Chicago imposes a 5 cent-per-bottle tax on bottled water sales and a tax on sales of alcoholic beverages imposed at various rates based on the type of alcohol sold and the percentage of alcohol by volume.1 With certain exceptions, the bottled water and liquor taxes are collected by wholesalers from retailers, and the retailers, in turn, collect the taxes from retail purchasers.2 If any retailer receives bottled water or alcoholic beverages subject to Chicago bottled water or liquor tax but the tax has not been collected by the wholesaler, then the retailer is required to collect the tax from the retail purchaser and remit the tax directly to the city.3 Additionally, if a wholesaler makes a taxable retail sale of bottled water or alcoholic beverages for use or consumption in the city, then the wholesaler (acting as a retailer) is required to collect the applicable tax from the purchaser and remit the tax directly to the city.4
Previously, the city taxed only sales of bottled water and alcoholic beverages physically occurring in Chicago. Thus, online purchases of bottled water or alcoholic beverages originating from outside of Chicago largely escaped taxation. To equalize the treatment of online purchases of bottled water and alcoholic beverages shipped into Chicago with purchases physically occurring in Chicago, on February 29, 2020, Mayor Lightfoot proposed Ordinance 2020-801 to amend Municipal Code Chapters 3-43 (Chicago Bottled Water Tax) and 3-44 (Chicago Liquor tax) to impose tax on shipments of bottled water or alcoholic beverages originating from outside of Chicago. The City Council unanimously passed the proposed ordinance on April 24, 2020. However, to allow time for remote sellers to implement this law change, it is our understanding that the Chicago Department of Finance will not require sellers subject to this amendment to begin collecting the taxes until July 1, 2020.