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Grundy County closer to knowing how point of sale will affect area

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 taxing 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, which it believes houses a more significant portion of the companies in question.

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

After months of back and forth and input from affected parties, the Joint Committee of Administrative Rules adopted June 17 the Illinois Department of Revenue’s proposed sales tax sourcing rules.

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.

The adopted rules replace the temporary ones issued in January by IDOR.

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.

Despite this, Cook added 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 JCAR’s rules.

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

While it’s too early to determine exactly how much revenue will be gone, the finance committee was hopeful the new rules could at least mitigate any 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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