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RTA files lawsuit to prevent point of sale agreements

Published: Saturday, June 28, 2014 10:54 p.m. CDT

The Regional Transportation Authority filed another lawsuit Friday aimed at preventing sales tax arrangements similar to those Morris and Channahon have with numerous companies housing purchasing offices in their towns.

The RTA, the umbrella organization that oversees the Chicago Transit Authority, the region’s Metra commuter lines and the Pace suburban bus service, is asking a Cook County judge to stop the Illinois Department of Revenue from enforcing its new point of sales rules, which RTA leaders believe exceed the department’s regulatory authority.

“I knew they were going to file a suit. They were talking about it when it passed because they didn’t like these new rules,” Grundy County Board Chairman Ron Severson said.

It’s too soon to say exactly how much revenue will be lost. The Grundy County Board is prepared to lose 10 percent of it’s budget, or $1.8 million annually, while Channahon officials have previously said it receives an average of about $1.5 million a year through the sales tax rebate program.

“We are already planning on us not getting any of this money,” Severson said. “That’s what we’re factoring into our budget because it’s a good possibility that that ship has sailed.”

Overall, the RTA’s goal is to stop companies from creating small satellite offices outside its boundaries in order to purchase materials at a lower sales tax rate. The sales tax rates are lower in Grundy County – 6.25 percent compared to 9.5 percent in Cook County – in part because they do not include the sales taxes that support the RTA.

In the past four years, the RTA has spent about $1.8 million in legal fees fighting the issue, which leaders believe is costing them tens of millions of dollars a year in sales tax revenue, said Jordan Matyas, the RTA’s chief of staff.

“If that keeps happening, that just means that that burden gets passed on to the riders, whether that be cuts in service, increases in fares,” Matyas said. “It just depends on how big this practice gets and how long it keeps going.”

Matyas believes the lawsuit filed Friday is a matter of interpreting the law and can be resolved quickly, while a spokesman for the state’s Department of Revenue said the department stands by the new rules.

“The state spent five months seeking comments from everyone involved,” spokesman Carson Krislov-Quinn said in a prepared statement. “The rules balance the interests of Illinois’ businesses with the needs of the local and regional governments to collect revenue. We are confident the rules reflect good policy and are consistent with the governing law.”

Meanwhile, other RTA lawsuits remain pending. In March, the RTA sued American Airlines and Sycamore for operating what it calls a sham office in Sycamore to avoid paying tens of millions of dollars in taxes a year in Chicago. About a year before, the RTA filed a similar lawsuit against United Airlines and Sycamore.

• Shaw Media writer Jessica Bourque contributed to this report.

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