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Elgin’s New Business Licensing Fees Tip Of Regulation Iceberg

30 December 2010 Craig 27 Comments

Construction site for new Walmart & Sam's Club Construction site for new Walmart & Sam's Club (Photo by The Elginite).

In the 1950’s, only 1 in 20 businesses needed the government’s blessing to operate. That number has grown to 1 in 3 today. This trend has been no different for Elginites.

In fact, 100% of Elgin businesses now need to pay for the privilege of doing business here.

In 2010, the city of Elgin implemented a licensing fee for every Elgin business. The amount of the fee, ranging from $35 to $595, is based on the number of square feet a business uses, requiring higher tribute from businesses that have been successful enough to expand into bigger outfits.

Businesses using zero square feet (home businesses) are also required to purchase a license.

I started my own business as a CPA in Elgin, IL. The list of regulation I’m expected to comply with and fees I’m expected to pay seems to grow by the day. Here’s what I’ve encountered so far:

  • Fee to the state of Illinois to be recognized as a limited liability company
  • Fee to the state of Illinois to be recognized as a licensed CPA
  • Fee to the federal government to be recognized as a professional tax preparer
  • Property taxes figured into my office rent
  • Taxes and fees on internet access
  • A disincentive to take on employees due to the amount of regulation and potential liabilities involved
  • Future income taxes on any profits I make after complying with the above
  • The aforementioned City of Elgin business license (Although I haven’t actually paid yet, I’ve requested the pleasure of doing so…)

And not only do the above require the use of actual dollars—they also take up time.

Ironically enough, a large portion of my time working is spent helping other businesses deal with this never ending regulation. (What could I and an army of other tax accountants be doing with our time if the regulations were simpler? Something productive perhaps?)

Oh well, at least I didn’t go into the lemonade business.

The point of this post is not to demonize the the government of Elgin above all others. Elgin’s regulation is less toxic (but toxic nonetheless) by comparison to that of Illinois and especially that of the Feds.

Rather, the point is to illustrate the overall burden placed on business owners by the state. While individual mandates may not seem excessive, when every government body gets involved, it’s death by a thousand cuts.

Politicians love to talk about creating good business environments, but somehow this is what we end up with. I can’t say I’m surprised.

Government can’t regulate us into prosperity. Instead it must come from the hard work of people, be it employers or employees. The more we make that process harder to accomplish, the less prosperity we’ll achieve.

Have you experienced the same feeling? The red tape I listed above only includes what I’ve encountered in business. Of course, they like to regulate your personal life as well with a litany of fees and rules. (DMV anyone?) What’s been your experience?

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27 Responses to “Elgin’s New Business Licensing Fees Tip Of Regulation Iceberg”

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  1. Common Sense Clarence Hayward says:

    Craig,

    I also get frustrated with all the intrusion by government in our lives. As a hard working taxpayer I am concerned that Elgin is going to intrude into the Tower Building and subsidize it to some extent. I don’t believe it is their place to do that.

    On another topic, I feel the city got it right the first time when based on the basic needs of the city and limited budget they were going to say adios to the old bison in Lord’s park.

    Now they have second thoughts and are reconsidering the situation.

    Governments need to realize “you can’t always get what you want but if you try sometime, you just might get what you need.” From a Rolling Stones classic.

    Elginites will not be deprived without a farm zoo in Elgin because just miles to the north in West Dundee is a terrific farm zoo that I took my own Elgin kids to so we could pet and feed the farm animals. The best thing about it was it was accessible to Elgin tax payers who did not have to support it with their taxes.

    The baby boomer generation started all this boom times and more and more of everything. Our boomer generation is now starting our retirement years. We have created too much debt for the coming generations to support.

    The demographics tell us that we can inflate the dollar until the Chinese and others put the brakes on our borrowing by charging much higher double digit interest rates or we can drastically cut spending to start paying our debts off.

    A third option is to increasingly tax our way to paying our debts.

    I would prefer we cut spending so our children and their children might have almost as good a standard of living as the baby boomers had it.

    “You can’t always get what you want but if you try sometime, you just might get what you need.” From a Rolling Stones classic.

