By Lauren N. Johnson and Jamey Dunn
Lawmakers took up two bills recently that, if enacted, would have big consequences for local governments throughout Illinois
Senate Bill 2194, which would determine what location is the point of sale for businesses that have multiple offices in the state, passed the Senate last week, although not without a heated debate.
Illinois has a 6.5 percent state sales tax rate, although local governments such as cities, counties and township can collect their own sales taxes, which can vary widely among taxing bodies. Sen. Toi Hutchinson, an Olympia Fields Democrat sponsoring the bill, said it is simply geared toward clearing up where businesses owe local sales tax and how much they must pay.
Sen. Sue Rezin, a Morris Republican and co-sponsor of the legislation, said a lawsuit filed in 2007 by Hartney Fuel Oil Co., a gasoline distributor based downstate, against the Illinois Department of Revenue, stirred up the discussion.
Hartney is headquartered in Cook County, but its sales office is in the low-taxed village of Mark in northern Putnam County. After the company funneled sales through the Mark office for four years, the department audited it and said it owed back sales taxes to Cook County because the sales actually were taking place there.
Hartney won the case after a Putnam County judge ruled that the Mark office was the point of sale.
SB 2194 would allow businesses to use the location where they process orders as their point of sale for taxing purposes.
“What I don’t like is any regulation that’s subjective. So only the person that’s coming in to audit you knows what that [sales tax rate] is, and you have to find out whether or not you’ve guessed right three years later,” said Hutchinson, saying that all businesses in the state need to be treated equally. “Clarity is always better than chaos,” she added.
But opponents of the bill say the change would allow Illinois businesses to ditch higher sales tax rates by setting up satellite offices in areas with little or no sales tax. Hutchinson said most of the pushback came from the local government with some of the highest sales tax rates in the state, Cook County.
Toni Preckwinkle, board president for Cook County, said the measure would lead to an additional drop in the tax base and lead to a loss of critical resources for public health and safety services. “This initiative would put at risk the work that this administration has already done to lower taxes for county businesses and residents.”
A Senate committee also approved a bill aimed at cutting down the number of taxing bodies in Illinois. At just less than 7,000, the state has more local governments collecting taxes than any other in the nation by more than 2,000. Those local units collect taxes to fund services such as park maintenance, fire fighting and mosquito abatement.
Under Senate Bill 173, a commission would be named by the four legislative leaders to create a list of taxing bodies to be eliminated or consolidated. Members of the General Assembly and representatives of local governments would be barred from serving on the commission. Lawmakers could vote to accept or reject the list, but could not change it in any way. They would have 60 days to act on the list or the recommendations would automatically be adopted.
The method is similar to that used by the federal government when making controversial military base closing decisions. “We’re not focusing [on] any particular units of local government. We’re looking at all 7,000 of them, and seeing if there is better ways of operating,” said Waukegan Democratic Sen. Terry Link, sponsor of the bill. “It think it would be a fair and positive way of trying to help the taxpayers of the state of Illinois.”
Opponents said there are already ways for local residents to decide if they want to eliminate a unit of local government such as a township through a referendum, and it is unfair to remove the decisions from taxpayers. “The voters have absolutely no input. …We think it usurps your authority, your power. The voter’s authority and power and the ability of townships and other local governments to make our case before you as elected officials or the voters,” Tim Bramlet, a lobbyist for the Township Officials of Illinois, said when testifying before the Senate committee. The measure awaits a floor vote in the Senate.