Last November, the Illinois Supreme Court ruled on the case of Hartney Fuel Oil Company v. Hamer (Brian Hamer is the Director of the Illinois Department of Revenue) and clarified a longstanding point of controversy regarding Illinois Retailer Occupation Tax or ROT. ROT is one of the two taxes that make up what’s colloquially called sales tax, the other being the Service Occupation Tax or SOT. Since that November ruling, IDOR has moved forward with new regulations, most recently holding public hearings on March 19, 2014.
The issue resolved in Hartney a previously uncertain technicality of sales tax. The court held that a seller incurs retailers’ occupation taxes in the jurisdiction where its predominant selling activities occur, regardless of any other limited activities in other jurisdictions. Previously, some retailers with selling operations in multiple jurisdictions(say, multiple cities) would pay ROT only in lower tax jurisdictions. To try to bend the rules, these retailers would arrange for final acceptance of purchase orders to take place in those lower tax areas, even though the predominant selling activities occurred in other places.
In Hartney the court has made it clear: retailers pay ROT in the local jurisdiction where its predominant selling takes place. This will have very little effect on most businesses as they will have their entire operation within a single jurisdiction. Among the most common businesses to previous make use of the pre-Hartney gray area were gas stations. Such companies or any company who had employed such practices, should take immediate action to comply with the decision.
Horowitz Law Offices has represented numerous business owners before the Illinois Department of Revenue regarding collections matters, sales and use tax audits, and other tax concerns. You are welcome to contact us at (312) 787-5533 or firstname.lastname@example.org.