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Lee County officials report sharp drop in local use-tax receipts after state reclassification
Summary
County finance staff said a state reallocation of internet sales/use tax receipts has reduced the county's monthly local use-tax receipts from about $40,000'$45,000 to roughly $6,000'$8,000, yielding an estimated $30,000'$35,000 monthly shortfall that could total about $180,000 annually and affect the upcoming budget.
Lee County finance officials told the county's finance committee that a state reclassification of local use-tax receipts beginning July 1, 2024, has substantially reduced the county's monthly local-use tax disbursements and will likely create a material shortfall in next year's revenue assumptions.
Reid, the county treasurer, explained the change to the committee: large retailers with "nexus" in Illinois now have receipts allocated to the ZIP code where an online purchase was shipped rather than pooling those receipts statewide. In prior years Lee County received roughly $40,000 to $45,000 per month in pooled local use tax; in the three months after the reclassification the county averaged about $6,000 to $7,000 per month, Reid said. "So my thought is we're gonna see probably at best, maybe 8 to 10 a month versus the 40 to 45," he told the committee.
Committee members discussed the revenue effect and whether increased sales-tax receipts would offset the reduction; staff said sales-tax collections rose slightly but not enough to make up the difference. One committee member summarized the impact: in a rural county the reallocation favors ZIP codes with higher retail nexus and population and reduces shared-pool benefits that previously helped smaller counties. The committee estimated the monthly loss at $30,000 to $35,000 and said that over a year the cumulative loss could be close to $180,000.
Reid said the county can request more detailed state data, but the state restricts access and requires agreements limiting use of vendor-level information. Staff said the change is still being reflected in monthly receipts as the state reconciles back to July 1, 2024, and noted the county's budget planning will need to account for the reduced pool-based receipts. The committee flagged the change for the upcoming budget review.
The committee also noted related formula changes to the Personal Property Replacement Tax (PPRT) and to other state distributions, which have modestly shifted receipts among local governments.
No formal action was taken at the meeting; committee members requested staff to track monthly receipts and report updated projections during the budget process.
