Gurnee may increase its home rule sales tax to recoup revenue lost when Illinois officially ends its grocery tax at the start of 2026.
When food is taxed at a grocery store, that excess revenue goes back to local municipalities, but that will no longer be the case starting on Jan. 1.
After passing House Bill 3144, Illinois is eliminating its 1% grocery tax, but is allowing municipalities to make up that funding by either implementing their own grocery tax, or increasing other taxes. Most groceries are currently taxed at 1.75%, with 1% being returned to municipalities, and .75% going to the Regional Transportation Authority.
While Gurnee did not take a vote on what it plans to do at its Village Board meeting Monday, members of the village staff and Board of Trustees discussed a plan to instead increase a home rule sales tax to help alleviate the tax burden on residents.
The new law covers most food items that can be purchased at a grocery store, but does not cover alcohol, candy, soft drinks and foods consisting of, or infused with, adult-use cannabis. Those foods will continue to be taxed when purchased throughout the state.
Gurnee Finance Director Brian Gosnell said that he’s “not quite sure” the exact amount that the village receives from the grocery tax, but estimated that it’s between $2 million and $2.5 million.
He added that Gurnee receives approximately $1.1 million from supercenters like Target and Walmart, $670,000 from grocery stores including Aldi, Mariano’s and Jewel, up to $480,000 from drugstores and $230,000 from other retailers.
In addition to the amount that Gurnee hopes to make up after the grocery tax is removed, Gosnell said that the village is also seeking additional revenue to cover a $3 million upgrade to its water infrastructure, so village officials are looking for options that would bring in about $5.5 million more each year.
According to Gosnell, a majority of purchases at Gurnee’s grocery stores are made by village residents, and the village hopes to relieve its residents of paying a grocery tax. Instead, he recommended opting for a home rule sales tax.
He said that Gurnee would have to increase its home rule sales tax in .25% increments, and a .25% increase would result in $2.89 million more in annual revenue.
“We would need a half-percent to make up the revenue that we need there,” Gosnell said.
Ultimately, he recommended that Gurnee not implement a grocery tax, and instead increase its home rule tax rate by .5%, dedicating half of that revenue to infrastructure.
“I think this is a great approach,” Trustee Kevin Woodside said. “I believe that it does provide those resources necessary to accomplish those long-term goals and the short-term goals. Importantly, in eliminating the grocery tax, which does impact our residents most directly, it does reduce the cost of food, which is essential.”
Woodside added that he appreciates that the new plan of increasing sales tax would place more of the tax burden on visitors, rather than Gurnee’s residents.
Municipalities have until Oct. 1 to enact a tax, without having to go to a referendum. Mayor Tom Hood said that the village will vote on a potential replacement for the grocery tax at an upcoming meeting, although it has yet to be scheduled.