SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Questionable tactics, for sure, but little to no causation

Thursday, Feb 27, 2014

* A recent Scott Reeder column was discussed in a Senate Revenue Committee hearing yesterday. The column was about the owner of a small business that was allegedly run out of existence by the Illinois Department of Revenue. The column was headlined “Another small business closed by the Illinois Department of Revenue”

For 10 days last month, a state auditor camped out at their store – sitting at one of those tiny little children’s tables – reviewing three months of receipts.

And that’s where the problem began.

You see, Ergadoo is the sort of business that has many nonprofits as customers – schools, churches, nurseries.

Those types of organizations don’t have to pay sales taxes.

So, teachers, church secretaries and principals often come in bearing letters from the Illinois Department of Revenue declaring their organizations’ sales tax exemptions.

Susan and her husband dutifully record the transaction – along with their tax exemption number.

Sounds good, right?

Well, no. The Revenue Department says that’s not good enough.

Clause said the Revenue Department told her it’s her store’s responsibility to determine where the customer’s money comes from.

“How am I supposed to prove if someone comes in with a $20 bill and a tax-exempt letter whether that money is from a school’s petty cash fund or someplace else? I can’t. No one can,” Susan said. […]

After examining three months of transactions such as these the auditor declared that the store owed $800 in back sales taxes.

“I told the auditor the state spent more to have you here for 10 days than it will end up collecting,” Susan said.

Then the other shoe dropped.

“We were told the state would plug the findings of the audit into some sort of formula and come up with a tax bill for the last three years. We’re guessing that will be about $8,000.”

After the salaries they drew from their business that is more than the store’s profits for the last two years.

* OK, first of all, small businesses like that one don’t really report “profits.” The money made is converted into salaries and other income, and then taxes are paid on personal income.

Also, check out a statement posted on the company’s Facebook page, which wasn’t so clear

As many of you already know, in September of 2013, we opened Ergadoozy on the south end of our building. It has taken off with great success and for that we thank everyone who has come by and visited even once! We seem to be booked with parties ahead for 6 weeks and are starting to turn people away. So we are going to expand our play offerings at Ergadoozy come Spring of 2014.

Do to this, we need more room and the only place to get it is from the north end of the building, now housing Ergadoo;the educational supply and toy store. In order to make room for the Ergadoozy additions, we are now discounting the entire store of Ergadoo at 50% off. First come, first served. Anyone is welcome to shop and help clear out the space. […]

We were probably headed to this point eventually, but a recent sales tax audit by the Illinois Department of Revenue will severely change how we would have gone forward with doing business with tax exempt organizations. We would rather leave the marketplace with our good name than get caught up in the burdensome details of the state taxing system.

* It’s not good at all that IDoR was camped out at her store. And the decisions about whom to give the non-profit exemptions are, indeed, not so self-evident. A good CPA would’ve probably cleared all that up.

But, while IDoR’s allegedly excessive actions do make me quite uncomfortable, this store was going out of business anyway to make way for a new, more profitable concern. I don’t think we can directly blame the government for the closure.

- Posted by Rich Miller        


29 Comments
  1. - A guy... - Thursday, Feb 27, 14 @ 11:14 am:

    Ask any small businessperson about this, they’ll tell you the very same thing. There’s a repressive and regressive culture there. Small biz doesn’t hire big 5 accountants, so they’re easy to rack up for IDOR. I didn’t do business with tons of NFPs, but it was much simpler for me to pay the tax whether I collected it or not. It’s defensive medicine. You swallow your pride and chalk it up to “that’s how things work in the Prairie State”. Too bad. Thin margins at these kinds of stores and a good deal of client loyalty. You’re right Rich, the IDOR didn’t put them out of business, they just sucked the entrepreneurial spirit out of them. That’s worse.


  2. - Rich Miller - Thursday, Feb 27, 14 @ 11:21 am:

    ===they just sucked the entrepreneurial spirit out of them===

    Huh? They expanded a new business. Doesn’t sound like any loss of spirit.


  3. - Commander Norton - Thursday, Feb 27, 14 @ 11:21 am:

    Ergadoo had been struggling for years when it opened Ergadoozy. I shopped there on several occasions because they had some unique educational toys and products that were different from what you see on the shelf at Wal-Mart. But the prices were quite high; as long as I left myself enough time for shipping, I could get my kids the same products from Amazon, sometimes for half the price. I still tried to shop there from time to time to support a local business (and no, I don’t care to support Amazon), but I’m one person raising kids on a modest income.

