RTA Helps Franklin Park Recover Critical Tax Dollars

March 4, 2014

A decision by the Illinois Supreme Court will translate into substantial sales tax revenue for the Village of Franklin Park and could result in similar recovery of much-needed tax dollars for other Northeast Illinois municipalities and taxing districts.

The Court’s recent decision in Hartney Fuel Oil Co. v. Hamer invalidated several Illinois Department of Revenue sales tax regulations that had been used by companies based in the six-county RTA region as justification for establishing remote sales offices in other parts of the state in order to avoid paying a higher sales tax rate within the region. This sales tax avoidance practice is responsible for diverting millions of dollars from the RTA region as companies that operate within the region choose to avoid paying sales tax in the region. Local governments and agencies in Northeastern Illinois – like the RTA, Metra, Pace and CTA – have been losing money for years despite the fact that these local governments have been providing police, fire and transit services to the companies who primarily operate within their jurisdictions.

Franklin Park-based The Hill Group, 3203 N. Wolf Road, recently decided to close its sales office in Kankakee, which had offered a lower sales tax rate of 6.25 percent, compared to 8 percent in Franklin Park. According to the RTA, the company’s tax strategy meant that Franklin Park did not receive approximately $1.3 million in sales tax revenue and the RTA’s transit region missed out on more than $1.8 million in additional revenue from 2006 to 2013.

“This is good news for the Village of Franklin Park, but more importantly for our taxpayers,” said Franklin Park Mayor Barrett Pedersen, who applauded the Regional Transportation Authority’s efforts to urge the Department of Revenue to establish new rules that are consistent with Illinois law and the Illinois Supreme Court’s decision in Hartney. “The Hill Group is a tremendously successful company and huge asset for our Village, providing jobs and generating revenue that benefits the entire community.”

Since 2011, the RTA has argued that companies should pay sales taxes in the area where the bulk of their selling activities occur. The Court’s ruling noted that state law enables taxing districts to collect sales tax from retailers in their communities in order to help pay for government services, including transportation. The RTA transit region, which includes Metra and CTA trains and Pace buses, relies on sales tax revenue to fund the majority of its operating budget.

“It’s a matter of fairness. A business should pay for the services it receives,” said RTA Chief of Staff Jordan Matyas.

In addition to The Hill Group, Medline Industries, Inc. a Mundelein based company recently closed its Kankakee office, which it had established in 2006. That agreement resulted in Mundelein not receiving more than $3 million in sales tax revenue and the RTA region missing out on approximately $900,000.

“These tax havens have meant that governments lose out on sorely needed revenue and taxpayers end up footing the bill,” Matyas said. “During these challenging times when local budgets are financially strapped and suburban governments are forced to raise property taxes or cut essential services, many Northeastern Illinois municipalities stand to gain much needed revenue as a result of these new rules.”