Illinois Municipal Law & the “Leveling the Playing Field for Illinois Retail Act”: We’re in the Money

By Thomas Condon

“Gone are my blues and gone are my tears, I\’ve got good news to shout in your ears, the long lost Dollar has come back to the fold…” are lyrics from the 1933 Song by the Gold Diggers, “We’re in the Money”. Those words may be appropriately sung by the leadership of Illinois Municipalities thanks to the recent passage of the “Leveling the Playing Field for Illinois Retail Act (“Act”)”.

The proliferation of online retail sales transactions has reduced the amount of tax collected by both the State of Illinois and local municipalities. For many years, there was no requirement that retailers without an Illinois presence collect tax. Instead, the onus was placed upon the purchasers to remit the use tax. Not surprisingly, many were unaware of their obligation and those that were failed to do so.

The Act follows on the heels of the 2018 Supreme Court Case, South Dakota v. Wayfair, which permitted states to charge a tax on purchases made from out of state retailers without a physical presence in the state and the subsequent 2018 legislation that required out of state retailers and service providers to collect and remit use tax and service use tax if one of two thresholds is met for a 12-month period: (i) the sales of tangible personal property or services to customers in Illinois are $100,000 or more; or (ii) the retailer or service provider enters into 200 or more separate transactions for sales of tangible personal property or services to Illinois customers. Beginning Jan. 1, 2020, the Act now also requires Marketplace Facilitators, someone who facilitates sales, i.e. Amazon, to collect and remit use tax and service use tax if they meet either of the above thresholds. This change increases the number of transactions that tax will be collected. The Act goes one step further and beginning on July 1, 2020, they will have to collect the state and applicable local Retailers’ Occupation tax which is determined where the product is delivered. The online sales will then be taxed at the same level as the brick and mortar stores. While the Act does not capture all lost tax revenue, it should have a significant impact.