Now comes the Internet Sales Tax Consultants

Community Groups/Interested Parties Contacted: In researching this request, City staff spoke with the Illinois Department of Revenue and representatives of the City of Frisco, Texas who have entered into an agreement with companies brought by this developer. Staff has also researched similar agreements in other states, and has researched experiences that municipalities have had with sales tax agreements of this nature.

Rants and Raves of Mac McIntyre

Oh George. When will they get it?

Shortly after 5pm during COW (committee of the whole) staff presented a request for consideration of a proposal (see pgs 146-160) for an interesting new concept for providing incentives to unnamed companies in return for choosing DeKalb as the municipality to pay state sales tax on their internet transactions in Illinois. Times are changing. Big Box bricks and mortar retailers are closing up and moving out. Internet sales are just beginning to explode.

But some of the language in the proposal sounds similar to another tax sharing deal — that win-win jet fuel sales tax incentive program Sycamore got. Or was it a win-win? The courts will decide. Last I heard there’s a scramble in the county and its seat just in case things don’t go their way.

So that’s why I was a bit flabbergasted when I read the regular city council agenda that included the proposal, complete with a contract, as an action item in the form of a resolution. Introduced at 5pm. Approved two hours later. Now the details will need to come in front of the council for approval but the resolution passed.

It authorized Mayor Rey to enter into an agreement with Great Lakes Economic Development LLC (GLED) for ten years. That agreement stipulates that the City of DeKalb budget for and appropriate funds necessary to satisfy its obligations hereunder.

Here’s the deal in a nutshell:

If an online retailer opens a physical office within a city which meets at least three of the five standards noted, and routes all online orders from within that state to their physical office and receives payment at that office, that physical office may be the place where the orders are deemed to originate from, and the sales tax accruing from those orders may be deemed to be payable in that city.

Dr. Thomas McPeak has clients, high volume internet retailers, who seek an arrangement to locate a qualifying enterprise in a city with an agreement to return a portion of the sales tax generated back to the company as an incentive.

Now staff assures the council that this deal is nothing like the aviation fuel tax sharing deal that Sycamore got. This is internet sales. There’s a difference between fuel sales and internet sales. No way would staff recommend approving an arrangement that would take away any sales from any bricks and mortar stores in any nearby communities.

Besides the agreement calls for GLED and its clients to take on all costs associated with lawsuits and liabilities. According to projections which appear to pan out in Texas revenues could be $500,000 per client, per year. What’s not to like about that?

Faster than a speeding train approval means the aldermen who were elected to represent their constituents took no time or effort to get any feedback or questions.  In less than two hours the city council made a philosophical and policy decision and without due diligence.

Mayor Rey was in such a hurry that he didn’t check to see if any citizens had signed up to comment on the proposal. After the meeting he apologized when I approached to complain. He said he saw that I had signed up to speak on multiple agenda items. In his haste he forgot to look to see which items I signed up for. When I mentioned the GLED issue was one he again apologized but reminded me that it passed.

Now I would have said what’s written above. I’d have urged the council to slow down and get some feedback. Maybe give the new Governor a few weeks to unveil plans his transition team’s report called “modernizing the sales tax” a phrase that in other states has turned out to be code meaning either taxes on services or Internet sales or both.

But most of all I would have warned that should they move forward with this concept just make sure they don’t make operating expenditure dependencies on the revenue projections confirmed in Texas.

I signed up to speak on the sweeping changes to the UDO. More than 300 pages of business regulations, zoning, etc., etc., etc. That request was ignored, too. But I thank 1st Ward alderman Dave Jacobson for his motion (seconded by 7th ward alderman Monica O’Leary) to throw this big dog to COW to get at least an hour to talk about it. See Amendments to Unified Development (UDO) Articles 5, 7, 13 and 19 on pdf pages 260 through 507.

The topic I did get to speak on was the Commercial Property Inspection ordinance now known as the Fire Safety Inspection Program. A Chronicle reporter asked me if I thought there was less opposition. Heck yes considering the original proposal. But it takes time, money and resources to fight City Hall when they overreach. It can just plumb wear you out.

2013 Top 50 Online Retailers

source: National Retailers Federation