Sales Taxes

 Got curious so checked the sales tax rates for Carbondale. Sadly, the 9.75% rate is now comparable to several other cities within the state.  Add a 9% hotel/motel tax and a 2% food and beverage tax and visiting Carbondale can get rather pricey 

Saluki Way Tax

 Back around 2009, city council passed the Saluki Way tax, increasing local sales taxes by .25% to help fund the replacement of McAndrews Stadium, remodeling of what is now Bantera Arena and helping cover the cost of the Studnet Services Building (which is not currently named after anything). The tax is supposed to raise about $1 million a year to help with repaying the bods issued to pay for all the contstruction and is scheduled to expire in 2027 or 2029. 

I certainly hope the council does not pass a resolution keeping the tax in place. Our current sales tax rate is higher than about 90% of the other sales tax rates imposed by other communities throughout the state and I have heard from several local restaurant owners they have lost catering business to restaurants in Marion and Murphysboro due to their lower tax rates.

Sales Taxes

 A  lot of communities in Illinois increased their sales taxes at the start of the year. happily Carbondale was not among them. Unhappily, Carbondale's rate of 9.75% is still higher than all of the communities on the list save 3, at least by my count.

Saluki Tax

 If I remember correctly, the increase in the sales tax voted for by the city council to help fund the Student Services Building, Saluki Stadium and renovations of the SIUC Arena expires in 2027. Basic sales tax for Illinois is 6.25% and Carbondale's sales tax is 9.75%, one of the highest in the state. Unless council is lobbied by residents, the council will likely vote to amend the ordinance setting that rate, as it did the last time a portion of the sales tax was set to expire. If you think the sales tax is too high, complaining about it on social media will do little good, unless you also direct your complaint to city council members as they are the ones who will either let it expire or vote to amend the ordinance to keep it in place.

Saluki Way Tax

 The Saluki Way tax is due to expire in 2027 but waiting until then to push the council not to renew it is a bad idea. Unless residents want to keep a sales tax higher than 93% of the rest of the state's municipalities, they need to start letting the current members of the council know they do not want any resolutions passed keeping the tax.

Grocery Sales Tax Holiday

 Recieved a notice today that the state will suspend the collection of the grocery sales tax from July 1 of this year until June 30 of 2023. That is 1% that stores will not collect. The grocery sales tax applies to food that is to be consumed off the premises where it was purchased. 

Saluki Way Tax

 The portion of the sales tax funding bonds for the  the new stadium, Arena remodel and Saluki Way project is scheduled to expire in 2027. I would be willing to bet though, unless people start pushing for its expiration. The city will likely argue, as it did when the tax funding bonds for repairs at CCHS was due to expire, that it needed the funds from the tax and had already figured the revenue into its budget.

 The argument made at the time for passing the sales tax increase was that the enhancements to the campus would attract more students and draw more people to campus to attend events in the new stadium and remodeled Arena, despite evidence that revenues do not increase when tax payer money goes to fund sportscapes and attendance at SIUC has trended downward for 3 decades. Still it will be easier for the council to argue it needs the money from the tax and vote to extend the ordinance that established it, rather than letting it expire and passing a new one. 

Clothing

With the closure of JC Penny's and Macy's , the clothing options for older professional adults have dropped dramatically in the Carbondale area. Kohl's is not about the only place to go, if you do not want to shop online, that is. The remaining stores in University Mall all target shoppers 16 to 30 or so and do not offer things such as suits , ties and button down shirts, meaning the city will see even more shopping take place online and with that, a further decline in sales tax revenue.

Saluki Way Tax

Also asked for the expiration date of the Saluki Way component of the local sales tax at Tuesday night's city council meeting as it has been in place for about a decade (enacted under the administration of Brad Cole). Has another decade to go so all of those who voted for it will be long out of office and those in office will likely find good reason to keep it in place to put money into the General Fund.

Tax Dates Extended

The city extended the due date for payment of certain taxes by about a month. Most businesses, mine included, combine tax collected with regular revenues and then remit the collected sales taxes to the appropriate entity on the due date. Instead of treating the money as a pass through and put into a separate account, which requires additional bookkeeping steps, business lump them all into one account and then remit collected taxes out of that account.

