Sales tax deals of past upheld

March 23, 2019

KANKAKEE — Even though the bulk of Kankakee’s sales tax sharing deals have long since past, the Illinois Supreme Court said the program Kankakee had operated for several years was legal.

In a 6-0 ruling reached on March 21, the Supreme Court reversed a previous Illinois Appellate Court ruling and denied the city of Chicago from filing future complaints.

The 14-page ruling basically upheld a Kankakee County Circuit Court ruling which had stated the sales tax sharing practice was legal.

“For the past 10 years, this is what we had been saying. What the city was doing was legal and correct,” former two-term Kankakee Mayor Nina Epstein said. “We were doing this the right way.”

Through these sales tax sharing agreements, which started in 2000 under the Mayor Donald Green administration, online retail companies from outside of Kankakee would establish an office here and then run purchases though this office.

As a result, the transaction was credited to Kankakee and Kankakee County and the two governmental bodies would received their sales tax. At the time, the city had a 6.25 percent sales tax rate, of which 5 percent went to the state and a quarter-percent to Kankakee County.

In return, Kankakee would rebate a portion of the sales tax back to the company.

At the peak of the program, these tax sharing contracts netted the city $2 million to $2.5 million annually — or about 10 percent of the city’s income.

These deals largely went unnoticed by those outside of Kankakee until the economy began to struggle. Chicago, Cook County and the Regional Transportation Authority then began to fight the practice.

After a prolonged legal battle, the Illinois Department of Revenue changed the rules in how sales tax would be allocated. The new rule basically eliminated the sales tax sharing program.

“We were operating under the rules the revenue department had established at the time,” Epstein said. “This program saved Kankakee taxpayers millions of dollars. We defended it, and we were right. I’m pleased we took on the fight and won.”

Former Kankakee corporate counsel Chris Bohlen also praised the Supreme Court ruling.

“This shows we were legally correct,” he said. “These contracts were entirely legal.”