Lake County Sales Tax Incentives – Resource Guide
Sales tax incentive agreements are framed by local communities, often to provide incentive to developers / businesses to undertake a project or to repay actual costs that have a public component to them – such as roadways, sewers lines, etc. Lake County Partners has developed a “Resource Guide” to provide some guidelines to municipal leaders and prospective private sector participants. The Resource Guide is downloadable through the link below.
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| Program Description: |
Illinois Statue 35 ILCS authorizes the charge of sales tax (technically, Illinois does not have “sales tax,” but rather retail occupation service tax and use tax – taken together, very similar to sales tax).
Sales tax paid by consumers is passed on by the business, with part going to the state, the county, the municipality, and in some cases other regional entities. In a sales tax incentive agreement, a municipality agrees to reimburse a business or developer all or part of the sales tax that the business will generate as a result of a project.
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| Characteristics of Agreements: |
For the most part, each community determines its own criteria and willingness to offer these incentives. However, these are some typical components of eligible projects:
- Usually, the maximum sales tax proceeds are tied to specific and often extraordinary public improvements associated with a retail development. Examples of these improvements are: stormwater detention, traffic light and left turn lane additions, etc.
- In most cases, there is a formula for determining the amount of sales tax revenue that will be shared with the business. Generally, this is tied to performance – the more sales the business generates, the higher the percentage of shared sales tax.
- Term is negotiable, average is 10 years.
- Sales tax sharing can secure a note securing bonds issued by a municipality for a project. However, the municipality is always protected from paying any more than the sales tax revenue provides.
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| Communities’ Authority to Increase Sales Tax: |
If a community has “home rule” status, it may raise its sales tax by ¼% increments, with no specific maximum. Municipalities with population above 25,000 are automatically home-rule; smaller communities may become home rule by referendum.
If a community does not have home rule status, it may increase its sales tax by ¼% increments, with a maximum of 1%, if a majority of citizens approve it in a referendum.
If a community creates a TIF District or a Business District, it can impose a higher sales tax only within that district, as a source of specific sales tax revenue.
A community does not necessarily need to increase sales tax in order to enter into a sales tax incentive agreement.
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Click here to download “Sales Tax Incentives: Resource Guide for Municipalities,” created by Lake County Partners and updated as of April 2008.
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Note: This program overview is intended as a reference only. Some details may have changed since publication and/or not be reflected in the description. For specific application of this program, please contact Lake County Partners at (847) 247-0137.
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