Illinois Administrative Code
Title 86 - REVENUE
Part 440 - CIGARETTE TAX ACT
Section 440.110 - Books and Records; Invoices; Penalties
Universal Citation: 86 IL Admin Code ยง 440.110
Current through Register Vol. 48, No. 38, September 20, 2024
a) Books and Records
1) Distributors. Every distributor of
cigarettes, who is required to procure a license under the Act, shall keep
within Illinois, at his or her licensed address, complete and accurate records
of cigarettes held, purchased, manufactured, brought in or caused to be brought
in from without the State, and sold or otherwise disposed of, and shall
preserve and keep within Illinois at his licensed address all invoices, bills
of lading, sales records, copies of bills of sale, inventory at the close of
each period for which a return is required of all cigarettes on hand and of all
cigarette revenue stamps, both affixed and unaffixed, and other pertinent
papers and documents relating to the manufacture, purchase, sale or disposition
of cigarettes. A distributor's records of a particular purchase from a
manufacturer or distributor shall include:
A)
A copy of the distributor's purchase order (if any) to the manufacturer or
distributor;
B) the manufacturer's
or distributor's invoice to the distributor in duplicate (see subsection
(b)(1));
C) a bill of lading or
waybill pertaining to the shipment covered by the invoice;
D) the receiving record showing the date when
the cigarettes were received by the distributor; and
E) evidence of payment by the distributor to
the manufacturer or distributor.
2) Secondary Distributors. Every
secondary distributor of cigarettes who is required to procure a license under
the Act shall keep within Illinois, at his or her licensed address, complete
and accurate records of cigarettes held, purchased, brought in from without the
State, and sold, or otherwise disposed of, and shall preserve and keep within
Illinois at his or her licensed address all invoices, bills of lading, sales
records, copies of bills of sale, inventory at the close of each period for
which a report is required of all cigarettes on hand, and other pertinent
papers and documents relating to the purchase, sale, or disposition of
cigarettes. [
35 ILCS
130/11a]
3) Manufacturers with Manufacturer
Representatives. Every manufacturer with authority to maintain
manufacturer representatives under Section 4f of the Act shall keep within
Illinois, at his or her business address identified under Section 4f of the
Act, complete and accurate records of cigarettes purchased, sold, or otherwise
disposed of, and shall preserve and keep within Illinois at his or her business
address all invoices, sales records, copies of bills of sale, inventory at the
close of each period for which a report is required of all cigarettes on hand,
and other pertinent papers and documents relating to the purchase, sale, or
disposition of cigarettes. At all times during the usual business hours of the
day, any duly authorized agent or employee of the Department may enter any
place of business of the manufacturers with authority to maintain manufacturer
representatives under Section 4f of the Act and their manufacturer
representatives, or inspect any motor vehicle used by a manufacturer
representative in the course of business, without a search warrant and may
inspect the premises, motor vehicle, and any packages of cigarettes therein
contained to determine whether any of the provisions of the Act are being
violated. [
35 ILCS
130/11b]
4) Retailers. Every retailer who is
required to procure a license under the Act shall keep within Illinois complete
and accurate records of cigarettes purchased, sold, or otherwise disposed of.
It shall be the duty of every retail licensee to make sales records, copies of
bills of sale, and inventory at the close of each period for which a report is
required of all cigarettes on hand available upon reasonable notice for the
purpose of investigation and control by the Department.
A)
The books and records need not be
maintained on the licensed premises, but must be maintained in the State of
Illinois. However, all original invoices or copies thereof covering purchases
of cigarettes must be retained on the licensed premises for a period of 90 days
after purchase, unless the Department has granted a waiver in response to a
written request in cases in which records are kept at a central business
location within the State of Illinois. Prior to removing the books and
records from the licensed premises, the retailer must notify the Department
that the books and records will be kept at another location in Illinois and
identify the location. Under these circumstances, books and records may be kept
at that location in Illinois, but the taxpayer must, within a reasonable time
after notification by the Department, make all pertinent books, records, papers
and documents available at some point within Illinois for the purpose of
inspection and audit as the Department may deem necessary.
B)
Books and records may be
maintained out of state if access is available electronically. However, all
original invoices or copies thereof covering purchases of cigarettes must be
retained on the licensed premises for a period of 90 days after purchase,
unless the Department has granted a waiver in response to a written request
when records that are available electronically are maintained out of
state. [
35 ILCS
130/11c]
C) The Department will grant a written waiver
under subsections (a)(4)(A) and (B) when the retailer submits a letter to the
Department containing:
1) the retailer's
license number and FEIN;
2) the
address or addresses of the licensed premises where records are currently
maintained;
3) the address of the
central location or out-of-state location where the retailer intends to
maintain the records;
4) if the
records are maintained out-of-state, an explanation of the process and system
that will enable the Department or its duly authorized agents or employees to
electronically access the records from the licensed premises on demand;
and
5) an acknowledgement by the
retailer that the Department, upon 30 days written notice, may revoke the
waiver of the retailer for one or more licensed premises if the retailer:
A) fails to provide access in accordance with
the requirements of the written waiver;
B) transfers or sells the licensed premises
to another person; or
C) changes
the process or system for providing access to the records
electronically.
