Oswego will implement its own grocery tax in light of the state’s 1% grocery tax expiring on Jan. 1 of next year.

At the Sept. 16 Oswego Village Board meeting, trustees unanimously voted to approve an ordinance implementing the tax.

“I love when the state cuts taxes,” Oswego Village President Ryan Kauffman said prior to the vote. “I just wish the state would cut its own taxes instead of trying to cut taxes for the municipalities because now we’re in the awkward position of needing to keep it. We’ve relied on the revenues for 35 years.”

The grocery tax in Illinois refers to the 1% sales tax on groceries that has been in place since the 1990 sales tax reform. The 1990 reform eliminated state taxation on groceries but allowed for a 1% grocery tax distributed to local governments. The proceeds of the tax are distributed to local governments by the state.

How the revenues will be used is still to be decided. Trustees plan to discuss the issue at their Oct. 25 budget workshop.

Kauffman has suggested directing half of the grocery tax – $500,000 – to the water and sewer fund and to use those funds to provide an annual credit of $50 to resident utility accounts.

“I want to make sure that we’re providing as much of a rebate to our residents as possible,” Kauffman said.

Village trustee Jennifer Hughes said she would be open to the idea.

“But I would like to see that in context of the whole budget,” she said. “I would prefer to reserve a position on that until we review the budget.”

Village trustee Karin McCarthy-Lange agreed.

“I think we need to talk more about the funds at the budget workshop as a whole,” she said. “I am definitely open to rebating some of this through our water bills, but I would like to know exactly where we stand on our budget for next year.”

Like other municipalities, Oswego receives a share of that tax. The village received $967,000 in grocery tax revenue in 2024 and is expected to receive at least $1 million in grocery tax revenue in 2025.

That includes revenues from convenience stores. Municipalities that want to implement a 1% local grocery tax that would take effect on Jan. 1 need to adopt an ordinance prior to Oct. 1 to ensure timely filing with the Illinois Department of Revenue, Oswego Finance Director Andrea Lamberg said at the Sept. 2 Oswego Committee of the Whole meeting.

Neighboring communities Montgomery, Yorkville, Plano and Sandwich have approved a 1% local grocery tax. Oswego’s grocery revenue currently goes to the village’s general fund, where it supports general operations and functions such as police service and public works divisions, Lamberg said.

“It’s estimated that approximately 50% of groceries sold in Oswego are sold to nonresidents,” she said. “So this keeps some of the pressure off homeowners and renters by providing at a minimum, half a million dollars per year of non-resident grocery tax revenue.”

Kauffman noted the village board is not looking at increasing the tax.

“We are not discussing a single cent in increase to our taxes,” he said. “This is solely about keeping a tax that has been around for 35 years and that residents have been paying for 35 years.”