Run for the border? Tax policies differ here and there

SPRINGFIELD - Between Wisconsin hiking cigarette taxes Tuesday and Illinois doing the same to alcohol, it might have drinkers and smokers eying the border for deals.

Illinois' tax on a fifth of whiskey now stands at $1.71, thanks to a new tax law that added 81 cents to that total and raised taxes Tuesday for other alcoholic beverages, shampoo, soft drinks and candy. In contrast, Wisconsin's tax for a fifth of whiskey is roughly 67 cents. Both are imposed on distributors and wholesalers so that increase is already built into the price shoppers see on the liquor store shelves.

Keep in mind that alcohol purchases are hit with sales tax, too, which varies greatly depending on location.

Comparing prices across borders is a familiar subject for suburban residents already accustomed to the significantly higher sales tax in Cook County - which seems here to stay after the Cook County Board on Tuesday failed to muster the votes to roll it back.

That tax could make a $499 laptop computer cost almost $14 more in Schaumburg (where a 1 percent municipal tax brings the total sales tax to 10 percent) when compared to Naperville (at 7.25 percent sales tax).

If Illinois residents head out of state for their liquor purchases, they might pass their Wisconsin neighbors driving south for cigarettes.

For smokers, Wisconsin's adding 75 cents per pack to bring the total to $2.52. The Illinois tax is 98 cents, though local governments can and do add on their own tax wallop, none more so than Cook County which adds on a $2 tax per pack - easily topping Wisconsin's new rate.

Of course, the price of gasoline negates anything more than the shortest of border runs for tax savings. But there's also a somewhat obscure state tax law that would come into play and reduce any financial incentive.

An Illinoisan going to Wisconsin to stock up on liquor - to presumably be consumed back in Illinois - is legally required to pay a use tax, essentially an after-the-purchase sales tax designed to even out competition across borders.

Buy something in Wisconsin at a cheaper tax rate, and you owe Illinois the difference. Buy something from a tax-free state, and you owe the full Illinois sales tax. There's a specific form for paying it and while many individuals might not be aware of it, the use tax is commonplace in the Illinois business world where bulk merchandise and supplies are often purchased from different states with varied tax policies.

And the differences in taxes might not last that long. There's a push afoot in Wisconsin to raise alcohol taxes and there's always a plan for higher Illinois cigarette taxes.