Tuesday 11th December 2018

Local governments want state’s sales tax admin fee cut in half

Local governments want state’s sales tax admin fee cut in half

LOCAL GOV picture
Part of the state’s new budget is a 2% fee to manage local sales taxes, which could cost local governments hundreds of thousands of dollars.

Teemu008 | Flickr


Cities across Illinois are banding together in an effort to block the state from keeping so much of their sales tax revenue.

Part of the new budget imposed by lawmakers over the governor’s veto is a two percent fee to manage local sales taxes.

The city of Springfield faces mounting pension debt that’s eating up most, if not all, of its share of property taxes. Springfield has seen little growth in sales taxes and now the state is eating up a chunk of that with a 2 percent fee it charges cities to administer sales taxes.

Springfield City Budget Director Bill McCarty said the fee means the city loses out on $800,000 in sales taxes.

“Let’s call it what it is, it’s a surcharge,” McCarty said. “And we’re balancing the state’s budget on the backs of local governments.”

McCarty joins the Illinois Municipal League in pushing for House Bill 4101 that would cut the fee in half.

The Illinois Municipal League lists the bill as key for its members, saying in a policy paper there was no real opportunity for discussion or debate of the fee before it was implemented over a gubernatorial veto. IML also said state law doesn’t allow municipalities to collect their locally imposed sales taxes themselves.

McCarty said the bill wouldn’t go into effect until next year.

“We’re simply trying to look forward going into the next fiscal year and get that reduced and provide a little relief in that administrative fee,” McCarty said, adding he’d like to see the fee eliminated altogether, but cutting it in half is a compromise. He said the state’s costs to administer the money for all cities doesn’t add up.

“They’re already collecting their own state sales taxes,” McCarty said. “How much incremental work and effort and resources could it possibly take to collect the city portion since they come in together and distribute those?”

The Illinois Department of Revenue said it’s reviewing the bill.

The department “has not provided cost figures associated with the two percent service fee rate increase,” a statement said. “It should be noted that the General Assembly imposed the two percent administrative fee for collecting sales taxes on behalf of local governments as a part of the FY 18 budget that Gov. [Bruce] Rauner vetoed.”

The measure remains in the Revenue and Finance Committee but could be voted on sometime next year.

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