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City staff explains sales/use tax shift and home-rule revenue role
Summary
Staff outlined composition of the 9% sales tax, the Jan. 1 state change treating some use-tax transactions as local sales based on delivery location, and the role of the home-rule 1.25% in funding bonds and community projects.
City finance staff told the council that Galesburg’s sales tax base is made up of multiple pieces and that a state change to how out-of-state retailers are taxed will shift collections based on delivery location starting Jan. 1, 2026.
Presenter S2 laid out the 9% total sales-tax rate, noting the state portion (~5%), a local 1% that returns to the city, and a 1.25% home-rule tax that the city controls. "So instead of paying 6.25%...if you deliver it to the city of Galesburg, they're paying the 9%," S2 said when explaining the recent use-tax rule change.
Councilors and staff discussed how the home-rule increment adopted in 2023 (0.25 percentage-point increase) was used to finance bonds for the community center; roughly half of that incremental revenue pays bond debt and the remainder funds community improvements. Staff said the use-tax line has moved but the net effect is still unfolding and they will monitor year-over-year receipts in 2026.
