It recently came to my attention that apparently restaurants in Chicago were not notified by the city of an important change to local taxes they are required to collect.
The Chicago City Council recently doubled the city’s 0.25% restaurant tax, which means that starting January 1, 2020, the city of Chicago’s restaurant tax rate is 0.50%.
Therefore, the total sales tax for restaurants in the city of Chicago is now supposed to be 10.75% instead of 10.50% — this includes state and local sales taxes as well as the city’s 0.50% restaurant tax.
(For restaurants located within the MPEA Food and Beverage Tax zone, the total sales tax will be 11.75% — made up of sales taxes + 0.50% restaurant tax + the 1.00% MPEA food and beverage tax).
Unfortunately, it doesn’t appear that this change was communicated widely to restaurant owners, so many of them did not update their Point of Sale systems to increase the tax charged to customers. This means they probably underpaid their monthly restaurant tax and will owe when they file their annual restaurant tax returns.
I suggest the following steps:
- Update your Point of Sale software to reflect the 10.75% tax immediately, so you can begin collecting it from customers.
- Calculate the approximate underpayment for January and February (0.25% of sales) and add it to your restaurant tax payment for March.
- It will all come out in the wash when you file your annual restaurant tax return in August.
For more information on state and local changes to legislation, rulings and ordinances that affect restaurants, check out this briefing from the Illinois Restaurant Association: News Laws in Effect as of January 1, 2020 – Illinois Restaurant Association
And for information on this and other consumer taxes in Illinois, check out this recent article by The Civic Federation.