Sat, Aug 27, 2011
Airlines, Others Avoid Millions In Sales Tax On Legal
Technicality
If you've ever shaken your fist at local governments that sock
it to travelers who have no choice but to pay taxes to fly through
their airports, this may be a rare opportunity to root for the big
airlines. The City of Chicago has a sales tax as high as 9.75%. So
United and American Airlines buy their fuel through subsidiaries in
the small town of Sycamore, Illinois, and it has saved them as much
as $12-14 million since 2004.
Illinois has a quirk in its tax law that makes sales tax
applicable wherever an offer to sell is accepted, not where the
product is actually delivered. The Chicago Tribune reports this has
turned into a boon for small-town tax havens such as Sycamore,
which has enacted tax rebate agreements with airline subsidiaries
United Aviation Fuel Corp. and American Aviation Supply, LLC to
officially sell the fuel in Sycamore for dispensing into aircraft
at Chicago O'Hare International Airport.
Chicago's Regional Transit Authority (RTA) is facing a deficit,
and the discovery of the deals has the bureaucrats fit to be tied.
Mayor Rahm Emanuel complains, "Companies are gaming the system and
cheating Chicago's taxpayers. I have to be the voice for the
taxpayers, and I will not tolerate this."
Last Sunday, the Tribune reported that dozens of other companies
ranging from catalog houses to oil and computer companies were
shifting the official point of purchase for their products from the
Chicago area to outlying cities such as Kankakee and Channahon.
Both those cities have been named in a lawsuit filed Tuesday by the
city and the RTA.
So far, Sycamore has escaped a legal attack, but Chicago
officials say they're now targeting the airline deals. Sycamore
City Manager Bill Nicklas insists to the Tribune, "We're confident
of our legal standing and will defend it all day."
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