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.
