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Chicago Regional Transit Authority Sues for Sales Tax

  • Mar 28, 2014 | Gail Cole

 There's a storm brewing between American Airlines and Chicago's RTA.

The Chicago Regional Transit Authority (RTA) is playing hardball with companies it claims are sidestepping their Cook County, Illinois, sales tax obligations, and the towns that enable them to do so.

Earlier this month, RTA filed a lawsuit in Cook County Circuit Court against American Airlines. RTA claims the country’s largest airline “has been engaged in a sales tax avoidance practice by claiming its sales tax place in Sycamore, Illinois, when the sales are actually taking place within the City of Chicago.” Due to this practice, says RTA, Chicago has lost close to $11.5 million in sales tax. Cook County has lost $3.8 million, and the RTA system (including the Chicago Transit Authority, or CTA), Metra and Pace have lost $8.3 million.

Since then, RTA has filed three more suits against companies and the small towns that allegedly allow them to set up sham offices:

  • RTA v. Village of Morris and Bell Fuels;
  • RTA v. City of Savanna and Palatine Oil; and
  • RTA v. City of Genoa and PetroLiance.

RTA claims these municipalities provided a sales tax rebate to the companies. Savannah rebated 36% of the sales tax revenue remitted by Palatine Oil; Genoa returned 50% of the sales tax revenue it received from PetroLiance; and Morris returned a whopping 70% of tax revenue from sales by Bell Fuels.

While the small towns still profited, RTA and the towns and counties where these companies host their main retail operations suffered. PetroLiance is based in the City of Elgin, Kane County; Palatine Oil is based in the Village of Schaumburg, Cook County, and Bell Fuels is based in the Village of Stickney, Cook County. These areas saw “a significant loss of revenue” because of the practices of these companies.

Sales tax laws apply to companies big and small, reminds RTA Chief of Staff Jordan Matyas. “Sales tax is designed to support the governments that are providing services to businesses and residents. These companies that rely on government service within the RTA region, but play games to avoid paying the correct tax, must be stopped.”

RTA filed a similar suit against Illinois Department of Revenue took Hartney Fuel Oil Company to court over a similar matter. The ruling was not in favor of the department, and in response, it proposed emergency and proposed rules to clarify the state's position on sales tax.

Don’t get sued over sales tax. File and remit the correct amount on time, every time. Learn more.

photo credit: Krazy Diamnd via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.