violation or threatened violation. If a violation 20 or threatened violation of this Act is established, the court 21 shall enjoin and restrain or otherwise prohibit the violation 22 or threatened violation. In addition, the court shall assess 23 in favor of the plaintiff and against the defendant the cost 24 of the suit, including reasonable attorney's fees. It shall 25 not be necessary that actual damages to the plaintiff be 26 alleged or proved, but if alleged and proved, the plaintiff 27 in the action, in addition to injunctive relief, the costs of 28 the suit, and reasonable attorney's fees, shall be entitled 29 to recover from the defendant the actual damages sustained by 30 him or her. 31 (f) Any person injured by a violation of this Act may 32 maintain an action for damages and the costs of suit in any 33 court of general jurisdiction, and if successful, shall be 34 entitled to 3 times the amount of actual damages, plus costs HB0941 Engrossed -8- LRB9103486LDmb 1 and reasonable attorney fees. 2 Section 50. Evidence admissible in determining cost to 3 wholesaler. In determining cost to the wholesaler, jobber, or 4 sub-jobber, the court shall receive and consider as bearing 5 on the proof of the cost, evidence tending to show that any 6 person complained against under any of the provisions of this 7 Act purchased the cigarettes involved in the complaint at a 8 fictitious price, or upon terms, or in a manner, or under 9 such invoices, as to conceal the true cost, discounts, or 10 terms of the purchase, and shall also receive and consider as 11 bearing on proof of the cost, evidence of the normal, 12 customary, and prevailing terms and discounts in connection 13 with other sales of a similar nature in the trade area or 14 state. 15 Section 55. Powers and duties of Department of Revenue. 16 (a) The Department of Revenue shall promulgate 17 administrative rules for the enforcement of this Act. 18 (b) All of the powers vested in the Director of the 19 Department of Revenue and Department of Revenue by the 20 provisions of the Cigarette Tax Act shall be available for 21 the enforcement of this Act. 22 Section 60. Application of Illinois Administrative 23 Procedure Act. The Illinois Administrative Procedure Act is 24 hereby expressly adopted and shall apply to all 25 administrative rules and procedures of the Illinois 26 Department of Revenue under this Act. 27 Section 65. Nothing in this Act shall be construed to in 28 any way limit or restrict the ability of a retailer to price 29 cigarettes as that retailer chooses. HB0941 Engrossed -9- LRB9103486LDmb 1 Section 95. The State Finance Act is amended by adding 2 Section 5.490 as follows: 3 (30 ILCS 105/5.490 new) 4 Sec. 5.490. The Prevention of Tobacco Use by Minors 5 Fund.