Amazon delivery tax? Ground shipping fees proposed in City Council

Chicagoans who have flooded Amazon and other online retailers with orders during the pandemic to avoid in-person shopping trips would pay for the privilege of that convenience under a “ground delivery tax” proposed Monday.

Ald. Patrick Daley Thompson (11th), grandson and nephew of Chicago’s two longest-serving mayors, wants to impose a $1.25 tax on packages with a “cumulative weight of 50 lbs. or less” and $2.50 for packages tipping the scales at more than 50 lbs.

Packages contained “prepared food for immediate human consumption” would be exempt. So would packages containing “solely prescription and non-prescription medicines, drugs and medical appliances including, but not limited to tampons and sanitary napkins, insulin, urine testing materials, syringes and needles used by diabetics.”

To avoid a collections nightmare, the ordinance states: “It shall be the duty of each seller of tangible personal property sold at retail and delivered to a location within the city by ground delivery service to collect the tax.” Sellers that fail to “collect and remit the tax…shall be liable to the city for the amount” left uncollected.

Daley Thompson could not be reached for comment.

He voted against Mayor Lori Lightfoot’s $12.8 billion budget in committee and opposed the mayor’s plan to raise property taxes by $94 million, followed by annual increases tied to the consumer price index.

Ald. Gilbert Villegas (36th), the mayor’s City Council floor leader, said he’s intrigued by the idea of a ground delivery tax,” particularly because the avalanche of home deliveries means more boxes and more garbage that need to be collected by city crews.

But, after consulting the city’s Law Department, Villegas said he’s convinced that the Il. General Assembly needs to authorize the proposed ground delivery tax.

The earliest that could happen is in the spring session, when Lightfoot is also expected to make a renewed push for pension relief, a graduated real estate transfer tax and a sales tax on services among other items.

“We need some enabling language so that we’re on solid ground. We could do it and face a lawsuit. But, if we were to do it in Springfield during the spring session, we would be in a better position as a city,” Villegas said.

“Definitely, we’re gonna be looking at all types of revenue moving forward, given the deficit that looms in 2022.”

With brick-and-mortar stores struggling and more Chicagoans shopping online, Villegas said the city must “level the playing field” by adjusting its tax policy to accommodate that new reality.

“It is costing the city more money. It does generate more trash. Not to mention the additional usage on the roads of the vehicles” making deliveries, Villegas said.

“The positive is that there’s, hopefully, more motor fuel tax being generated. But a lot of these companies — especially Amazon — are looking at electric vehicles, which will not allow us to collect from the motor fuel tax on that usage.”

In other City Council matters

Also at Monday’s City Council meeting, Aldermen Edward Burke (14th) and Ray Lopez (15th) joined forces on a pair of ordinances tied the pandemic.

One requires “daily cleaning of public accommodations.” The other requires hotels to offer “all job positions which become available” to “qualified” employees laid off during the pandemic and give those employees 10 days to accept or decline the offer.

Hotels deeming laid-off employees as unqualified for those openings would be required to file a written explanation within 30 days.

The preamble to the ordinance quotes the American Hotel & Lodging Association as reporting that, during the peak of the pandemic, 9 out of 10 U.S. hotels were forced to lay off or furlough employees.

As of Aug. 31, 40% of hotel employees had not returned to work, the ordinance states. That leaves the “accommodations sector” of the U.S. economy with an unemployment rate of 38%, nearly four times the national average.

“Almost two-thirds of hotels remain at or below 50 percent occupancy with little expectation that occupancies will increase until at least 2021,” the ordinance states.

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