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(BusinessWeek)   Why does a town of 17,500 in rural Illinois, with no airport, need $1.2 billion in jet fuel? Well, it turns out Chicago politics is squeaky-clean compared to rural Illinois politics   (businessweek.com) divider line 45
    More: Interesting, RTA, Chicago, Illinois, Circuit Court of Cook County, Willis Tower, sycamores, United States bankruptcy court, incentive programs  
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5408 clicks; posted to Business » on 14 Jan 2013 at 10:12 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-01-14 08:50:04 AM  
Lots of banks in the Cayman Islands are nothing more than a post office box; same with corporate offices in Liechtenstein.

Crooked, but legal.
 
2013-01-14 09:17:59 AM  

give me doughnuts: Lots of banks in the Cayman Islands are nothing more than a post office box; same with corporate offices in Liechtenstein.

Crooked, but legal.


Pretty much this, and it has nothing to do with politics in CHicago.
 
2013-01-14 09:26:52 AM  
Greasy
 
ZAZ [TotalFark]
2013-01-14 09:27:43 AM  

I was going to call this mere forum shopping, like when a bank incorporates in South Dakota to avoid usury laws. This part bothers me:

The two companies have entered 25-year agreements that call for Sycamore to "kick back" most of its share of the sales tax on jet fuel - as much as $14 million a year - in exchange for payments of at least $300,000 a year from each airline.
I favor uniform tax rates and don't think that tax rates should be adjusted on a case-by-case basis to attract business. I don't think old people should get property tax discounts (deferral until death is OK). I hate the thousands of pages of special tax exceptions in the federal tax code.
 
2013-01-14 10:18:18 AM  
Sales taxes are owed in the territory where the goods change hands, not where the business is incorporated
 
2013-01-14 10:18:54 AM  
What kind of fuels do they think we are?

/the airlines are jet-A-holes
 
2013-01-14 10:20:48 AM  

ZAZ: I hate the thousands of pages of special tax exceptions in the federal tax code.


All of those incentives would be dwarfed by the savings in effort we could reap if the tax code were a one-page table.
 
2013-01-14 10:25:11 AM  

Tr0mBoNe: Greasy


Short Youtube with dirty wordy.
http://www.youtube.com/watch?v=irt6533qLm8&t=6s
 
ZAZ [TotalFark]
2013-01-14 10:26:11 AM  
Lost Thought 00: Sales taxes are owed in the territory where the goods change hands, not where the business is incorporated

It can be more complicated than that, but I agree that the arrangement is suspicious leaving aside the kickback angle.

One possibility is that the buyer offset the 9.5% surburban rate against the 8% Chicago rate, leaving Chicago unable to collect tax on a sale otherwise subject to its jurisdiction. You can do this sometimes. The law tries to protect people from paying double sales tax. I don't know if Illinois allows such offsets.
 
2013-01-14 10:30:48 AM  

ZAZ: I favor uniform tax rates and don't think that tax rates should be adjusted on a case-by-case basis to attract business.


You may not like it, but it happens all the time. Custom tax breaks got Boeing HQ to Chicago ten years ago, not to mention all the deals New Jersey cuts to get companies to move there.
 
RJB
2013-01-14 10:37:10 AM  

ZAZ: Lost Thought 00: Sales taxes are owed in the territory where the goods change hands, not where the business is incorporated

One possibility is that the buyer offset the 9.5% surburban rate against the 8% Chicago rate, leaving Chicago unable to collect tax on a sale otherwise subject to its jurisdiction. You can do this sometimes. The law tries to protect people from paying double sales tax. I don't know if Illinois allows such offsets.


You're both right. They're seeking to avoid mass transit taxes, which is why RTA is the plaintiff. RTA is the taxing body for the transit systems covering the six counties including and surrounding Chicago (which would certainly include O'Hare airport, where the exchange of fuel occurs). Sycamore is just past the county line where RTA's jurisdiction ends. The airlines are rate-shopping on a small scale.
RTA assesses an incremental 1.25% sales tax in Cook County and 0.75% in the collar counties, and I assume fuel is taxed similarly. For the volume of fuel they use, it's quite a savings.
 
