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The NeverEnding story, Part 2

November 16, 2010
April 1 tax increases

Uncertainty continued about the area’s April 1 tax hike for the Regional Transit Authority. The increase adds an additional quarter-cent per dollar RTA tax in Cook County and twice that in the five collar counties.
That takes the RTA tax to 1 percent in Cook County and to 0.75 percent in DuPage, Kane, Lake, McHenry and Will counties. 
As reported in the March 24 edition of this newsletter, the latest tax rates on vehicles and general merchandise are 9.25 percent in Chicago; 8.00 percent in suburban Cook County; 7.25 percent in DuPage County; and 7.00 percent in Kane, Lake, McHenry and Will counties. Important, those rates do not reflect the nuance of any community home-rule use taxes, which might create higher tax rates.
Many callers to the CATA questioned what tax rate to charge a person who resides in a different county than the dealership. All Illinois customers must pay the rate preprinted on the dealer’s Form ST-556. The only time a customer may pay less than that preprinted rate is if the customer’s address is outside Illinois. Then, the customer would pay the rate set forth where he lives. (See adjoining story on Indiana’s new rate.)
But there are several exceptions when a customer would pay more than the dealership’s preprinted vehicle tax rate, including for Chicagoans (+1.25 percent), for Cook County residents (+0.75 percent), and for people subject to the DuPage Water Commission Tax (+0.25 percent). 
From the instructions to complete Form ST-556:
1. Note for businesses in Cook, DuPage, Kane, Lake, McHenry, or Will County when the customer’s address is in Chicago: If your customer’s address on Form ST-556, Section 1, is in Chicago, your customer owes an additional 1.25 percent home rule use (sales) tax, known as "Chicago Home Rule Use Tax." To help you calculate the tax due on one of these sales, we preprint a combined rate on your ST-556 below Line 4. This combined rate includes your tax rate plus the additional 1.25 percent (.0125) home rule use (sales) tax. To figure the correct tax due, multiply the amount subject to tax on Line 3 by the combined rate. Write the result on Line 4.
2. Read these instructions regarding Line 5 if your buyer’s address is in Cook, DuPage, Kane, Lake, McHenry, Will, Madison, or St. Clair County. Your buyer may owe tax at a higher rate than the rate at which you are required to collect tax. This applies to a buyer that is located in a portion of one of the above counties in which tax has been imposed by the Regional Transportation Authority, Metro-East Transit District, or DuPage Water Commission District. In these cases, you may do your buyer the courtesy of collecting the additional tax 
(called "use" tax) so that he or she will not be billed for it later. Once you have determined whether your buyer is subject to a higher rate than your rate, you should multiply the amount on Line 3 by any difference in rates (expressed as a decimal), and write the result on Line 5. Finally, write the name of the buyer’s county; city or village, if any; and township if in Madison or St. Clair County.