    CJ

    • Craig says:

      Well said CJ. I agree with just about all of that. We are living beyond our means. It’s a gravy train that will have to come to an end, like a college kid with a credit card, reality always sets in.

      What you brought up that really scares me is our dependence on inflating the dollar as the world’s reserve currency. No other country in the world has that privilege. It’s essentially akin to having the ability to counterfeit money and spend it anywhere legally.

      I think we’re in big trouble when that happens. (And it will…no fiat monetary system ever withstands the test of time.)

      Like you said, having things like a zoo are nice, but sometimes the money is flat out not there.

      In the past, Americans and Elginites alike have relied on private financing of things that they really wanted. Doing so keeps us out of the trouble we’ve gotten ourselves so far into.

      In the past, government knew their place and stayed out of where they didn’t belong. The sooner they relearn that lesson, the less it will hurt when they finally do.

      Craig

      • Thomas Jackson says:

        So Craig, do you want to have no choice but to use an unlicensed CPA? Would you like to have corporations that don’t have to obtain a charter?

        What kind of surreal dystopia do you offer instead of regulated businesses? If you can’t foot the bill to start a CPA business or an insurance business, or another kind of business, then, find something else to do! You’re a CPA who can’t figure out how to afford a CPA license? Thanks for the consumer friendly info!

        Maybe you would be more comfortable with a lemonade stand.

        Why don’t you dip into that private financing you advocate?

        Or, stop being such a whiner and realize we live in a modern world, with modern finance, modern regulations, and modern conveniences.

        You want a city without an orchestra, or a museum, or a zoo, or a library? Wellll. Save your big bucks fella and move to Gary Indiana. If you’ve never driven your wimpy butt through there, let me tell ya: Elgin is a LOT better.

  2. RS says:

    I think it’s interesting that we rank #13 on the Business Freedom component of the Index of Economic Freedom World Rankings

    http://www.heritage.org/index/Explore.aspx

    That means the countries New Zealand, Hong Kong (China!), Singapore, Denmark, Canada, Sweden, Finland, U.K., Iceland, Belgium, Ireland and South Korea enjoy more business freedom than the “Land of the Free.”

    • Craig says:

      I think that’s another key point. The “Land of the free” is no longer any different than the rest of the world.

      At one point, the US would’ve topped such an index by a landslide, and from this former economic freedom, we still enjoy the fruits of the tremendous success that it brought.

      But, through slowly increasing incremental change towards over-regulation, we’ve allowed ourselves to fall into the same trap as everyone else, giving up our liberties for security, and with them, our exceptional ability to create prosperity.

    • paul says:

      Douglas Street Sports Bar is closed.
      3% alcohol beverage tax cited as a cause amongst many causes.
      Kaptain quoted in DH - tax approved by 7-0 vote so thus it is all good establishments go out of business as a result of council 7-0 decisions!

      I did break my word on not buying drinks at Elgin taxed establishments. It is difficult NOT ordering a beer when in a bar. Hoppe’s Tavern on Liberty st. has the absolute best fish fry on Friday nights.

      • RS says:

        OK I will try this Hoppe’s place

        • paul says:

          Have a chat with the friendly blond, Mrs Hoppe. The Hoppe’s have owned the tavern since the 70’s.
          She has an interesting tale of appearing before the city council relatively recently complaining about all the business regulations, rules, fees, and taxes making it difficult to run a business in Elgin.

          Apparently, Chooch’s is having problems. Getting to be a pattern of businesses wanting to open in Elgin but don’t.

          I don’t eat Danny’s Dalton pizza - can’t wash the SOAP off it.

      • Alan says:

        Danny’s Pizza is taking over the space. I heard they want to be open in 2 weeks. We’ll see. Chooch’s was supposed to be open a year ago.

        Anyone have any idea what is going on where Red Bar was?

        • One Vote says:

          You mean Chooch’s never opened??? I’m paying for that facade and so are you. They’d better open up and pay some taxes.

