House bill would bring more transparency to Illinois sales taxes
Illinoisans face the highest average combined sales tax in the Midwest. A new bill would show consumers exactly where those dollars are going on every purchase receipt.
Spend $100 at a Chicago store and the bill is $110.25, thanks to the sales taxes, but exactly what happens to that $10.25 is an open question. A bill in the Illinois House intends to solve that consumer mystery.
Illinoisans face an average combined sales tax rate of 8.74 percent – the highest in the Midwest and seventh in the nation. House Bill 3095, introduced by state Rep. Fred Crespo, D-Hoffman Estates, would require retailers to include an itemized list of sales taxes by unit of government on customer receipts, similar to how property taxes are itemized on a resident’s bill.
“This is a commonsense measure to make sure that when people see the sales tax on their receipts, they know what unit of government is collecting that tax,” Crespo said in a statement.
The average combined sales tax rate of 8.74 percent, as calculated by the Tax Foundation, uses population to weight the many rates found across the state, so a customer is unlikely to pay that exact rate anywhere. Sales taxes are set by the state at 6.25 percent everywhere in Illinois. Then counties and other local governments set and add their own rates.
For example, shoppers in Chicago face a combined sales tax rate of 10.25 percent – a combination of the state rate, Cook County (1.75 percent), city (1.25 percent), and a special tax for the Regional Transportation Authority (1 percent). The maximum sales tax rate Illinois allows local governments to collect is 4.75 percent.
Receipts list sales taxes as a lump sum, but consumers don’t know which unit of government is collecting what portion of the revenue. An itemized list would bring greater awareness to consumers, and help residents more clearly assess pleas for sales tax increases – such as voters in Sangamon and Lake counties had to on Election Day 2018.
“If taxpayers don’t know where the taxes they pay are going, then they can’t effectively hold elected officials accountable,” Crespo said.
Adding to an already high tax burden, Illinoisans’ were recently hit with a sales tax expansion after the U.S. Supreme Court decision in South Dakota v. Wayfair opened the door to applying the sales tax to all online purchases, regardless of geography. On Oct. 1, 2018, Illinoisans saw the state’s 6.25 percent sales tax rate applied to all online purchases.
An itemized list of sales taxes on customers’ receipts would increase transparency and allow Illinoisans to hold their local leaders accountable. Lawmakers in Springfield should send HB 3095 to the governor’s desk, and continue reforms that increase taxpayer transparency.