    Ergadoozy has really taken off. I haven’t been there yet, but other Springfield moms I know swear by it. As an easy-in, easy-out indoor playplace, it’s been a sanity-saver for kids and parents during a really nasty winter that has seen students cooped up at home during six weather days off from school.

    I agree with you, Rich; this isn’t a business that got shut down by the overbearing state; this is a company that made a smart business decision. I hope for their sake that their success continues as the weather warms and families choose to spend more time outside. The planned Springfield “Kidzeum” children’s museum will also be competition for them, I’m sure. But no, the owners of Ergadoo shouldn’t be blaming the state or big government for their situation. That’s ridiculous.


  4. - Rahm's Middle Finger - Thursday, Feb 27, 14 @ 11:23 am:

    Rich,
    Thank you once again for exposing IPI/ INN propaganda. They didn’t even call the DoR for a comment. These pieces aren’t new stories, they have a singular purpose. To discredit all government.

    Keep up the good work!


  5. - Excessively Rabid - Thursday, Feb 27, 14 @ 11:38 am:

    Let me play the Devil’s advocate here a little bit. We all love to complain about the big bad revenue authorities, but there are plenty of people, including mom-and-pop “job creators,” who can and do cheat the authorities, and the rest of us who have to pick up their tab, blind. So even though we don’t like to hear about the tactics, how else are you going to catch such people? Or would you rather just base tax collection on trust?


  6. - Liandro - Thursday, Feb 27, 14 @ 11:58 am:

    Valid points Rich. The timeline seems to back up Reader’s point, though. Ergadoo was in business for over a decade and a half, correct? Then they started up a new, non-competing (except for space, arguably) off-shoot concept that was also successful. Possibly the owners were sick of the struggles of Ergadoo’s business and/or business model, possibly they were just being entrepreneurial, who knows. But clearly they had a choice to keep their existing business and move it, sell it, or grow it.

    They decided it wasn’t worth it to keep that business alive. Revenue/profit was undoubtedly the biggest factor (I would assume), but that doesn’t negate the frustration of dealing with the state as a factor. If they say that the prospect of having to deal with newly-complicated audits, regulation, and record-keeping affected their decision to kill the business (instead of move/sell/keep)–well, that seems to make sense to me.

    They had a long-standing business that was getting more and more frustrating to run. They have a more enjoyable (and profitable?) new business venture that they wanted space for. Instead of keeping both businesses via moving one or the other, they killed one.


  7. - Tom Joad - Thursday, Feb 27, 14 @ 11:58 am:

    Another hack job by Scott Reader. He only talks to one side then writes a story. Does he really have a degree in journalism? If so, it should be revoked.


  8. - Liandro - Thursday, Feb 27, 14 @ 12:00 pm:

    Commander Norton also makes a good point about increasing (especially online) competition for Ergadoo’s business model. That’s one of the reasons that various local Chamber’s support a national push to equally tax online sales.


  9. - A guy... - Thursday, Feb 27, 14 @ 12:05 pm:

    Rich, thoughtfully…they could have 2 thriving businesses. Now they have one which appears to perhaps be a service where sales tax may be less of an issue. I don’t know most of the details, but it appears like they’re doing business in a building they already own or neither might be possible. That’s the stacked deck that faces potential business people here. When they heard “$8000 potential fine”, this one went away. Hope they are very successful with the other one. To bad they had to decide at all.


  10. - Bigtwich - Thursday, Feb 27, 14 @ 12:22 pm:

    –The money made is converted into salaries and other income, and then taxes are paid on personal income.–

    Sounds like DOR was of the opinion they underpaid sales tax in the amount of $8,000. That should come from the business.


  11. - MyTwoCents - Thursday, Feb 27, 14 @ 12:33 pm:

    A guy…if you read what was posted they closed the store to expand the gym into the space that was at least partially occupied by the store.


  12. - BIG R. Ph. - Thursday, Feb 27, 14 @ 12:43 pm:

    Just because you are standing at the edge of the cliff does not mean that you are jumping off. IDOR just gave them the final shove. In business you can put up with a lot of “stuff” but it in the end it comes down to the “One bad day” theory. All business owners have them but we are all just “one bad day” away from saying screw it.

    I have been through two of these sales tax type audits. The first one was when Blago first took over and we were “lucky” enough that they only went back 2 & 1/2 years instead of the 7 years that they could have. Luckily we only had to pay $100,000 even though the State at the time owed me over $1 million.

    These are the kinds of actions that the bureaucrats just don’t understand. This is why the State (and country) are screwed up!