Unfortunately, businesses then forget that is not their money but was collected as a use tax, spend it and then have to worry about coming up with the money by the due date. Unusually, the business just pulls the owed taxes out of general revenue but now there is a situation where a lot of businesses, especially restaurants, collected taxes the first half of the month, used that money, and then had much lower revenues coming in for the past two weeks, while expenses such as rent and payroll still need paying. hence the push back of the date with the hope that businesses will, once they reopen, generate enough revenue to pay the tax collected.

Sales Tax

Illinois sales tax was due this past Friday. For those of you not familiar with how tax collection works, businesses in Illinois collect (not charge, stores do not charge sales tax, they collect it on behalf of the state), sales tax on products, not services, purchased in the state and then remit the money to the state by the 20th of each month. If businesses turn in the money late, the state charges them interest and late fees. However, the state has announced it will waive interest and fees on this month's, and likely next month's, sales tax remittance.

Saluki Tax

The Saluki Tax or percentage of the city sales tax will expire in a year or two. If residents of the city want to get rid of it, now is the time to lobby the city council to do so. The last time a portion of the city sales tax expired, a portion used to retire the bonds passe to pay for school roofing, council figured in the additional revenue into the following year's budget and  found it easier to pass an ordinance maintaining the tax rather than letting it expire, as it was supposed to, and debating the merits of reinstating that portion of the sales tax.

One of the selling points for any increase in a city sales tax has been that it is only for a limited period of years and will expire once that time elapses. Allowing any portion of the sales tax to expire has not happened, at least as far as I can recall.

Marijuana Sales Legalized

Next year, that is.  City council voted last night to allow recreational sales of marijuana in the city limits whenever the state legalization of sales starts, next September I believe. A additional 2% sales tax will be imposed on sales, pushing the sales tax on it to around 11.75%. mayor says he would like to see the additional tax revenue funneled into some form of social programs.

South Dakota vs. Wayfair

The Supreme Court ruled in the case of South Dakota vs. Wayfair this morning, a case revisiting the collection of sales taxes by states and local communities.

The SCOTUS Quill decision, back about 1992, in the early days of online retailing, ruled that retailers without a physical presence in a state were not required to collect and remit state and local sales taxes. At that time, online retailing was a minor presence and the taxes lost were pretty small. However as online retailing has grown over the past couple of decades, accounting for about 10-15% of all retail sales, the sales tax revenue loss has impacted states and cities severely. Just ask anyone in management at Carbondale City Hall.

Under the South Dakota law, which was upheld today, any retailer doing more that $100,000 in online sales or with over 200 customers in the state, is required to collect and remit sales tax to the state. This ruling only affects South Dakota but opens the way for other states to enact similar laws or for Congress, under the Commerce Clause of the Constitution, to enact some sort of national regulation. Since there is no national sales tax in place, I doubt we will see any national form of sales tax collection put into place though.

Bost Meeting

Sat in on the Mike Bost meeting discussing tax cuts/reform at the Civic Center this afternoon. Was rather surprised at how many of the businesses attending saying the cuts had helped their business, given that we really haven't seen them implemented yet. Infrastructure investment was a major topic as well. A couple of bankers asked about the tax benefits credit unions get compared to traditional banks and I asked if there were any plans to address the exemption online retailers get from collecting sales taxes if they did not have a physical location in the state. A couple of forlorn looking protesters stood outside the Civic Center as I left. 

Restaurant Tax

Was talking with someone this morning about business in Carbondale and he made a point of saying that the food and beverage tax drives him away from eating in Carbondale when he comes here to shop. He will make purchases at the stores but chooses to leave the city to eat rather than pay a "1% tip to the city" as he put it.

Sales Taxes Extended

Rather surprised at the very light turnout at tonight's city council meeting, especially since sales taxes, always a hot button issue, were on the agenda. The audience consisted of less than 6 people.  Members of the council stated several times that extending the taxes had been discussed a number so far this year and had even been figured into this year's budget. However, the half a dozen or so people I spoke with this week knew nothing about the proposed extensions and the Chamber of Commerce had not polled its members on the topic.

After some discussion, the council voted to eliminate the sunset clause for both taxes, meaning both will continue indefinitely unless council chooses to revisit them, which will likely only happen if enough residents of Carbondale contact them.. The vote was closer than I expected with Councilmen Loos and Grant, Councilwoman Harvey and Mayor Henry voting yes and Councilmen Doherty and Kang and Councilwoman Bradshaw voting no.

I was interested to learn that, due to the way the original ordinance had been written, the CCHS bond tax would not have sunseted. Instead, since the bonds had been paid off, the money from the tax would have continued to go into the general school funds until the ordinance was changed.

