Illinois passes Tax Holiday
Illinois retailers will get a boost from the Illinois State Legislature during the back-to-school shopping season in August.
The Illinois General Assembly on May 27 amended the State Finance Act by creating a Sales Tax Holiday from Aug. 6 to Aug. 15 on clothing, footwear and school supplies below $100. The holiday suspends the State’s Use Tax of 5 percent on eligible items, but leaves the 1.25 percent rate paid to local governments.
“This is good news for retailers, customers and the state,” IRMA President & CEO David F. Vite said. “Aiding Illinois families through a Sales Tax Holiday will generate sales, encourage job growth and provide lower costs for Illinois consumers.”
The tax holiday would give Illinois retailers a competitive advantage over competitors in neighboring states. More than 40 percent of Illinois residents live near a state border. By giving customers an incentive to shop for school items in Illinois, the tax holiday will likely impact other retail sales not subject to the holiday.
Governor Pat Quinn first proposed a Sales Tax Holiday while IRMA members were gathered in Springfield for Retail Day on May 5. Despite the state’s budget troubles, Quinn said it was another way the state could help stimulate the economy and help residents weather the recession.
The recently completed Energy Star Appliance Rebate Program showed how retailers and customers can both benefit from government stimulus programs. The Appliance program saved customers 15 percent on qualified white good appliances. Those customers spent more $37 million dollars on 62,129 appliances in just 11 hours on April 16.
“The Sales Tax Holiday is something that will benefit all retailers in Illinois,” said IRMA President & CEO David F. Vite. “I think this will prove that offering customers an incentive the state will see a net gain by suspending its 5 percent use tax for 10 days.”
IRMA thanks Gov. Quinn, the four leaders of the General Assembly, and everyone who supported the Sales Tax Holiday.
Sales Tax Holiday includes clothing, footwear and school supplies
The Sales Tax Holiday approved May 27 by the Illinois General Assembly will offer customers an incentive on clothing items, footwear and school supplies priced at less than $100.
Eligible items include all “human wearing apparel suitable for general use,” including household and shop aprons, athletic supporters, bathing suits and caps, belts and suspenders, boots, jackets and coats, ear muffs, footlets, gloves and mittens for general use, hats and caps, hosiery, insoles for shoes, lab coats, neckties, overshoes, pantyhose, rainwear, rubber pants, sandals, scarves, shoes and shoelaces, slippers, sneakers, socks and stockings, steel-toes shoes, underwear, and school uniforms.
Clothing does not include clothing accessories such as briefcases, cosmetics, hair notions including, but not limited to barrettes, hair bows and hair nets, handbags, handkerchiefs, jewelry, non-prescription sunglasses, umbrellas, wallets, watches, and wigs and hair pieces.
Also not included in the tax holiday are protective equipment such as breathing masks, clean room apparel and equipment, ear and hearing protectors, face shields, hard hats, helmets, paint or dust respirators, protective gloves, safety glasses and goggles, safety belts, tool belts, and welder’s gloves and masks.
The tax will not be suspended for sport or recreational equipment such as ballet and tap shoes, cleated or spiked athletic shoes, gloves including but not limited to baseball, bowling, boxing, hockey and golf gloves, goggles, hand and elbow guards, life preservers and vests, mouth guards, roller and ice skates, shin guards, shoulder pads, ski boots, waders, and wetsuits and fins.
Eligible school supply items include items “used by a student in a course of study.” The purchase of school supplies for persons other than students are not eligible. School supplies include binders, book bags, calculators, cellophane tape, blackboard chalk, compasses, composition books, crayons, erasers, expandable, pocket, plastic, and manila folders, glue, paste and paste sticks, highlighters, index cards, index card boxes, legal pads, lunch boxes, markers, notebooks, paper including loose leaf ruled notebook paper, copy paper, graph paper, tracing paper, manila paper, colored paper, poster board and construction paper, pencils and pencil leads, pens, ink and ink refills, pencil boxes and other school supply boxes, pencil sharpeners, protractors, rulers, scissors, and writing tablets.
