In Quest For Lower Taxes, How Far Is Too Far?

Sep 12, 2013

The Illinois Supreme Court bench is seen in this file photo.
Credit Brian Mackey / WUIS

The Illinois Supreme Court heard arguments Wednesday in case that asks whether the Hartney Fuel Oil Company went too far in trying to secure a lower tax rate for its product.

Harney sells gas to big transportation companies — railroads, trucking firms, that sort of thing.

Until 2008, you could have been forgiven for thinking Hartney was based in Forest View, in Cook County. After all, the company had a building there where all of its employees worked.

But, every day, Hartney customers sent orders to a fax machine in the tiny town of Mark, Illinois (population 555). There, a contractor would forward the order to Hartney headquarters.

Why go to the trouble? The tax rate was 2.5 percent lower in Mark than in Forest View.

Hartney's lawyer, Rob Hochman, told the justices it's necessary in the low-margin fuel business.

"There's nothing wrong with a business structuring its affairs to reduce the tax burden on its customers," Hochman says.

The state of Illinois and Cook County taxing bodies take a dim view of this. They argue the key factor is where the business is located, not where the sale occurs.

Hartney ultimately did move its actual headquarters to Mark. It also paid more than $23 million in taxes and penalties, and is fighting to get that money back.