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Small Bites

The sales tax went down, but did your favorite restaurant get the memo?



Your local restaurant may be taking too big a bite out of your wallet.

On July 1, half a percentage point was sliced off Cook County's sales tax rate, but a lot of places don't seem to have caught on. I check receipts when I eat out, and over the past month nearly half the restaurants I've gone to—places in Lakeview, Lincoln Park, Lincoln Square, River North, Roscoe Village, and the West Loop—have billed me at the wrong rates. I won't name them because I'm giving them the benefit of the doubt—they're probably confused. You'll shortly see why they could be.

Every retail establishment in Chicago must collect and turn over to the Illinois Department of Revenue a 9.75 percent "retailers' occupation tax"—or sales tax. The state keeps 6.25 percent and passes along the rest: 1.25 percent to Chicago, 1.25 percent to Cook County, and 1 percent to the Regional Transportation Authority.

Restaurants that operate at O'Hare or Midway, or within a central area bounded by the Stevenson Expressway, Ashland, Diversey, and the lake, pay an additional 1 percent McPier tax. That's revenue the state passes on to the Metropolitan Pier and Exposition Authority to help fund Navy Pier and McCormick Place.

And there's more. Chicago restaurants must collect an additional .25 percent that they turn over directly to the city. So we're talking about a tax that, depending upon what kind of business you run and where in Chicago you run it, is either 9.75 percent, 10 percent, or 11 percent. If it's a restaurant, it's either 10 or 11.

Whatever the tax you collect, before July 1 it was half a percent higher. That's when the Cook County rate dropped to 1.25 percent from 1.75 percent.

I found out about that tax cut at a restaurant on Southport near the el. The bill said they'd added 9.75 percent. I'd thought the sales tax was higher than that. The manager explained that it used to be but the county had just cut its share. I checked into the tax rate, discovered what it had been and was now, and learned something else—they should have been charging me 10 percent.

They weren't the only ones. A bistro further south on Southport also added 9.75 percent. But usually I've been overcharged, and the overcharges have come without rhyme or reason. For instance, the restaurant in the West Loop added an unfathomable 11.8 percent, a rate that doesn't correlate with any actual sales tax present or past. The Lincoln Square establishment added 10.25 percent. This time I was alert enough to ask why, and I was told the restaurant had to pay a higher tax because it's located in the McPier district. But it isn't in the McPier District. And if it were, the correct sales tax would be 11 percent.

Spokesperson Susan Hofer says the Department of Revenue mailed an "informational bulletin" to all Illinois retailers in June announcing all the July 1 rate changes around the state. I wouldn't call this bulletin difficult to read. There was a box labeled "Cook County" that consisted of three columns: the old rates, the rate decrease (.50 percent in every case), and the new rates. The department also posted bulletins online and sent press releases to local newspapers.

Restaurant consultant Mark Cymerman says that making an adjustment is easy. Restaurants simply "have to program their cash registers or POS systems," says Cymerman, president of Dine in Support. "Aloha [a software system for restaurants] has tax rates for multiple categories, such as food [and] liquor. Each item is assigned a tax rate category, so all you have to do is change it in one place."

Anthony Schittino, manager of Heaven on Seven on Wabash, doesn't have a software system in his place, but he says the rate change was no big deal. "We just changed the amount we ring up," says Schittino. "We're old school, cash only. I have a calculator and use paper receipts."

Ditto at Andersonville's Hopleaf. Owner Michael Roper says, "We run our restaurant the way they were run in 1939—paper receipts and the old chrome National cash register. It's easier for the servers, it's easier for the accountants." Hopleaf's menu prices already include the sales tax, and Roper won't change the menu over a few pennies. When the city added its .25 percent restaurant tax in 2004, "we didn't do anything," says Roper. "We just made a little less money. And now we're getting it back."

But almost all Chicago restaurants do add the sales tax on your bill, and in my experience they so often do it wrong that you might want to check the math. As Roper says, we're talking pennies. But they're pennies that add up to millions when collected for local governments, and if they're your pennies you might want to keep them.   

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