Does Illinois's new Parking Excise Tax apply to parking lots that my municipality operates directly?

Plain-English summary

A law firm representing a number of Illinois local government clients wrote to the Illinois Department of Revenue asking for guidance on the then-forthcoming Parking Excise Tax Act (Article 10 of SB 690, effective January 1, 2020, codified at 35 ILCS 525). The Act imposes a new tax -- 6% on hourly, daily, or weekly parking charges, and 9% on weekly, monthly, or annual charges -- on the privilege of parking a vehicle in a parking lot or garage in Illinois. The tax is charged to customers as a line-item cost, collected by the lot's "Operator," and remitted to the Department of Revenue monthly. 35 ILCS 525/10-10(a).

The firm's municipal clients, including some that operate fee-based commuter parking lots directly (particularly in the Chicago area), wanted to know whether the tax applies to lots operated directly by a municipality or other local government entity, or whether such lots are exempt. The firm laid out an ambiguity it had identified in the statute: Section 10-5 defines "Operator" to include any person who operates a parking area or garage, or who collects parking consideration directly or through an arrangement with another party. But the Act's definition of "Person" -- covering natural individuals, firms, trusts, estates, partnerships, corporations, LLCs, and similar entities -- does not explicitly mention the State of Illinois, the federal government, or units of local government, unlike the "person" definitions in some other Illinois excise tax statutes. At the same time, the Act explicitly exempts parking operated by the federal government or its instrumentalities (Section 10-20(1)), but includes no comparable explicit exemption for state or local government operation. The firm asked the Department to resolve this ambiguity before the Act took effect.

The Department's response did not resolve the ambiguity. It confirmed the two facts the firm had already identified: (1) the "Person" definition does not include the State of Illinois, the federal government, or units of local government, and (2) the federal-government exemption under Section 10-20(1) is narrow -- it applies only if the parking area or garage is operated directly by the federal government or its instrumentality holding an active Section 1g tax-exemption number, and does not apply if a third party operates the lot under a lease or other contractual arrangement, even on behalf of that government or instrumentality.

Beyond that, however, the Department explicitly declined to give a final answer. At the time of this letter, the Department was still in the process of drafting rules for the Act, and it stated that it would "address the issue you raise in the Department's rules" once those proposed rules were published in the Illinois Register, after which the public would have an opportunity to comment. In other words, the core question -- whether a municipality operating its own parking lot is subject to, or exempt from, the Parking Excise Tax -- was left open for future rulemaking rather than answered in this GIL.

What this means for you

If you're a municipality or other local government operating parking facilities directly

As of this letter, the Department has not said whether your directly-operated parking lots or garages are exempt from the Parking Excise Tax. The absence of "State of Illinois," "federal government," or "units of local government" from the Act's "Person" definition is a point in favor of an exemption, but the Department stopped short of confirming that reading applies to the "Operator" collection-and-remittance obligation. Watch for the Department's forthcoming rules in the Illinois Register, and take advantage of the public comment period once they are proposed. Until the rules (or a later, more definitive ruling) clarify the issue, treat the tax's applicability to your directly-operated lots as an open question rather than a settled exemption.

If you're a private parking operator under contract with a government entity

The Act's explicit federal-government exemption (35 ILCS 525/10-20(1)) does not extend to third-party operators, even when that third party operates a lot on behalf of, or under a lease or contract with, a governmental body that itself might otherwise qualify. So even if a future rule confirmed an exemption for parking lots operated directly by a government entity, a private company running that same lot under a lease or management agreement would not automatically inherit that exemption -- the statute's own text ties the federal exemption to direct government operation, not to who ultimately owns or benefits from the lot.

Common questions

Q: Did the Department ever definitively answer whether municipally-operated parking lots are exempt from the Parking Excise Tax?
A: No. The Department acknowledged the ambiguity the requester identified but explicitly stated it would address the issue in forthcoming rules, to be published in the Illinois Register with a public comment period, rather than resolve it in this letter.

Q: Does the fact that "Person" doesn't mention local governments mean municipal lots are automatically exempt?
A: Not necessarily. The Department noted that the "Person" definition in 35 ILCS 525 Section 10-5 does not include the State of Illinois, the federal government, or units of local government, but it did not go on to conclude that this omission exempts municipally-operated lots from the tax or the Operator's collection/remittance duties.

Q: If a private company operates a parking lot on behalf of the federal government, does the federal exemption in the Act apply?
A: No. Under 35 ILCS 525/10-20(1), the federal-government exemption applies only when the parking area or garage is operated directly by the federal government or its instrumentality with an active Section 1g tax-exemption number. It does not apply if a third party operates the lot, whether under a lease, contract, or any other arrangement.

