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Grundy County closer to knowing impact from new point of sale rules

Published: Tuesday, June 24, 2014 10:47 p.m. CDT

MORRIS – Illinois legislators have spoken, and Grundy County is closer to knowing exactly how much supplemental sales tax revenue it could lose from Channahon and Morris.

The two municipalities – and several others throughout the state – are being sued by the Regional Transportation Authority for using tax strategies that enticed companies to open small purchasing offices within Grundy County to take advantage of the county’s low sales-tax rate.

Most Grundy municipalities have a sales tax rate of 6.25 percent, one of the lowest in the state. Chicago’s is 9.25 percent.

To further entice the companies, Channahon and Morris agreed to rebate as much as 85 percent of the sales tax revenue generated in the purchasing offices back to the businesses.

The RTA claims the sales tax revenue generated at these remote purchasing offices should go to Cook County, contending that is where the actual business took place.

The Illinois Department of Revenue became involved in rewriting the state’s sales tax sourcing laws in November when the state Supreme Court ruled the laws were essentially unconstitutional.

The Joint Committee of Administrative Rules adopted the revenue department’s proposed rewrite of the law on June 17.

The standards are structured as a five-part test. Companies must meet at least three of the five criteria to be considered a legal business headquarters. The criteria look at how many employees work at each office, where corporate offices are located and where inventory is housed, among other factors.

Channahon Village President Joe Cook and Administrator Joe Pena told the Grundy County Finance Committee on Monday they are optimistic about the rules because they give the village a bright-line standard to use moving forward.

“We still have some players in the game and some of them are willing to make some changes to adopt to the new rules,” Cook said. “That’s the good news.”

Channahon is even considering the addition of a small corporate center to properly house some of the companies.

Cook said the village still anticipates losing a significant amount of sales tax revenue as many of the village’s purchasing offices would not meet the new standards and will most likely leave Channahon.

“Last time I was here, I told you folks that we were going to ask for everything and probably get about half,” Cook said. “That looks like where we’re at.”

Morris Mayor Richard Kopczick said he was not notified about the new rules and could not comment until city officials had a chance to review them.

County officials have estimated the county’s operating budget could shrink by 10 percent if all supplemental sales tax revenues generated in Channahon and Morris offices are lost.

For the past several months, the outlook was grim as the county trimmed each department’s budget by 10 percent in preparation for the loss of revenue.

The finance committee was hopeful the new rules, which replace emergency rules that were implemented in January, could at least mitigate major revenue losses.

“These rules are much more favorable than the emergency rules,” Grundy County State’s Attorney Jason Helland said Monday.

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