  3. TSandor says:

    The Elgin Business License was the idea of the Chamber of Commerce,which was facing a reduction of financial support from the city due to lower riverboat revenues. In past years, the council had budgeted funds from the riverboat to fund “economic development” service provided through a purchase of services agreement with the Elgin Area Chamber. The council then approved the creation of a general business license to generate revenue to fund the Chamber. Most of the dollars given to the Chamber are used to fund salaries,some of which exceed $100,000 per year. Additionally, a portion of the license fees are used to subsidize the operation of DNA, through a similar purchase of service agreement. This is another example of special interests being given access to public funds through the creation of a new tax in the form of license fees.
    One should note that the downtown area, aka the perpetual construction zone, is exempt from license fee payments for three years.

    • David Reinert says:

      This post is the reason to use Elginite.org. It allows the general public to have a voice on an issues without the censorship of the managing editor of a newspaper,who may be bias, on controversial subject matter in viewpoints and letters to the editor. If the news media didn’t like a person’s remarks he/she can throw it in the trash. Elginite.org allows electronic comment, with merit and worth, to be posted immediately on submission. The power of the managing editor has been diminished in size, degree and importance. Elginite.org allows electronic comment too be posted without censorship as long as it is reasonable and responsible. A person dose not have to worry about a bias individual playing a power game with their comments. Everyone should feel free to post on Elginite.org.

      • Craig says:

        So true. The general stodginess of the old school news publications gives me a chuckle.

        The internet really levels the playing field and I think it’s the only reason people have any chance of becoming really informed as to how the wool has been pulled over their eyes continuously by government for their entire lives.

        Anyone can post anything, and everyone walks around with cameras and internet connections. It makes me hopeful for the future.

    • Craig says:

      Very interesting. I didn’t know anything about the funding of the EAC with license funds. As a chamber member, I see what a great benefit it is. However, I don’t expect my dues to be subsidized by the businesses that aren’t a part of it and don’t get to realize the benefits.

      Raise my dues or cut the costs. Either way, keep the public funds and additional taxation out.

      Also, I didn’t come across anything about being exempt for being downtown. Do you have a source for this? I double checked the CoE’s website and didn’t see anything: http://www.cityofelgin.org/index.aspx?NID=1077

  4. TSandor says:

    The three year exemption for businesses in “the perpetual construction zone” is found in the ordinance. Additionally, one member of the council suggested that the city used the license ordinance as a way to check businesses employment records for undocumented workers, and if found revoke the businesses license. This idea was a non-starter with other members of the council. This business license is purely a revenue source to replace riverboat funds for EAC and DNA. AS a result of this tax all businesses in Elgin contribute to EAC and DNA without the benefits of membership. One might want to check the annual Federal 990 Not for Profit filing of both of these organizations to see where this money goes. These are public records available for inspection at the EAC and DNA. One might be interested in the salary levels of the executives of these organizations. Just wait till after the April elections when the council will begin to talk about a new utility tax, and or a monthly charge for residential garbage pickup. These two ideas have quietly been discussed for 2012 as the 2011 budget was “balance” by using reserve funds.

    • Craig says:

      Very interesting information. You would think that somewhere on the page describing the fee, that the city would note that some businesses are exempt.

      Looking into the 990’s is a great idea. I’m curious as to what we’d find there…

      I haven’t heard anything about a potential utility tax or garbage charge. These talks must have been quite quiet, as I’ve been to the majority of the budget meetings and council meetings in recent months. Have you seen anything in print or online about these things?

  5. TSandor says:

    A cardinal rule of the council is nothing controversial before an election. There were news reports last year related to the city analyzing its fee structure, including the addition of a separate garbage collection fee. The utility tax has been quietly in the wings for a long time, and was discussed briefly before the telecommunications tax, which is currently maxed out, was adopted. You must remember that budget meetings and council meeting are carefully orchestrated as to content, most of the discussion goes on in the background among staff, and individual council members.

    • Craig says:

      Wow, I guess I need to keep a closer eye on our dear leaders. Many thanks for the thought provoking comments, TS.

      • Chuck Keysor says:

        Hello Craig! At the time you and Tom had this exchange, I hadn’t met you, and you hadn’t yet spoken to the council against the Elgin Business License, and I effectively, I was not reading the Elginite.

        However, because of new posts to this thread, I of course started to browse through this, and was amazed at the wealth of accuratte information that Tom Sandor presented.

