The monopoly business was started in Taiwan during the time of the Japanese occupation. Aside from maintaining its monopoly on opium in 1898, the Taiwan Governor’s Office had also expanded its range of items to include a monopoly on salt and later camphor. It merged the Taiwan Pharmaceutical Factory, the Taiwan Salt Bureau and the Taiwan Camphor Bureau in 1901 into the “Monopoly Bureau of the Taiwan Governor’s Office”. The Taiwan Governor’s Office took over tobacco in 1905 and liquor in 1922, matches, as well as standardized weights and measures in 1942, and petroleum in 1943. Therefore, the eight monopolized items before the retrocession of Taiwan were: cigarettes, liquor, opium, salt, camphor, matches, petroleum and the standardization of weights and measures.

After the retrocession of Taiwan in 1945, the Taiwan Government Executive Administration Office, in an effort to maintain its financial resources and minimize taxpayers’ burdens, continued the monopoly system by establishing the “Taiwan Provincial Monopoly Bureau”. The number of monopolized goods was reduced to five: tobacco, liquor, camphor, matches, and standardized weights and measures. In 1947, the Taiwan Provincial Government brought the Bureau directly under its authority by a re-organization which formed the “Taiwan Tobacco and Wine Monopoly Bureau”. At this time, the number of monopolized items was reduced to three: tobacco, liquor, and camphor. After the statutes were amended in 1951, the bureau was placed under the supervision of the Finance Department of the Taiwan Provincial Government as a third level agency of Taiwan Province. After this, the monopolized items of the Taiwan Tobacco and Wine Monopoly Bureau were further reduced to be only tobacco and liquor, when the camphor business ended in 1968.

The Taiwan Tobacco and Wine Monopoly Bureau was an agency which handled the production, delivery, and sales of tobacco and liquor products. It was responsible for mass production of sufficient supplies of tobacco and liquor to satisfy the public demand, and also the execution of the tobacco and liquor Monopoly Regulations. The agencies under its jurisdiction included tobacco and liquor distribution units and permitted retailers spread throughout Taiwan, which form an integral sales network. The monopoly profits from tobacco and liquor sales were submitted to the National Treasury to fulfill the economic and financial goals of the Taiwan Tobacco and Wine Monopoly Bureau. The operations of the Bureau were very profitable, and the profits provided to the Treasury accounted for a large portion of the tax revenue of Taiwan.

In accordance with the "Temporary Regulations of the Taiwan Provincial Government's Functions, Business and Organization", the Taiwan Tobacco and Wine Board was reformed, and has been supervised by the Ministry of Finance since July 1, 1999, which continues to manage the administration, production and sales of tobacco and liquor. In recent years, in order to prepare for internationalization and liberalization, the government decided to abolish the monopoly system of tobacco and liquor products, and free the manufacture of tobacco and liquor. Accordingly, the government enacted the "Tobacco and Liquor Management Law" and the "Tobacco and Liquor Tax Law". The two laws took effect on January 1, 2002. Thus, the monopoly system was eliminated, and free production of tobacco and liquor began.

The "Taiwan Tobacco and Liquor Corporation Regulations" were passed by the Legislative Yuan on April 25, 2002 and became law by presidential decree on May 15, 2002. The name of the Board was subsequently changed to the Taiwan Tobacco and Liquor Corporation on July 1, 2002.