With Illinois grocery tax ending, Cary and other towns look at higher sales tax

As Illinois ends the statewide grocery tax that funded local municipalities, Cary is the latest McHenry County community to start discussions on ways to replace the tax to avoid lost revenue.

Gov. JB Pritzker recently signed the 2025 budget that will remove the statewide 1% grocery tax Jan. 1, 2026. With the change, the state is allowing non-home rule municipalities such as Cary, in addition to home-rule towns, to have the authority to issue their own local general sales tax up to 1% without a referendum.

The non-home rule sales tax would have “very similar parameters” to the 1% home-rule sales tax that Cary was aiming to implement if its bid to gain home-rule status had passed, Assistant Village Administrator Courtney Sage said. Cary residents denied the home-rule referendum in the March primary election, with about 75% of voters against it.

Although the grocery tax is a state tax, it benefited local communities. And the village of Cary alone could lose about $400,000 in revenue each year without the grocery tax, Mayor Mark Kownick said. A potential non-home rule sales tax is estimated to bring in about $600,000 annually to the village.

“This does level the playing field,” Cary Village Administrator Erik Morimoto said. “It doesn’t put Cary’s restaurants or businesses at a disadvantage compared to comparable places one may shop at [in] nearby communities.”

The tax would be exempt from essential items such as pharmaceutical prescriptions and groceries, but it doesn’t mean all items sold at grocery stores are exempt, Sage said.

“There are items at Jewel that are not considered grocery,” she said, citing alcohol as one example.

Harvard, Lakewood, Spring Grove and Johnsburg are municipalities in McHenry County that already have a non-home rule sales tax, according to village documents.

Crystal Lake passed an ordinance to increase its home-rule sales tax by 0.5% in March, in order to prepare for the possible loss in the grocery tax revenue. The city’s vote to impose the additional 0.5% sales tax came on the same day that McHenry County voters backed a new 0.25% sales tax to fund the McHenry County Mental Health Board. With those two increases, Crystal Lake’s sales tax rate will be at 8.5% – the highest in the county starting Monday, July 1.

​​The increased tax, which is estimated to bring in an extra $4.55 million annually, will help fund more police officers and firefighters, Crystal Lake Director of Finance Jodie Hartman said. Crystal Lake estimates it would lose out on $1.7 million to $2 million annually without the grocery tax, Hartman said. This loss would make finances tight to fund more public safety officers, officials said.

Cary’s sales tax will grow to 7.25% with the new mental health sales tax added starting Monday.

The Metropolitan Mayors Caucus and the McHenry County Council of Mayors – both organizations Kownick is a part of – worked with the state to give non-home rule municipalities the authority to implement their own tax if the grocery tax would be taken away, he said.

“It would make us less likely to become so reliant on raising property taxes,” he said.

To implement the 1% non-home rule sales tax, the village would need to file with the Illinois Department of Revenue by Oct. 1 to implement it Jan. 1, or file by April 1 for July 1 implementation.

The grocery tax currently goes to Cary’s general fund. If implemented, the general sales tax would act as a replacement to the grocery tax, not an add-on, Trustee Rick Walrath said.

“I want this to be tied as closely to the exit date, to the sunset date of the other one,” he said.

The village plans to provide information to residents and have more discussions on this in the future, Sage said.

“We’re not rushing through this,” Kownick said.