Out-of-town shoppers pay more grocery taxes than St. Charles residents, finance director says

As St. Charles leaders consider whether the city will join a list of Illinois municipalities enacting a local 1% grocery tax in 2026, a recent analysis shows that a tax on groceries has more impact on out-of-town shoppers.

More than 200 municipalities have decided to impose a local grocery tax next year in response to Illinois lawmakers’ plans to eliminate a statewide tax effective Jan. 1.

The St. Charles City Council plans to vote on a proposed local tax at its July 7 meeting.

St. Charles has several grocery stores, including Costco, Meijer, two Jewel-Oscos, Walmart, Target, Aldi, La Huerta Grill and Market, and the newly opened Whole Foods.

Bill Hannah, the city finance director, has said the town would lose roughly $2 million in annual revenue if local grocery purchases weren’t taxed anymore. He argued the funding loss would negatively impact the city’s public health and safety services.

Hannah said a tax on groceries has more impact on out-of-town shoppers than city residents. He cited data the city collected through artificial intelligence on foot traffic, which he said showed that 27% of area stores’ customers were St. Charles residents.

“A majority of this grocery tax can be presumed to be paid by nonresidents,” Hannah said. “That alleviates the burden that is put on residents for funding city services.”

Placer.ai is an artificial intelligence analytics software that uses geospatial data from people’s cellphones – provided by cellular networks – to monitor the travel patterns and spending habits of people in St. Charles.

The city uses the data to track foot traffic and consumer behavior, as well as to gauge the success of events and businesses.

Of the seven grocery stores in the city, five saw more foot traffic from nonresidents than residents, according to Pacer.ai. Hannah estimated that out-of-town customers accounted for about 65% of the grocery tax revenue collected at St. Charles stores.

Under Gov. JB Pritzker’s plan to eliminate a statewide tax, municipalities have until Oct. 1 to enact their own local taxes, which would take effect in January 2026.