Illinois (City of Chicago): Ruling addresses collection obligations of facilitators

Recently, the City of Chicago released Uniform Revenue Procedures Ordinance Ruling #6, which addresses the tax collection obligations of “facilitators.”  Under the Ruling, a “facilitator” is a business that contracts with other businesses that provide taxable services, property, or products to customers.  The specific taxes at issue in the Ruling were the City’s amusement tax, hotel tax, lease tax, and parking tax. The Ruling provides several examples of activities that “facilitators” might engage in: 

·        Contracting with a local venue to sell tickets for amusements that are held at the client’s venue in Chicago. 

·        Contracting with the owner of a local hotel or other establishment to lease accommodations at the establishment. 

·        Contracting with the owner of certain personal property to lease the client’s property to customers in Chicago. 

·        Contracting with the owner of a local garage or parking lot to lease parking spaces at the client’s garage or lot.

Due to the nature of the services being provided, these facilitators are considered to be “tax collectors,” meaning the facilitators are required to collect and remit taxes to the City of Chicago. The tax base in situations in which facilitators are involved includes the full amount paid by the customer, including any and all charges that the customer pays incidental to obtaining the taxable services, property, or products in question, such as service fees, facilitation fees, and the like.

Under certain circumstances, a facilitator and its client may enter an agreement to assign responsibility for remitting the taxes that are owed.  The party that collects or remits taxes must be registered with the City’s Department of Finance as a tax collector or taxpayer, and must be in good standing with the Department.  If both the facilitator and the client are registered and in good standing, they may agree that the facilitator will remit taxes on its fees, and the client will remit taxes on the charges it receives after deduction for the facilitator’s fees.  Clients and facilitators must keep books and records sufficient to demonstrate their compliance with their respective collection and remittance obligations.  Facilitators also cannot delegate their collection and remittance obligations to clients who are individuals, or for taxable transactions that involve small amounts of money.  Examples include individuals engaged in “house sharing” or “car sharing.” Finally, the Ruling states that it is intended to confirm, rather than change existing law. Please contact Drew Olson at (312) 665-2897 or Adam Terrell at (312) 665-2032 with questions on this Ruling.