United States

City of Chicago: BYOB—City Council Approves New Bag Tax

Nov 21, 2016
From KPMG TaxWatch

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On November 16, 2016, the Chicago City Council approved the “Chicago Checkout Bag Tax Ordinance.” Under the new ordinance, effective January 1, 2017, a seven cent ($0.07) per bag tax is imposed on the retail sale or use of paper and plastic checkout bags (as defined) in the City. The ultimate liability for the tax is on the user of the bags, and the ordinance provides detailed rules for how and when wholesalers and stores should remit tax. Both wholesalers and stores are entitled to a remittance allowance of two cents per checkout bag sold or used. Excluded from the definitions of checkout bags are bags used for certain specific purposes, such as packaging loose bulk foods (e.g., fruit, vegetables, nuts, grains), wrapping frozen foods or damp items, or segregating food or merchandise that could contaminate other food or merchandise (e.g., leaky chicken juices). The terms “paper and plastic carryout bags” also exclude bags used to contain specific types of items, including but not limited to, dry cleaning bags, bags provided by pharmacists for prescription drugs, and bags provided by a take-out restaurant. Every affected bag wholesaler or store must register with the City Department of Finance within 30 days of the effective date of the ordinance or 30 days of commencing business, whichever is later, and the annual checkout bag tax returns are due by August 15 of each year. Please contact Drew Olson at 312-665-2897 with questions on the new Chicago bag tax.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.