UPDATE: Cook County Suing Channahon For 'Wrongful Sales and Kickback Schemes'
The county's suit, announced Monday, is the latest in a series of legal action taken by entities including the Regional Transportation Authority and the nearby village of Lemont.
Editor's Note: On October 11, we added the video of the announcement from Cook County to the story.
Channahon is facing a new round of civil charges and legal action stemming from a sales tax loophole that has some Chicago businesses routing their sales through satellite offices in the village.
Following in the footsteps of the city of Chicago and the Regional Transportation Authority, Cook County has filed its own 12-count civil complaint alleging the village of Channahon and the city of Kankakee have been using a complex scheme to collect sales tax on purchases in which the bulk of the sale occurred outside of the communities and in Cook County.
Cook County Board President Toni Preckwinkle, who held a press conference Monday along with Cook County State’s Attorney Anita Alvarez, said businesses in Channahon and Kankakee use satellite offices to create the illusion that business was transacted in their municipalities when in reality the bulk of all these transactions occurred in Cook County.
“Kankakee and Channahon pretend that sales take place where the order is ‘received,' often a virtually empty office; even the bulk of the sale takes place elsewhere,” Preckwinkle said. “These municipalities collect sales taxes based on these transactions and then kickback up to 85 percent of the proceeds to retailers and brokers.”
Cook County State’s Attorney Anita Alvarez also explained the nature of Channahon’s involvement.
“Certain retailers with warehouses in Cook County were claiming that their sales were taking place in Kankakee and Channahon, two municipalities with lower tax rates than Cook County," Alvarez said. “We began investigating and researching this matter. That has led us to the filing of today’s 12-count complaint against Kankakee, Channahon and three retail acceptance brokers. The lawsuit is targeting these brokers and municipalities for wrongful sales and kickback schemes in violation of Illinois’ taxing regulations.”
Under these schemes, Alvarez said certain unnamed retailers would set up offices in both Kankakee and Channahon to use as nothing more than a physical address so they could claim sales in those two towns. The municipalities would then kickback to the retailers up to 85 percent of all taxes collected, according to county officials.
Preckwinkle said she wasn’t able to estimate the amount of "stolen" sales tax nor could she name any specific businesses involved and she put the blame for this squarely on both municipalities.
“My understanding is that we attempted to get Kankakee and Channahon to divulge the businesses involved in this scheme and they declined to do so,” Preckwinkle said, explaining that both municipalities’ lack of cooperation was one reason the county moved forward to file suit.
The city of Chicago filed a similar suit against the village of Channanhon in September but Preckwinkle explained that the suit filed Monday would represent the entire county and would run concurrently with the other suit.
Late last month, four municipalities — Lemont, Tinley Park, Stickney and Forest View — also joined the RTA complaint, citing the need "to maintain a level playing field for all businesses and a desire end the detrimental practice of Kankakee and Channahon’s tax avoidance agreements on economic development throughout the region."
Lemont Mayor Brian K. Reaves, Forest View Village President Richard Grenvich, Stickney Village President Daniel O'Reilly and Tinley Park Mayor Edward Zabrocki released the following joint statement:
"This is an issue of fairness. Our region requires a level playing field for businesses to compete with one another and for municipalities to use economic development tools as the law intends. Businesses that utilize municipal services because their company and their employees are located in our jurisdictions should pay their proper share of taxes.
"We have no intention of bankrupting another municipality and sincerely hope that this dispute will end as soon as possible and that we can find a legislative solution to end these practices.”
In previous interviews, Channahon Village President Joe Cook called the lawsuit "incestuous" and "political," maintaining that the village had done nothing wrong. He said individual municipalities and businesses do not get a say in where tax revenue goes.
“The (state's) Department of Revenue … makes that determination,” Cook said.