Stores in Illinois keep a portion of what you pay in sales tax. Think of it like a collection fee, though in state government shorthand it’s called a retail discount.
The amount is based on a percentage of what they collect. So the more they sell, the more they keep.
Gov. J.B. Pritzker wants to cap that amount to $1,000 per month for each retailer. It’s one of several proposals aimed at addressing a $3.2 billion deficit in next year’s budget.
The change would net the state around $75 million and local governments $58 million, according to Pritzker’s budget office. Compared with other revenue proposals, that’s less than what Illinois could bring in by taxing sports gambling or health insurers, but more than the cigarette tax hike or e-cigarette tax.
And business groups don’t like the idea.
“They are mandating that we provide them a service, and now they don’t want to reimburse us for the full cost of that service,” said Rob Karr, head of the Illinois Retail Merchants Association. “And they’re not reimbursing us for the full cost of the service now.”
Consumers wouldn’t be directly affected by the change. Although, Karr says retailers could eventually pass the cost of collection to consumers.
Pritzker’s budget staff emphasized that the vast majority of shops and stores – about 99 percent – wouldn’t see a change in their discounts.
Only the largest corporations, such as Walmart or Target, that sell the most in the state, would see their discounts capped. That would be around 2,400 businesses, according to the Illinois Department of Revenue.
Still, Carol Portman, president of the Illinois Taxpayers Federation, said targeting the bigger retailers defeats the purpose of the discount.
“If you cap it for the big ones, they’re the ones who are taking on more burden, they’re the ones who have the more complicated, diverse product lines,” she said. “The ones who are at the greatest risk, the ones who are incurring the greatest expense don’t get the compensation.”
Progressive groups, including Fair Economy Illinois, have pushed the idea to cap the discount. Although their cap is much smaller than the one proposed by Pritzker – just $1,000 per year for each retailer instead of the governor’s $12,000 per year.
State Rep. Will Guzzardi, a Chicago Democrat, filed a bill this session for the smaller cap.
“We believe we need to raise new revenue to fund our priorities, and we need to raise that revenue from those who can best afford to pay it,” he said at a news conference last month with Fair Economy Illinois. “So we’re going preserve this benefit for small businesses and ask the big corporations to pay their fair share.”
He also said it mirrors rules in other states.
In other states, Karr said retailers are “eating the costs” of collection.
“But that doesn’t make it right,” he said. He said on this policy, Illinois has friendlier rules.