  13. - downstate hack - Thursday, Feb 27, 14 @ 12:45 pm:

    Eight days for an auditor at a business to collect $800. No wonder Illinois is broke.


  14. - Newsclown - Thursday, Feb 27, 14 @ 12:51 pm:

    Another example of “Advertorial” writing disguising itself as journalism. I can’t thank the USSC enough for the rulings that enabled the funding of these.


  15. - Joe M - Thursday, Feb 27, 14 @ 1:00 pm:

    I would like to hear the DOR’s version of the story.


  16. - Rich Miller - Thursday, Feb 27, 14 @ 1:07 pm:

    ===I would like to hear the DOR’s version of the story. ===

    I asked. They can’t comment on specific cases. They can’t even confirm audits.


  17. - And the horse he rode in on! - Thursday, Feb 27, 14 @ 1:15 pm:

    Thanks Rich for always keeping us alerted to the never ending examples of biased journalism such as those pontificated Mr. Reeder.


  18. - Living in Machiaville - Thursday, Feb 27, 14 @ 1:19 pm:

    This is not uncommon. I hear from small businesses all over the state who have experienced similar IDOR audits. Some of which have the same outcome as Ergadoo. Not many actually go out of business but it’s costly and upsets the conduct of day-to-day operations while an auditor is encamped. Commenters may not like IPI or Reeder but he’s not making unfair or inaccurate accusations about IDOR auditors. They most certainly do this.


  19. - Ahoy! - Thursday, Feb 27, 14 @ 1:23 pm:

    Scott Reeder and the IPI needs to be more honest (I don’t even read their articles anymore because I can’t trust them) and DOR needs to be more rational and not scare businesses out of having tax-exempt organizations as customers.

    Also, spending 10 days at a small business like that just going over sales tax receipts is a huge management failure.


  20. - Eugene - Thursday, Feb 27, 14 @ 1:35 pm:

    Good post, Rich. Reality: the state needs to do audits or there would be no compliance. Some people are going to be the unlucky ones who get audited. Could the state do a better job of targeting audits? Probably - maybe start with the 2/3 of Illinois corporations that pay no income tax at all. As for a business closing down because of an $800 bill for back taxes and fines? Extremely unlikely, especially since payment plans are generally available. And in this case, they were clearly going to convert the space to the other business anyway.


  21. - Arthur Andersen - Thursday, Feb 27, 14 @ 2:52 pm:

    FWIW, local teevee carried this story as well. The tone and tenor were almost identical to Reeder’s-”Hard-working ex-teachers run out of business by the evil State.” The story there did not mention the cash cow next door.
    I’m just wondering if the owners are trying a little PR payback to the DOR after what they suffered. Could be wrong.


  22. - downstate hack - Thursday, Feb 27, 14 @ 2:53 pm:

    “Clause said the Revenue Department told her it’s her store’s responsibility to determine where the customer’s money comes from.”

    This is disturbing. The small business collected the tax exemption number as required, but the DOR now wants them to do the impossible. Unrealistic and not fair. And an extrampolated payment of $8,000 for earlier years is even more outrageous.


  23. - Raymond - Thursday, Feb 27, 14 @ 3:24 pm:

    Reeder has something of a love affair with Ergadoozy because, apparently in his mind, it embodies a free market initiative in stark contrast with the forthcoming Kidzeum (a public/private partnership).

    Reeder wrote a valentine to Ergadoozy just a couple months ago. So, this latest column is nothing more than another plug.

    http://ilnews.org/museum-showcases-free-enterprise-in-action/

    I guess when Reeder isn’t busy trashing teachers and other public workers, or spreading the gospel of Our Lord Jesus Christ, then he’s throwing some free advertising to his favorite local business.


  24. - Sunshine - Thursday, Feb 27, 14 @ 4:30 pm:

    Ergadoozy is a great kid’s place! Been there with the grandkids and their friends and they love it.

    Too bad about the tax man. One needs to always watch their back….and their record keeping.


  25. - Democrat Grrrl - Thursday, Feb 27, 14 @ 4:30 pm:

    Classic Scott Reeder “reporting.” A hack with an agenda to push.


