SPRINGFIELD -- Cigarette distributors agreed Thursday to end a lawsuit against the state of Illinois over sales of cigarette tax stamps in advance of next week’s $1-per-pack increase in the tax.

SPRINGFIELD -- Cigarette distributors agreed Thursday to end a lawsuit against the state of Illinois over sales of cigarette tax stamps in advance of next week’s $1-per-pack increase in the tax.


The agreement came after distributors loaded up on tax stamps last week, buying as many in two days as the state normally sells in a month.  The buying spree came after a Sangamon County judge issued a temporary restraining order that said the state could not restrict the sale of tax stamps ahead of the tax hike.


The Illinois cigarette tax jumps from 98 cents per pack to $1.98 on Sunday.


Tax stamps are purchased by cigarette distributors and must be attached to cigarette packages before they can be sold to retailers.  The state initially said it would allow distributors to buy only 25 percent more stamps than they bought at the same time a year ago.


Distributors, however, said retailers were selling more cigarettes as smokers tried to stock up before the tax hike took effect.  They said they faced lost business if they could not buy enough stamps to meet their customers’ demands.


Cornelius Brown, an attorney representing the distributors, said the state has no reason to restrict sales of the tax stamps once the increase goes into effect.


“We could have continued on, but the issue becomes moot after a certain point in time,” Brown said.  “To continue litigating it, I don’t think was beneficial to any of the parties.”


As part of the agreement, the Department of Revenue agreed not to “challenge the legality, validity or appropriateness of any purchases of tax stamps” by the distributors while the restraining order was in effect.


After the order was issued last Thursday, distributors went on a tax-stamp buying spree.  Distributors bought nearly $20.2 million in stamps Thursday and nearly $21 million more Friday, said Revenue spokeswoman Sue Hofer.  Normally, the state sells $10 million to $12 million a week.


Sales this week dropped to $2.55 million Monday and $2.97 million Tuesday.


“I don’t know if they got all of the stamps they wanted last week, but they were able to meet the demands of their customers,” Brown said.  “The distributors were experiencing the shortfall of being able to meet the demand of their retailers.  The retailers were starting to go to other sources.  (Distributors) were losing business.”


When the tax hike goes into effect, distributors with cigarettes on hand will have to pay the additional tax before selling the cigarettes to retailers, Hofer said.


The tax hike, along with an increase in other tobacco taxes, is expected to raise $350 million.  It will be used to secure federal matching funds that will boost state Medicaid spending by $700 million.


Doug Finke can be reached at (217) 788-1527.