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Head-scratching policy: How Quinn's sales tax change could affect you
By Nicole Milstead | Daily Herald Staff

There's a subtle difference between these two shampoos: The one on the right fights dandruff, while the one on the left is hit with a full 6.25 percent state sales tax.

 

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Published: 3/24/2009 5:29 PM | Updated: 3/24/2009 6:37 PM

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Illinois families get extra tax help

State and nonprofit tax assistance providers are urging working families to seek free tax assistance to maximize their refunds from last year's tax payments.

They should file federal and state taxes as soon as possible to take advantage of free assistance and benefit from a larger refund if they are eligible for the Earned Income Tax Credit.

Through its partners, the state offers services to help eligible Illinois families get the largest refunds to which they are entitled.

The state has teamed up with local governments and nonprofit organizations, like the Center for Economic Progress, to provide free tax guidance to families earning up to $45,000 and to individuals with incomes up to $20,000.

The sites are open on evenings and weekends to accommodate working families and will remain open through April 15. A list is available on the Illinois Department of Revenue's Web site at tax.illinois.gov.

SPRINGFIELD - Illinoisans suffering from dry, flaky scalps and chafing rashes could soon find themselves paying a bit more for shampoos and lotions on store shelves touting relief.

Drinks like iced tea and Starbucks beverages found in stores could cost more, too.

It's part of Gov. Pat Quinn's proposed overhaul of state sales tax laws that impose a 1 percent rate on shampoos and other hygiene products promising to provide relief, while similar products are hit with the full 6.25 percent state sales tax.

Illinois consumers now can find items such as two different brands of toothpaste side-by-side on the shelf taxed at two different rates.

The state's revenue department separates these products by key phrases, like "medicated," "for relief," "relieves itching," "cracking," "burning" or "relieves skin irritation, chafing, heat rash and diaper rash."

Mike Klemens, spokesman for the Illinois Department of Revenue, used shampoos as an example. Klemens said Herbal Essences is taxed at the full sales tax rate while Head & Shoulders gets the low rate because, even though they are both shampoo, one claims to have medicinal qualities.

Under Quinn's plan, the medicated products would no longer be exempt from the regular sales tax based solely on what the labels say. The move is estimated to bring in $2 million per year.

Klemens said the change targets shampoos, toothpastes, lotions and deodorants and doesn't cover all ointments and creams on store shelves. For example, athletes' foot creams and other antifungal salves are still considered medicinal, so they'd still be taxed at the lower rate.

The sales tax change isn't limited to the grooming and beauty aisles. Currently items such as Lipton bottled tea or Starbucks double shots are also taxed at the 1 percent rate because they are classified as food. Soft drinks, however, are not considered food and get hit with the full 6.25 percent rate.

But the drinks are taxed the same when sold in vending machines. And the freshly brewed teas and coffees patrons buy at Starbucks and other outlets similarly are taxed at the higher rate because they're sold for immediate consumption.

It's just the bottled and canned varieties on store shelves that somehow escape the higher rate.

Quinn's budget aides say the plan wipes out confusing loopholes. It would also bring in an e stimated $12 million per year.

"We are simply trying to bring things in line with where they should be," said Katherine Ridgway, spokeswoman for governor's budget office. "Some places such as drugstores were taxing things differently based on what they thought."