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April 30:   
Compliance & Enforcement Update: Part I (Sponsored and hosted by BDO featuring presenters from BDO and Horwood Marcus & Berk)
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April 26, 2019
State and Local Tax  
This Week 

Illinois General Assembly
The House and Senate are on Easter break for the weeks of April 15 and April 22.

The House and the Senate return to Springfield on April 30 for the final month of the legislative session.

We have continued to work on a number of issues during the break.  We had discussions with representatives of the Illinois Department of Revenue and the Department of Commerce and Economic Opportunity on SB 1591, our data center bill which is now in the House.

We also continued our efforts in opposition to SB 1379, the Cook County Assessor's legislation that will require burdensome and unnecessary data submission by owners, and other parties, who have an interest in "income-producing property."  

There are continued efforts in opposition to the Governor's proposal to cap the retailers' discount.  

I also predict that there will further efforts during the last month of the legislative session to revive efforts to impose local retailers' occupation taxes on a destination basis on online sales -specifically out-of-state online sellers.  There are two issues triggering this attempt - First, the desire of bricks and mortar retailers to have tax rate parity with online sellers.  Online sellers who now have nexus in the post-Wayfair world are use tax collectors subject to the 6.25% Illinois use tax.  Second, the desire of local governments to impose their local retailers' occupation taxes on this new revenue stream and collect the additional revenues.

As you know, under our current statutory sales tax scheme, many local governments are authorized to impose local retailers' occupation taxes on sales by retailers that take place within their jurisdictions. Local governments do not have the authority to impose local "sales taxes" on sellers not located with the local jurisdictions who make sales into those jurisdictions - only the state 6.25% Use Tax is imposed on such sales.

As a result, even post Wayfair, there remains a significant tax rate differential between the rate imposed on online sales and the rate imposed on bricks and mortar sales. 

As you will recall, we strongly opposed an attempt to impose local sales taxes on online sellers,  HB 270, because it was deeply flawed.  However, no bad or flawed idea is ever dead in Springfield until the legislature adjourns at the end of May.

I have heard that are continuing efforts to come up with some sort of "fix" that would authorize the imposition of local taxes on retailers who are currently subject to a use tax collection obligation, and not subject to the Retailers' Occupation Tax Act.  

I  remain skeptical that there is a viable way of converting certain use tax collectors into retailers, subject to the Retailers' Occupation Tax, and then also require them to charge and collect locally-imposed retailers' occupation taxes on a destination sourcing basis under the Illinois Constitution and current law.  But, I will not be surprised to see such an attempt before the end of the spring session. 

Rather than attempting to add another "patch" to the current sales tax system, there should be an effort to completely revamp the current Illinois sales tax law. 

We will continue in our efforts to move our other legislative proposals forward during the last month of the session.  Please let me know if you have questions about any particular legislative issues.

Senate Revenue committee
The Senate Revenue committee did not meet over the break.

House Revenue committee
The House Revenue committee held a subject matter hearing on Thursday in Chicago on sports wagering.   

House Labor and Commerce committee
The House Labor and Commerce committee is holding a subject matter hearing this morning in Chicago on workforce development, reducing unemployment and improving the economy.

Amendments to tax legislation this week
A number of new amendments were filed this week, but none of the amendments are tax-related.

The April 26 edition of the Illinois Register
did not contain any new or adopted rulemakings by the Illinois Department of Revenue or the Illinois Department of Commerce and Economic Opportunity.
Court cases
The People of the State of Illinois ex rel. Richard Lindblom and Ralph Lindblom v. Sears Brands, LLC, Home Depot et al. is a False Claims Act case.  The relators alleged that Home Deparot knowingly engaged in a scheme to avoid payment of retailers' occupation tax to the Illinois Department of Revenue by treating the sale and installation of dishwashers and over-the-range microwave ovens as a construction contract.  

The case was in front of the appellate court on an appeal by the relators of the dismissal of their complaint on a technical issue of whether they were required to plead an actual completed transaction.  The appellate court reversed the circuit court dismissal and remanded the case back to the circuit court.

This case is of interest for a couple of reasons in addition to the technical basis for the appeal.  First, it demonstrates the continuing exposure of the business community to False Claims Act actions in areas of the sales tax where there may ambiguity under the law and regulations.  Second, the issue of when these types of sales are retail sales or construction contracts is an issue that the Department of Revenue has been focused on for some time.  You will recall that the Department issued a  Compliance Alert on this subject back in June 2015.

Tax Tribunal 
No new decisions were posted this week.

None of the new cases filed this week raise unique issues.

Free Unclaimed Property Webinar
Please note the upcoming event on the side column.  Tax Institute member accounting firm BDO is holding a complimentary webinar - Illinois Unclaimed Property Compliance & Enforcement Update featuring insights from unclaimed property specialists from BDO and Horwood Marcus & Berk.  Click the link at the left to register.

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