2013-01-14 10:43:59 AM  

give me doughnuts: Lots of banks in the Cayman Islands are nothing more than a post office box; same with corporate offices in Liechtenstein.

Crooked, but legal.


Having been to Cayman a number of times, I can tell you that the corporate headquarters of Cola Cola looks nothing like you would expect.
 
2013-01-14 10:49:04 AM  

gsiofa: not to mention all the deals New Jersey cuts to get companies to move there.


My mom's company took residence in a former factory in Camden and she hates the building. The project she's on shift phase to SLC in a few months and she's counting the days until she can go back to working in a real office building with a functional computer network. I think the company pretty much got the building for free if they promised to keep its historically significant parts intact.
 
2013-01-14 10:58:42 AM  
If there is a way to get out of a tax, someone (whether it be personal or business) will try to figure out the cheaper solution and go with that.
 
ZAZ [TotalFark]
2013-01-14 11:04:41 AM  

According to the Chicago Sun-Times:

Both airlines would not comment on specifics of the suit but said what they are doing is legal.
That's because while most states say sales taxes should be collected where products are received, Illinois law says they should be collected where the purchase is accepted.
In its suit, however, the RTA will argue Illinois law also requires that other factors should be considered besides where the order is accepted.
The article goes on to say similar sales tax arrangements have been ruled legal, but the RTA hopes for a better result in a home town court with a home town jury.
 
2013-01-14 11:28:11 AM  
It sounds to me like the corporations are doing what they are permitted to do under the law.

If the city and state don't like it, they can rewrite the tax code. But the corporations and local governments don't have any responsibility to pay taxes on done deals that were executed in compliance with the law.

I'm sure it's embarrassing for the government tax lawyers to be outsmarted by the corporate tax lawyers, but they don't have any right to sue anyone because if it.

Admit your mistake, fix it and move on.
 
2013-01-14 12:02:32 PM  
It may be rural, but Sycamore is still well within Chicago's area of influence in the state. Fark Chicago.
 
2013-01-14 12:07:46 PM  

cgraves67: It may be rural, but Sycamore is still well within Chicago's area of influence in the state. Fark Chicago.


Chicago's "influence" is felt through the entire state... so what is your point?
 
2013-01-14 12:25:25 PM  

Lost Thought 00: Sales taxes are owed in the territory where the goods change hands, not where the business is incorporated


The sales tax in that area is less, thanks to the Chicago(area) sales tax.
 
2013-01-14 12:29:56 PM  
That article provided a shocking absence of any relevant information.
 
2013-01-14 12:37:47 PM  

Land Ark: give me doughnuts: Lots of banks in the Cayman Islands are nothing more than a post office box; same with corporate offices in Liechtenstein.

Crooked, but legal.

Having been to Cayman a number of times, I can tell you that the corporate headquarters of Cola Cola looks nothing like you would expect.


And according to Google Maps, Western Sky's headquarters is a plywood cabin (think of a log cabin, but made with plywood instead of logs) on a dirt road in the middle of South Dakota. With the rates they charge, you'd think they could afford to move their headquarters to a plywood cabin on a paved road in the middle of South Dakota.

/calling them loan sharks would be an insult to the scruples, honesty, integrity and quality of customer service of actual loan sharks
 
2013-01-14 12:49:07 PM  
Sycamore is rural? They are a freak'n burb.
 
2013-01-14 01:38:43 PM  
Politics? More like the usual corporate malfeasance. You know, Job Creators
 
2013-01-14 01:44:42 PM  
Don't most of the major IT companies do this sort of thing. I seem to recall some article somewhere about how Microsoft's office in Ireland is something akin to a broom closet, yet most of their corporate income (sales) come out of that office. They do that for "tax purposes".
 
2013-01-14 01:58:22 PM  
Why does a town of 17,500 in rural Illinois, with no airport, need $1.2 billion in jet fuel? Well, it turns out Chicago politics is squeaky-clean compared to rural Illinois Corporate politics

/FTFS
//they should have put their PO Box office in Peotone - it would have looked less shady
 
2013-01-14 02:27:02 PM  
So if the office is located in Sycamore, the user telecommutes from an address Chicago, and the company uses offsite servers, where did the transaction take place?
 