  26. - Frosty-The Snowman - Thursday, Feb 27, 14 @ 5:47 pm:

    I believe Pat Quinn and the guys down in Springfield are smarter than we think. Pat is leaving these “roadblocks” in place for businessmen in Illinois in order so they can “improve their ability to learn to deal with adversity.” There is no question about it. When another Illinois business throws in the towel and leaves this state for Texas or Indiana, that business has been “honed” to a fine edge. They know what “real governmental roadblocks” are. They can deal with anything that their competition overseas (or in the USA) can throw at them. They owe it all to Pat and the boys down in Springfield. Pat probably gets a dozen “thank you” cards each week mailed from Texas and Indiana by these ex-Illinois businesses. Not to mention the “Thank You” cards from the governors of surrounding states.


  27. - Liandro - Thursday, Feb 27, 14 @ 7:36 pm:

    - Democrat Grrrl - Thursday, Feb 27, 14 @ 4:30 pm:

    “Classic Scott Reeder “reporting.” A hack with an agenda to push.”
    —————–
    Reader reported on specific events that happened to a pair of Springfield businesses. Rich looked into the details from some different angles. Both seem legitimate. I’ve gone through a similar week-long sales tax audit myself, so I find it to be an interesting topic. Is highlighting the struggles of Illinois’ small business community such an awful agenda?


  28. - With Liberty For All - Thursday, Feb 27, 14 @ 7:47 pm:

    I am still hung up on the $800 in unpaid taxes turning into $8000. Sounds like a kinder, gentler Mafia interest rate.


  29. - Regnad Kcin - Thursday, Feb 27, 14 @ 8:41 pm:

    It’s difficult to know the whole story in these situations somewhat similar to personnel matters. The “victim” can make statements without having to supply all of the details and the accused has to stay silent.


Sorry, comments for this post are now closed.


* Question of the day
* What could possibly go wrong?
* *** UPDATED x1 *** The tide shifts a bit
* Vallas says CSU will not be absorbed
* We've come a long way, baby
* Rauner won't say where he stands on "repeal and replace"
* Zombies!!!
* Treating the symptoms
* Manar wants Rauner to "personally" negotiate AFSCME contract
* And Petrella makes 8
* Candidate preview at Rainbow PUSH
* On inauguration day, a study in contrasts
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............
<


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

  
* OPPO Find 9 images, specs leak in return to flagship segment
* Vine Transitions into 'Vine Camera' as Original Service Shuts Down
* Samsung’s S Health app will soon allow you to check-in with your Doctor via video
* Google Pixel demand is much higher than expected, study shows
* Twitter loops all videos under 6.5 seconds as Vine shrivels into a camera
* Evernote attempts to simplify with its new iOS app
* [Deal] Pick up a Google Daydream View for $49 right now

* Many forces at play in GM's Quintana plans
* Watch HOF announcement coverage live, 4 CT Wednesday
* White Sox trio among top RHP prospects
* Healthy Tilson should boost hometown White Sox
* Healthy Tilson should boost hometown White Sox
* Frazier, 4 others agree with Sox on 1-year deals
* Frazier, 4 others agree with Sox on 1-year deals

...............


Main Menu
Home
Illinois
YouTube
Pundit rankings
Obama
Subscriber Content
Durbin
Burris
Blagojevich Trial
Advertising
Updated Posts
Polls

Archives
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005

Syndication

RSS Feed 2.0
Comments RSS 2.0
WordPress

Loading


* Illinois governor signs school, daycare lead-te.....
* Rauner Names Panel To Guide Overhaul Of Chicago.....
* Rauner recommends Vallas for Chicago State trus.....
* Rauner recommends Vallas for Chicago State trus.....
* Illinois is short 600 school substitutes a day,.....
* Rauner recommends Vallas for Chicago State trus.....
* List of Illinois Democrats skipping Donald Trum.....
* Rauner recommends Vallas for Chicago State trus.....
* Rauner names advisory board to help Chicago Sta.....
* Rauner recommends Vallas for Chicago State trus.....


* Rauner recommends Vallas for Chicago State trustees chairman
* Biomass boiler brings environmentally friendly heat to UI
* Illinois is short 600 school substitutes a day, study finds
* Player suicides lead to tough set of questions for coaches
* 2 charged after gunfire exchange with off-duty officer
* Police: 3 dead, 1 hurt following crash on Chicago expressway
* EXCHANGE: New year, new opportunity to overcome hearing loss
* Permanent home for Chicago Children's Theatre opens
* Northern Illinois students bound for Trump inauguration
* Additional mental health training given first responders

