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Is United Airlines Scamming Chicago Out Of $289 Million In Taxes?

A government lawsuit highlights the difficulties local agencies have when trying to collect taxes in a global and virtual world.

Is United Airlines Scamming Chicago Out Of $289 Million In Taxes?

As the recent debt ceiling debate made painfully clear, more than ever taxes are a contentious issue. And in an age of increasingly global and virtual business, it gets harder and harder to collect the funds that our local governments rely on to keep the roads free of potholes and school doors open. Amazon, for example, after years of avoiding sales tax, has struck a series of deals to collect it on purchases made by customers in California, Texas, and Pennsylvania.

United Airlines, allegedly, has gone to greater lengths than most to avoid paying local taxes. According to a lawsuit filed today by Chicago's Regional Transportation Authority, the airline set up a "sham" office in rural Sycamore, IL, and pretended it was purchasing all of its fuel there, in order to avoid paying a total of $289 million in city, county, and RTA taxes since 2005. The community collected $300,000 a year for its part in the scam. RTA investigators visited the office on a recent weekday and found it locked, with not even a computer inside.

The RTA, which operates Chicago's El and regional train lines, has a similar case against American Airlines, which rented an office in Sycamore's City Hall, but won't be filing suit against them yet because American is in bankruptcy. Fuel costs can make up to 40% of the budget of an airline, billions of dollars a year, so these tax dodges may be a make-or-break act of desperation. United contends that the Sycamore arrangement is legal.

United Airlines moved its headquarters from the suburbs to downtown Chicago just last summer. With an eye on bringing jobs to his city, Mayor Rahm Emanuel zealously courted the airline.

[Image: Flickr user mattingham]