Taxpayers with unused Illinois sales and use tax credits for which they’re unable to receive a refund can convert them into cash by transferring them to another taxpayer. When pursued correctly, this process often results in taxpayers having more cash on hand to reinvest in their businesses.

Learn how to pursue a credit memorandum and seize this opportunity below.

How Are Illinois Credits Generated?

Taxpayers that have overpaid Illinois retailers’ occupation or use tax, the state sales and use tax, and are unable to apply it to future liabilities may convert the overpayment to a credit memorandum. Memorandums may then be refunded or transferred to another taxpayer. 

Due to budget shortfalls, Illinois has been slow or unable to issue refunds for these memorandums. As a result, a good alternative option is to sell the credit to another taxpayer, converting it into cash you can use now. Depending on the amount of credit, purchasers typically expect a purchase price discount of 5%–15% of the credit amount.

How Do You Know If You Have Unused Credits?

The Illinois Department of Revenue issues taxpayer statements listing any unpaid balance, available credits, or returns taxpayers haven’t filed as these items arise.

For example, companies with sales tax overpayments resulting from tax paid on otherwise exempt purchases will want to pay particular attention to these statements because the credit must be converted to a credit memorandum and transferred within the statute of limitations.

This period includes the current month plus 30 or 36 months from the time the credit was created or determined by the state, depending on when the request is made.

How Does the Credit Memorandum Transfer Process Work?

If you have sales or use tax overpayment in Illinois and approach the process efficiently, you can expect a turnaround time of 30–45 days from the moment you request the credit memorandum until you receive cash from a buyer in exchange for your credit.

A tax specialist can facilitate the process by helping you:

• Apply for a credit memorandum
• Confirm the full credit amount, including interest owed by the state
• Secure a buyer
• Negotiate the purchase and sale agreement
• Complete the transfer request
• Submit transfer paperwork to the state

By approaching the process with a solidified purchase and sale agreement, taxpayers typically walk away from the transfer with more cash on hand to reinvest in their businesses.

We’re Here to Help

If you’re interested in leveraging this opportunity or have any questions, we can help you review available credits, identify potential purchasers, and navigate the transfer process in Illinois as well as other states with similar tax credit transfer opportunities. To learn more about how to get started, contact your Moss Adams professional.