Council to Vote on Maintaining Sales Taxes

City council will vote on Tuesday to repeal the ordinance sunsetting the 1/4% sales tax enacted back in 1999 to fund bonds for construction of the Carbondale Community High School, as well as one enacted in 2014 to shore up city revenues against the potential loss of state revenue. The CCHS tax is scheduled to expire in October, the other on Jan. 1 of 2018. The repeal would eliminate the sunsetting in both instances.

This is wrong. These taxes were enacted for specific reasons and there has been little to no discussion regarding the need for them. Let the taxes expire and then make a case for enacting a new tax for the loss of revenue. If such a tax is needed, council should be able to make a strong case for it.

Here is the text of the proposed change in the ordinance:

On February 2, 1999, the Carbondale City Council approved Ordinance 99-06 which imposed an additional 1/4% home rule municipal retailers' occupation and service occupational tax.  The purpose of this additional tax was to provide additional revenue to fund the construction of the new Carbondale Community High School (CCHS). CCHS issued $16 million in bonds to finance the project and the City of Carbondale pledged the proceeds of the additional 1/4% home rule sales tax to provide annual debt service payments.  Annual debt service payments are approximately $800,000.  Ordinance 99-06 also directed the Carbondale City Council to "take action to repeal the 1/4% increase in the City's home rule sales tax" once the CCHS bond is retired in full.  The City of Carbondale will make the final debt service payment in October 2017.  Although Ordinance 99-06 directs Council to repeal the tax following the retirement of the CCHS bond, it is the opinion of Staff that a seated Council doesn't have the legal authority to direct a future Council to take specific action(s). As such, and to avoid any confusion, Staff recommends that if the City Council wants the 1/4% tax established in Ordinance 99-06 to continue, then affirmative action should be taken to confirm the continuation of the tax.  

On March 25, 2014, the Carbondale City Council approved Ordinance 2014-10 which imposed an additional 1/4% home rule sales tax.  This tax was imposed primarily to defend against the potential loss of shared State revenue that the Governor's office and legislature were considering at that time.  Ordinance 2014-10 contains a sunset provision which terminates the 1/4% tax automatically on January 1, 2018.  If the Council wants this tax to continue beyond the sunset date, then action to repeal the sunset provision should be taken. If not, then the tax will terminate on January 1. 

Currently, each 1/4% home rule sales tax generates approximately $1,023,000 annually that is used for general fund revenues. The FY18 budget was developed with the assumption that each of these home rule sales taxes and their associated revenues would continue.  As mentioned in previous City Council meetings, the loss of one of the 1/4% sales taxes would facilitate a budget shortfall of approximately $321,092 for FY18. Therefore, if revenue is reduced by this amount then additional cuts to personnel and/or services will need to be made to mitigate the loss of revenue or budget adjustments should be made to reflect that the City will produce a projected budget deficit for FY18.  The State of Illinois allows home rule communities to adjust their home rule sales tax rates in 1/4% increments.  Ordinances must be filed with the Illinois Department of Revenue by October 1 to begin implementation by January 1 or must be filed by April 1 to begin implementation by July 1.

Attached to this agenda item are 5-year budgets with 3 scenarios; one assumes that both home rule sales taxes continue, another assumes the loss of revenue from one of the 1/4% taxes, and the last assumes the loss of both sales taxes. Staff has spent considerable time analyzing the City budget and recommends that each of these taxes be continued if the City Council wants to maintain current service levels.  

Recommended Action:

It's recommended that the City Council Amend Title 7 of the Carbondale Revised Code to repeal the sunset provision in Ordinance 2014-10, maintaining the 1/4% home rule sales tax, and affirm and maintain the 1/4% home rule sales tax established in Ordinance 99-06. 

Sales Tax Talk

Today's Carbondale Times has a pretty lengthy article on the request by local restaurants to lower the recently approved  2% sales tax on food and beverages purchased within the city limits. Coupled with the 1% county wide sales tax that goes into effect July 1,  the sales tax on food and beverages within the city limits will reach 11.75%. Needless to say, local restaurants are not particularly thrilled about this and have blamed the increased taxes at least partially on softening sales.

Sales Tax Perception

Carbondale needs to work on getting out the word about the new sales tax and the upcoming one. I got told today by someone who lives in Anna and comes to Carbondale mainly for the music scene that the Carbondale sales tax is now 12%. It is high, thanks to the county, but not quite that high.