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Pumpkins are considered to be food and are therefore subject to the reduced (1%) Illinois state sales tax rate if they are sold in a condition suitable for human consumption. Local sales taxes may also apply, depending upon where the retail sales are made. However, if the pumpkins have been rendered unsuitable for human consumption, for example, scooped out and carved, they are subject to the regular (6.25%) state tax rate plus any applicable local taxes. (General Information Letter ST 05-0081-GIL, Illinois Department of Revenue, September 26, 2005)

(12/06/2005)

This is just a reminder that the Chicago, IL sales tax rate is increasing to 9% effective 7/1/05. In addition the hotel tax is increasing from 3% to 3.5%. However, it appears that the City did not increase the Non-Titled Use Tax rate which applies to consumers on purchases made from vendors located outside the City. The increase will apply to Titled Use Tax which applies to vehicles that require title and registration.

If you are selling items from within Chicago for delivery anywhere in Illinois this new rate will impact you. Don't forget to update your tax billing systems. If you are purchasing from a Chicago vendor and taking delivery in Illinois, this new rate will impact you. If you are purchasing for use in Chicago from a vendor located outside of Chicago, this rate will NOT impact you.

The sales tax increase applies to transactions occurring on and after July 1, 2005. A transaction is deemed to occur on the data of delivery unless payment is made at an earlier date prior to delivery or if there is a deposit or prepayment and there is a binding purchase order. In order to qualify as a binding purchase order, the seller must identify the property to the contract and specifically mark it as belonging to the customer and there must have been a payment towards the purchase price.

For the Illinois Department of Revenue Bulletin, please visit http://www.revenue.state.il.us/publications/bulletins/2005/Fy200515.pdf

If you can expedite any major transactions to occur prior to 7/1/05, you can save 0.25% tax on the transaction if you are purchasing from a vendor located in Chicago.

(06/27/2005)

The State of Illinois has issued an Informational Bulletin stating changes to the “out-of-state buyer” exemption. The bulletin states that effective February 1, 2005, certain nonresidents may no longer claim the “out-of-state buyer” exemption on purchases of motor vehicles or trailers. Nonresidents may not claim the exemption if the motor vehicle or trailer will be titled in a state that does not give Illinois residents and “out-of-state buyer” exemption on purchases in that state of motor vehicles or trailers that will be titled in Illinois. The bulletin further states that the tax rate will be the nonresident’s state sales tax rate, limited to 6.25%. States that do not give Illinois residents such an exemption include Arizona, Florida, Indiana, Massachusetts, Michigan, and South Carolina. (Illinois Department of Revenue, Information Bulletin FY 2005-13, January 2005)

(03/10/2005)

As of March 1 2005, the Illinois Department of Revenue has posted the names, addresses, and outstanding tax balances of 100 business and individuals who have outstanding liabilities of $1,000 or more, which was due at least six months ago. The liabilities threshold of $1,000 includes tax, penalties, and interest. Each of the taxpayers on the list was notified by certified mail at their last known address at least 90 days prior to March 1, 2005. The initial action brought 89 taxpayers to pay an overall total of $590,000 to avoid being listed publicly. Director Brian Hamer was cited as saying, “The taxpayers whose names appear [March 1] owe money not just to the Department of Revenue, they owe money to all the citizens of Illinois. They have a right to know whose these people are.” (News, Illinois Department of Revenue, March 1, 2005)

(03/04/2005)

On January 15, 2005, Illinois Governor Rod Blagojevich signed into law P.A. 93-1068, amending the late payment penalties imposed under the Uniform Penalty and Interest Act (UPIA).

As stated in the act for returns due on and after January 1, 2005, a penalty shall be imposed for late payment or underpayment at the same 2% and 10% rules applicable for the tax period 2004, however, the 10% penalty is applicable for a period of 30 days after the due date of the return and prior to the date the Department has initiated an audit. Once the Department has initiated an audit, the penalty will be imposed at 20%, providing that the penalty shall be reduced to 15% if the entire amount due is paid not later than 30 days after the Department has provided the taxpayer with an amended return. The Department has the authority to rescind the 15% reduction if the taxpayer makes a claim for refund or credit of the tax, penalties, or interest determined to be due upon audit, unless the claim is filed pursuant to Section 506 of the Illinois Income Tax Act or to claim a carryover of a loss or credit.

The State of Illinois’ ability to rescind the discounted penalty also could reach to the taxpayer’s ability to make an appeal to the Board of Appeals. Essentially, a taxpayer may compromise the 5% reduction in penalties if appealing an audit determination. (Illinois Department of Revenue, 35 ILCS 735/3-3 as amended by P.A. 93-1068, amended January 15, 2005)

(02/14/2005)

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