RTA Pushes Back on Sales Tax Diversion Bill

April 18--The Regional Transportation Authority will kick off a campaign this week aimed at defeating legislation in the General Assembly that opponents say could potentially cost Chicago-area transit agencies hundreds of millions of dollars in sales tax revenue.

The measure would allow companies to get around paying some sales taxes in Chicago and the six-county region by effectively migrating the tax to counties where the sales tax rate is lower or no local sales tax is imposed. A Chicago-based company could do this by setting up an office elsewhere and designating it as the point of sale, for example.

The proposed change would not affect direct consumer "cash-to-hand" sales, such as buying gasoline at a local station, officials said. But it could apply to a furniture showroom or a catering service where an order is placed.

If the bill passes, the RTA system, which includes the Chicago Transit Authority, Metra and Pace, could lose up to $605 million in sales tax revenue annually, a study commissioned by the RTA estimated. Sales tax collections on behalf of the RTA totaled $1.2 billion last year.

The amount of sales tax receipts lost on a transaction would depend on several factors. The entire amount would be lost if a business relocated its purchase-order receipting operation outside the RTA region, officials said. Shifting it from Cook County to a collar county would result in a decrease in RTA revenue because of the lower sales tax rate.

In addition, lost revenue among the municipalities and counties in northeastern Illinois would total up to $1 billion, the study found.

"Business is trying to legalize a tax loophole that would devastate the budgets of the transit system and every county and municipality in the Chicagoland region," RTA Chairman John Gates Jr. said.

The measure passed the Senate on Friday, with the 20 lawmakers who voted against all representing parts of Cook County. It now goes to the Illinois House, where Gates said he hopes to "run a different bill."

The House is overseen by Speaker Michael Madigan, D-Chicago. Madigan's son-in-law is Jordan Matyas, the RTA's newly hired deputy executive director.

"The RTA relies on the sales tax," Matyas said. "If this bill passes, the CTA, Metra and Pace would have to raise fares, cut service or go to the state seeking a bailout."

The legislation, sponsored by Sen. Toi Hutchinson, D-Olympia Fields, is supported by the Illinois Chamber of Commerce and the Chicagoland Chamber of Commerce. The groups argue that businesses already are saddled with high taxes and relief is needed. Hutchinson's district is centered in Will County and includes a far southern portion of Cook County.


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