RTA Seeks Injunctive and Declaratory Relief Regarding New Sales Tax Rules

June 27, 2014

Transit Agency Says New Rules Perpetuate Loopholes and Diminish Tax Revenues

Chicago – The Regional Transportation Authority (RTA) today filed a lawsuit in Cook County Circuit Court seeking a preliminary and permanent injunction to bar enforcement of administrative rules recently approved by the Joint Committee on Administrative Rules (JCAR) and filed by the Illinois Department of Revenue.  The lawsuit asks the Court to declare that the new rules are invalid, because they exceed the Department’s authority to regulate.  The Department promulgated new rules following the Illinois Supreme Court’s decision last November in Hartney Fuel Oil v. Hamer, which invalidated the Department’s previous sales tax sourcing rules.  The new rules were approved by JCAR on June 17 over the objections of the RTA, the Metropolitan Mayors Caucus and numerous individual municipalities, including the City of Chicago. 

Over the past several years, the RTA has pursued legal action against a number of retailers which it believes are deliberately avoiding paying the RTA sales tax by establishing remote sales offices outside of the RTA region.  While these retailers have been paying sales tax in these lower-taxing jurisdictions, the RTA’s lawsuits assert that these companies continue to operate within the RTA region.  While these companies benefit financially from this tax avoidance practice, the RTA and other local governments within the RTA region are burdened with the responsibility of having to continue to provide services to these companies and their employees without receiving the sales tax revenue necessary to support these services.

The new rules recently filed by the Department of Revenue will provide retailers with a justification to continue to divert sales outside of the RTA region in violation of Illinois law. 

“The RTA believes these rules do not comply with Illinois law and with the Illinois Supreme Court’s decision in Hartney," said Jordan Matyas, RTA Chief of Staff.  “Sales tax revenue comprises 50% of the operating budget of mass transit in our region.  These dollars are critical to the continuous operations of the CTA, Metra and Pace.  We simply cannot allow these new rules to go unchallenged.” 

View a copy of the lawsuit.