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| | 103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB3282 Introduced 2/7/2024, by Sen. Sara Feigenholtz SYNOPSIS AS INTRODUCED:
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Amends the Retailers' Occupation Tax Act. Requires each holder of a Direct Pay Permit to review its purchase activity by January 31 and July 31 of each year to verify that the purchases made in the preceding 6-month period were sourced correctly and the correct tax rate was applied. Sets forth penalties for failure to comply with the reporting requirements. Effective immediately.
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| | A BILL FOR |
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| | SB3282 | | LRB103 34197 HLH 64020 b |
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| 1 | | AN ACT concerning revenue.
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| 2 | | Be it enacted by the People of the State of Illinois,
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| 3 | | represented in the General Assembly:
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| 4 | | Section 5. The Retailers' Occupation Tax Act is amended by |
| 5 | | changing Section 2-10.5 as follows:
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| 6 | | (35 ILCS 120/2-10.5)
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| 7 | | Sec. 2-10.5.
Direct payment program; purchaser's providing |
| 8 | | of permit to
retailer; retailer relieved of collecting use tax |
| 9 | | and local retailers'
occupation tax reimbursements from |
| 10 | | purchaser; direct payment of retailers'
occupation tax and |
| 11 | | local retailers' occupation tax by purchaser.
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| 12 | | (a) Beginning on July 1, 2001 there is established in this |
| 13 | | State a Direct
Payment Program to be administered by the |
| 14 | | Department. The Department shall
issue a Direct Pay Permit to |
| 15 | | applicants who have been approved to participate
in the Direct |
| 16 | | Payment Program. Each person applying to participate in the
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| 17 | | Direct Payment Program must demonstrate (1) the applicant's |
| 18 | | ability to comply
with the retailers' occupation tax laws and |
| 19 | | the use tax laws in effect in this
State and that the |
| 20 | | applicant's accounting system will reflect the proper amount
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| 21 | | of tax due, (2) that the applicant has a valid business purpose |
| 22 | | for
participating in the Direct Payment Program, and (3) how |
| 23 | | the applicant's
participation in the Direct Payment Program |
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| 1 | | will benefit tax compliance.
Application shall be made on |
| 2 | | forms provided by the Department and shall contain
information |
| 3 | | as the Department may reasonably require. The Department shall
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| 4 | | approve or deny an applicant within 90 days after the |
| 5 | | Department's receipt of
the application, unless the Department |
| 6 | | makes a written request for additional
information from the |
| 7 | | applicant.
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| 8 | | (b) A person who has been approved for the Direct Payment |
| 9 | | Program and who
has been issued a Direct Pay Permit by the |
| 10 | | Department is relieved of paying tax
to a retailer when |
| 11 | | purchasing tangible personal property for use or
consumption, |
| 12 | | except as provided in subsection (d), by providing that |
| 13 | | retailer a
copy of that Direct Pay Permit. A retailer who |
| 14 | | accepts a copy of a customer's
Direct Pay Permit is relieved of |
| 15 | | the obligation to remit the tax imposed by
this Act on the |
| 16 | | transaction. References in this Section to "the tax imposed by
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| 17 | | this Act" include any local occupation taxes administered by |
| 18 | | the Department
that would be incurred on the retail sale.
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| 19 | | (c) Once the holder of a Direct Pay Permit uses that Permit |
| 20 | | to relieve the
Permit holder from paying tax to a particular |
| 21 | | retailer, the holder must use its
Permit for all purchases, |
| 22 | | except as provided in subsection (d), from that
retailer for |
| 23 | | so long as the Permit is valid.
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| 24 | | (d) Direct Pay Permits are not valid and shall not be used |
| 25 | | for sales or
purchases of:
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| 26 | | (1) food or beverage;
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| 1 | | (2) tangible personal property required to be titled |
| 2 | | or registered with an
agency of government; or
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| 3 | | (3) any transactions subject to the Service Occupation |
| 4 | | Tax Act or Service
Use Tax Act.
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| 5 | | (e) Direct Pay Permits are not assignable and are not |
| 6 | | transferable. As an
illustration, a construction contractor |
| 7 | | shall not make purchases using a
customer's Direct Pay Permit.
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| 8 | | (f) A Direct Pay Permit is valid until it is revoked by the |
| 9 | | Department or
until the holder notifies the Department in |
| 10 | | writing that the holder is
withdrawing from the Direct Payment |
| 11 | | Program. A Direct Pay Permit can be
revoked by the Department, |
| 12 | | after notice and hearing, if the holder violates any
provision |
| 13 | | of this Act, any provision of the Illinois Use Tax Act, or any
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| 14 | | provision of any Act imposing a local retailers' occupation |
| 15 | | tax administered by
the Department.
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| 16 | | (g) The holder of a Direct Pay Permit who has been relieved |
| 17 | | of paying tax to
a retailer on a purchase for use or |
| 18 | | consumption by representing to that
retailer that it would pay |
| 19 | | all applicable taxes directly to the Department
shall pay |
| 20 | | those taxes to the Department not later than the 20th day of |
| 21 | | the
month following the month in which the purchase was made. |
| 22 | | Permit holders
making such purchases are subject to all |
| 23 | | provisions of this Act, and the tax
must be reported and paid |
| 24 | | as retailers' occupation tax in the same manner that
the |
| 25 | | retailer from whom the purchases were made would have reported |
| 26 | | and paid it,
including any local retailers' occupation taxes |
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| 1 | | applicable to that retail sale.
Notwithstanding any other |
| 2 | | provision of this Act, Permit holders shall make all
payments |
| 3 | | to the Department through the use of electronic funds |
| 4 | | transfer.
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| 5 | | (h) Beginning on January 1, 2025, each holder of a Direct |
| 6 | | Pay Permit must review its purchase activity by January 31 and |
| 7 | | July 31 of each year to verify that the purchases made in the |
| 8 | | preceding 6-month period ending on the last day of the |
| 9 | | calendar month immediately preceding the month in which the |
| 10 | | report is due were sourced correctly and the correct tax rate |
| 11 | | was applied. If any errors are discovered, then the holder of |
| 12 | | the Direct Pay Permit shall correct the errors on returns |
| 13 | | filed on or after the date on which the error is discovered and |
| 14 | | shall file amended returns to correct past errors. Any holder |
| 15 | | of a Direct Pay Permit who fails to properly verify purchase |
| 16 | | activity and correct sourcing and tax rate errors based on the |
| 17 | | permit holder's purchase activity, as required by this Section |
| 18 | | and the rules adopted by the Department, is liable to pay to |
| 19 | | the Department, for deposit into the Tax Compliance and |
| 20 | | Administration Fund, a penalty of $6,000 for each 6-month |
| 21 | | review period after which the permit holder does not correct |
| 22 | | sourcing and tax rate errors based on its purchase activity |
| 23 | | until the permit holder comes into compliance and corrects any |
| 24 | | sourcing or tax rate errors. The penalties imposed under this |
| 25 | | Section shall not apply if the permit holder shows that he or |
| 26 | | she acted with ordinary business care and prudence. The |