Propsed IL Gross Receipts Tax - Details Released
Illinois Governor Rod Blagojevich has released details of his proposed gross receipts tax, which he announced in his State of the State and Budget address. If enacted as proposed, that tax would replace the current state corporate income tax, as reported previously.
The tax would take effect on January 1, 2008, and the first full year of implementation would be the tax/calendar year 2008. During this period, businesses would receive a 100% credit against corporate income taxes paid.
The following would be exempt from the tax:
- Small businesses with less than $1 million in sales;
- Insurance products;
- Retail food and drug products;
- Gaming (gaming taxes will remain in effect);
- Medicaid payments;
- Not-for-profit organizations;
- Illinois goods that are sold regionally and globally; and;
- Transactions between divisions of a company or between related companies.
In addition only gains on securities and commodities trades would be counted as receipts.
Mitigation of "Pyramiding"
The gross receipts tax would apply at the rates of 0.5% for manufactured goods and 1.8% for service-based businesses, as reported previously. Goods usually have multiple steps during the production process where a gross receipts tax could be applied. Imposition of the lower rate for manufactured goods would mitigate the cost of any tax on unfinished or intermediate goods used during the creation of a finished product, it was explained. The Governor's Plan, Illinois Governor Rod R. Blagojevich, March 8, 2007
For further information on how this proposal may affect your business contact us: 630-285-0215.