Bill Text: IL SB3282 | 2023-2024 | 103rd General Assembly | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Amends the Retailers' Occupation Tax Act. Provides that, by March 31 of each year, each holder of a Direct Pay Permit shall review its purchase activity for the 12-month period ending on December 31 of the immediately preceding calendar year to verify that the purchases made in that 12-month period were sourced correctly and the correct tax rate was applied. Provides that the Direct Pay Permit holder is subject to a $6,000 penalty for failure to properly verify purchase activity and correct sourcing and tax rate errors. Provides that the penalty does not apply if at least 95% of the Direct Pay Permit holder's transactions for the applicable 12-month review period are correctly sourced and the correct taxes have been remitted or the permit holder acted with ordinary business care and prudence. Effective immediately.

Spectrum: Moderate Partisan Bill (Republican 4-1)

Status: (Passed) 2024-08-09 - Public Act . . . . . . . . . 103-0966 [SB3282 Detail]

Download: Illinois-2023-SB3282-Introduced.html


103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB3282

Introduced 2/7/2024, by Sen. Sara Feigenholtz

SYNOPSIS AS INTRODUCED:
35 ILCS 120/2-10.5

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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1 AN ACT concerning revenue.
2 Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4 Section 5. The Retailers' Occupation Tax Act is amended by
5changing Section 2-10.5 as follows:
6 (35 ILCS 120/2-10.5)
7 Sec. 2-10.5. Direct payment program; purchaser's providing
8of permit to retailer; retailer relieved of collecting use tax
9and local retailers' occupation tax reimbursements from
10purchaser; direct payment of retailers' occupation tax and
11local retailers' occupation tax by purchaser.
12 (a) Beginning on July 1, 2001 there is established in this
13State a Direct Payment Program to be administered by the
14Department. The Department shall issue a Direct Pay Permit to
15applicants who have been approved to participate in the Direct
16Payment Program. Each person applying to participate in the
17Direct Payment Program must demonstrate (1) the applicant's
18ability to comply with the retailers' occupation tax laws and
19the use tax laws in effect in this State and that the
20applicant's accounting system will reflect the proper amount
21of tax due, (2) that the applicant has a valid business purpose
22for participating in the Direct Payment Program, and (3) how
23the applicant's participation in the Direct Payment Program

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1will benefit tax compliance. Application shall be made on
2forms provided by the Department and shall contain information
3as the Department may reasonably require. The Department shall
4approve or deny an applicant within 90 days after the
5Department's receipt of the application, unless the Department
6makes a written request for additional information from the
7applicant.
8 (b) A person who has been approved for the Direct Payment
9Program and who has been issued a Direct Pay Permit by the
10Department is relieved of paying tax to a retailer when
11purchasing tangible personal property for use or consumption,
12except as provided in subsection (d), by providing that
13retailer a copy of that Direct Pay Permit. A retailer who
14accepts a copy of a customer's Direct Pay Permit is relieved of
15the obligation to remit the tax imposed by this Act on the
16transaction. References in this Section to "the tax imposed by
17this Act" include any local occupation taxes administered by
18the Department that would be incurred on the retail sale.
19 (c) Once the holder of a Direct Pay Permit uses that Permit
20to relieve the Permit holder from paying tax to a particular
21retailer, the holder must use its Permit for all purchases,
22except as provided in subsection (d), from that retailer for
23so long as the Permit is valid.
24 (d) Direct Pay Permits are not valid and shall not be used
25for sales or purchases of:
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
3 (3) any transactions subject to the Service Occupation
4 Tax Act or Service Use Tax Act.
5 (e) Direct Pay Permits are not assignable and are not
6transferable. As an illustration, a construction contractor
7shall not make purchases using a customer's Direct Pay Permit.
8 (f) A Direct Pay Permit is valid until it is revoked by the
9Department or until the holder notifies the Department in
10writing that the holder is withdrawing from the Direct Payment
11Program. A Direct Pay Permit can be revoked by the Department,
12after notice and hearing, if the holder violates any provision
13of this Act, any provision of the Illinois Use Tax Act, or any
14provision of any Act imposing a local retailers' occupation
15tax administered by the Department.
16 (g) The holder of a Direct Pay Permit who has been relieved
17of paying tax to a retailer on a purchase for use or
18consumption by representing to that retailer that it would pay
19all applicable taxes directly to the Department shall pay
20those taxes to the Department not later than the 20th day of
21the month following the month in which the purchase was made.
22Permit holders making such purchases are subject to all
23provisions of this Act, and the tax must be reported and paid
24as retailers' occupation tax in the same manner that the
25retailer from whom the purchases were made would have reported
26and paid it, including any local retailers' occupation taxes

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1applicable to that retail sale. Notwithstanding any other
2provision of this Act, Permit holders shall make all payments
3to the Department through the use of electronic funds
4transfer.
5 (h) Beginning on January 1, 2025, each holder of a Direct
6Pay Permit must review its purchase activity by January 31 and
7July 31 of each year to verify that the purchases made in the
8preceding 6-month period ending on the last day of the
9calendar month immediately preceding the month in which the
10report is due were sourced correctly and the correct tax rate
11was applied. If any errors are discovered, then the holder of
12the Direct Pay Permit shall correct the errors on returns
13filed on or after the date on which the error is discovered and
14shall file amended returns to correct past errors. Any holder
15of a Direct Pay Permit who fails to properly verify purchase
16activity and correct sourcing and tax rate errors based on the
17permit holder's purchase activity, as required by this Section
18and the rules adopted by the Department, is liable to pay to
19the Department, for deposit into the Tax Compliance and
20Administration Fund, a penalty of $6,000 for each 6-month
21review period after which the permit holder does not correct
22sourcing and tax rate errors based on its purchase activity
23until the permit holder comes into compliance and corrects any
24sourcing or tax rate errors. The penalties imposed under this
25Section shall not apply if the permit holder shows that he or
26she acted with ordinary business care and prudence. The

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1Department may adopt rules to administer the penalties under
2this Section.
3(Source: P.A. 92-484, eff. 8-23-01.)
4 Section 99. Effective date. This Act takes effect upon
5becoming law.
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