Illinois' statewide tax on parking areas and garages
Beginning January 1, 2020, the Parking Excise Tax Act [35 ILCS 525] imposes a statewide tax on parking areas and garages. The tax is imposed upon the person purchasing and using the parking space at the rate of 6% of the purchase price for hourly, daily, or weekly parking and 9% for a monthly or annual parking. It will most often be collected by the operator of the parking area or garage.
What’s Taxed? - Parking at “Parking Area or Garage”
As mentioned above parking at a parking area or garage is subject to the new 6% or 9% excise tax. A “parking area or garage” is defined to mean any real estate, building, structure, enclosure or other place, whether enclosed or not, except a public way, within the State:
- where motor vehicles, recreational vehicles, or other self-propelled vehicles, are stored, housed or parked for hire, charge, fee or other valuable consideration in a condition ready for use, or
- where rent or compensation is paid to the owner, manager, operator or lessee of the premises for the housing, storing, sheltering, keeping or maintaining motor vehicles, recreational vehicles, or other self-propelled vehicles
Who’s Responsible? - The “Operator” of the Parking Area or Garage
The operator of a parking area or garage is responsible for collecting and remitting the excise tax. “Operator” is defined to mean any person who engages in the business of operating a parking area or garage, or who, directly or through an agreement or arrangement with another party, collects the consideration for parking or storage of motor vehicles, recreational vehicles, or other self-propelled vehicles, at that parking place.
Therefore, it is quite possible this new excise tax will not only apply to parking at traditional parking lots and structures but can also apply to businesses not normally thought of as being in the parking business. These include hospitality businesses that charge for valet parking services and businesses that provide storage facilities for which their tenants may store cars or motorcycles.
The IDOR as issued proposed rules that cover about 20 pages and include a variety of examples. Lawmakers are currently reviewing the proposed rules and are considering potential changes due to unintended consequences such as shown by this example:
“Every year a fair comes to town. The owners of property near the fairground sell parking spaces on their property for $10 per day. If an owner of property makes available for use more than 3 parking spaces, the owner is liable for collecting and remitting the tax.” The example lays out that if private property owners were to rent out more than three spots, they would be liable to collect and remit the tax to the IDOR.
As is the case with most laws, there are exceptions to collecting the tax. Per the IDOR Informational Bulletin FY 2020-07, an operator is not required to collect the tax in the following circumstances:
- The operator is engaged in the business of renting three or fewer parking spaces throughout Illinois.
- The parking space is owned and operated by the federal government and its instrumentalities, the State of Illinois, State universities created by statute, and units of local government [e.g., counties, municipalities, townships, and special districts that possess an active exemption number from the Illinois Department of Revenue (IDOR)]. Note: This exemption does not apply if the parking area, space, or garage owned by these entities is operated by a third party.
- The parking space is provided for residential off-street parking for home, apartment tenants, or condominium occupants, and is covered by the lease or separate agreement between the landlord and tenant.
- The parking space is provided for hospital employees and is owned and operated by the hospital for which they work.
Operators should use Form PE-100 to report and pay the tax. The form and tax must both be filed and paid electronically at mytax.illinois.gov. The form and payment are due on or before the last day of the calendar month following the end of the reporting period. With a small exception for operators operating a parking area for 14 days or less in calendar year, the filing frequency is monthly. In addition to monthly payments, the state may require quarter-monthly (accelerated) payments. If an operators account reaches the statutory threshold for accelerated payments, they will be notified by the IDOR. The state estimates that it will collect about $60 million a year from this tax.