Mayor Rahm Emanuel’s administration is offering a partial amusement tax amnesty to restaurants, bars and hotels with satellite television feeds, but the carrot-and stick approach is not sitting well with the restaurant industry.
Illinois Restaurant Association President Sam Toia said he is examining his legal options in response to the city’s plan to get tough on businesses that decline the city’s offer to waive years of delinquent amusement taxes — along with interest and penalties – provided businesses pay past-due amusement taxes alone dating back to July 1, 2015.
“Why are they offering amnesty if it’s always been there? Obviously, it’s been kind of in a grey area. I just think it’s the wrong approach going after people for six years of an amusement tax they didn’t know they had to pay or weren’t sure they had to pay,” Toia said Monday.
“Our legal team is examining the legality of this form of tax enforcement by the city. Our legal team is looking to have a meeting with the Department of Finance and the Department of Law in the next week or so.”
Toia argued that the “sudden shift” in city policy is going to hurt his members, particularly “the little guys and independent guys” in Chicago neighborhoods.
“Over the last 18 months, you’ve had the county impose a sugar tax, a sales tax and a hotel tax. That all hit the hospitality industry. And on the city level, we’ve been hit with a property tax, a water tax and a garbage tax,” Toia said.
“It’s just everything all at once over the last 18 months. This is just another little straw on the pile. I’m not saying it’s this per se. I’m just saying it’s everything. I really think about the small business, the independent business in the neighborhoods.”
In a “notification” to taxpayers distributed Nov. 10, the Department of Finance noted that many businesses were “previously unaware of their obligation” to pay the amusement tax that also applies to cable television.
The confusion stems, in part, from the fact that because federal law prohibits municipalities from requiring satellite providers to collect the amusement tax, restaurants and bars that subscribe to the service are on the hook and required to pay the tax directly to the city.
As a result, the city is offering to accept payment of past-due amusement taxes from July 1, 2015 to the date of the payment, waiving all interest and penalties.
All amusement tax liabilities for the period before July, 2015 — including taxes, interest and penalties — will be wiped off the books, provided businesses apply by Dec. 31, the notification states.
That’s quite a break, considering the fact that the city’s normal statute of limitations is six years for non-filers.
Molly Poppe, a spokeswoman for the city’s Office of Budget and Management, said the Emanuel administration issues “clarification and bulletins all the time” to make certain businesses are aware of their tax obligations. But, the amusement tax that applies to satellite services was a particular concern.
“The federal statute says the city cannot require satellite providers to collect the tax. That means businesses must pay the amusement tax directly to the city. We understand that some businesses were, maybe a little confused by the federal statute,” Poppe said Monday.
“We didn’t want to place an undue burden on these businesses. So, we’re only asking them to pay a portion of their back taxes, then come into full compliance going-forward. It allows them to pay back taxes without penalty and interest. If the city were to audit their books, interests and penalties would apply. This is less invasive.”
Poppe noted that “nearly 200” Chicago businesses have been paying the nine percent amusement tax on satellite TV services since 1996.
She offered no estimate on the number of businesses that are not paying the tax.
In 2009, then-Mayor Richard M. Daley pulled the plug on his controversial plan to end the free ride for 135,000 Chicagoans who get their cable TV by installing a satellite dish.
Daley had originally planned to require satellite customers to pay a reduced amusement tax that already applied to monthly cable TV bills.
To get around the federal law that prohibited cities from taxing direct-broadcast satellite services, Daley wanted to require DirecTV and Dish Network to give the city the name, address and phone number of all of their Chicago subscribers so the city could do the billing.
Customer billing information would have been due by Aug. 15 each year — unless DirecTV and Dish volunteered to “collect and remit” the tax itself to the city. The companies also would have been required to warn subscribers they were “liable for the amusement tax” and “may receive a separate bill from the city.”
But, after meeting with satellite industry attorneys, the Daley administration acknowledged that the proposed end-run was illegal.
Bars, restaurants and hotels with satellite TV feeds have been paying the amusement tax since 1996. But, collections have been disappointing, prompting the partial amnesty.
Chicago levies a 9 percent amusement tax on movies, concerts, sporting events, live theater and entertainment venues with a seating capacity of more than 750.
A lower rate of 5 percent applies to live theatrical, musical and cultural performances in smaller venues with fewer than 750 seats.
Two years ago, Emanuel reduced and then eliminated entirely the amusement tax exemption that had long benefited cable television companies to offset their franchise fee. The lower rate had also applied to businesses that receive satellite services to keep the two competing services on an even playing field.
