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3 Replies Last post: Jul 22, 2009 6:26 PM by snccigars

Sales Tax: How Will it Affect You and Your Business?

Aug 4, 2008 11:24 AM

Click to view tscheer's profile Professional tscheer 6 posts since
Jul 22, 2008
With most prices on the rise, many people are probably thinking, how
can it get any worse? Well it can. In Illinois, on July 1, 2008 Cook
County's sales tax has gone up to 10.25 percent which is now the
highest of any major city in the country. With our struggling economy,
no county in the United States is safe from increasing prices including
sales tax.

Todd Stroger is currently the Board President in Cook County, Illinois.
The reason behind the tax increase in Cook County is to fund the
Stroger Administration's massive $150 spending increase over last
year's budget which includes more than 1100 new county employees. So
where is this massive amount of spending money going? Well, the Daily
Herald newspaper explains claims that Stroger promised during his visit
to Palatine and whether or not they actually are true. A truth behind
what Stroger said is that Cook County provides police patrols, plowing
and road services, Vista Health Care clinic services, infectious
disease control and many other services to the North and Northwest
suburbs. Most of what Stroger said, however, came out to be false.
Stroger stated that Administrators cut departments 4 percent this
current budget year. In reality that figure was a reduction from the
proposed increase Stroger wanted to give departments. The actual dollar
amount for most departments still increased, just at a rate lower than
what he originally proposed. Another one of his claims that was proven
to be false is that "The 8 percent (of the budget) that is under the
president's control, just about all of that is designated for the
suburban areas." The article in the Daily Herald then goes on to say "A
Cook County spokesman had no immediate explanation of the claim, but it
seems to stem from the fact that Stroger's office controls departments
like Building and Zoning or Animal Control, which only provide services
in the suburbs or unincorporated areas. But many more departments, like
the Juvenile Advisory Council, the Medical Examiner, the Public
Defender, The Veteran's Assistance Commission, the Cook County Law
Library, The Department of Human Rights, Public Affairs and others
serve both Chicago and suburban residents."

I am sure many people have different opinions on what can be done to
change these tax increases. I guess one alternative that is possible is
to cut back on government programs and services. However we would be
losing some important services in the county. The question is, would
you rather lose these services or pay higher taxes? I just can't
believe though that with our struggling economy, where most people are
having a hard time paying their bills, our government feels the need to
raise taxes.

Consumers could go against this tax by shopping in surrounding
counties, but it wouldn't protect their pockets as high taxes are
everywhere. This would then affect an innocent business owner who is
trying to keep their business up and running in Cook County. This will
not only affect the business owner but can then become a problem with
the money they are able to bring home to support their families.

Since sales tax is becoming more of an issue, Internet shopping may
become increasingly popular with consumers. Depending on where you live
and what online store you buy through, you might not have to pay a
sales tax. If this is the case most people who live in an area with
high sales tax will probably benefit more from online shopping. This
way if there is a sales tax online, it would be the same for every
consumer even if they live on the opposite end of the country. If
someone were to go purchase the same item in the store as they would
online, they could possibly be paying a much greater amount due to the
high sales tax in the county they live in. Some websites, including
Amazon.com, never charge a sales tax. This is one of the reasons online
sales continue to grow. This could be considered unfair competition for
local businesses. This, unfortunately, is one of the negative outcomes
of Stroger's actions. This is also proven to take away sales tax
revenue from public agencies. The loss of local sales tax revenues is a
serious problem. When sales tax revenue declines, local citizens must
pay the price, either in diminished services or increased taxes. Also,
the competition factor for online shopping starts many other issues.
When local businesses shrink, jobs are lost and companies don't spend
as much for everything in the local economy from site costs to
advertising.

No matter if you are a consumer or a business owner, the increase in
sales tax is going to affect you in some sort of way. I don't see this
issue becoming better any time soon. Everyone just needs to find an
alternative that is right for them and realize their actions not only
affect themselves but everyone around them.
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Click to view JVCruz's profile Mogul JVCruz 47 posts since
Jul 27, 2008
1. Re: Sales Tax: How Will it Affect You and Your Business? Aug 4, 2008 11:41 AM

Just a note:

Buying from a company operating outside of the state in which someone lives doesn't prevent them from paying taxes. Sales and Use tax laws are in place in just about every state. Just because a company doesn't charge a customer sales tax, it is up to the customer to file and remit a Use tax. Forms are found in the State's Dept. of Revenue's site (usually). Most customers don't know of this law and therefore, don't pay the proper taxes.
Click to view Lighthouse24's profile Mogul Lighthouse24 2,396 posts since
Oct 10, 2007
2. Re: Sales Tax: How Will it Affect You and Your Business? Aug 4, 2008 12:50 PM

As JVCruz points out, most consumers and many business owners don't understand that Sales and Use Tax is a tax imposed by the state on the buyer. The business merely collects it and passes it along to the state when the item is taxable, and the business and buyer are located in the same state.

To use Amazon.com as an example, items shipped to customers in Kansas, Kentucky, New York, North Dakota, and Washington are subject to sales tax (those are the states where Amazon's operations are physically located). The state of New York requires Amazon to charge and collect sales tax on items shipped there (and Amazon does), while the other four states do not (yet). As JVCruz notes, buyers in those states could be obliged to file and pay Use Tax on items that are purchased from Amazon (or not -- it depends on their state's law).

Because Target has physical operations in almost every state, Target.com is required to charge and collect sales tax on items shipped anywhere except Alaska and Vermont.

As for the initial post, what's happening in Cook County is happening in every county in which a major growing city is located. In the U.S., "county" used to equate to "rural" (and still does in many areas) -- but as cities explode into the suburbs, counties have to provide more infrastructure and services than they did when they were rural. In Illinois, the sales tax on general merchandise is 6.25 percent -- in which the state gets 5, the city gets 1, and the county gets 0.25 (which isn't enough in a county that's affected by "urban sprawl"). About the only other way to get the money is to arbitrarily value residential property higher so the county can assess more property tax (which they are probably doing, as well).

Many small towns and truly rural counties with lower tax rates are using this situation as a business and economic development incentive.
Click to view snccigars's profile Mogul snccigars 44 posts since
Jul 22, 2009
3. Re: Sales Tax: How Will it Affect You and Your Business? Jul 22, 2009 6:26 PM

I live in montana, where there is no sales tax. To add to tscheer's question: If i were to ship items from my online business within Montana, obviously no sales tax. However, if I ship to another state that DOES charge sales tax, am I understanding correctly that the customer, NOT my business, would be responsible for paying any sales tax that would apply. Or would my business need to calculate and include that states sales tax into the purchase price?