Daily Tax Report: State

Pandemic Surcharge Pricing Subject to Chicago’s Restaurant Tax

May 22, 2020, 7:00 PM

Coronavirus-related surcharges applied to food take-out orders in Chicago are subject to the city’s 0.5% restaurant tax, but the tax doesn’t apply to fees imposed on food transacted by third-party food delivery platforms.

Chicago’s Finance Department has issued guidance clarifying that surcharges on any prepared food and beverage sales are considered taxable and “should be included in the basis upon which the restaurant tax is calculated.” The restaurant tax shouldn’t, however, be applied to any delivery or processing fees charged by e-commerce platforms such as DoorDash, GrubHub, and UberEats, a department spokesperson told Bloomberg Tax on Friday.

Chicago’s guidance responds to restaurants that have adopted new pricing models in response to mounting costs for food, security, and wages during the pandemic. Chicago is one of a handful of jurisdictions nationally that imposes a separate tax on food prepared by restaurants.

Separately, Chicago homeowners won’t have to pay the 1.5% interest rate penalty on property taxes paid late due to the pandemic. Cook County approved an ordinance waiving the penalty through Oct. 1 for taxes due Aug. 3.

Toni Preckwinkle, president of the Cook County Board, said the ordinance provided “much-needed tax relief during these unprecedented and challenging times.”

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; David Jolly at djolly@bloombergtax.com

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