        I didn’t start to investigate the Elgin Business License until early May of 2011. I started knowing nothing of the subject, but met with every councilmember, the Mayor, the City Manager, a group of 5 Chamber executives, the executive director of the DNA, well over 100 business owners, before I had grasped the core of what you and Tom discussed in a few simple paragraphs. And now I know why you suggested that we pull copies of the 990 form for the Chamber (which showed Mr. Nelson was paid a bit more than $100,000).

        Well, of course we did get to discover lots of side aspects of the issue as well, and publicise things which had not yet come to pass at the time of this thread, like the fact that the City paid out $550,000 in total to the Chamber and the DNA in both 2010 and 2011, but each year only took in about $260,000 leaving the taxpayers to provide the deficit. And of course there was the Purchase of Service Agreement that had all the deliverables deleted, and we got to prove this had happened by getting a copy of the original draft PSA!

        And of course, the fun of having the City tell us they didn’t have the emails for the business license holders, and the City refusing to give us working spread sheets with the business license database, until we went to Lisa Madigan, and then in 24 hours we suddenly had all the email addresses and a full working spread sheet with over 2000 entries for all the Elgin businesses. Ah, those were the good old days! But gee,,,, I wish you would have shown me this thread back in April of 2011!

  6. rei016 says:

    Dose Elgin get a fair share of online sales tax? I wonder if anyone relly knows?

    We purchased a number of items online from: Amazon.com, Mindware.com, Target.com, WalMart.com, Best Buy.com, and Lego.com, this holiday season, just to mention a few. All of these retail sources charge us a sales tax. What checks and balances are in place to make sure the sales tax collected on the items we purchased are sent to the Illinois Department of Revenue? Online sales are increasing at a rapid pace each year. Millions of dollars are collected as sales tax. Are all of the companies, who collect state sales tax, responsible enough to submit these monies to the proper governments? There has been a lot of controversy about online sales tax. Some companies do not collect sales tax. They advertise this to the public to increase their business revenue like they advertise free shipping promotions. The state wants to increase the state income tax by 1 or 2 per cent. Why don’t they go after online sales tax revenue like they to for failure to pay toll fees? It is time for the GA to get their act together. They need to start considering the working on behalf of the people of the state and stop thinking about how they can continue to get elected when their term ends. All citizens need to get more involved in how their government, federal, state and local, runs. It now runs for the benefit of the elected official. It will only change when all citizens, collectively, start doing something that will make a difference.

    • RS says:

      The only companies that charge sales taxes to Illinois residents are the ones with a physical presence in Illinois. Amazon.com does not charge sales tax to Illinois residents. Charging sales taxes on Internet purchases would have disastrous consequences for thousands of small Illinois businesses that depend on Internet merchants like Amazon.com for affiliate revenue. These small businesses would be dumped from the affiliate programs, because Amazon and other large Internet merchants would rather sever their affiliate relationships than charge sales taxes to Illinois residents. This has happened in a number of states:

      http://www.readwriteweb.com/start/2010/03/new-state-law-bumps-colorado-off-amazons-affiliate-map.php
      http://www.theregister.co.uk/2009/07/01/amazon_cuts_affiliates_rhodeisland_hawaii/

      In most cases, no additional revenue was collected by the state because Amazon etc simply severed their affiliate relationships so they would have no in-state presence. In fact, the states harmed their economy by driving the small businesses out of state or out of business.

      • rei016 says:

        I’m sorry, but I have confirmations on my PC where out-of-state companies charged me sales tax for Illinois. The question remains dose the state have a system where they collect these taxes from these online retailers? I think a ton of this tax money is collected and put into the pockets of the companies for their own use. How dose the consumer know if the money ends up in the units of governments or it just gets lost due to the lack of accountibility by all involved?

        • RS says:

          Most of the online stores you mentioned–target.com, walmart.com, bestbuy.com and lego.com–have physical stores in Illinois so they have to charge taxes on Internet sales to Illinois residents. But your question about compliance is an interesting one. Of course it’s possible that individual companies are not remitting the taxes but I think it’s reasonable to assume that that would be the exception rather than the norm. Keep in mind that Internet sales are no different than catalog sales, and systems have been in place to deal with that for a long time.

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