September 28, 2018

State and Local Tax this week

The September 28 edition of the Illinois  did not contain any new rulemakings by t he Illinois Department of Commerce and Economic Opportunity. 

The Illinois Department of Revenue emergency amendments to the Use Tax rules to implement the Wayfair decision were published in the Illinois Register today. (I previously distributed a copy of the emergency rules in a prior newsletter prior to publication in the Illinois Register.)

The Department of Revenue provided the following description of the emergency rules:

"These regulations implement the provisions of Article 80 of PA 100-587, the FY19 Budget Implementation Act ("Act").  Prior to the Act, an out-of-State retailer (a "remote seller") had to maintain a physical presence in Illinois before it could be required to collect and remit Illinois Use Tax on sales of tangible personal property to Illinois purchasers.  The Act, however, created a new type of nexus, which does not require a physical presence.  The Act's nexus standards are substantially similar to provisions enacted by South Dakota and upheld in the recent U.S. Supreme Court case, South Dakota v. Wayfair, Inc., No. 17-494 (U.S. June 21, 2018).  Effective October 1, 2018, the Act requires remote sellers to register with the Department and collect and remit Use Tax on sales to Illinois purchasers if they meet specific selling thresholds.  Retailers whose cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more, or who enter into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois, must register and collect and remit Use Tax.  The Act provides that retailers must determine on a quarterly basis whether they meet either of the selling thresholds for the immediately preceding 12-month period; if they meet either of the selling thresholds, they are required to collect and remit Use Tax and file returns for the subsequent year.  These regulations implement the provisions of the Act.  They provide key definitions; explain how retailers assess their selling activities by making quarterly lookback determinations; and provide rules that retailers must apply in determining if they have met either of the selling thresholds.  Examples are provided throughout the regulations.  The regulations also generally describe the relationship of these regulations to other nexus regulations, the types of retailers that may be affected by these new nexus provisions, and the Use Tax that must be collected, including the way it is distributed in Illinois."

The Treasurer proposed rules under the Revised Uniform Unclaimed Property Act in the September 28 edition of the Illinois Register. 

The following is included in the description of the Treasurer's rulemaking proposal: 

"In 2017, the General Assembly adopted the Revised Uniform Unclaimed Property Act (RUUPA), which was based on the 2016 Uniform Law Commission (ULC) Act, and repealed the existing Uniform Disposition of Unclaimed Property Act (765 ILCS 1025), which was based on the 1954 ULC Act. These proposed rules implement the Illinois Revised Uniform Unclaimed Property Act (765 ILCS 1026) as adopted by the General Assembly through Public Acts 100-22 and 100-566."

The Treasurer has scheduled a public hearing on the proposed rules and provided the following information on the public hearing:    

The Treasurer's Office will hold a public hearing on this proposed rulemaking at the date and time listed below. Further details and the hearing agenda may be found on the Treasurer's website at: www.illinoistreasurer.gov.

Public Hearing: Thursday, October 18, 2018 

2:00 PM - 4:00 PM 

Stratton Office Building, Room C-1 

401 S. Spring Street 

Springfield IL 62704

I plan to submit comments on the proposed rulemaking and if warranted testimony at the public hearing.  To that end, I will schedule a call on October 9, to discuss my thoughts on the rulemaking and obtain questions, comments and concerns from the membership.  I will send out a meeting notice for the call on Monday.

Court cases

The Illinois Appellate Court upheld a decision of the Tax Tribunal in Horsehead Corporation v. Department of Revenue.  The Department of Revenue issued two notices of tax liability for Horsehead's failure to pay use tax on purchases of metallurgical coke.  The Tax Tribunal upheld the NTLs.  The appellate court affirmed the Tax Tribunal's decision. This case deals with the scope of Use tax exemption for chemicals or chemicals acting as a catalyst to effect a direct and immediate change.  

In reviewing the decision of the Tribunal, the court concluded that "we cannot say that the tax tribunal committed clear error in determining that Horsehead's purchases of metallurgical coke for use during the Waelzing process did not qualify for an exemption under Section 3-50(4) of the Use Tax Act.  Therefore, we affirm the tax tribunal's order affirming IDOR's determination of use tax liability for Horsehead's out-of-state purchases of metallurgical coke.

The appellate court also upheld the tribunal's decision not to abate penalties stating, "[w]e conclude that the tax tribunal's decision to uphold the penalties is not against the manifest weight of the evidence.  In declining to overrule the decision of the tribunal to not abate penalties, the court noted that "Horsehead presented no evidence at the hearing as to any previous audits by IDOR . . . [n]or was there any evidence that Horsehead sought any professional guidance on its potential use tax liability, which, while not determinative, may have persuaded the tax tribunal of Horsehead's good-faith efforts to comply with the Use Tax Act.

Tax Tribunal 

No new decisions were issued this week by the Tribunal.  None of the new cases filed with the Tribunal this week raise noteworthy issues. 

Publications

The Illinois Science and Technology Coalition issued a new report entitled Illinois' R & D Landscape and Path Forward.