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In previous posts, we have explored several local Illinois taxes, including the Chicago Personal Property Lease Transaction Tax and Cook County Parking Lot Tax. Also notable is the Chicago and Cook County Amusement Tax, which can apply more broadly than taxpayers often anticipate. Specifically the scope of the amusement tax has been expanded over the last few years to non-traditional amusements, including electronically transferred television shows, movies, videos, music, and games. Imposition of The Amusement Tax Although the Chicago and…

Pursuant to 28 U.S.C. Section 1782, a party may apply to conduct discovery in the U.S. for use in foreign proceedings. In a recent decision from the U.S. District Court for the Southern District of New York, In re Ruiz, 2018 U.S. Dist. Lexis 180262, the court considered whether former investors in Banco Popular could conduct discovery against Banco Santander in New York for use in foreign proceedings before the General Court of Justice of the European Union. Banco Santander…

In a previous article, I shared our insights related to the Cook County Department of Revenue ("Department") audit and administrative hearings process. That article focused on the Department's appeals process and, more importantly, the affirmative steps that taxpayers must take to formally protest an assessment issued by Department. This article focuses on one of the County taxes that has recently been targeted by the Department, the Parking Lot and Garage Operations Tax ("Parking Lot Tax"). In the past 3-5 years,…

In a previous post, we addressed the basics of Illinois corporate income tax apportionment. We also addressed how while most corporations are required to follow the standard statutory formula, the state imposes unique rules on a number of industries, including  financial organizations. In addition to financial organizations, insurance companies must also apportion their income to Illinois according to special rules. As with financial organizations, beginning with the tax year ending December 31, 2017, insurance companies must be included in the…

In a previous post, we discussed how Illinois taxes software. In a General Information Letter published in 2017, Illinois addressed how its taxation of canned and custom software would apply to cloud computing. The state explained that software as a service ("SaaS") is not subject to the Retailers' Occupation Tax, and SaaS providers are instead subject to the Servicemen Occupation Tax.[1] Thus, providers of SaaS to Illinois customers will generally be subject to use tax on tangible personal property transferred…

In  Marquette Bank v. Gesiakowski, et al., 2015 IL App (1st) 142627, the Illinois First District Appellate Court recently ruled in favor of a lender in a mortgage foreclosure case that resolved interesting issues regarding a mortgagee's ability to foreclose on real estate held in a land trust, when the beneficial interest in that land trust is held by spouses as tenants by the entirety. Lawrence Gesiakowski obtained a loan from Marquette Bank to support his business, and as security for…

Partnerships are not subject to the Illinois Income Tax. Instead, partners are taxed individually on their distributive shares from a partnership.[1] For nonresident individual partners, only their pro rata share of the partnership's income apportioned to Illinois is taxable.[2] Corporate partners may be required to combine the partnership income and factors in their combined business income and factors if they are unitary with the partnership.[3] However, it is always important to keep in mind that Illinois also imposes a Replacement…

The Illinois Franchise Tax is a weird tax. It is imposed on the privilege of exercising a franchise in Illinois or, in the case of foreign corporations, for the authority to transact business in the state. It is administered by the Illinois Secretary of State, not the Department of Revenue, and is measured by paid-in capital. Knowing the ins and outs of the Franchise Tax is a must for any corporation doing business in the state. Applicability of the Franchise…

Ontario's Divisional Court in 2092280 Ontario Inc. v. Voralto Group Inc., 2018 ONSC 2305, confirmed the requirements in obtaining an injunction on the dissipation of assets without notice. There, the Appellants were a landlord and contractor who had allegedly been defrauded in a scam involving the illegal dumping of waste. The court noted that where the five requirements for a Marevain junction that need to be met, wherein notice to the parties affected is not initially required. Make full and…

Like many states, Illinois and a number of Illinois localities impose motor fuel taxes. Although these taxes are each generally similar, they function slightly differently and are administered by different agencies. It is important not only for retailers of motor fuel, but any business that uses motor fuel in the operation of its business to understand the different layers of motor fuel taxes in Illinois. Illinois Overview Illinois' motor fuel tax is imposed on the retail sale of motor fuel.[1]…

This post is featured in the Illinois Practitioner Series. For taxpayers surprised to find their business caught in the crosshairs of a Chicago or Cook County audit, substantial penalties can also be an alarming challenge. In a prior post, I outlined penalties assessed by the Illinois Department of Revenue ("Department"), the basis for relief, and the process for seeking penalty abatement. Although the basis for relief is similar for Chicago and Cook County penalties, there are key differences in the…

Every state recognizes the right of a company's shareholder (or member in the case of a limited liability company) to make a demand of the Board of Directors to initiate litigation that the shareholder believes will benefit the company. If the Board fails or refuses to act, the shareholder has the right to sue derivatively on behalf of the company. While derivative lawsuits can serve as a useful check on the unbridled authority of Directors, they are too often used by…

The Illinois Constitution was adopted on December 15, 1970. The constitution sets forth the taxing powers of home rule units and describes the exclusive power of the General Assembly to raise revenue. Because the constitution creates the framework for how Illinois' taxing system functions, this post will discuss the constitution's general structure and the impactit has on Illinois taxes. Background In 1968, the people of Illinois called a constitutional convention to "modernize, shorten, and liberalize" its 1870 constitution. One of…

