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Local Editorials

OUR VIEW: Ottawa officials should move away from vehicle sales tax

Some Ottawa residents started 2020 with quite the surprise.

A tax bill.

According to a sales tax approved by 85% of voters in 2004, a 0.5% sales tax is applied to all vehicle purchases made by only Ottawa residents, regardless of where a vehicle is purchased.

That amount had been collected from in-city sales, all along.

The city, however, didn't collect it from every sale outside the city's limits, as was intended when it was adopted.

That's only the beginning of what has been a bad policy.

During a summer workshop session, local auto dealers complained to City Council members buyers were seeking dealerships in other nearby communities to avoid the 0.5% sales tax.

Just after the holiday season, the city sent out roughly 700 bills to people who purchased vehicles outside of the city's limits in October and November, and who also did not pay the extra local sales tax.

The tax bills upset some residents. And rightfully so.

That's an unexpected $100 on a $20,000 vehicle purchase right after Christmas. Mayor Dan Aussem acknowledged it was bad timing on the city's part and offered to extend the due date of bills to May 1 for anyone who asked for an extension.

Timing of the billing aside, the city did not provide much notice.

Council members announced in July they would start collecting the sales tax on out-of-town vehicle purchases, but months went by without residents knowing when or how it may come about.

Ottawa resident Denetta Flamingo, who is attempting to get an advisory referendum on the November ballot urging the City Council to repeal the tax, said all residents should have been notified about plans to begin collecting the tax on out-of-town vehicle purchases.

We agree. At the very least, people should have been given advance notice that the city would start collecting the sales tax differently than it had been for years.

This would have given officials an opportunity to educate residents on the tax, share its history and explain why car buyers might find a hefty tax bill in their mailbox. There's still misunderstanding about the tax. Some of the new funds brought in from the tax could have paid for whatever costs were necessary to give residents notification.

With that said, it isn't clear why city officials didn't collect out-of-town purchases for several years. Aussem said that responsibility always had fallen on the city, even though some out-of-town dealerships voluntarily collected the tax on Ottawa's behalf.

City officials receive a notice from the state of Illinois when a resident has purchased a vehicle, which would tip off the city that tax is due.

If that's the case, why didn't city officials take the step all those years to make this a fair process?

Taxes are never any fun to pay, but they should at least be collected fairly and transparent to the consumer. Many people probably would prefer to finance the cost of the tax along with their vehicle purchase, rather than receive a separate tax bill later.

Even though this tax is legal, we understand why city residents feel it’s unfair — it’s like a penalty for living in Ottawa. Not only that, but also it’s been unfairly administered, so hundreds of people have avoided the tax over the years because the city failed to collect.

Residents expect to pay another city's sales taxes when they travel out-of-town, but they don't anticipate getting a bill in the mail to pay another round. No other purchases are taxed in this manner.

We encourage citizens to sign the petition for an advisory referendum if they too believe the tax is unfair. We also urge the City Council to honor an advisory referendum if one passes.

When promoting the larger referendum, including the vehicle tax in 2004, city officials showed a need for the funds and voters agreed. Now 16 years later, some voters see it as a cash grab because of all those years of incomplete collection. The city would do well to demonstrate the importance of this money to its operations.

The tax generates more than $100,000 per year. We would like to see officials seek an alternative source for these funds. Perhaps the difference can be made up by recreational marijuana sales tax revenue, and do away with this confounding tax.

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