School supplies do not include school art supplies, school instructional materials, cameras, film and memory cards, video cameras, tapes and videotapes, computers, cell phones, personal digital assistants, hand-held electronic schedulers, and school computer supplies.
Discounts and coupons can push the selling price of an item below $100, but manufacturer coupons cannot. Eligible items bundled with non-eligible items qualify only if the value of the qualified items is greater than the value of the non-qualified items.
Articles that are normally sold as a single unit (such as shoes) cannot be priced separately. Delivery charges, including shipping, handling and service charges are considered part of the sales price of eligible items.
Vite marks 25 years as IRMA President
The retail industry in Illinois has gone through substantial changes over the past 25 years, but one constant has been the work of IRMA President & CEO David F. Vite.
State Senator John Cullerton (D-Chicago) speaks at IRMA's Annual Lunch in May 1985 when David F. Vite took over as IRMA President & CEO.
Vite marked 25 years as IRMA President & CEO in May, an achievement duly noted at Retail Day on May 5 by IRMA Chairman Richard Cohen of Macy’s.
Cohen recognized Vite’s tenure at the IRMA Board of Directors meeting and, by consensus, the board congratulated Mr. Vite on his service and his major contributions to IRMA, the retail community in Illinois and the overall economic well-being of our state.
“This is really a remarkable achievement not only in terms of the length of Dave’s service, but in the context of all that he has accomplished.” Cohen said.
“He has empowered the state’s retail community by building a reputation of hard work, dedication and integrity. Largely because of Dave, government officials throughout Illinois leadership have a deep respect for the contributions of Illinois retailers, both large and small.”
After graduating from the University of Wisconsin – LaCrosse, Vite served as Executive Director of the Woodstock Chamber of Commerce and Industry. He started his career with IRMA in 1978 as a Field Representative, and became Vice President of Government Affairs in 1981.
In 1983, Vite was named Executive Vice President of IRMA. He assumed the position of President & CEO in May 1985 when the late Hugh Muncy retired as IRMA President.
Vite served for more than 20 years as a representative to the Illinois Department of Employment Security Advisory Board and the Workers Compensation Advisory Board. He was the lead spokesman for the business community during the state’s unemployment insurance negotiations in 2002.
In 1997, Vite was chosen to facilitate meetings on electric deregulation, one of the state’s most comprehensive bills in decades. The new law led to the IRMA/ComEd Electric program, the largest electric cooperative purchasing program in the country.
Vite also led the charge in 2006 as IRMA fought against a proposed Big Box/Living Wage ordinance in Chicago.
During his tenure he has also served on the Board of Directors and Executive Committee of the National Retail Federation and chaired the National Association of State Retail Association Executives.
Durbin fights to limit card swipe fees
U.S. Senator Dick Durbin went to bat for Illinois consumers and small businesses in a big way by successfully working to limit the fees merchants pay to accept major credit cards.
The Senator helped drive an amendment as part of comprehensive financial reform to limit the fees.
“Senator Durbin should be commended for his work on this amendment,” said IRMA President & CEO David F. Vite. “These fees have seen outrageous increases in recent years. They’ve hurt struggling Main Street businesses and prevented job growth.”
Every time consumers swipe their VISA or MasterCard to make a purchase, the credit card companies and their issuing banks charge the merchant an interchange fee, commonly referred to as a swipe fee. Once a reasonable fee charged to a business to accept a credit or debit card, interchange fees have grown so out of control that small retailers are being bludgeoned by these constantly escalating fees and some could even be forced to close their doors should these unsustainable increases in swipe fees continue.
With no rhyme or reason, credit card companies inflate these fees simply because they can. More than 80 percent of all swipe fees are collected by the 10 largest banks, interchange fees have tripled since 2001 and in 2008 cost consumers and merchants $48 billion. Just last month Visa increased rate increases on debit transactions by 30 percent in the U.S. – with no change in service or rationalization for the increase, while at the same time decreasing swipe fees in Europe by 60 percent.