2013-01-14 02:34:51 PM  
Seems like a simple fix. Impound all fuel deliveries for said airline until they cough up the tax money.

You know, someday we are going to have to play hardball with these corporations or they're just going to keep on doing this shiat.
 
2013-01-14 02:43:35 PM  

Saiga410: Sycamore is rural? They are a freak'n burb.


Come down south of I74 and you'll see real rural. Keep going past I72 and you'll be in Western Kentucky (aka, southern IL, aka Little Egypt).

Rural IL don't shiv, son.
 
2013-01-14 02:51:12 PM  
Big Oil, Big Education, Big Guns...now I have to rail against Big Airlines too? I just don't have it in me.
 
2013-01-14 02:55:31 PM  

WhackingDay: Seems like a simple fix. Impound all fuel deliveries for said airline until they cough up the tax money.

You know, someday we are going to have to play hardball with these corporations or they're just going to keep on doing this shiat.


And get sued and end up paying 10x the price of the goods you confiscated.
 
2013-01-14 03:12:14 PM  
Pass a law subjecting all airline fuel offloaded at any Illinois airport to a tax equivalent to the local sales tax, and allow the local sales tax to be a refundable credit against that tax. In other words, fuel is taxed at the point of use, not the point of sale but not subject to double taxation.
 
2013-01-14 03:14:59 PM  

Stile4aly: Pass a law subjecting all airline fuel offloaded at any Illinois airport to a tax equivalent to the local sales tax, and allow the local sales tax to be a refundable credit against that tax. In other words, fuel is taxed at the point of use, not the point of sale but not subject to double taxation.


Since fuel is used throughout the duration of the flight, are you going to calculate taxes based on the duration of the plane through each city's airspace?
 
2013-01-14 03:31:18 PM  
I don't like political arguments that spin in circles, but it's interesting to me how if this article was about a single "welfare queen" playing the laws in KY, I bet this thread would have 400 posts easy (probably many of which would be derogatory to welfare recipients). But when a corporation is doing it on the $millions scale and screwing municipalities, no one gets too worked up.

It seems to incite so much more rage when poor individuals are seen to be trying to arrange situations to their advantage as much as possible, but things like this are just generally meh. My blood isn't boiling or anything, but maybe it's because there isn't a clear individual at fault (besides the "corps are people" line) and so they can't be called out and threatened with death/deporation/whatever. Maybe if they rolled out American's CFO who said "i concocted this scheme" people would be more passionate. Fixing situations like this might help all the debt IL and the US are move in positive directions as well, but instead the national media argues about PBS or whatever. A melon scratcher.
 
2013-01-14 04:52:19 PM  

TelemonianAjax: Saiga410: Sycamore is rural? They are a freak'n burb.

Come down south of I64 and you'll see real rural. and you'll be in Western Kentucky (aka, southern IL, aka Little Egypt).

Rural IL don't shiv, son.


FTFY

Go Dawgs.
 
ZAZ [TotalFark]
2013-01-14 05:00:52 PM  
Guelph35: Since fuel is used throughout the duration of the flight, are you going to calculate taxes based on the duration of the plane through each city's airspace?

Truck drivers have to do that. They keep log books and pay taxes based on how much fuel they use in each state.
 
2013-01-14 05:01:57 PM  

Guelph35: Stile4aly: Pass a law subjecting all airline fuel offloaded at any Illinois airport to a tax equivalent to the local sales tax, and allow the local sales tax to be a refundable credit against that tax. In other words, fuel is taxed at the point of use, not the point of sale but not subject to double taxation.

Since fuel is used throughout the duration of the flight, are you going to calculate taxes based on the duration of the plane through each city's airspace?


You calculate the tax based on where the plane is fueled, not where the actual fuel is burned. The point is that these companies are trying to circumvent paying proper sales tax by claiming the purchase occurs in a lower tax jurisdiction. By taxing based on the point of consumption (the actual airport) you prevent them from doing this.
 
