Could a retailer inside an Illinois business district pay the additional local retailers' occupation tax itself instead of charging customers?

Plain-English summary

A city planned to impose a 1% Business District Retailers' Occupation Tax. A retailer in the new district was willing to pay the tax but wanted to use its own funds rather than add a separate charge to customer bills.

IDOR said the retailer could do that. The business-district statute permits retailers to reimburse themselves by separately stating the additional tax, but does not require them to collect that reimbursement from customers. A retailer choosing to absorb the tax still must pay it to IDOR and remains liable for tax on its gross receipts.

The response was limited to Retailers' Occupation Tax. IDOR noted that it does not collect or administer the separate business-district tax on hotel room rentals.

Common questions

Must the retailer separately charge customers the district tax? No.

Does absorbing the tax reduce the retailer's liability? No. The retailer still owes the additional tax to IDOR.

Citations and references

• 65 ILCS 5/11-74.3-6(b) and (d)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0055.pdf

Original ruling text

ST 13-0055-GIL 09/19/2013 MUNICIPALITIES
This letter discusses the taxes a retailer must collect in municipalities that have created
business districts. See 65 ILCS 5/11. (This is a GIL.)

September 19, 2013
Dear Xxxxx:
This letter is in response to your letter dated August 9, 2013, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”)
are issued by the Department in response to specific taxpayer inquiries concerning the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only to
the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code
1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to
Department regulations or other sources of information regarding the topic about which they
have inquired. A GIL is not a statement of Department policy and is not binding on the
Department.
See 2 Ill. Adm. Code 1200.120.
You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant
to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
The CITY is in the process of creating its first Business District under the
Business District Development and Redevelopment Law. The City Business
District Plan and ordinances will establish a 1% Retailers' Occupation Tax.
One of the retailers who will be located in the new Business District has indicated
they do not have any objections in paying the 1% tax; but they do not want to
charge the 1% tax off to their customers. Instead the retailer has proposed to track
the sales attributable to the new 1% tax and utilize their own money to cover the
payment of the sales tax to the Illinois Department of Revenue.
I spoke to an IDOR employee in local taxes regarding this matter. After
reviewing the Business District law, the individual indicated the law was not
specific on this issue. He suggested I contact your office and request a ruling on
this matter.
I would appreciate your assistance with this issue. Should you have any questions
or need clarification, please contact me. I can be reached by telephone. I look
forward to receiving your response.

DEPARTMENT’S RESPONSE:
When a retailer commences operations in a business district under the Business District
Development and Redevelopment Act, it must pay the additional Retailers’ Occupation Tax (up
to one percent) to the Illinois Department of Revenue. The statute provides that retailers within
the district may reimburse themselves for the additional tax that they owe by separately stating
the tax as an additional charge, which may be stated in combination with the taxes that retailers
are required to collect under the Use Tax Act. Though retailers in a business district are
obligated to pay the additional Retailers’ Occupation Tax, the Act does not require that they
reimburse themselves for the additional tax. However, a retailer who chooses not to collect
reimbursement will still be responsible for paying the additional local tax to the Department of
Revenue, and the retailer will still owe tax on his/her gross receipts. See 65 ILCS 5/11-74.36(b). Please note that this response is limited to the application of the Retailers’ Occupation Tax.
The Illinois Department of Revenue does not collect or administer business district taxes for
persons renting, leasing, or letting rooms in hotels within the district. See 65 ILCS 5/11-74.36(d).
I hope this information is helpful. If you require additional information, please visit our
website at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at
(217) 782-3336.
Very truly yours,

Cara Bishop
Associate Counsel
CB:msk