What is clear is that banks have found yet another way to perpetuate their bad behavior, this time fattening their pockets on the backs of small businesses that have no choice but to pay the fees if they want to accept credit or debit cards. Already fighting to recover from the recession, small retailers are being bullied and squeezed with these fee increases while the ability to grow their businesses and create jobs is placed in jeopardy and they bear the brunt the burden created by big banks and credit card companies.
Senator Durbin’s amendment to the financial reform bill limits these fees on debit card transactions and would protect small businesses of Illinois and consumers from the bad behavior of big banks and the credit card industry. With this new law merchants would be able to look forward to a fair and reasonable electronic payment system that benefits all parties equally.
“Now merchants can get back to serving their customers, adding jobs and growing our economy without the worry of escalating swipe fees hanging over their head, Vite said.”
The amendment also only affects banks with $10 billion or more in assets, thus exempting community banks and credit unions.
Gov. Quinn, Sen. Brady offer varying viewpoints on serving Illinois
Gov. Pat Quinn and his gubernatorial challenger, Sen. Bill Brady (R-Bloomington), offered the state’s business leaders two very different plans for pulling the state out of its economic malaise during the Business Day Luncheon on May 5.
Quinn portrayed himself as a cheerleader for Illinois, suggesting Brady was not as optimistic about the state’s future.
Gov. Pat Quinn enters the Business Day Luncheon in Springfield on May 5.
Brady called himself a realist who sees a state in big trouble, but having the rich assets necessary to turn the state around.
“I look at it very optimistically when I look at opportunities. But we have to be realistic,” Brady said. “We have to realize our flaws and our faults and we have to overcome them.”
Quinn spoke first to about 285 Illinois business leaders, including nearly 160 IRMA members. He announced his plans for a School Tax Holiday in mid-August. The program would suspend the state’s 5 percent Use Tax on eligible back-to-school items less than $100. The bill passed the Illinois House and awaits support of the Senate.
Sen. Bill Brady (R-Bloomington) speaks to business leaders at the Business Day Luncheon in Springfield on May 5.
The Governor listed the positives accomplished during his 17 months in office: passage of a tax credit incentive leading to 1,200 new jobs by Ford; a small business job creation tax credit; and success on a pair of federal stimulus programs – Put Illinois to Work, and the Energy Star Appliance Rebate Program, run in part by IRMA.
“It was our job collectively to come together and restore Illinois’ good name. I think we’ve done that,” Quinn said.
But Brady suggested Quinn’s call for an income tax increase is the wrong strategy. Instead, he called for the elimination of the sales tax on gasoline, the estate tax penalty and all the tax and fee increases that Gov.’s Quinn and Blagojevich imposed on businesses“The way to maximize the assets and resources we have is to make Illinois a competitive place to live, work and do business. And that means cutting taxes, not raising taxes,” Brady said. “We have to reduce the tax burden.”
Both candidates finished their speeches on positive notes. While Brady said change is needed, he expects Illinois will “rise to the challenge.” Quinn said the state must have a plan for economic growth and promised he was the candidate offering “a lot of vision.”
Health Care enacted, but questions remain for retailers
Last year the details of health care reform were being negotiated by Congress, but many accurately predicted that the final bill would significantly impact employers-including retailers.
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). Six days later, the Health Care and Education Reconciliation Act of 2010 was enacted. The legislation is structured so that the new rules become effective in stages.
Therefore, retail employers should focus on various effective dates in the legislation to determine what actions need to be taken with respect to their group health plans. The effective dates of the legislative provisions are wide ranging, triggered from the date of enactment all the way to 2018.
The following are some important changes relevant to retailers:
Large Employer v. Small Employer (Effective January 1, 2014)
A significant portion of the new law becomes effective in later years. For example, effective in 2014, “applicable large employers” are required to provide affordable group health plan coverage. This requirement applies to employers who employ, on average, the equivalent of at least fifty full-time employees. A “full time employee” is defined as an employee who works an average of 30 hours a week. Employers with less than 25 full time employees (or the equivalent) will have no government mandate to offer health insurance. However, as noted below, an eligible small employer may receive a federal subsidy if it chooses to offer health coverage.
