January 4, 2018
Annually the Civic Federation releases a report on consumer taxes in the City of Chicago. Consumer taxes include both taxes and fees and are tied to the use or consumption of certain goods and services that can be charged directly to consumers through retail transactions or passed onto consumers by businesses or governments. This blog highlights the changes to taxes that were approved in 2017 by the City of Chicago, Cook County and the State of Illinois and went into effect in 2017 or will go into effect in 2018. While there were no new taxes or fees created in 2017 for Chicago, there were a number of significant changes to existing taxes and fees.
Recent Changes to Consumer Taxes:
The following consumer taxes have undergone changes within the last year.
Emergency Telephone System Surcharge (Landline and Wireless), City of Chicago – On November 21, 2017, the Chicago City Council increased the 911 surcharge by $1.10 from $3.90 to $5.00 per connection per month, effective January 1, 2018. The rate for Chicago’s 911 tax previously increased from $1.25 to $2.50 with the approval of the FY2008 City Budget. As part of the FY2015 Budget, the tax was again increased from $2.50 to $3.90 per phone connection per month. The 911 surcharge on prepaid wireless phones increased on September 1, 2014 from 7.0% to 9.0% where it currently remains. The surcharge on prepaid wireless service has been in effect since January 1, 2012.
Sweetened Beverage Tax, Cook County – On November 10, 2016, the Cook County Board of Commissioners voted to approve a new tax on sweetened beverages that charged a one cent per ounce tax for both fountain and bottled beverages containing real or artificial sweetener. The tax was scheduled to go into effect on July 1, 2017, but was postponed to August 2, 2017 due to a lawsuit that was filed by the Illinois Retail Merchants Association. However, on October 11, 2017 the Cook County Board of Commissioners voted to repeal the sweetened beverage tax effective December 1, 2017. IRMA ultimately dropped its lawsuit when the tax was repealed.
Gasohol Sales and Use Tax, State of Illinois – The sales and use tax on motor fuel is included in the retail price of diesel, gasoline and special fuel, such as gasohol (aircraft fuel is exempt). The sale of gasohol was previously only subject to 80.0% of the sales and use tax and was set to expire December 31, 2018. However, with the passage of the State of Illinois FY2018 budget on July 6, 2017, the exemption was eliminated and went into effect retroactively for collections starting on July 1, 2017.
Amusement Tax, City of Chicago – Previously the City of Chicago imposed an Amusement Tax of 5.0% of admission fees for all for-profit live theatrical, musical or other cultural performances with a capacity over 750 persons. The tax did not apply to such performances with capacity under 750 persons. Regardless of capacity a 9.0% tax was applied to all other for-profit performances and participatory events including movies, sports, amusement parks, circuses, pleasure boat rides, dancing, bowling, tennis, weightlifting, etc.
With the approval of the FY2018 Budget, the City of Chicago modified the way the amusement tax was imposed by exempting for-profit venues that have a capacity of fewer than 1,500 persons. Previously only for-profit venues with a seating capacity of less than 750 persons were exempt from the amusement tax. For-profit venues with a seating capacity of 1,500 or more persons will see the amusement tax increase from 5.0% to 9.0%. This is the same rate that large entertainment complexes such as sport stadiums and other amusements are taxed.
Non-profit venues such as the Chicago Symphony Orchestra will continue to be exempt from the tax under the recently amended amusement tax ordinance. Other exemptions include activities that are primarily educational rather than recreational, initiation fees and memberships to health clubs.
Ground Transportation Tax, City of Chicago – As part of the City of Chicago’s FY2018 Budget approval process, the City increased the ground transportation tax on rideshare companies from the current rate of $0.40 per vehicle per trip to $0.55 per vehicle per trip effective January 1, 2018. Beginning in 2019 the tax will be $0.60 per ride. For rides that include a pick-up or drop-off at O’Hare Airport, Midway Airport, McCormick Place or Navy Pier the rate will also increase by $0.15 from its current rate of $5.40 to $5.55 per vehicle per trip. With the approval of the ordinance authorizing this increase, the City also approved an intergovernmental revenue sharing agreement with the Chicago Transit Authority (CTA) that authorizes the City to provide the CTA with $16.0 million annually from the proceeds of the tax increase for capital projects.
Recent Changes to Other Taxes and Fees:
Income Tax, State of Illinois – With the passage of the State of Illinois FY2018 budget on July 6, 2017, the income tax rates for individuals, trusts and estates increased from 3.75% to 4.95%, and the Illinois Income Tax for corporations (excluding S corporations) increased from 5.25% to 7.0%. The new income tax rates retroactively went into effect on July 1, 2017.
Bus and Rail Fares, Chicago Transit Authority (CTA) – On December 13, 2017 the Chicago Transit Authority’s Board of Directors approved the FY2018 Budget that included an increase in base fares for the first time since 2009. Base fares will increase by $0.25 for bus and train service. This will increase the fare for bus service from $2.00 to $2.25 and for rail from $2.25 to $2.50. The 30-day pass for bus and rail will increase from $100.0 to $105.0 and the reduced fare for bus and rail will also see a slight increase, rising from $1.00 to $1.10 for bus and from $1.10 to $1.25 for rail. The new fare structure will take effect January 7, 2018.
Water and Sewer Utility Tax, City of Chicago – The City of Chicago approved a new tax on the consumption of water and the transfer of wastewater to the sewer system on September 14, 2016. Beginning January 1, 2017, in addition to the regular water-sewer rate charged on Chicago residents’ water and sewer bills, the City will charge a tax of $0.59 per 1,000 gallons used, increasing over a period of four years to $2.51 per 1,000 gallons in 2020. When this ordinance was adopted in 2016 it included automatic increases over a four year period. In 2018 the charge will increase to $1.28 per 1,000 gallons.