MORRIS – Grundy County faces more tax revenue woes with the arrival of yet another sales tax lawsuit.
The city of Morris joined the village of Channahon as the second Grundy County municipality being sued by the Chicago Regional Transit Authority for controversial taxing strategies.
The RTA named Morris and Bell Fuels – a wholesale petroleum distribution company – as defendants in the lawsuit filed Wednesday morning. The lawsuit claims Bell Fuels is unlawfully routing all purchases through a small office at 519 Franklin St. in Morris, even though the company is headquartered in Stickney, in Cook County.
Much like the Channahon lawsuit, the RTA claims Morris and Bell Fuels are diverting a “significant” amount of sales tax revenue from Cook County and, subsequently, the RTA.
Morris Mayor Richard Kopczick said Thursday morning the city had not yet been served and he could not comment on the lawsuit.
Bell Fuels’ attorney Micheal Mulcahy, of Vedder Price law firm, said his client also had not been served as of Thursday morning and were unavailable for comment.
“These agreements need to stop,” RTA Chief of Staff Jordan Matyas said Thursday. “We want the court to say not only are we entitled to damages, but these practices need to stop.”
The lawsuit cites a rebate agreement between Bell Fuels and the city signed in October 2001. In it, the city agreed to rebate 70 percent of all sales tax revenue generated at the Morris office back to Bell Fuels. At the time it was signed, such an agreement was allowable under Illinois law.
According to the original rebate agreement, Bell Fuels agreed to open a “single-order acceptance point for all Credit Sales,” in Morris in exchange for the hefty rebate.
The agreement also hinged on the city’s 6.25 sales tax rate – one of the lowest rates in the state. If the tax rate were to be raised, Bell Fuels reserved the right to cancel the agreement.
According to Bell Fuels’ website, the company employs 29 people in the administration, operations and sales departments. A visit to the Morris office Thursday found three employees working in the office.
“Sales tax is designed to support the governments that are providing services to businesses and residents,” Matyas said in a news release. “These companies that rely on government service within the RTA region, but play games to avoid paying the correct tax, must be stopped.”
The RTA oversees the Chicago Transit Authority, the region’s Metra commuter line and the Pace suburban bus service.
The Morris lawsuit was filed in conjunction with two similar suits against companies in Genoa and Savanna.
In 2011, the RTA sued the village of Channahon for using the same taxing strategies used in Morris. The Channahon case is still ongoing. The RTA has seven ongoing tax-related lawsuits with several companies and municipalities throughout the state.
These lawsuits and a recent ruling from the Illinois Supreme Court prompted the Illinois Department of Revenue to issue an emergency amendment in January putting a stop to “artificially sourced sales.”
The emergency amendment provides new regulations preventing municipalities from collecting sales tax revenue on sales that did not happen in a “meaningful way” within their municipal borders.
The amendment could become law pending review from the Joint Committee on administrative rules.
Grundy County already stands to lose $1.8 million per year from Channahon sales tax revenues, and is at risk of losing even more revenue with the advent of the Morris lawsuit.
It is unclear Thursday how much revenue is generated at the Morris office.
• Shaw Media Reporter Katie Dahlstrom contributed to this report.