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With Illinois’ grocery tax repealed, Cary and other cities consider higher sales tax – Shaw Local

As Illinois eliminates the statewide grocery tax that funded local municipalities, Cary is the latest community in McHenry County to begin discussions about ways to replace the tax to avoid lost revenue.

Governor JB Pritzker recently signed the 2025 budget, which will eliminate the statewide 1% grocery tax effective January 1, 2026. With the change, the state gives non-home rule municipalities like Cary, in addition to home rule cities, the authority to impose their own local general sales tax of up to 1% without a referendum.

The sales tax for non-home rule residents would have “very similar parameters” to the 1% home rule sales tax Cary wanted to implement if its bid to gain home rule status had been successful, said Assistant Township Administrator Courtney Sage. Cary residents rejected the referendum on self-government in the March primary elections, although about 75% of voters were against it.

Although the grocery tax is a state tax, it has benefited local communities. And the village of Cary alone could lose about $400,000 in revenue each year without the grocery tax, Mayor Mark Kownick said. A possible non-home government sales tax would be estimated to bring in about $600,000 annually for the village.

“This creates a level playing field,” said Erik Morimoto, Cary Township Administrator. “It does not discriminate against Cary’s restaurants and businesses compared to comparable businesses in surrounding communities.”

Essential items such as prescription drugs and groceries would be exempt from the tax, but that does not mean that all items sold in grocery stores would be exempt, Sage said.

“There are items at Jewel that are not considered food,” she said, citing alcohol as an example.

Harvard, Lakewood, Spring Grove and Johnsburg are municipalities in McHenry County that already collect a sales tax for non-home rule communities, according to municipal records.

Crystal Lake has passed an ordinance to increase the home rule sales tax by 0.5% in March to prepare for the potential loss of food tax revenue. The city’s vote to impose the additional 0.5% sales tax came on the same day that McHenry County voters approved a new 0.25% VAT to fund the McHenry County Mental Health Board. With these two increases, the sales tax in Crystal Lake is 8.5% – the highest in the district from Monday, July 1st.

The increased tax, which brings in an estimated $4.55 million extra per year, will help fund more police officers and firefighters, said Jodie Hartman, Crystal Lake’s finance director. Crystal Lake estimates it would lose $1.7 million to $2 million annually without the grocery tax, Hartman said. That loss would tighten finances to pay for more public safety officers, officials said.

A shopper walks past the Five Below store in Crystal Lake on Friday, June 28, 2024. Sales tax in McHenry County increases on Monday.

With the new mental health sales tax going into effect Monday, Cary’s sales tax will rise to 7.25%.

The Metropolitan Mayors Caucus and the McHenry County Council of Mayors – both organizations of which Kownick is a member – are working with the state to give non-home rule municipalities the authority to impose their own tax if the grocery tax is eliminated, he said.

“This would make us less dependent on increasing property taxes,” he said.

To implement the 1% sales tax for non-home rule residents, the municipality would have to file an application with the Illinois Department of Revenue by October 1 if it wants to implement the tax on January 1, or by April 1 if it wants to implement the tax on July 1.

The grocery tax currently goes into Cary’s general fund. If implemented, the general sales tax would be a replacement for the grocery tax, not an addition, said Trustee Rick Walrath.

“I want this to be linked as closely as possible to the exit date, to the expiry date of the other,” he said.

The village plans to inform residents in the future and hold further discussions on this issue, Sage said.

“We are not rushing this,” said Kownick.

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