Small Employer Tax Credit (Effective January 1, 2010)
“Eligible small employers” may apply for a new subsidy in the form of a tax credit if they choose to provide health insurance coverage, effective for taxable years beginning on or after January 1, 2010.
Tax credits are available for employers with 25 or fewer full-time equivalent employees with annual average wages of no more than $50,000 per employee. The maximum amount of credit is between 25 percent and 50 percent of the cost of offering coverage. Complex eligibility and phase-out rules apply to this credit and should be examined now to determine whether the Tax Credit could apply.
Prohibitions of Exclusions for Pre-Existing Conditions for Children Under Age 19
Employer group health plans are no longer permitted to exclude coverage of pre-existing conditions for children under age 19. Additional pre-existing condition limitations for participants over the age of 19 will take effect for plan years beginning on or after January 1, 2014.
Prohibition of Lifetime Benefit Limits on “Essential Health Benefits”
The new legislation prohibits lifetime limits on certain “essential health benefits” under employer plans. The definition of “essential health benefits” is not provided in the legislation but, instead, is left to future regulations from the United States Department of Health and Human Services, after it receives information by a U.S. Department of Labor survey as to what is typically offered under employer-sponsored plans, including collectively-bargained plans. Retailers therefore should keep an eye out for future information on lifetime benefit limits.
Expanded Availability of Coverage for Adult Children
For new group health plans that cover dependent children, all children under the age of 26 must be offered coverage under the plan. This coverage must be available to an adult child regardless of the adult child’s income, marital status, or lack of status as a dependent for federal tax purposes. For plan years beginning prior to January 1, 2014, “grandfathered plans” are required to offer coverage to such adult children only if they are not eligible for coverage under another employer’s group health plan. The Internal Revenue Code also was amended to provide for an exclusion from income related to the cost of coverage provided to such adult children.
Prohibition on Dropping Coverage Group health plans will be prohibited from rescinding coverage with respect to an enrollee once that enrollee becomes covered under the plan, except in the case of fraud or intentional misrepresentation of material fact as stated in the plan document.
The fact is that the impact of the legislation will not be fully understood until additional regulations are issued to govern implementation. Members are encouraged to review their current health plan documents and administrative procedures. Additionally, members should consult their attorney, insurance broker and/or TPA to ensure compliance and analyze the effect on annual employer cost. Governing plan documents and contracts may need to be amended to comply with the new rules. Additionally, enrollment materials and summary plan descriptions may need to be updated.
Author Robert T. Shannon is a partner in the law firm of Hinshaw & Culbertson LLP, and can be reached at 312-704-3901 or rshannon@hinshawlaw.com
Chairman Cohen’s Retail Day address:
Speech given by IRMA Chairman Richard Cohen, Macy’s, on May 5, 2010
Last year, you heard from my predecessor, former IRMA Chairman Linda Johnson, that times were difficult, jobs were scarce, and money was tight.
IRMA Chairman Richard Cohen, Macy's, speaks at the Business Day Luncheon in Springfield on May 5.
You also heard about proposals to increase income and cigarette taxes, and to eliminate the retailers’ sales tax collection allowance. I’d like to tell you that the storm has passed and while there may be a glimmer of hope in the business sector, unfortunately the situation has gone from bad to worse in threats to our businesses.
The State’s deficit is $12-14 billion. Vendors are owed billions and are waiting 150-plus days for even partial payment. For the last month for which data is available, Illinois had the ninth worst unemployment rate in the nation at over 11 percent. The state’s youth are being hit the hardest with no signs of relief. IRMA predicted that this would be the case when the last minimum wage increases were imposed, and ironically, this year there have been proposals to create government programs to hire youth.
To address the fiscal crisis, some advocate for simply more cuts. While the government must do more to demonstrate a commitment to cost-cutting, it is hard to imagine how government can cut nearly half of their budget.
Some advocate taking it all out of the pockets of businesses and consumers in Illinois by simply increasing the income tax, the service tax, plastic bag tax, bottle deposit tax, or any other number of taxes). The solution, as in most things in life, is somewhere in between.
Everyone (government, citizens and businesses alike) should shoulder their fair share of the burden when trying to weather the storm in a tough economy. Employers and families have made cuts and controlled their expenses to the best of their ability. But even while making these cuts, employers and families have been hit with higher taxes, mostly at the federal and local levels. As State government looks to repair its broken finances, we implore the governor and the legislature not to try to balance the State budget on employers.
We in the business world know that higher costs to employers have an effect on employment. Our employees are the backbone of our businesses. A strong and confident workforce will help to restore Illinois to its rightful place as a state that encourages businesses to survive in a tough economy. So lets go out and tell our legislators today how important our businesses are to this state and to our employees. Explain to them what each of has done to weather this economic storm. Share with them the support we provide to our respective communities. Let them know how difficult it would be to shoulder an increased tax burden and the effect that it would have on our employees and customers. Impress upon them that supporting the employer community supports the Illinois economy.
So when you’re over at the Capitol today, I encourage you to share your own business’s story and emphasize the public/private enterprise partnership that is so critical to growth.
Some sales tax rates to change on July 1
Cook County’s sales tax rate will roll back 0.5 percent on July 1, bringing a bit more equity to competing retailers along county borders such as Lake Cook Road.
The Cook County Board, which had raised taxes from 0.75 to 1.75 percent in July 2008, agreed to the rollback in December 2009. The Board was able to override Chairman Todd Stroger’s veto, but only after the State Legislature reduced the number of votes needed to do so.
The action means the Cook County sales tax rate will drop to 1.25 percent in July, decreasing the Chicago rate from 10.25 to 9.75 percent.
County Commissioners expect the lower tax will encourage more spending in Cook County and level the playing field for businesses.
The sale tax discrepancy is most apparent in cities which are located in both Cook and a neighboring county. Shoppers in cities such as Elmhurst, Orland Park, Elgin and Deerfield currently save 2 percent in the sales tax rate if they opt to spend their money in DuPage, Will Kane or Lake counties.
Throughout the state, some locally imposed sales tax rates will also change on July 1. In Union County, the rate will rise 0.75 percent; in Stark County, it will increase by 0.5 percent; and in Lawrence County, the rate moves up a full 1 percent.
For a complete list of all the tax rates, use the Tax Rate Finder on the Illinois Department of Revenue’s website at tax.illinois.gov. The state also released a bulletin with all the changes for July 1.
Retailers will need to adjust cash registers and computer programs that generate sales tax amounts. If you would like to purchase a laminated sales tax rate card, send $3 per card to the Illinois Retail Merchants Association, 19 S. LaSalle St., Suite 300, Chicago, IL 60603. Tell us what percent you need and where you would like the tax rate card sent.
Roderick P. Miller, Jr. 1928-2010
Former IRMA chair served industry and Quincy community
Roderick P. Miller, Jr., a former Quincy retailer and past IRMA Chairman died April 23 at his home. He was 81.
Roderick Miller in his Quincy store during his final clearance sale.
From 1968 to 2004, Miller ran the specialty women’s apparel store, Roderick P. Miller, Inc., founded by his father in 1935. An IRMA member retailer for 63 years, the store was featured as one of IRMA’s Retailers of the 20th Century in 2000.
Miller was active in the retail industry, serving on IRMA’s Board of Directors from 1971-1977, and was chairman in 1973 and 1974. He called his time as a director “one of the highlights of my career.”Active in his community, Miller served on the Quincy School Board, was president of the St. Mary’s Hospital Board and president of the Quincy Country Club. He also served as president of Uptown Quincy and as chairman of the Quincy United Way. Miller was also a member of the Quincy Chamber of Commerce and the Great River Economic Development group.
The IRMA staff offers its sincere condolences to the Miller family.
