86 Ill. Adm. Code 130.2050 — Sales and Gifts By Employers to Employees

# Sales and Gifts By Employers to Employees

TITLE 86: REVENUE CHAPTER I: DEPARTMENT OF REVENUE PART 130 RETAILERS' OCCUPATION TAX SECTION 130.2050 SALES AND GIFTS BY EMPLOYERS TO EMPLOYEES

Section 130.2050 Sales and Gifts By Employers to Employees a) When Liable For Retailers' Occupation Tax 1) Where a manufacturer or other employer, who is engaged in a commercial enterprise, sells tangible personal property to its employees for use or consumption, such manufacturer or other employer is engaged in the business of selling tangible personal property at retail and incurs Retailers' Occupation Tax liability with respect to its gross receipts from such sales. It is immaterial that the receipts from such sales constitute only a small fraction of the manufacturer's or other employer's total receipts from its business, or that sales ordinarily are made at retail only to the employees of the manufacturer or other employer and not to the general public. 2) For example, where a manufacturer operates a restaurant or cafeteria at which it sells meals exclusively to its own employees, such manufacturer must remit to the Department the Retailers' Occupation Tax measured by its gross receipts from these sales; or where a clock and watch manufacturer makes sales of clocks and watches to its employees for their use or consumption, such manufacturer must remit to the Department the Retailers' Occupation Tax measured by its gross receipts from these sales. b) When Not Liable For Retailers' Occupation Tax 1) Employers do not incur Retailers' Occupation Tax liability when they furnish tangible personal property to employees free of any charge whatsoever. For example, if employees of a restaurant, hotel or other place of business are granted the right to eat their meals free at such place of employment and are not charged anything for such meals, and are entitled to no additional compensation if they fail to eat their meals at such place of business, the furnishing of such free meals does not constitute a sale under the Retailers' Occupation Tax Act. 2) The mere fact that an employer shows on its books, for Social Security or other similar purposes, an amount which is construed under the Federal laws as "additional compensation" to employees, and which is then charged off the employer's books for meals or other tangible personal property transferred to such employees, is not sufficient, in and of itself, to establish that such transactions constitute sales within the meaning of the Retailers' Occupation Tax Act. c) Liability For Use Tax on Gifts to Employees If the employer gives away instead of selling the tangible personal property to the employee, such employer must pay Use Tax at the rate that would have been imposed at the time the employer acquired it from a supplier on its cost price of the tangible personal property. Where hotels, restaurants or other food vendors furnish free meals, as defined more fully in subsection (b) of this Section, to their employees, it will be presumed, in the absence of evidence establishing a lower figure, that the average cost of such meals to such food vendor is 75 cents per meal through December 31, 2021 and, beginning January 1, 2022, $3.50 per meal, so this would be the tax base on which such food vendor should compute its Use Tax liability with respect to such meals. (Source: Amended at 45 Ill. Reg. 16058, effective December 3, 2021)

Section 130.2050 Sales and Gifts By Employers to Employees

a) When Liable For Retailers' Occupation Tax

1) Where a manufacturer or other employer, who is engaged in a commercial enterprise, sells tangible personal property to its employees for use or consumption, such manufacturer or other employer is engaged in the business of selling tangible personal property at retail and incurs Retailers' Occupation Tax liability with respect to its gross receipts from such sales. It is immaterial that the receipts from such sales constitute only a small fraction of the manufacturer's or other employer's total receipts from its business, or that sales ordinarily are made at retail only to the employees of the manufacturer or other employer and not to the general public.

2) For example, where a manufacturer operates a restaurant or cafeteria at which it sells meals exclusively to its own employees, such manufacturer must remit to the Department the Retailers' Occupation Tax measured by its gross receipts from these sales; or where a clock and watch manufacturer makes sales of clocks and watches to its employees for their use or consumption, such manufacturer must remit to the Department the Retailers' Occupation Tax measured by its gross receipts from these sales.

b) When Not Liable For Retailers' Occupation Tax

1) Employers do not incur Retailers' Occupation Tax liability when they furnish tangible personal property to employees free of any charge whatsoever. For example, if employees of a restaurant, hotel or other place of business are granted the right to eat their meals free at such place of employment and are not charged anything for such meals, and are entitled to no additional compensation if they fail to eat their meals at such place of business, the furnishing of such free meals does not constitute a sale under the Retailers' Occupation Tax Act.

2) The mere fact that an employer shows on its books, for Social Security or other similar purposes, an amount which is construed under the Federal laws as "additional compensation" to employees, and which is then charged off the employer's books for meals or other tangible personal property transferred to such employees, is not sufficient, in and of itself, to establish that such transactions constitute sales within the meaning of the Retailers' Occupation Tax Act.

c) Liability For Use Tax on Gifts to Employees

If the employer gives away instead of selling the tangible personal property to the employee, such employer must pay Use Tax at the rate that would have been imposed at the time the employer acquired it from a supplier on its cost price of the tangible personal property. Where hotels, restaurants or other food vendors furnish free meals, as defined more fully in subsection (b) of this Section, to their employees, it will be presumed, in the absence of evidence establishing a lower figure, that the average cost of such meals to such food vendor is 75 cents per meal through December 31, 2021 and, beginning January 1, 2022, $3.50 per meal, so this would be the tax base on which such food vendor should compute its Use Tax liability with respect to such meals.

(Source: Amended at 45 Ill. Reg. 16058, effective December 3, 2021)