After city staff revealed revenue from a 1% Naperville grocery tax is far from expected, some city council members expressed concern and are looking to replace the tax with an alternative revenue stream.
“I will reiterate my concern as I did last fall, I don’t think we should be taxing groceries,” said councilwoman Mary Gibson.
Shortfall specifics
Deputy Finance Director Traci Marrocco reported that in just over the first half of the year, the city has collected $1.63 million from its grocery tax, which at this rate would put that revenue at 24.6% below the $6.5 million budgeted by year’s end.
“The sole justification [for the local grocery tax] was that it was a more stable source of income. With a [nearly] 25% variance, that just didn’t happen,” said Councilman Ian Holzhauer, who proposed ‘fixing the mistake that we made last year’ (replacing that tax) for the 2027 budget cycle.
Issues with remittance
Illinois passed legislation abolishing the statewide 1% grocery tax effective January 1, 2026 but municipalities were given authorization to pass local ordinances replacing it. Marrocco attributed the deficit to the fact a number of grocers have failed to remit (turn in) that tax.
“It’s clear that many retailers heard that the [state] grocery tax was eliminated and didn’t follow their local legislative process to understand that it was replaced at the local level in many jurisdictions,” said Naperville Finance Director Ray Munch.
Munch went on to say that the projections may be “misleading”, as more grocery stores appear to be remitting than was first seen in the early part of the year.
“[Local grocery tax revenues] went from $511,000 the first month all the way up to almost $600,000 in the most recent month,” said Munch. “In the first year of revenue collection, we’re not quite as clear on timing and just rain straight projections for the next 12 months.
“While total revenues are below projections, monthly remittances increase each month, signaling improved tax reporting compliance by local businesses,” Naperville Deputy Finance Director Traci Marrocco said.
Some not convinced
Still, Holzhauer proposed the idea of replacing the local grocery tax with an increased Home Rule Sales tax to compensate for the projected shortfall for the 2027 budget, to which councilman Ashfaq Syed and councilwoman Gibson raised their hands in support of.
Staff will bring back more information to discuss the option at a future city council meeting.
If you have a story idea, we want to hear from you!
