SPECIAL REPORT: No usage tax in Illinois; new plan would increase IRP fees

| 6/18/2003

An attempt to eliminate the rolling stock exemption in Illinois – which would have effectively placed a usage tax on trucks in the state – has been avoided, but keeping the exemption has come with a price tag.

Instead, the General Assembly passed a bill that will require all truckers who travel in Illinois – both those who are based there and those based elsewhere who travel there – to pay increased IRP fees.

The fees, which are based on the percentage of a truckers total miles that were traveled in Illinois, will go up 36 percent, according to Don Kerber, a state official familiar with the legislation.

“So if I’m paying $1,000 now to Illinois, then I’m going to be paying $1,360,” Kerber said.

While the bill, SB841, does leave open the possibility that some truckers could pay the rolling stock tax, in effect, none would. Any trucker either based in Illinois or elsewhere who pays any IRP fees to the state would be exempt from the tax.

“If you are subject to paying that increased fee, then you are no longer liable for paying any sales tax,” Ann Sundeen, a spokeswoman for the governor’s Office of Management and Budget, told Land Line.

The bill also contains a hidden bonus for trucking companies. Every firm that pays the increased fee would receive a $50 tax credit for every employee who is a resident of Illinois and who drives a truck, Sundeen said.

SB841 has passed both houses of the General Assembly and is now awaiting the governor’s signature. However, the General Assembly’s Web site does not indicate that the bill has been sent to his desk yet, and under Illinois law, he has 60 days after a bill is sent to him to sign or reject it.

Gov. Rod Blagojavich first announced his plan to end the rolling stock exemption – a rule that exempts tractor-trailers and other transportation equipment from the state's sales tax – in his annual budget address to the General Assembly earlier this year. The governor referred to the exemptions as "loopholes."

If the exemption had been overturned, a trucker purchasing a new tractor for $100,000 would have faced a tax bill from the state of more than $6,200. A new trailer would have added to the tax bill.

"Fairness means closing the corporate loopholes that allow corporations to skirt their obligations to the state while regular, hardworking people dig deep into their pockets, week in, week out," Blagojevich said. "Some business incentives necessary then, aren't necessary now."

“What the governor may call a loophole is really just a realization that the feds can beat states to the punch on taxing truckers,” Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, said. “Every new large truck sold comes with a 12 percent federal excise tax assessed right on the top. That exorbitant amount is paid by truckers when the truck is new and the tax is reflected in the price of the truck throughout its life. That’s no loophole to truckers.”

State revenue from trucking has been an issue in the Land of Lincoln. For years, Illinois has been locked in a battle with Oklahoma over reciprocal fees paid between states. A significant number of out-of-state truckers had base plated in Oklahoma, where trucking fees have been lower, to avoid higher fees in their own states. Illinois had complained about the problem to the International Registration Plan, or IRP, an interstate compact that regulates the reciprocal arrangement.

--by Mark H. Reddig, associate editor