Public Act 103-0966

SB3282 Enrolled LRB103 34197 HLH 64020 b

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois,

represented in the General Assembly:

Section 5. The Retailers' Occupation Tax Act is amended by

changing Section 2-10.5 as follows:

(35 ILCS 120/2-10.5)

Sec. 2-10.5. Direct payment program; purchaser's providing

of permit to retailer; retailer relieved of collecting use tax

and local retailers' occupation tax reimbursements from

purchaser; direct payment of retailers' occupation tax and

local retailers' occupation tax by purchaser.

(a) Beginning on July 1, 2001 there is established in this

State a Direct Payment Program to be administered by the

Department. The Department shall issue a Direct Pay Permit to

applicants who have been approved to participate in the Direct

Payment Program. Each person applying to participate in the

Direct Payment Program must demonstrate (1) the applicant's

ability to comply with the retailers' occupation tax laws and

the use tax laws in effect in this State and that the

applicant's accounting system will reflect the proper amount

of tax due, (2) that the applicant has a valid business purpose

for participating in the Direct Payment Program, and (3) how

the applicant's participation in the Direct Payment Program

will benefit tax compliance. Application shall be made on

forms provided by the Department and shall contain information

as the Department may reasonably require. The Department shall

approve or deny an applicant within 90 days after the

Department's receipt of the application, unless the Department

makes a written request for additional information from the

applicant.

(b) A person who has been approved for the Direct Payment

Program and who has been issued a Direct Pay Permit by the

Department is relieved of paying tax to a retailer when

purchasing tangible personal property for use or consumption,

except as provided in subsection (d), by providing that

retailer a copy of that Direct Pay Permit. A retailer who

accepts a copy of a customer's Direct Pay Permit is relieved of

the obligation to remit the tax imposed by this Act on the

transaction. References in this Section to "the tax imposed by

this Act" include any local occupation taxes administered by

the Department that would be incurred on the retail sale.

(c) Once the holder of a Direct Pay Permit uses that Permit

to relieve the Permit holder from paying tax to a particular

retailer, the holder must use its Permit for all purchases,

except as provided in subsection (d), from that retailer for

so long as the Permit is valid.

(d) Direct Pay Permits are not valid and shall not be used

for sales or purchases of:

(1) food or beverage;

(2) tangible personal property required to be titled

or registered with an agency of government; or

(3) any transactions subject to the Service Occupation

Tax Act or Service Use Tax Act.

(e) Direct Pay Permits are not assignable and are not

transferable. As an illustration, a construction contractor

shall not make purchases using a customer's Direct Pay Permit.

(f) A Direct Pay Permit is valid until it is revoked by the

Department or until the holder notifies the Department in

writing that the holder is withdrawing from the Direct Payment

Program. A Direct Pay Permit can be revoked by the Department,

after notice and hearing, if the holder violates any provision

of this Act, any provision of the Illinois Use Tax Act, or any

provision of any Act imposing a local retailers' occupation

tax administered by the Department.

(g) The holder of a Direct Pay Permit who has been relieved

of paying tax to a retailer on a purchase for use or

consumption by representing to that retailer that it would pay

all applicable taxes directly to the Department shall pay

those taxes to the Department not later than the 20th day of

the month following the month in which the purchase was made.

Permit holders making such purchases are subject to all

provisions of this Act, and the tax must be reported and paid

as retailers' occupation tax in the same manner that the

retailer from whom the purchases were made would have reported

and paid it, including any local retailers' occupation taxes

applicable to that retail sale. Notwithstanding any other

provision of this Act, Permit holders shall make all payments

to the Department through the use of electronic funds

transfer.

(h) By March 31, 2025, and by March 31 of each year

thereafter, each holder of a Direct Pay Permit shall review

its purchase activity to verify that the purchases made during

the 12-month period ending on December 31 of the immediately

preceding calendar year were sourced correctly and that the

correct tax rate was applied. If the holder of the Direct Pay

Permit discovers an error in sourcing or the tax rate during

the review process, then, by April 20 of the calendar year in

which the review under this subsection occurs, the holder of

the Direct Pay Permit shall file an amended return to correct

the error. If, for any 12-month review period under this

subsection, a holder of a Direct Pay Permit fails to properly

verify purchase activity and correct sourcing and tax rate

errors as required by this subsection and the rules adopted by

the Department, then the Direct Pay Permit holder is liable to

pay a penalty of $6,000 to the Department, for deposit into the

Tax Compliance and Administration Fund. However, the penalty

under this subsection shall not be imposed if the Department

finds that 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. For the purposes of this subsection, ordinary

business care and prudence shall be determined in accordance

with Section 3-8 of the Uniform Penalty and Interest Act. The

Department may adopt rules to administer the penalties under

this Section.

(Source: P.A. 92-484, eff. 8-23-01.)