Chicago Automobile Trade Association

Suburban dealers impacted by Chicago lease tax change

November 17, 2010

Suburban dealers must for five years maintain evidence that their lease customers are not Chicagoans, or the dealers risk paying the city’s vehicle lease tax, under a recordkeeping change that took effect last month.

The Chicago Revenue Department rules interpretation holds suburban dealers accountable because, in the absence of documentation stating otherwise, Chicago would "presume that the lessee either resided in the City or was staying at a local visiting address in the City," and thus subject to the city’s 8.0 percent lease tax.

In the absence of such documentation, Chicago would exact from the lessor any tax plus interest and penalties.

Dennis O’Keefe, the CATA’s general counsel, said he expects the recordkeeping change to be challenged in court. The Chicago Revenue Department has the right to audit suburban dealers whose advertising can be seen or heard within the city limits because such reach establishes nexus with the city.

For now, O’Keefe said the burden falls to a dealer to obtain and maintain for five years evidence of a lessee’s residence. Acceptable evidence would include a photocopy of the lessee’s driver’s license, a photocopy of some other government-issued identification, or other reliable written proof of residence.

The latter may consist of a statement from the lessee, such as the name and address of the hotel or other location at which the lessee is staying while visiting the area, and the location in which the lessee expects to be using the vehicle, according to the Chicago Revenue Department rules change.



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