Chicago Mayor Rahm Emanuel said the city will sue Kankakee and Channahon for sales tax revenue.
The Regional Transportation Authority said the two small towns allowed companies to purchase goods in Chicago and Cook County and then claim the transactions occurred in their own jurisdiction to collect the sales tax revenue. Businesses save with lower sales tax rates and the town also rebates them for up to 75 to 85 percent of the town's tax revenue.
The RTA is involved because mass transit is funded by sales tax and the agency said 33 companies were getting the sale tax rebates from Kankakee and eight companies from Channahon. Both are within 60 miles of Chicago and the state Dept. of Revenue is auditing 26 municipalities who could have lost money.
The practice first drew attention when a bill protecting it was introduced a year ago in the state General Assembly. Emanuel called the practice "a way of cheating the system."