cover
TO: Mayor John Laesch
FROM: Stacey Peterson, Director of Financial Operations
Christopher Minick, CFO/City Treasurer
DATE: June 26, 2025
SUBJECT:
An Ordinance Enacting a Municipal Grocery Retailers' Occupation Tax and A Municipal Grocery Service Occupation Tax.
PURPOSE:
The Illinois state grocery tax of 1% is set to be eliminated effective January 1, 2026, as per Public Act 103-0781, and provides municipalities the authority to enact a local sales tax on grocery items. We wish to implement the local grocery tax effective on January 1, 2026 to avoid revenue loss and service cuts as a result of the State action.
BACKGROUND:
The grocery tax in Illinois refers to the 1% sales tax on groceries that has been in place since the 1990 sales tax reform. The 1990 reform eliminated state taxation on groceries but provided for a 1% grocery tax imposed and administered by the State but distributed to local governments. It also standardized tax collection.
Public Act 103-0781 called for elimination of the State tax on groceries effective on January 1, 2026 but allowed the option for individual units of government to pass an ordinance allowing for the continued collection of the Grocery Tax via a locally imposed and administered tax of 1% on grocery items. The City would lose an estimated $4.5 million annually should it decide not to continue to collect the tax.
The proceeds of the tax will be distributed to the City by the state. The City records these revenues in the General Fund and they are utilized to provide services such as Police, Fire, Public Works, and other governmental services.
It is important to note that this is not an imposition of a new tax. Passing the ordinance continues the current practice of collecting a 1% tax on the sale of grocery items that has been in place for 35 years.
DISCUSSION:
The grocery tax is collected from everyone that purchases grocery items in the community, including non-residents. The Grocery Tax is applied to food...
Click here for full text