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Chicago Lease Tax Amnesty Option: Deadline Approaches!

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Jurisdictions across the country typically offer Voluntary Disclosure Agreements to taxpayers with outstanding liabilities. They are essentially compromises between the Departments of Revenue and the taxpayer in which each side gives some and gets some. Taxpayers are allowed to pay their existing liabilites at somewhat favorable terms, including a limitied look back period (three to four years depending on the jurisdiction) and abatement of penalties. In exchange, taxing authorities get money they didn't know they were missing, and a new taxpayer contributing to their revenue.

The City of Chicago is starting to crack down on certain unpaid taxes, and under their current VDA offering, taxpayers considering disclosing unpaid lease tax liability should do so quickly. Chicago is offering a limited amnesty for taxpayers who file a lease tax VDA application by January 1, 2016. This program includes special benefits not normally available through a typical City of Chicago VDA. The program is particulalry appealing for lessors and lessees that earn or spend a lot on remotely accessed software in Chicago. The benefits include:

  1. No liability for tax, interest, or penalties related to charges for nonpossessory computer leases that qualified for Exemption 11 prior to the Department’s issuance of Ruling #12. Specifically, this relates to remotely-accessed software where charges are predominantly for information transferred.​
  2. A limited one-year lookback period for taxable cloud software (e.g., “nonpossessory computer leases”) and complete abatement of penalty and interest charges for this period.
  3. The terms of the City’s standard voluntary disclosure program will apply for all other leases (e.g., possessory leases). In other words, for standard VDAs, up to a four-year lookback period for tax and interest liability and waiver of penalty applies.

The program is open to any provider or customer who is eligible for participation in the city’s standard VDA program. This excludes any taxpayer who is either currently under audit or has received a written notice of tax audit or investigation.

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2 Responses to Chicago Lease Tax Amnesty Option: Deadline Approaches!

  • Posted by Ellen on January 27, 2016 9:09am:

    We are a facilities maintenance company located in IL and will be doing business in WV and hiring local sub-contractors to complete these jobs. We are not doing new/general construction. Our main customers are restaurants and we perform routine maintenance work such as electrical repairs, plumbing issues, and miscellaneous repairs. My question is regarding sales tax and who is responsible for it. Do I pay sales tax to my vendor who then is responsible for filing. Or, do I need to obtain a certificate of resale to provide to the vendor and am then responsible for collecting and filing the sales myself?

    • Posted by williamseitz on January 28, 2016 11:33am:

      Hi Ellen,

      Is your question specific to West Virginia, Illinois, or both? If it's WV, from what I gather, you would need to bill sales tax to your clients on those taxable repairs, provided they aren't capital improvements (and it doesn't sound like they are). You will need to register in WV and remit the tax you collect to the state. As a registered retailer of those services, you should then be able to provide resale certificates to your subcontractors. You will have nexus with WV by virtue of the agency relationship with your subcontractors.

      In Illinois, the services should be non-taxable. However, tax would be do on any repair parts used incident to the service.


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