5)
For purposes of this Section, "records" means all data maintained by
distributors, secondary distributors, manufacturers with manufacturer
representatives, and retailers, including data on paper, microfilm, microfiche
or any type of machine sensible data compilation. [
35
ILCS 130/11, 11 a, 11b and 11c]
6) All books and records and other papers and
documents which are required by the Act to be kept shall be kept in the English
language, and shall, at all times during the usual business hours of the day,
be subject to inspection by the Department or its duly authorized agents and
employees. At all times during the usual business hours of the day, any
duly authorized agent or employee of the Department may enter any place of
business of the distributor, secondary distributor, manufacturer with authority
to maintain a manufacturer representative, manufacturer representative's
vehicle, or retailer without a search warrant and inspect the premises and the
stock or packages of cigarettes and any vending devices in the premises to
determine whether any of the provisions of the Act are being violated. If the
agent or employee is denied free access or is hindered or interfered with in
making the examination, the license of the distributor, secondary distributor,
manufacturer representative or retailer shall be subject to revocation by the
Department.[
35
ILCS 130/11, 11 a, 11b and 11c]
7)
The books, records, papers and
documents shall be preserved for a period of at least 3 years after the date of
the documents, or the date of the entries appearing in the records, whichever
is later, unless the Department, in writing, authorizes their destruction or
disposal at an earlier date. [
35
ILCS 130/11, 11 a, 11b and 11c]
b) Invoices
1) Every distributor who is required to
procure a license under the Act and who purchases cigarettes for shipment into
Illinois from a point outside this State shall procure invoices in duplicate
covering each shipment, shall make the invoices available for inspection upon
demand by a duly authorized agent or employee of the Department, and shall, if
the Department so requires, furnish one copy of each invoice to the Department
upon request.
2)
Every
sales invoice issued by a licensed distributor to a retailer in this State
shall contain the distributor's cigarette distributor license number unless the
distributor has been granted a waiver by the Department. The distributor shall
file a written request with the Department, and, if the Department determines
that the distributor meets the conditions for a waiver, the Department will
grant the waiver. The Department will grant a waiver in response to a written
request when:
A)
the
distributor sells cigarettes only to licensed retailers that are wholly-owned
by the distributor or owned by a wholly-owned subsidiary of the
distributor;
B)
the licensed retailer obtains cigarettes only from the distributor
requesting the waiver; and
C)
the distributor affixes the tax
stamps to the original packages of cigarettes sold to the licensed
retailer. [
35
ILCS 130/11]
3)
Any licensed distributor that
ships or otherwise causes to be delivered unstamped original packages of
cigarettes into, within, or from this State shall ensure that the invoice or
equivalent documentation and the bill of lading or freight bill for the
shipment identifies the true name and address of the consignor or seller, the
true name and address of the consignee or purchaser, and the quantity by brand
style of the cigarettes so transported, provided that this subsection
(b)(3) shall not be construed as to impose any requirement or liability
upon any common or contract carrier. [
35
ILCS 130/3]
4) Each Illinois manufacturer of cigarettes
in original packages that are contained inside a sealed transparent wrapper
shall keep a copy of each invoice rendered by the manufacturer to any purchaser
to whom the manufacturer delivered cigarettes (or caused cigarettes to be
delivered) during the period covered by the manufacturer's return. Copies of
invoices must be furnished to the Department upon request.
5) Each manufacturer who holds a permit under
Section 4b of the Act shall keep a copy of each invoice rendered by the
permittee to any purchaser to whom the permittee delivered cigarettes of the
type covered by the permit (or caused cigarettes of the type covered by the
permit to be delivered) in Illinois during the period covered by the return.
Copies of invoices must be furnished to the Department upon request.
6) When a distributor who is licensed or has
a permit under the Cigarette Tax Act sells cigarettes to a federal or foreign
government agency or instrumentality under circumstances causing Illinois
cigarette tax liability to be incurred (see Section
440.180
), the distributor shall print, stamp or otherwise write substantially the
following legend on the original and all copies of the invoice covering the
cigarettes: "Illinois cigarette tax paid".
7) When a distributor who is licensed or has
a permit under the Cigarette Tax Act sells Illinois tax-stamped or
tax-imprinted original packages of cigarettes to any purchaser other than a
federal or foreign government agency or instrumentality, the distributor's
invoice not only shall state that the cigarette tax has been paid by the
distributor, but also shall state the amount of the tax to the purchaser as a
separate item from the selling price of the cigarettes.