Q: Is there a comparable explicit exemption in the Act for state or local government-operated parking?
A: The Act, as described in this letter, contains an explicit exemption only for federal government-operated parking (35 ILCS 525/10-20(1)). No parallel explicit exemption for state or local government operation was identified in the letter, which is part of why the requester raised the ambiguity in the first place.

Citations and references

Statutes cited:

• 35 ILCS 525/10-10(a) (Parking Excise Tax imposition, effective January 1, 2020)
• 35 ILCS 525 Section 10-5 (definitions of "Operator" and "Person")
• 35 ILCS 525/10-20(1) (federal government/instrumentality parking exemption, limited to direct operation)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st-19-0013-gil.pdf

Original ruling text

ST-19-0013-GIL 07/15/2019 MISCELLANEOUS
This letter discusses the Parking Excise Tax Act. 35 ILCS 525/ (This is a GIL.)

July 15, 2019

Dear Xxxx:
This letter is in response to your letter dated June 25, 2019, in which you requested
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:
RE: Request for General Information Letter (GIL) Addressing Applicability of
Forthcoming Parking Excise Tax to Municipally-Operated Lots
To Whom It May Concern:
My firm represents a number of local governmental entities throughout the State. We
have fielded numerous inquiries from our governmental clients regarding the “Parking
Excise Tax Act,” which is Article 10 of SB 690 (the “Act”), which recently passed both
chambers of the General Assembly and is presently awaiting the governor’s signature to
become law. Upon the governor’s signature, which may have occurred by the time you
read this, the Act will become effective January 1, 2020.
This letter constitutes a formal request for a General Information Letter from IDOR on
the applicability of the parking excise tax created by the Act on parking lots, structures
and areas operated directly by municipalities or other local government entities.
The Act will impose a new 6% (hourly, daily, weekly) to 9% (monthly, annual) tax on
the privilege of parking vehicles in parking lots and garages throughout the State. The tax
is borne by customers in the form of an extra line-item cost on each parking transaction

ST-19-0013-GIL
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collected by parking lot operators and remitted to the Department of Revenue (IDOR) on
a monthly basis.
Many of our municipal clients in the Chicago area operate fee-based commuter parking
lots and have inquired whether the new tax applies to these lots operated directly by
municipalities, or whether they are exempt. We have reviewed the proposed Act and find
its applicability to municipally-owned parking lots and structures to be ambiguous. Our
analysis is set forth in brief below.
Section 10-5 of the Act establishes definitions. An “Operator” under the Act, of the sort
responsible for collecting and remitting the tax returns and proceeds, is in relevant part
“any person who engages in the business of operating a parking area or garage…”. The
definition of “Person” does not include any explicit reference to governmental bodies, as
does the definition of “person” in every other Illinois excise tax. This is, perhaps,
suggestive of a legislative intention to exclude local government bodies operating parking
lots from being subject to the new parking excise tax. On the other hand, Section 1020(1) pointedly exempts parking operated “by the federal government or its
instrumentalities” and does not contain a similar exemption for local governments or
other political subdivisions of the State.
Transcripts of the floor debate over House Amendment 2 and House Amendment 3 to SB
690, which amendments create the new parking excise tax, are not yet available as of this
writing. I look forward to any guidance you may be able to offer.
DEPARTMENT’S RESPONSE:
The Parking Excise Tax Act (“Act”), beginning on January 1, 2020, imposes a tax on the
privilege of using in this State a parking space in a parking area or garage for the use of parking
one or more motor vehicles, recreational vehicles, or other self-propelled vehicles. 35 ILCS
525/10-10(a).
"Operator" means any person who engages in the business of operating a parking area or
garage, or who, directly or through an agreement or arrangement with another party, collects the
consideration for parking or storage of motor vehicles, recreational vehicles, or other selfpropelled vehicles, at that parking place.
"Person" means any natural individual, firm, trust, estate, partnership, association, joint
stock company, joint venture, corporation, limited liability company, or a receiver, trustee,
guardian, or other representative appointed by order of any court.
The Department is in the process of drafting rules for the Act. It recognizes that the
definition of “person” does not include the State of Illinois, the federal government, and units of
local government. It is important to note that, although the Act exempts parking in a parking
area or garage operated by the federal government or its instrumentalities that has been issued an

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active tax exemption number by the Department under Section 1g of the Retailers' Occupation
Tax Act, for the exemption to apply, the parking area or garage must be operated by the federal
government or its instrumentalities. The exemption does not apply if the parking area or garage
is operated by a third party, whether under a lease or other contractual arrangement, or any other
manner.
Thank you for your letter. We will address the issue you raise in the Department’s rules.
After the Department’s proposed rules have been published in the Illinois Register, the public
will have an opportunity to provide comments.
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,

Richard S Wolters
Associate Counsel

RSW:rkn

ST-19-0013-GIL
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MISCELLANEOUS: This letter discusses the Parking Excise Tax Act. 35 ILCS 525/ (This is a
GIL.)