Consumers in Chicago will see costs increase in 2016 as a result of a recent vote by the Cook County Board. The tax rate will jump from 9.25% to 10.25%, bringing Chicago’s rate to the highest among the nation’s most populated cities. Cook County will be expanding its portion of the tax by 1%, bringing their total percentage to 1.75%. By comparison, Chicago will now have a higher tax rate than Seattle, WA (9.60%) and Oakland, CA (9.50%) and continue to have a higher rate than cities such as New York, NY (8.88%) and Los Angeles, CA (9.00%). Surrounding cities such as Bensenville, IL and Oak Brook, IL both located in DuPage County carry lower rates at 8.25% and 7.75%, respectively.

McPier Tax

Some areas in Chicago will have a tax rate on food and beverage items as high as 11.25%, due to the “McPier Tax.” The Metropolitan Pier and Exposition Authority (MPEA) Food and Beverage Tax (McPier Tax) is currently set at 1% and is imposed on gross receipts from foods suitable for immediate consumption as well as alcoholic beverages and soft drinks. The area subject to the tax is highlighted in a map, courtesy of the Illinois Department of Revenue [1]. The area encompasses downtown Chicago along with other high-traffic surrounding neighborhoods.  The incentive behind the tax is to service debt for the MPEA’s expansion projects. The MPEA was created by the Illinois General Assembly and exists “to promote and operate conventions, fairs and expositions in the Chicago area, in an effort to strengthen the local economy.” Unsurprisingly, their holdings include the McCormick Place and Navy Pier. The MPEA has also partnered with DePaul University to build a multipurpose center near McCormick Place. The partners are planning on sharing the construction costs. As if these taxes are not enough, be sure to not overlook the Chicago Restaurant Tax of .25% imposed on certain “places for eating” in the City of Chicago.

Uncertainty and Greener Pastures

Consumers dining on the edge of the McPier tax boundaries may be inclined to travel a couple of blocks, exit the zone and seek lower bills. This mentality could prove detrimental to restaurant owners in non-tourist areas.  Similarly, cities bordering other counties may see sales decrease as consumers flock to lower rate areas, burdening some areas more than others. The effect of the tax increase is still unclear. Some are wary that consumers will travel to get lower total prices and the anticipated revenue increase for Cook County will fall short. Additionally, the city’s portion of revenue may even decrease since their percentage is set to remain the same, but in theory, the gross receipts (taxable amounts) may decrease due to price-sensitive consumers.

For questions on the Chicago Sales tax or any other tax matter, contact Christopher Georgiou at [email protected] or call him at 312.670.7444. Visit orba.com to learn more about our Restaurant Group.

[1] http://www.revenue.state.il.us/TaxForms/Sales/MPEA/IDOR-535.pdf