8) When a permit holder or licensee under the
Cigarette Use Tax Act (as distinguished from a licensee or permit holder under
the Cigarette Tax Act) sells Illinois tax-stamped or tax-imprinted cigarettes
to anyone other than a federal or foreign government agency or instrumentality,
the distributor's invoice shall state the amount of the cigarette use tax to
the purchaser as a separate item from the selling price of the cigarettes. (See
Section
440.50.)
However, when a person sells cigarettes to a federal or foreign government
agency or instrumentality, the invoice should omit any reference to the
cigarette use tax.
c) Penalties
1)
Any person required by
the Act to keep records of any kind whatsoever, who shall fail to keep the
records so required or who shall falsify those records, shall be guilty of a
Class 4 felony. If a person fails to produce the records for inspection by the
Department upon request, a prima facie presumption shall arise that the person
has failed to keep the records so required. A person who is unable to rebut
this presumption is in violation of the Act and is subject to the penalties
provided in this subsection (c). [
35 ILCS
130/14] .
2)
Any person who shall fail to
safely maintain and preserve the records required by Sections 11, 11a, 11b, and
11c of the Act for a period of 3 years, as required in the Act, in such manner
as to insure permanency and accessibility for inspection by the Department,
shall be guilty of a business offense and may be fined up to $5,000. [
35 ILCS
130/15] (See subsection (a) for the requirements to
maintain books and records.)
3)
The Department may, after notice and hearing as provided for by the
Act, revoke, cancel or suspend the license of any distributor, secondary
distributor, or retailer for any noncompliance with this subsection (c). No
license so revoked shall be reissued to any such distributor, secondary
distributor, or retailer within a period of 6 months after the date of the
final determination of the revocation. Any distributor, secondary distributor,
or retailer aggrieved by any decision of the Department under this Section may,
within 20 days after notice of the decision, protest and request a hearing.
Upon receiving a request for a hearing, the Department shall give notice in
writing to the distributor, secondary distributor, or retailer requesting the
hearing of the time and place fixed for the hearing. If a distributor,
secondary distributor, or retailer protests the revocation, cancellation or
suspension of a license and requests a hearing, the notice also shall contain a
statement of the charges preferred against the distributor, secondary
distributor or retailer. The Department shall hold the hearing in conformity
with the provisions of the Act and then issue its final administrative decision
in the matter to the distributor, secondary distributor, or retailer. In the
absence of a protest and request for a hearing within 20 days, the Department's
decision shall become final without any further determination being made or
notice given. [
35 ILCS
130/6]
4)
Any person who fails to keep books and records or fails to produce
books and records for inspection, as required by Sections 11, 11a, 11b, and 11c
of the Act, is liable to pay to the Department, for deposit in the Tax
Compliance and Administration Fund, a penalty of $1,000 for the first failure
to keep books and records or failure to produce books and records for
inspection, as required by Sections 11, 11a, 11b, and 11c, and $3,000 for each
subsequent failure to keep books and records or failure to produce books and
records for inspection, as required by Sections 11, 11a, 11b, and 11c.
[
35 ILCS
130/15a] (See subsections (a) and (b) for the
requirements to maintain books and records.)
A) All books and records and other papers and
documents that are required to be kept by the Act shall, at all times during
the usual business hours of the day, be subject to inspection by the Department
or its duly authorized agents and employees. (See subsection (a)(6).) A person
that prohibits a duly authorized agent of the Department from inspecting books
and records during usual business hours of the day has failed to produce books
and records to the Department for inspection as required by this Section. The
Department may issue a notice of penalty to that person pursuant to this
subsection (c)(4). The Department is not required to provide the retailer with
a written document request pursuant to this subsection (c)(4)(A) or provide
additional time for the retailer to allow the inspection of the premises and
the books and records at the location.
B) Except for retailers that are permitted to
maintain books and records at another location pursuant to subsection (a)(4),
distributors, secondary distributors, manufacturers with manufacturer
representatives, and retailers must have a person at their place of business at
all times during the usual business hours of the day who is authorized to
produce books and records for inspection by the Department. It is presumed that
a person working at a place of business has authority to permit the Department
to inspect the books and records at the business location. If a retail
establishment has only one employee working at the time of the request for the
books and records who has no ownership interest in the establishment and is not
authorized to produce books and records, the employee is required to advise the
Department he or she does not have authority to provide books and records for
inspection. The Department will not issue a notice of penalty to a retailer for
failure to produce books and records if a person who is authorized to produce
the books and records can be contacted by the employee and arrives at the place
of business within 2 hours and produces the books and records. The Department
may extend the period either on verbal or written request for good cause shown
or on its own motion.
