Illinois Appellate Court Holds Cook County Use Tax On Non-Titled Tangible Personal Property Violates State Law

On August 4, the Illinois Appellate Court held that the Cook County, Illinois use tax on non-titled tangible personal property cannot be imposed because it violates the Illinois Counties Code.1 The Court affirmed a permanent injunction preventing enforcement of the tax that previously had been granted by the circuit court. This use tax is imposed on any individual or company based on the value of non-titled tangible personal property acquired from sellers located outside Cook County, when the property is first subject to use in the county. The use tax originally was imposed starting on April 1, 2013 at a rate of 1.25 percent, but the rate was subsequently reduced on June 19, 2013 to 0.75 percent.2

Original Ordinance

On November 9, 2012, the Cook County Board of Commissioners passed the use tax ordinance as a component of its budget for fiscal year 2013. Under the ordinance, effective April 1, 2013, the use tax is imposed "upon the privilege of using in the county non-titled personal property which is purchased outside of the county."3 When the ordinance became effective, this tax was originally applied at a rate of 1.25 percent of the non-titled property's value on the date of first use of the property within the county.4 The ordinance provides that non-titled property purchased outside the county, and delivered to a location within the county, is presumed to be first used in the county on the date of delivery.5 The purchaser or user of the property is liable for remittance of the tax.6 Sellers are not required to collect and remit the tax on a purchaser or user's behalf.7

Every person in Cook County who, in the course of business, acquired non-titled property from outside the county is required to register with Cook County's Department of Revenue to remit the tax.8 Returns are to be filed by the 20th day of each month, remitting tax due on any transaction that occurred in the immediately preceding month.9 A credit is available for the first non-titled property valued at $3,500 at the time of first use within the county, which is applied against the taxpayer's aggregate county use tax liability for the taxable year.10

Initial Complaint and Amended Ordinance

In May 2013, two law firms filed complaints in the Cook County Circuit Court against the county to enjoin it from enforcing its newly enacted use tax.11 The complaints asked the court to declare that the tax violates the Illinois Counties Code, the Illinois Constitution and the Commerce Clause of the U.S. Constitution.

On June 19, 2013, Cook County amended the ordinance12 in order to make two changes. First, the use tax rate was changed to 0.75 percent, decreasing the use tax rate to equal the corresponding county sales tax rate.13 Second, a credit equal to the amount of county sales or county retailers' occupation tax actually paid in another county was instituted for taxpayers who paid such taxes in another county.14

Preliminary Injunctions

On August 1, 2013, Cook County Circuit Judge Robert Lopez Cepero entered two preliminary injunctions blocking imposition and enforcement of the Cook County use tax as originally enacted and amended.15 Cook County was directed to give notice of these orders on the Cook County Department of Revenue Web site16 and to not cash any...