Oak Brook anticipates collecting significant additional sales tax revenue from retail businesses, which would likely include furniture and jewelry stores, that previously have not been paying into the village coffers.
“Though speculative to estimate, Oak Brook quite possibly is missing out on well over $1 million of annual sales taxes that are owed,” said Village Board member Larry Herman.
A tax attorney by trade, Herman began looking into the sales tax situation in regards to Restoration Hardware, which in September 2021 opened a 60,000 square foot gallery in a former Oakbrook Center parking area, after having a smaller presence for several years in the mall.
Restoration Hardware previously, and some other businesses in Oak Brook, currently, have not paid sales tax to the village because merchandise ordered and paid for in their stores is shipped to the customers’ homes from out-of-state locations.
Multiple conversations with Restoration Hardware officials resulted in the company starting when it opened its new gallery to pay its sales tax to Oak Brook on delivered items ordered in the store. And village staff currently is looking into identifying other businesses that are not collecting local sales tax to Oak Brook, as it should be.
“The Village is not enforcing the sales tax laws, that is the role and responsibility of the Illinois Department of Revenue,” Herman said. “However, we do seek to identify situations in the village where retailers may not be correctly collecting and remitting to the Department of Revenue local sales taxes.”
Herman said such noncompliance creates an unlevel playing field because the vast majority of other retailers with similar businesses and business models are complying.
“It also deprives the village of revenue that supports the village’s goal of keeping sales tax rates at the current comparatively low rate of 7.5%,” he said. “The village may choose to work with the individual retailers to better understand their fact patterns and find consensus on how the sales tax laws should apply.”
Herman said that village officials prefer that approach to asking the Department of Revenue to audit retailers.
“An audit could well result in the imposition by the Department of Revenue on the retailer of liability for back uncollected taxes,” he said. “While that might benefit the village financially, it would harm our retailers, and our ultimate goal is to harmonize the collection process prospectively and ensure Oak Brook remains the preferred community for retailers to choose.”
Herman said Illinois sales tax laws are complex, and that complexity creates an environment for retailers to potentially misconstrue the application of the laws to their sales activity. Herman said it’s not uncommon for premier furniture and jewelry stores to generate up to, or more than, $1,000 per square foot and some may not be.
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“A 25,000 square foot store with sales of $1,000 per foot equals $25 million of annual sales,” he said. “That translates into $375,000 of sales taxes to Oak Brook at 1.5%.”
Village President Gopal Lalmalani gave kudos to Herman for his work on sales tax revenue.
“He’s an expert on this, and he’s done a spectacular job because not only did he find the actual problem, he also found a solution to get this done,” Lalmalani said.
He said he questioned Restoration Hardware officials before Herman joined the Village Board about paying sales tax to Oak Brook.
“That never went anywhere,” he said. “We didn’t look at this issue as we should have, but we are moving forward now.”
Generating additional sales tax revenue will be a positive move, especially in Oak Brook, which doesn’t assess any property tax, Lalmalani said.
“The additional sales tax revenue gives us some flexibility and allows us to improve the quality of services around the village,” he said.