2013-01-14 05:27:04 PM  
Crime is always easier on the local level. Which is why the GOP fights so hard to get power to the locals.
 
2013-01-14 06:02:32 PM  
ZAZ: Lost Thought 00: Sales taxes are owed in the territory where the goods change hands, not where the business is incorporated

One possibility is that the buyer offset the 9.5% surburban rate against the 8% Chicago rate, leaving Chicago unable to collect tax on a sale otherwise subject to its jurisdiction. You can do this sometimes. The law tries to protect people from paying double sales tax. I don't know if Illinois allows such offsets.

You're both right. They're seeking to avoid mass transit taxes, which is why RTA is the plaintiff. RTA is the taxing body for the transit systems covering the six counties including and surrounding Chicago (which would certainly include O'Hare airport, where the exchange of fuel occurs). Sycamore is just past the county line where RTA's jurisdiction ends. The airlines are rate-shopping on a small scale.
RTA assesses an incremental 1.25% sales tax in Cook County and 0.75% in the collar counties, and I assume fuel is taxed similarly. For the volume of fuel they use, it's quite a savings.


...And this just sounds like a butt-hurt mis-managed public transportation authority whining about how if someone would just give them more tax revenue, their epic mismanagement would be less obvious, and they could all just go on their merry way.

Sounds like the usual Chicago graft off public utilities and services has just gone a little too far with the RTA.
 
2013-01-14 07:06:10 PM  

Stile4aly: You calculate the tax based on where the plane is fueled, not where the actual fuel is burned. The point is that these companies are trying to circumvent paying proper sales tax by claiming the purchase occurs in a lower tax jurisdiction. By taxing based on the point of consumption (the actual airport) you prevent them from doing this.


When taxiing out to the  Polderbaan runway in Amsterdam, I often wonder how many jurisdictional boundaries I'm crossing.  (The far end of the runway is more than 4 miles from the control tower, and the taxiway crosses at least one freeway.)
 
2013-01-14 09:01:28 PM  
Life offers more.
 
BBH
2013-01-14 11:26:15 PM  
More like Chicago and C(r)ook County are trying to bully the surrounding municipalities because they are losing the money they thought they could steal from the suburbs by enticing major companies to relocate into the City.

Fark Chicago and their money hungry politicians.
 
2013-01-15 01:37:55 AM  

ghare: Crime is always easier on the local level.


The ATF would probably disagree with you there. They seem to do a dandy job at the top levels.
 
2013-01-15 11:15:03 AM  

Electromax: ***snip***

It seems to incite so much more rage when poor individuals are seen to be trying to arrange situations to their advantage as much as possible, but things like this are just generally meh. My blood isn't boiling or anything, but maybe it's because there isn't a clear individual at fault (besides the "corps are people" line) and so they can't be called out and threatened with death/deporation/whatever. Maybe if they rolled out American's CFO who said "i concocted this scheme" people would be more passionate. Fixing situations like this might help all the debt IL and the US are move in positive directions as well, but instead the national media argues about PBS or whatever. A melon scratcher.


Companies have better PR than people on welfare.
 
2013-01-15 12:49:30 PM  

BBH: More like Chicago and C(r)ook County are trying to bully the surrounding municipalities because they are losing the money they thought they could steal from the suburbs by enticing major companies to relocate into the City.

Fark Chicago and their money hungry politicians.


Agreed. Start with the simple fact that OHare was an annexation of an area that was not even in the city, and it is even more obvious. Chicago likes to think that i can bully surrounding muncipalities like they do their own wards However, over the years their influence has declined yet they cry like babies when they don't get their way.

There is a reason the Chicago has been on the losing end of tax revenues - nobody wants anything to do with the idiots who run the city, so they moved and took their tax dollars with them.. (yes I know this is simplistic, but it is indicative of the larger issue)

www.newgeography.com

The Evolving Urban Form: Chicago

by Wendell Cox
07/18/2011
newgeography.com
 
2013-01-15 06:41:43 PM  
Sounds like what United and Oakland did back in California in 2002. San Francisco and San Mateo counties took the hit while Oakland benefitted. I think it took six years to fix the California loophole.
 
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