The Illinois Department of Revenue has adopted a regulation (86 Ill. Admin. Code § 150.802, effective July 27, 2018) relating to registration of out-of-state retailers and trade show appearances. The new rule provides that the presence of an out-of-state retailer or its representative in Illinois for the purpose of engaging in trade show activities establishes nexus for the retailer and requires collection of use tax on all sales into Illinois unless the following three conditions are met: (1) the retailer…

At the close of an audit, in addition to tax and interest, a taxpayer may also be assessed various types of penalties that can often be substantial and even surpass the underlying tax liability. However, there are several courses of action for seeking penalty abatement, which can often prove to be a worthy exercise for taxpayers. As such, when faced with an audit, taxpayers should become familiar with: (1) the potential penalties that may result from underpayment or missed filing…

Like most states, Illinois statutes and regulations permit taxpayers and the Director of the Department of Revenue to obtain alternative apportionment of Illinois base income. Although case law is relatively scant, alternative apportionment remains an important means of reaching a fair income tax liability in the State. And with the State's amorphous treatment of market based sourcing, alternative apportionment is likely to become an increasingly important tool, particularly in resolving controversies. As I have previously discussed, Illinois transitioned to a…

Financial organizations in Illinois are required to follow different apportionment rules than general service providers. Prior to December 31, 2017, such businesses were also required to file separate unitary business returns from taxpayers that filed their income tax returns under the standard apportionment rules. Beginning with the tax year ending December 31, 2017, however, financial organizations must be included in the combined return with the entire unitary business group.[1] It is therefore crucial for taxpayers to understand the nuances as…

Everyone is by now likely familiar with the recent Wayfair decision and its central holding.  Prior to Wayfair, businesses had some degree of comfort that they would not be required to collect and remit sales or use taxes to states in which those businesses did not have physical presence.  Now that the physical presence test is gone, state legislation must be reviewed on a case-by-case basis to determine whether it will survive Commerce Clause scrutiny.  Rather than go over every…

The Commerce Clause and interstate commerce were thrust into the spotlight last week, as the United States Supreme Court reversed the longstanding physical presence standard for sales tax nexus. As states and businesses begin to grapple with the ramifications of the Supreme Court's decision in South Dakota v. Wayfair, Inc., et al,585 U.S. __ (2018), it will be important to assess each state's nexus statutes and regulations in light of Justice Kennedy's opinion. In this article, we will provide the context leading…

My Initial Reactions in Bold. 5 to 4 decision. Not surprising. Alito was the swing vote. "Quill is unsound and incorrect." Stare decisis basically stands for that premise.  You never have to rely upon stare decisis if the prior decision you were relying upon was and is still correct. "Each year, the physical presence rule becomes further removed from economic reality." True, but the rule has been in place for over 50 years and commerce has reasonably relied on it.…

A consent directive is an authorization providing for release of information or documents by a third party located anywhere in the world.  The form does not abrogate Fifth Amendment rights because it does not acknowledge that an account is in existence or is controlled by the party to sign the authorization. The U.S. Supreme Court gave its blessing to consent directives in Doe v. United States, 487 U.S. 201 (1988).  District courts rely on the All Writs Act, 28 U.S.C.…

As we have discussed previously, Illinois localities have adopted a variety of unique taxes, such as the Chicago Personal Property Lease Transaction Tax, the Amusement Tax, and dozens more. But, like many other states, Illinois localities may also impose a local option tax which is imposed in addition to the state Retailers' Occupation Tax ("ROT"). Unlike many other states, however, Illinois localities use a unique sourcing methodology. Whereas sales of tangible personal property to Illinois are subject to a destination-based…

We should have a Wayfair decision by then, but IL adopted a South Dakota remote seller nexus rule effective October 1, 2018. For purposes of the Use Tax Act, the definition of "retailer maintaining a place of business in this state" is amended, and for purposes of the Service Use Tax Act, the definition of "serviceman maintaining a place of business in this state" is amended. Beginning October 1, 2018, such a retailer will include a retailer making sales of…

In calculating the Illinois sales factor, Illinois employs both a "throw-back" and "throwout" rule.  Under the throw-back rule, if a sale of tangible personal property originates in Illinois and the taxpayer is not subject to tax in the destination state, the gross receipts from the sale will be "thrown back" to Illinois and will be included in the numerator of the Illinois sales factor.  Under the throwout rule, if a taxpayer is not subject to tax in the state in…

Illinois' treatment of leases is an anomaly when compared to almost all other jurisdictions.[1] While most jurisdictions impose sales tax on the lease receipts collected from the lessee, the user of the equipment, Illinois differs by treating the lessor as the user of the equipment.  As such, the lessor is subject to Illinois use tax.  86 Ill. Admin. 130.2010; GIL 16-0067 (12/27/2016).  Illinois' unique treatment presents many challenges for lessors.  First and foremost, Illinois' places the imposition of tax on…

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