Taxes Suspended On Nutritional Supplements
In the flurry of activity at the end of the spring legislative session in April, a number of tax policy items were approved along with passage of the Fiscal Year 2023 state budget. Partly because there was a rare budget surplus for the state, and partly because it is a key election year, Illinois lawmakers were finding ways to return some of the budget surplus back to the taxpayers.
Along with doubling the state income tax credit for property taxes, freezing taxes on gasoline, creating a “tax holiday” for back-to-school purchases, and sending direct tax rebates to taxpayers, the Governor signed a bill that will suspend the grocery tax from July 1, 2022 through June 30, 2023. The provision was contained in Public Act 102-0700.
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This will directly impact chiropractic physicians who sell nutritional supplements.
According to the Administrative Rules already in place, “Food” is any solid, liquid, powder or item intended by the seller primarily for human internal consumption, whether simple, compound or mixed, including foods such as condiments, spices, seasonings, vitamins, bottled water and ice”.
What Do I Have To Do To Comply?
Chiropractic physicians who sell nutritional supplements will have to take the following actions:
- Beginning July 1, 2022, reduce the sales tax on nutritional supplements to 0%
- Add notification language of this change on customer receipts if possible; if not, post proper signage
- Report the sales of the 0% purchases to the Department of Revenue using its newly established tax schedule
- Tax sales of medical appliances and orthotics at the usual 1% as these are not affected by this new law
Background and Details
The Tax
Beginning July 1, 2022, the state of Illinois sales and use tax on groceries normally taxed at the 1% low rate will be 0%. Groceries taxed at the low rate include food for human consumption that is to be consumed off the premises where it is sold (other than alcoholic beverages, food consisting of or infused with adult use cannabis, soft drinks, candy, and food that has been prepared for immediate consumption). The complete definitions can be found in the Administrative Rules.
The 1% tax will continue to be imposed on drugs, medicine, and medical appliances. Medicines include powders, potions, and salves, depending on how they are labeled. The definitions that are applicable can be found here.
The Notification
Written into the legislation is a provision requiring notification to consumers about the tax suspension.
Retailers, to the extent feasible, shall include the following statement on any cash register tape, receipt,
invoice, or sales ticket issued to customers: “From July 1, 2022, through June 30, 2023, the State of Illinois sales tax on groceries is 0%.” If it is not feasible for the retailer to include the statement on the receipts or cash register tape, the retailer shall post the statement on a sign that is clearly visible to customers. The sign shall be no smaller than 4 inches by 8 inches. A printable sign will be available on the Illinois Department of Revenue (DOR) website.
This provision is similar to the requirement that requires gas stations to place stickers on all gas pumps notifying consumers that the gasoline tax is suspended.
Reporting
DOR has created Schedule GT, Sales and Use Tax Holiday and Grocery Tax Suspension Schedule for retailers to report sales of groceries during the tax suspension period. According to the department, this schedule should be filed with your Form ST-1, Sales and Use Tax and E911 Surcharge Return (and when applicable, Form ST-2, Multiple Site Form). Form ST-1 has not changed. Specific instructions on how to report sales under the tax suspension can be found on the second page of the DOR notification form.
