Illinois: State tax reform passes General Assembly

The Illinois General Assembly has passed several bills that would institute major changes to the state tax code. By and large, the measures are designed to raise tax revenue to pay for state spending and pension promises. The Illinois General Assembly has passed each of the following measures. Of them, Gov. Jay Pritzker has signed SB 687 while the others await his signature.

Sales Tax for Marketplace Facilitators & Tax Amnesty (Senate Bill 689)

Senate Bill 689 makes a number of changes including the following:

• Require marketplace facilitators such as Amazon to collect and remit sales tax on behalf of sellers;
• Phase out the state franchise tax over four years from 2020 to 2024;
• Expand the state sales tax exemption for manufacturing equipment;
• Disallow certain deductions for purposes of the state corporate income tax; and
• Establish a new tax amnesty program for corporate and sales taxes

Sin Tax Bill & Other Items (Senate Bill 690) 

Among other provisions, Senate Bill 690 would do the following:

• Authorize the state to contract with certified service providers and certified automated systems to facilitate Illinois sales tax collection and remittance for remote sellers;
• Expand the state’s economic nexus standard for the local Retailer Occupation Tax as well as change from origin to destination sourcing for remote sellers;
• Impose a $1 per pack increase to the state cigarette tax;
• Impose a 15 percent tax on e-cigarettes;
• Legalize sports gambling; and
• Authorize new casinos

Progressive Income Tax (Senate Bill 687)

The Illinois General Assembly passed legislation to create a ballot issue at the November 2020 election on a proposal to impose a progressive personal income tax and raise the corporate income tax rate from 7 percent to 7.99 percent. Currently, all Illinois resident are taxed at a 4.95 percent rate regardless of their income level.

Gas Tax (Senate Bill 1515)

The Illinois motor fuel tax rate will increase twofold, from 19 cents per gallon to 38 cents per gallon. The tax rate is also indexed to increase with inflation. The legislation also allows Chicago to increase its local gas tax by 3 cents and increases state vehicle registration fees.

Recreational Marijuana (House Bill 1438)

With Gov. Pritzker’s signature on House Bill 1438, Illinois is expected to become the 11th state to legalize marijuana for recreational use. House Bill 1438 has been dubbed the Cannabis Regulation and Tax Act and part of the revenue generated from the measure will support communities disproportionately affected by criminal prosecutions from the cannabis prohibition.