Police beats help prove a Chicago address is outside city limits
Tracey Sellers, Managing Director
Rebecca Perrryman, Senior Manager
Bryan Fairholm, Tax Consultant
We recently represented a Florida-based company who leased property in the City of Chicago. Being an out-of-state company with no Chicago location but a large number of Chicago customers, the company was aware of the Chicago Lease Transaction Tax and regularly collected and remitted it from its customers.
Still, under audit, Chicago found a number of “error transactions” – instances where Chicago claimed tax should have been collected but was not. The error transactions were all associated with a handful of customers with Chicago addresses where tax was not assessed on the invoices. The liability was not insignificant, totaling close to $1 million, but we were eventually able to get the adjustment reversed following an interesting turn of events.
Noting that the Chicago Lease Transaction tax only applies to leases occurring within the city limits, we took a closer look at the customers’ mailing addresses.
True, they all listed “Chicago” as their mailing city. However, upon closer inspection, we noted that the customers were located right on the edge of Chicago’s border. Were they outside of the city’s jurisdiction?
And so the question became – what constitutes Chicago’s “city limits”?
We looked at property tax records and found that the addresses were actually located in a non-Chicago township. Chicago responded that this wasn’t enough because the property tax records also referenced Chicago school districts. We needed more.
Next, we looked at utility bills and garbage pick-up. Unfortunately, it was Chicago’s policy to service districts outside of the city, so this, too, became an unreliable metric.
In a final attempt to demonstrate that these addresses were outside of the city limits, we turned to the police and fire departments. It was here, looking at the maps which demonstrated the beat paths for Chicago police and fire departments, where we noted that the addresses in question were outside the scope of Chicago’s police & fire departments.
And so, the Chicago auditor relented and removed the transactions from the final audit report. The addresses in question were Chicago “in name only.” #keepdigging #thinkoutsidethebox
Questions about the Chicago Lease Transaction Tax? Email Rebecca Perryman.