Back in July, I reported on some overtaxing that was taking place in Peoria. I discovered first-hand that when businesses erroneously charge too much sales tax, the citizen who is overcharged pretty much has to fend for himself to get reimbursed.

A communication from the city’s legal department to the city council more or less confirms that state of affairs. Councilman Gary Sandberg had requested that the city draft an ordinance that would impose penalties on businesses that collected more sales tax than they are statutorily authorized to collect. The memo to the council is in response to Sandberg’s request.

In a nutshell, the memo states that sales tax collection is handled at the state level — the city has no power to enforce collection or impose penalties for collecting the wrong amount (whether too little or too much). A plain reading of state statutes confirms this, unfortunately. However, City Legal then goes on to state:

A review of the State sales tax statutes, however, reveals that, in fact. there is a specific provision, 35 ILCS 120/2-40, which provides that purchasers are entitled to refunds from retailers who erroneously collect Retailers’ Occupation Tax and further provides that any erroneously collected tax not refunded must be forwarded to the Illinois Department of Revenue. 35 ILCS 120/2-13 provides for civil and criminal penalties for those who file fraudulent returns, who collect Retailers’ Occupation Tax and do not forward it to the Illinois Department of Revenue and who do not properly collect the tax. In short, the State sales tax statutes cover the field for civil and criminal penalties for sales tax violations.

The thrust of this and subsequent paragraphs, as I see it, is to assure the council that citizens are adequately protected by state law, and thus a local statute would not be needed even if it were permitted (which it’s not). But I would argue that it’s not adequate. Yes, 35 ILCS 120/2-40 does provide that, if the seller collects too much sales tax, “the purchaser shall have a legal right to claim a refund of that amount from the seller.” But this puts the onus on the purchaser to prove to the seller that they collected the wrong amount in the first place.

That might be easy if dealing with a local merchant (of course, a local merchant probably wouldn’t make that mistake in the first place), but when dealing with an out-of-town company, the local manager will generally give you a blank look and say, “the sales taxes are put in the computer by our corporate office.” So then you have to try to contact the corporate office, and the red tape only gets worse from there. Bottom line: it’s not worth your time to fight it unless you’ve purchased a big-ticket item and the difference in tax is significant.

Furthermore, the civil and criminal penalties listed under 35 ILCS 120/13 (not 35 ILCS 120/2-13, which doesn’t exist) only covers deliberately fraudulent acts and the failure to remit to the state all sales tax money collected. It doesn’t cover a situation like the one that happened in Peoria in July. We already knew that because I called the state and was basically told that as long as the business is remitting the money, the state isn’t going to do anything to correct the problem. It falls on the citizen to call the business and somehow convince them that they’re charging the wrong tax rate.

And that’s where this system falls apart. When you, Joe Citizen, complains that a business is charging the wrong tax rate, you are the one who has to prove it. From personal experience this year, I can tell you that the seller is going to defend the tax rate the store is charging. They get official documents from the home office in Chicago or Minnesota or wherever that says the tax rate is X, and by golly, the tax rate is X. Why should they listen to you? You’re probably just uninformed or a general complainer about how high taxes are.

There has to be a way for official notification to be sent to places that are charging the wrong tax rate. The city did do that this past month in order to clear up confusion with a number of businesses. But there is no policy in place that would require the city to do that. I would argue that they only did it because of the media spotlight that was put on the issue, because they certainly didn’t offer to do that for me when I complained, before the story got picked up by the local mainstream media.

If nothing else can be done (and that appears to be the case), the city should at least establish a procedure wherein citizens can notify the city of erroneous tax charges, and the city will notify the company of the correct rate. Someone needs to go to bat for the citizens of Peoria. Why shouldn’t it be the City?