Some of our local small business service providers have received very good news in their ability to compete for and retain customers. Big box retailers including Home Depot, Lowe’s and Best Buy have been putting small business service providers, including Card’s Appliance Sales & Service and Broadway Appliance and Home Center, at a competitive disadvantage for many years.
Cook County Circuit Court Judge James Snyder recently ruled that big box retailer Lowe’s engaged in a “material violation of the law” in avoiding taxes by portraying itself as a contractor when it sold and installed dishwashers, microwaves and other appliances in the home of Illinois customers.
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This ruling could also affect Best Buy’s and Home Depot’s ability to avoid these taxes. They were using the contractor claim to avoid charging sales tax to their customers when installing appliances. Our local dealers had to charge the sales tax which made it harder to win and keep customers.
The case was initiated by a group of small regional appliance retailers who complained of unfair competition. Lowe’s could face an assessment of more than $10 million after back taxes, treble damages, interest and attorneys’ fees are assessed.
Lowe’s, Best Buy and Home Depot were named as defendants in the original 2015 case under the Illinois False Claims Act. The case was broken into pieces with the Lowe’s portion proceeding to trial first.
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The central tax question involves whether home improvement stores should be viewed as retailers or contractors when appliances are sold and installed. The contractor designation cuts their tax burdens in two ways. They were able to remit Illinois taxes at 6.25% when they should be charging up to 11% in some locations. They were also able to charge taxes on the wholesale price rather than the retail price to customers.
The judge relied heavily on an Illinois Department of Revenue alert in July of 2015 which warned retailers that “the sale of tangible personal property with a separate agreement to install does not convert the retail sale to a construction contract.” This ruling should level the playing field for our local small business retailers when they service and install appliances since everyone will have to charge the same taxes.
There is more good news for local businesses. The state of Illinois eliminated all COVID-19 related restrictions on businesses last Friday by moving into Phase 5 of the Restore Illinois Plan. All businesses, schools, and recreation activities can resume with no restrictions.
Conventions, sporting events and festivals can go on with no capacity limits. Please remember that some businesses including health care providers will still require safety protocols so be kind, considerate and mindful that they are trying to protect their customers, clients and employees.
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Mattoon Area Educational Extension Center
General Electric Co.
East Rudy Place
E. Rudy Place
Douglas Nursing Center
Consolidated Telemarketing Association (CTA)
Central Illinois Public Service (CIPS)
Ed Dowd is the executive director of the Mattoon Chamber of Commerce.