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Chicago Transit System’s Tax Beef

Transportation authority names retailers in local tax rebate dispute.

Chicago’s Regional Transportation Authority has called out Sears Holding Corp., Target Corp. and scores of other large companies in its sales tax dispute with the nearby towns of Kankakee and Channahon.

The transportation system, which is partially funded by sales tax dollars, said the two neighboring towns cut tax deals with the companies, agreeing to rebate a large percentage of the local share of statewide sales tax incurred.

The transit authority said the agreements have cost more than $100 million in tax revenue and is in the midst of a legal dispute with Kankakee and Channahon.

The retailers were not named in the case but were identified in a statement from the transit authority Wednesday.

The group alleges that many businesses “rented office space in these towns to avoid paying higher sales taxes from their actual offices in the six-county RTA region. These small, part-time offices are rarely occupied, but companies claim they make purchases — among their largest expenses — from these offices, so they are taxed at a lower rate.”

 

A Sears spokesman said the company “acts as both a buyer and a seller on billions of dollars of transactions each year in the State of Illinois. When we buy, we pay all sales and use taxes that we are required to pay, and when we act as a seller, we collect and remit all sales and use taxes that we are required to collect. Given the millions of dollars that go uncollected each year in violation of applicable sales and use taxes, we believe a focus on companies that don’t comply with applicable sales and use tax law is more appropriate than a focus on those of us who do. Sears Holdings no longer seeks or receives any benefits from Kankakee, and historically, any benefit has been negligible.”

A Target spokeswoman said the company did have an “operational office” in one of the towns, but that it was closed in late 2010 and was not relocated.