City Losing Businesses to Suburban Tax Shelters
By aaroncynic in News on Aug 22, 2011 9:40PM
Taking a page out of America’s bigger companies like Goldman Sachs and G.E., the Tribune reports dozens of companies doing business in Chicago route their sales through outer lying cities in the collar counties in order to pay lower sales tax rates.
In some of these municipalities, like Kankakee, a corporation might pay as little as 6 percent, which rates in Chicago still hover around 9.75 percent. Mayor Emanuel’s office told the Trib the city plans on filing a lawsuit against some of these cities, like Kankakee and Channahon
“It's a tax-reduction strategy that has gained momentum in the past decade, fostered by consultants who help companies set up and operate satellite offices, some of which are not much more than scantily equipped storefronts. To woo and retain the remote offices, towns often rebate a portion of their sales taxes to the businesses.”
The RTA and Illinois House Majority Leader Barbara Lynn Currie (D-Chicago) are currently working on legislation aimed at blocking this particular tax workaround. The RTA’s deputy executive director Jordan Matyas said “This practice has to stop; every month we lose money.” Half the Regional Transportation Authority’s budget comes from sales tax revenues. So far, 33 companies have contracts with Kankakee and 8 have contracts with Channahon. The Illinois Department of Revenue is conducting audits in 26 municipalities who may have lost tax dollars to such practices.