Target, Sears And Aldi Named In Illinois Tax-Dodge Scheme

Target (NYSE:TGT), Sears (NASDAQ:SHLD), Land's End and Aldi have been called out by the Chicago-area mass-transit agency, which claims the retailers set up "sham offices" to dodge millions of dollars in sales taxes, The Associated Press reported.

The Regional Transportation Authority (RTA), which operates commuter trains and buses in the Chicago area, on Wednesday (April 17) released a list of dozens of companies that allegedly set up small offices in two Illinois cities, Kankakee and Channahon, that have low sales-tax rates. The RTA has sued the two cities, alleging they illegally induced the retailers and other companies to "claim that their sales are sourced through sham offices" in the two cities, according to the RTA's complaint, which was filed in 2011.

The lawsuit also claims that the cities kicked back as much as 85 percent of the sales-tax proceeds to the companies.

Also on the list of companies maintaining sham offices was point-of-sale vendor NCR (NYSE:NCR) and telcos Verizon (NYSE:VZ) and AT&T (NYSE:T).

"Whatever work they are doing is just enough to create a sham office in order for these sales transactions to be cited to these cities," the RTA's chief of staff, Jordan Matyas, told The AP. "In some places, you have 20 companies procuring millions of dollars in goods from these offices where there is minimal staff doing minimal work."

Target said in a prepared statement that the company closed its Kankakee office in 2010.

Sears said in its own statement that the chain "no longer seeks or receives any benefits from Kankakee," adding, "Given the millions of dollars that go uncollected each year in violation of applicable sales and use taxes, we believe a focus on companies that don't comply with applicable sales and use tax law is more appropriate than a focus on those of us who do," apparently a reference to online merchants that don't collect sales tax.

No retailers are named as defendants in the lawsuit. The RTA said it obtained the names of the companies through Freedom of Information Act requests, and that a judge issued an order late last week allowing the RTA to release the names to the public.

For more:

- See this Chicago Sun-Times story 
- See the RTA news release

Related stories:

Why Is Only Target In Trouble For What Every Other Retailer Is Doing?
The Portrait Of Embarrassment: Sears And Walmart Learn Contractor Lesson
Skim Scam: Did Aldi Invite 11-State Coordinated Attacks?

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