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A car rental company’s short-term vehicle rental that occurred outside Chicago was subject to the Chicago personal property lease transaction tax since the vehicle was used in Chicago. The tax is imposed on a lessee who is a Chicago resident as shown by the renter’s driver’s license who leases personal property in Chicago or primarily uses leased property for more than 50% of the time in Chicago. A Department of Finance ruling stated that the tax applies to rentals made by car rental companies inside Chicago and within three miles of Chicago’s border. An appellate court reversing the Trial Court, found that taxing non-Chicago rental transactions did not exceed Chicago’s home-rule authority since the connection between the rental company, the use of the car, and the city of Chicago is reasonable and clear. The Court discussed the nature of the tax as being more of a use tax than a transaction tax and therefore the City has the right to require a retailer who has nexus with the City to collect the tax on transactions that occur outside its jurisdiction.  Rental companies do not have standing to challenge the federal constitutionality of the ordinance since it imposes tax on the use of the property in Chicago, which is not an extraterritorial transaction. Imposition of the tax and the city’s guidance on keeping vehicle use records do not exceed the scope of the ordinance. The lessor has options on how to document the use occurs outside the City.  It is reasonable to require a taxpayer to document an exemption from the tax.  (Hertz Corp v. City of Chicago, Appellate Court of Illinois, First District, No. 1-12-3210, 1-12-3211, September 22, 2015, released December 10, 2015)

(07/25/2016)

On February 11, 2016, the U.S. Senate approved a permanent extension of the Internet Tax Freedom Act (ITFA) that is included in H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015. The bill also establishes an end date of June 30, 2020 for the seven states that currently impose a tax on internet access: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin. President Obama is expected to sign the permanent extension of the ITFA into law. The House of Representatives had previously passed H.R. 235, the Permanent Internet Tax Freedom Act, on December 15, 2015.  For our previous news item on this topic, visit Internet Tax Freedom Act Extended Through October 1, 2016.

 

UPDATE: On February 24, 2016, President Barack Obama signed into law the permanent extension of the Internet Tax Freedom Act.

 

(Trade Facilitation and Trade Enforcement Act of 2015)

(02/23/2016)

For purposes of Illinois public utilities tax, the Renewable Energy, Energy Efficiency, and Coal Resources Development Law of 1997 is repealed effective December 31, 2020. The law previously was set to repeal effective December 12, 2015. This law provides for a trust fund to provide grants, loans and other incentives to foster investment in and the development and use of renewable energy sources in Illinois.  (P.A. 99-489 (H.B. 1365), Laws 2015, effective December 4, 2015)

(01/25/2016)

On December 18, 2015, President Barack Obama signed H.R. 2029 – Consolidated Appropriations Act, 2016. The Act extends the Internet Tax Freedom Act (ITFA) through October 1, 2016. Prior provisions that grandfather taxes that existed prior to October 1, 1998 are also extended through October 1, 2016. For our previous news item on this topic, see Internet Tax Freedom Act Extended Until December 11, 2015. (H.R. 2029 – Consolidated Appropriations Act, 2016)

(01/18/2016)

The final payment of a lease-to-own transaction of tangible personal property was not subject to Illinois sales tax because the lease agreement constituted a true lease. In Illinois, sales tax is due on lease transactions that are deemed conditional sales where the lessor is guaranteed a sale of the leased property to the lessee by a nominal or one dollar purchase option at the end of the lease term. In this case, the lease did not guarantee a sale of the property at the inception of the contract.  Title to the leased property was transferred to the lessee after the final payment was made and there was no nominal or one dollar option to purchase at the end of the lease. The lease agreement also allowed the lessee to walk away at the end of the lease term without further obligation or penalty. (Private Letter Ruling, ST 15-0013-PLR, Illinois Department of Revenue, October 15, 2015)

(12/09/2015)

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