Illinois Issues Short-Term Sales Tax Relief for Restaurants Affected by the COVID-19 Virus Outbreak
In an effort to assist eating and drinking establishments impacted by the COVID-19 outbreak, effective immediately, the Illinois Department of Revenue (IDOR) is waiving penalties and interest that would have been imposed on late sales tax liabilities reported on Form ST-1 and Sales and Use Tax and E911 Surcharge Return, that are due from qualified taxpayers due in March, April, and May 2020 (for February, March, and April reporting periods). Eligible taxpayers are registered Illinois eating and drinking establishments that incurred less than $75,000 in sales tax liabilities in calendar year 2019. The IDOR estimates this will give relief to nearly 80% of bars and restaurants in Illinois.
Qualified taxpayers are still required to file Form ST-1 for each reporting period by the original due dates, even if they are unable to make a payment. Qualified taxpayers taking advantage of this relief are required to pay their total sales tax liabilities due from March, April, and May 2020 over four equal monthly installments starting May 20, 2020, and extending through Aug. 20, 2020, together with regular sales tax collections due for those periods.
IDOR guidance states that penalties and interest should automatically be waived for most qualified taxpayers during the applicable reporting periods. Clark Hill attorneys can assist businesses that receive a notice from IDOR that imposes penalties and interest but believe they should have qualified for a waiver.
By law, retailers are required to collect sales tax on all taxable sales, hold the funds in trust and remit the sales tax collections to the IDOR, typically by the 20th day of the month following collection. The IDOR’s temporary relief to provide the affected businesses with temporary liquidity by allowing affected qualified taxpayers to defer payment of their sales tax collections could create potential issues for taxpayers that defer remittance of their sales tax as permitted and are unable to repay the deferred sales tax payments by the installment due dates, including personal liability for unpaid tax by the taxpayer, officer, employee, partner, manager, or member of the taxpayer. Accordingly, if a restaurant qualifies for this relief and files the required sales tax returns but defers payment of collected sales taxes for the next three months, beware that if a business cannot repay the sales tax in the monthly installments starting May 20, 2020, the business may be personally responsible for repayment. Clark Hill's tax group is available to assist with questions affected taxpayers may have regarding this policy.
For more information, IDOR’s informational bulletin is available here.