Now comes the Internet Sales Tax Consultants

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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
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

Rank Company Headquarters 2012 Rank Main Product
1 Amazon.com Seattle 1 general merchandise
2 Walmart.com Bentonville, Ark. 2 general merchandise
3 eBay.com San Jose, Calif. 3 online marketplace
4 Kohls.com Monomonee Falls, Wis. 5 apparel
5 BestBuy.com Richfield, Minn. 4 electronics
6 Target.com Minneapolis 7 general merchandise
7 JCPenney.com Plano, Texas 6 apparel
8 Macys.com Cincinnati 8 apparel
9 Sears.com Hoffman Estates, Ill. 9 general merchandise
10 OldNavy.com San Francisco 11 apparel
11 Google.com Mountain View, Calif. 10 information
12 LandsEnd.com Dodgeville, Wis. 15 apparel
13 Kmart.com Hoffman Estates, Ill. 14 general merchandise
14 LLBean.com Freeport, Maine 21 apparel
15 Overstock.com Salt Lake City 12 general merchandise
16 WomanWithin.com New York 17 apparel
17 Forever21.com Los Angeles 18 apparel
18 HomeDepot.com Atlanta 20 hardware
19 Gap.com San Francisco 23 apparel
20 Zappos.com Las Vegas 24 footwear
21 QVC.com West Chester, Pa. 13 general merchandise
22 Haband.com Oakland, N.J. 26 apparel
23 Blair.com Warren, Pa. 22 apparel
24 Nordstrom.com Seattle 25 apparel
25 Yahoo.com Sunnyvale, Calif. 19 information
26 VictoriasSecret.com Columbus, Ohio 27 apparel
27 BedBathandBeyond.com Union, N.J. 44 home goods
28 AE.com/American Eagle Pittsburgh 28 apparel
29 Newegg.com City of Industry, Calif. 30 electronics
30 Aeropostale.com New York 39 apparel
31 Lowes.com Mooresville, N.C. 16 hardware
32 KingSizeDirect.com New York 38 apparel
33 Hollisterco.com New Albany, Ohio 45 apparel
34 Nike.com Beaverton, Ore. 41 sporting goods
35 ColdwaterCreek.com Sandpoint, Idaho 29 apparel
36 Express.com Columbus, Ohio 35 apparel
37 TigerDirect.com Miami 33 electronics
38 Roamans.com New York 43 apparel
39 Belk.com Charlotte, N.C. N.A. apparel
40 Costco.com Issaquah, Wash. 32 general merchandise
41 LaneBryant.com Columbus, Ohio 37 apparel
42 Meijer.com Grand Rapids, Mich. N.A. general merchandise
43 Hot Topic.com City of Industry, Calif. N.A. apparel
44 RossStores.com Pleasanton, Calif. 34 apparel
45 OneStopPlus.com New York N.A. apparel
46 TJMaxx.com Framingham, Mass. N.A. general merchandise
47 SamsClub.com Bentonville, Ark. N.A. general merchandise
48 Dillards.com Little Rock, Ark. 42 apparel
49 BananaRepublic.com San Francisco 46 apparel
50 ChildrensPlace.com Secaucus, N.J. N.A. apparel

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