United States

Illinois enacts FY19 budget with economic sales tax nexus provisions

TAX ALERT  | 

On June 4, 2018, Illinois Governor Bruce Rauner signed House Bill 3342, the state’s FY19 budget bill enacting minor changes to the state sales and use tax and income tax laws.

Sales and use tax economic nexus

House Bill 3342 enacts an economic sales and use tax nexus provision requiring remote sellers with no physical presence in Illinois to collect, remit and comply with all applicable provisions of the state sales tax code.

The bill expands the definition of a “retailer maintaining a place of business” in Illinois to include remote retailers that, beginning Oct. 1, 2018, make sales of tangible personal property or services to Illinois purchasers if the remote retailer has either:

  1. Cumulative gross receipts from sales of tangible person property or services to Illinois purchasers of $100,000 or more, or
  2. 200 or more separate transactions for the sale of tangible personal property or services to Illinois purchasers.

The retailer shall determine on a quarterly basis whether he or she meets either of the criteria listed above for the preceding 12-month period. If either provision is met, the retailer will be required to collect, remit, and file returns for the tax for one year. Subsequent determinations may be made quarterly or annually, depending on whether the criteria were met in the preceding 12 months.  

The requirements are substantially similar to the economic sales tax thresholds enacted in South Dakota, the constitutionality of which is currently under U.S. Supreme Court review in South Dakota v. Wayfair. The outcome of that litigation could overrule Illinois’ new economic sales tax nexus law. For more information on the status of Wayfair, please read our alerts South Dakota v. Wayfair: What to know and how to prepare and U.S. Supreme Court hears argument on Quill challenge.

Other tax provisions

  • Extension of the hospital income tax credit through Dec. 31, 2022
  • New individual income tax credit for certain adoption expenses beginning in tax years ending on or after Dec. 31, 2018
  • Extension of the individual income tax credit for damage caused by a natural disaster after Jan 1, 2017 and prior to Jan. 1, 2019

Takeaways

The FY19 budget, providing for a total state operating budget of $38.5 billion, easily passed the state house and senate. This year’s budget effort stands out in strong contrast to the previous period, when a budget stalemate lasted for well over a year until the FY18 budget was enacted in July of 2017. Taxpayers with questions about the new tax provisions should speak to their Illinois state tax adviser. 

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