EXAMPLE 1: An authorized agent of the Department attempts to inspect the books and records of a cigarette retailer. The person at the store states the books and records are at the store but refuses to provide access to the books and records because the owner of the store told him not to let anyone have access to the records. The person states the owner is unavailable and cannot be contacted. The Department issues a notice of penalty.
EXAMPLE 2: An authorized agent of the Department attempts to inspect the books and records of a cigarette retailer. The person at the store states the books and records are at the store but refuses to provide access to the books and records because the owner of the store told him not to let anyone have access to the records. The person states he can call a person responsible for making the records available to the agent. The employee calls the person and the person arrives at the store in less than 2 hours and makes the books and records available to the agent. The Department will not issue a notice of penalty.
EXAMPLE 3: An authorized agent of the Department enters a retailer's place of business and requests to see the books and records. The person at the store states the books and records are maintained at another business location in Illinois. The agent cannot issue a notice of penalty unless the retailer failed to notify the Department that the books and records are located at another location pursuant to subsection (a)(4). However, the authorized agent of the Department does have authority to inspect the premises pursuant to subsection (a)(6).
C) If a person fails to produce books and
records for inspection by the Department upon request, a prima facie
presumption shall arise that the person has failed to keep the books and
records so required. A person who is unable to rebut this presumption is
subject to the penalty provided in this subsection (c)(4). Except as otherwise
provided by subsection (c)(4)(A), if a request for the production of books and
records has been made and not honored, prior to issuing a notice of penalty for
a failure to maintain books and records or a failure to produce books and
records, the Department must provide the taxpayer with a document request in
writing. The written document request shall contain:
i) the name of the person receiving the
request;
ii) the name of the
business;
iii) the date of the
original request or requests;
iv)
the books and records requested;
v) the books and records that the person
failed to produce;
vi) the number
of days the person has to produce the books and records; and
vii) the name of the Department agent or
employee and his or her contact information.
D) The Department agent or employee shall
sign and date the written document request and personally provide or mail a
copy of the written document request to the business at its last known address.
The person shall have 30 days from the date of the written document request to
produce the books and records the person has failed to produce. The Department
may extend the period either on written request for good cause shown or on its
own motion. If the person fails to produce the books and records within the
time allotted, the Department may issue a notice of penalty pursuant to this
subsection (c)(4) to the business at its last known address.
EXAMPLE: An authorized agent of the Department enters a convenience store and requests to see all the invoices for cigarettes purchased by the store in the last 60 days and all cash register receipts for sales made in the last 60 days. The person at the store produces the cash register receipts but states that they have no invoices for cigarettes purchased in the last 60 days. The agent completes a written document request, provides a copy to the person, and provides the person 30 days to produce the invoices. The agent returns 30 days later and requests the invoices. The person at the store cannot produce the invoices. The Department will issue a notice of penalty to the business at its last known address.
E) Any person receiving a notice of penalty
may, within 20 days after the date on the notice, protest and request a
hearing. Upon receiving a request for a hearing, the Department shall give
notice to the person requesting the hearing of the time and place fixed for the
hearing and shall hold a hearing in conformity with the provisions of the Act
and then issue its final administrative decision in the matter to that person.
If the request is made during an audit, the Department shall postpone the
hearing until completion of the audit or inspection. In the absence of a
protest and request for a hearing within 20 days, the Department's decision
shall become final without any further determination being made or notice
given.
F) The Department cannot
impose more than one penalty for failure to produce books and records for a
calendar month.
EXAMPLE 1: An authorized agent of the Department inspects a cigarette retailer and requests the records for the first week in April. The retailer does not produce the records. The agent subsequently requests the records for the remaining 3 weeks in April. The retailer does not produce the records. The agent can assess only one penalty for the month of April.
EXAMPLE 2: An authorized agent of the Department inspects a cigarette retailer and requests all purchase invoices for cigarettes for March. The invoices are not provided by the retailer and the Department issues a notice of penalty. The agent returns in May and ask to see all the cigarette sales receipts for March. The retailer fails to produce the sales receipts for March. The Department cannot issue a penalty for failure of the retailer to provide sales receipts for March because the agent has previously issued a notice of penalty for failure to produce the invoices for March.
G) A records request
can cover multiple periods. The Department is authorized to issue a separate
penalty for each period; e.g., for a taxpayer that files
returns monthly, the period is one month.
EXAMPLE: An authorized agent of the Department inspects a cigarette retailer and requests the books and records for the months of January through July. The retailer cannot produce the books and records for any of the months. The agent fills out a written document request, provides a copy of the document request to the person, and provides the person 30 business days to produce the invoices. The agent returns 30 business days later and requests the invoices. The person at the store cannot produce the invoices. The Department will issue a notice of penalty in the amount of $1,000 for the month of January and $3,000 for each of the months February through July, for a total penalty of $19,000.
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