Illinois Supreme Court Ends Tax Avoidance Practice
The Illinois Supreme Court has ended a practice that let businesses avoid paying millions of dollars in local taxes.
Most retail companies based in Chicagoland have to pay a fairly high tax rate.
In the past, if you set up a way to take orders somewhere else in Illinois, you’d face a much lower tax burden there, instead.
This is reportedly fairly widespread, but now the Illinois Supreme Court is stopping it.
In a unanimous opinion, the court indicates it’s a problem that companies get out of paying local taxes, but still enjoy local services, like police and fire protection.
The ruling was based on a lawsuit filed by Hartney Fuel Oil Co., then headquartered in the relatively high-tax suburb of Forest View. To take orders, Hartney installed a fax machine 100 miles away in Mark, Illinois. The state forced Hartney to pay $23 million in back taxes, which led the company to sue.
The Supreme Court says because Hartney was acting in accord with state regulations — however flawed — the company is entitled to a refund. But the court says companies cannot use that tactic in the future.
The ruling could have a ripple effect in DeKalb County, where United and American Airlines operate satellite purchasing offices in Sycamore.