Vendor's Discount Cap

TITLE 86: REVENUE CHAPTER I: DEPARTMENT OF REVENUE PART 130 RETAILERS' OCCUPATION TAX SECTION 130.565 VENDOR'S DISCOUNT CAP Section 130.565  Vendor's Discount Cap a)         Periodic returns. Except as provided in Section 3 of the Retailers' Occupation Tax Act, the retailer filing the return under that Section shall, at the time of filing such return, pay to the Department the amount of tax imposed by the Act less a discount of 1.75% or $5 per calendar year, whichever is greater, which is allowed to reimburse the retailer for the expenses incurred in keeping records, preparing and filing returns, remitting the tax and supplying data to the Department on request. Beginning with returns due on or after January 1, 2025, the vendor's discount allowed under the Retailers' Occupation Tax Act, the Service Occupation Tax Act, the Use Tax Act, and the Service Use Tax Act, including any local tax administered by the Department and reported on the same return, shall not exceed $1,000 per month in the aggregate for returns other than transaction returns filed during the month. [35 ILCS 120/3] 1)         The following non-transaction return types are each subject to a separate $1,000 per month cap: A)        Form ST-1, Sales and Use Tax and E911 Surcharge Return (sales and use tax portion of the return).  Public Act 103-592 imposed a separate $1,000 per month vendor's discount cap on the Prepaid Wireless E911 surcharge [50 ILCS 753/15] reported and remitted on Schedule B of Form ST-1.  The 3% vendor's discount for the Illinois Telecommunications Access Corporation ("ITAC") Assessment [220 ILCS 5/13-703] also reported and remitted on Schedule B of Form ST-1 does not have a cap. B)        Form ST-70, Aviation Fuel Sales and Use Tax Return. C)        Form CD-1, Cannabis Dispensary Tax Return ("Step 1: Sales and Use Tax" portion of the return).  The "Step 2: Cannabis Purchaser Excise Tax" portion of Form CD-1 is subject to a separate statutory $1,000 per month vendor's discount cap. D)        Form LSE-1, Lease Tax Return for Vehicle Leasing Companies.  For purposes of the vendor's discount cap, Form LSE-1 is considered a periodic return subject to a separate $1,000 per month vendor's discount cap.  Tax reported on Form LSE-1 is not reported on a transaction-by-transaction basis.  Instead Form LSE-1 is filed once per month to report aggregate monthly amounts related to numerous, previously filed, transaction returns. In this capacity, it functions in the same manner as a periodic return, such as Form ST-1. 2)         Amended periodic returns.  If an amended periodic return is filed for a prior period and results in a reduction in the vendor's discount awarded for that prior period, then the amount of any tax refund or credit issued to the taxpayer shall be reduced by the amount of the reduction in the vendor's discount.  If an amended periodic return is filed for a prior period and results in an increase in tax due, then the vendor's discount awarded for that period shall be increased only if the additional tax due had been timely paid, and in no event shall the vendor's discount awarded for a given month exceed $1,000. 3)         The $1,000 per month vendor's discount cap is incorporated into the following taxes by reference to Section 3 of the Retailers' Occupation Tax Act and therefore creates a separate $1,000 per month vendor's discount cap on returns filed under each of the following taxes. A)        Form ST-201, Rental Purchase Agreement Occupation and Use Tax Return. B)        Form ART-1, Automobile Renting Occupation and Use Tax Return. C)        Form CMFT-1 County Motor Fuel Tax Return. D)        Form MMFT-1 Municipal Motor Fuel Tax Return. b)         Transaction returns. In the case of retailers who report and pay the tax on a transaction by transaction basis, as provided in Section 3 of the Retailers' Occupation Tax, such discount shall be taken with each such tax remittance instead of when such retailer files his periodic return, but, beginning with returns due on or after January 1, 2025, the discount allowed under the Retailers' Occupation Tax and the Use Tax Act, including any local tax administered by the Department and reported on the same transaction return, shall not exceed $1,000 per month for all transaction returns filed during the month. [35 ILCS 120/3] 1)         All transaction returns filed under the same Illinois Account ID are subject to the $1,000 per month discount cap, which shall apply to all original returns filed during a given calendar month.  This means that the discount taken on all Form ST-556s filed under an Account ID during the month plus the discount taken on all Form ST-556-LSEs filed under the same Account ID during the same month shall not exceed $1,000 in total. 2)         For the purposes of uniform administration and to avoid assessing penalties and interest on taxpayers who claim excess vendor discount in error, for transaction returns due on or after January 1, 2025, taxpayers may claim the discount with each tax remittance but shall not reduce tax payments by the amount of any discount claimed.  Instead, after the end of each calendar month, the Department shall determine the discount allowed to each taxpayer for that month and shall issue a discount payment to each taxpayer in the amount calculated, not to exceed $1,000 per Account ID per month for all original transaction returns filed during the month.  This process avoids the errors that would result if taxpayers and the Department attempt to track in real time the ongoing monthly discount total and whether the cap has been reached.  This is in light of the fact that transaction returns under a given Account ID may be filed using the Department's online filing tool, a third party vendor, or paper returns, or all three during a given month as well as the fact that multiple returns may be filed simultaneously or nearly simultaneously – all of which could result in over-claiming a discount, which, in turn, would result in tax assessment, late payment penalties, and interest. 3)         Amended transaction returns.  If an amended transaction return is filed for a prior period which results in a reduction in tax due and therefore a reduction in the vendor's discount awarded for that prior period, then a subsequent discount payment made to the taxpayer following the filing of the amended return shall be reduced to reflect the reduction in the prior discount amount resulting from the amended return. If an amended transaction return is filed for a prior period which results in an increase in tax due, then the vendor's discount awarded for that period shall be increased only if the additional tax due had been timely paid, and in no event shall the vendor's discount awarded for a given month exceed $1,000. 4)         No interest paid.  No interest is paid on vendor discount payments.