Kane municipalities collect more local sales tax, thanks to new state law

A new state law in 2021 requiring online purchases to include local sales tax is boosting the revenues of local governments.

Though the state does not differentiate between sales tax that rings up in a brick-and-mortar store or through an online purchase, local officials think the new law played a role. The new law, called the Leveling the Playing Field for Illinois Retail Act, went into effect in January 2021.

Geneva Finance Director Rita Kruse stated in an email that the city’s November sales tax report shows revenue up 49.58% from fiscal year 2020-21.

And when compared with the same period – pre-pandemic – the city’s sales tax revenue increased 16%, Kruse’s email stated.

“We believe a portion of the increase can be attributed to internet sales tax revenue because other Illinois communities are seeing similar trends in their sales tax receipts,” Kruse stated in the email.

The latest sales tax revenue for the first seven months of the 2021-22 fiscal year is nearly $3.5 million, an increase of $1.16 million.

Considering revenue for the whole year – and that sales tax is three months behind the month when items are purchased – the 2020-21 fiscal year had total sales tax revenue of nearly $4.5 million.

Pre-pandemic in fiscal year 2019-20, revenue was nearly $5.3 million, records show.

“Sales tax revenue helps support the city’s police, fire, public works and general administration functions,” Kruse stated in the email.

At the end of November, St. Charles had received about $19 million in sales tax revenues for 2021, compared to $16,591,000 in 2020 and $16,965,000 in 2019. In November alone, the city received about $2 million in sales tax revenues, compared to about $1.8 million in 2020 and about $1.7 million in 2019.

“We are exceeding our projections for this year,” St. Charles City Administrator Heather McGuire said.

McGuire said the new state law is helping level the playing field for municipalities.

“That was a huge loss for municipalities when the internet sales started booming only because we were losing that traffic and the sales tax base from the people doing online shopping,” she said.

As McGuire noted, most of the sales tax revenues go to support operations and projects within the city.

“Having the additional revenue to make sure we’re able to support development, infrastructure and capital needs is huge for us,” she said.

In addition to the new state law, McGuire also attributed the increase to the fact the state since last summer has been in phase 5 of the Restore Illinois reopening plan and that businesses no longer have occupancy restrictions.

“The push for outdoor dining has been a big help as well for the people that aren’t comfortable eating indoors yet, or, as the numbers have fluctuated, still have that as an option and an opportunity,” she said.

Some establishments are offering outdoor heated igloos as a way to keep warm during the winter.

Batavia also fared well in sales tax revenue, already at nearly $5.2 million for 2021, up from just under $5 million in 2020 and $5.1 million in 2019.

“Although we can’t say what percentage of sales tax receipts are the result of the Leveling the Playing Field Retail Act, we are very pleased with the increase we have seen in our sales tax collections,” Batavia Finance Director Peggy Colby stated in an email.

“Receipts through November are 15.1% higher than 2020 and 11% more than 2019. The increase over the prior years averages around 9.6% so we can assume that percentage is due to internet sales, while 5% is due to the economy,” Colby’s email stated. “While we are optimistic, it is hard to say with certainty if this level of increases will remain over time.”

Elburn officials forecasted in March 2021 that the village would receive $1,029,000 in sales tax revenue in 2020.

“At the end of November, the village received $753,832, or about 73% of the budgeted amount,” Village Administrator John Nevenhoven said. “We have five months left in the fiscal year and I would expect to exceed the budgeted amount.”

Nevenhoven said he is pleased with the latest sales tax numbers.

“It’s exceeding what we expected,” she said. “But it’s also part of our budgeting process. As far as those revenues, it’s something we don’t have any control over. We’re going to start our budget in January. So we’re going to be looking at these numbers in January and February trying to forecast from May 2022 through April 2023. And you got to kind of guess what you think is going to happen. So on those types of revenues, we’re always on the conservative side when we estimate.”