* Rauner recommends Vallas for Chicago State trustees chairman
* Manar: Rauner should personally negotiate with AFSCME
* Lead testing for schools, day cares signed into law
* Illinois governor signs school, daycare lead-testing law
* Illinois Senate vows swift action on ambitious budget plan
* Ex-Rep. Don Moffitt appointed to state Agriculture Department post
* AFSCME schedules state employee strike authorization vote
* AFSCME schedules state employee strike vote
* AFSCME schedules strike vote
* Antiquated system leaves Stratton Building’s lights on overnight

* Citibank makes play for customers wanting fee-free cash
* Rauner names advisory group for Chicago State
* Boeing chief exits Trump meeting with hints that jet deal is near
* Premiums, uninsured would soar under GOP health law repeal: CBO
* Google exec well-known in Chicago named Mattel CEO


* Waukegan men charged in connection with 8 armed robberies
* 23-year-old man wounded in Austin shooting
* Police: Four cellphone store burglaries reported in Austin
* ‘Aladdin’ star James Monroe Iglehart switches to ‘Hamilton’
* FBI: 50 more bank robberies reported in 2016 than previous year
* Time to ‘fish or cut bait’ on airport security, alderman says
* Man shot in leg in West Pullman
* Quenneville splits up struggling Toews, Hossa to spark offense
* Blackbird named restaurant of the year at Jean Banchet Awards
* Four Chicago teens arrested for theft at Oakbrook Center Mall


* 'It's inspiring': Cubs' Contreras pays visit to Advocate Children's Hospital
* Fox Valley couple heading to Trump Inauguration
* Cowboys delay talk of Tony Romo's future, likely knowing answer
* Judge to Waukegan woman who killed daughter: 'How can humans do this?'
* Key offseason dates for the Bears
* Wife of Orlando nightclub gunman knew he was going to commit attack that killed 49, prosecutors say
* Blackhawks shake up lines in search of production
* Paramedic ran red light in ambulance-car crash: Naperville police
* More than 50 Democratic lawmakers now skipping Trump's inauguration
* List of Illinois Democrats skipping Donald Trump inauguration grows


The widget AQL4JYGHIY powered by Feed Informer does not exist.


* Rauner recommends Vallas for Chicago State trustees chairman
* Manar: Rauner should personally negotiate with AFSCME
* Kathleen Parker: Hosea, can you see?
* Lead testing for schools, day cares signed into law
* Illinois governor signs school, daycare lead-testing law
* Allan Woodson: Proud of President Obama
* Their View: Be a lifesaver; sign up to become an organ donor
* Illinois Senate vows swift action on ambitious budget plan
* Our View: It’s up to us if MLK’s legacy of service continues
* Bernard Schoenburg: DelGiorno says Democrats would be better without Madigan


* Illinois is short 600 school substitutes a day, study finds
* Alleged burglar charged with felony
* Man accused of having loaded gun, drugs
* 4 men face aggravated battery charges
* 5 foodie things to do this month
* R-12: Best PSA - boy scouts rocket program
* 2017 Silver Dome Entries
* Chicago Cubs World Series trophy coming to Davenport later this month
* AAUW offers three SIUC scholarships for women
* European Court fines Russia for banning U.S. adoptions


* Cowboys delay talk of Romo's future, likely knowing answer
* Poll: Young Americans doubt media's ability to cover Trump
* Islanders fire coach Jack Capuano in his seventh season
* Prosecutor: Orlando gunman's widow knew about the attack
* 2 weeks, 1 country and a world of wonders in Thailand

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* Menendez, Durbin Praise Final HUD Lead Saf......
* Menendez, Durbin Praise Final HUD Lead Saf......

* Will Newt Gingrich and ex-senator Mark Kir......
* Here's what happened in week 2 of the Colo......

* The education governor is clueless about teaching and learning.
* What is the difference between Betsy DeVos and Davos, Switzerland?
* Illinois 100th Senate sworn in with 37 Democrats, 22 Republicans
* Celebrity Meltdown
* Illinois 100th House sworn into office with 67 Democrats, 51 Republicans
* Are Humans More Valuable Than Animals?
* Illinois REALTORS® sworn in as state representatives
* Morning Minute: NAR calls for quick confirmation of Carson as HUD Secretary
* Property tax freeze passes one chamber as session adjourns
* Thorner: Join the effort to preserve the Constitution


* Governor Rauner Signs Lead Testing Bill
* Governor Announces Appointments
* Illinois Targeted Violence Prevention Program Receives $187,000 U.S. Department of Homeland Security Grant - Funding will support community training and engagement programs
* Governor Rauner Announces #GovClassroomVisit
* IDoA tips for winter weather preparedness - Health hazards to be aware of during the winter months that could affect older adults




      Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller