FOR IMMEDIATE RELEASE: September 9, 2015
Catie Sheehan, 217-220-1717; email@example.com
Illinois Retailers Testify About Unfair Statute That Could Cost Them Their Business
SPRINGFIELD—Members of the Illinois Retail Merchants Association (IRMA) testified before the Illinois Senate Revenue Committee about issues retailers unfairly face with qui tam lawsuits in this state, specifically related to application of sales taxes on shipping and handling charges at the point-of-sale.
Qui tam lawsuits are civil suits filed against a person or company who is believed to have committed fraud against the government. Qui tam lawsuits are filed by whistleblowers under the False Claims Act, which gives whistleblowers a reward or a percentage of what’s recovered if the qui tam lawsuit he/she files recovers money for the government. The False Claims Act was not intended to apply to tax transactions. In fact, it was borrowed from the federal government and income tax is specifically excluded from its provisions. Because the federal government does not have a sales tax, no one thought to exempt sales tax as well.
Both Illinois retailers who testified at the hearing were sued by the same firm, Schad, Diamond & Shedden, P.C. This firm has filed hundreds of qui tam lawsuits in the same fashion.
Bob Jones, president of American Sale based in Tinley Park, also testified at the committee hearing because his company was involved in a qui tam case. “The so called ‘whistleblower’ in my case was an attorney who through his knowledge of a poorly written law set out to essentially extort retailers for a very minor twist in how the law was written,” says Jones. “As a business owner and not an attorney, I am sure there are hundreds of possibilities where an unscrupulous attorney can take these twists or confusingly written laws and use them to make millions of dollars. I think the spirit of the law was to provide incentives for people who had knowledge of some intentional illegal act in a business but were afraid to say anything. It was not intended to punish employers for following the interpretations and regulations established by the state of Illinois. And it certainly was not intended not to empower opportunistic law firms seeking to find a sweet spot of financial leverage through intimidation.”
Illinois retailers are following the law as applied and interpreted by the Illinois Department of Revenue (IDOR). These lawsuits attempt to coerce money from law-abiding retailers who must choose to either settle or spend months and years defending themselves against this spurious practice. For example, Jeff Pape, president of WrestlingGear.Com, Ltd. based in Elmhurst, ended up settling for $25,000 rather than spending tens of thousands more than that to defend himself against this lawsuit. “I’m a small businessman as are many of the people targeted by this law firm,” says Pape. “We have to choose between running our businesses, staying open, keeping our employees paid, generating sales tax revenue for the state and local units of government, or defending ourselves against these lawsuits and likely losing our businesses– all this as a ‘reward’ for following state regulations and interpretations. No employer should be at risk for following state regulations and interpretations.”
IRMA President and CEO Rob Karr says interpretation of state tax law and regulations issued by IDOR should be the exclusive purview of IDOR. “We hope Illinois lawmakers will consider the unfairness of the current statute and be inspired by the testimony today to change the laws so that people will stop taking advantage this situation. Illinois employers face enough challenges. This should be an easy fix,” says Karr. “This current law hurts retailers to the point that it could easily put them out of business.”