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Thursday, August 7, 2014

Cook County's "Use Tax" is an Improper Sales Tax

Cook County's "use tax" was found invalid by an appellate court this week in an unpublished opinion.  Reed Smith LLP v. Zahra Ali, Cook County Dept. of Revenue, 2014 IL App (1st) 132646-U (Aug. 4, 2014).  In 2012, the Cook County Board had enacted an ordinance imposing a tax on the "value" of nontitled personal property that was purchased outside of the county when that property is "first subject to use" in the county.  Cook County residents and businesses would be affected by the tax which would be imposed on property they purpose outside of their resident county.  The 1.25% tax (later reduced to .75%) would apply to any property with a value of more than $3,500.  Taxpayers were required to file monthly returns and remit the appropriate taxes. 

Plaintiffs (business owners and residents of Cook County) filed lawsuits against the county claiming the ordinance violated state statute and the stated and federal constitutions.  The trial court ruled in favor of the plaintiffs and against the county.  On appeal, the appellate court affirmed the trial court, finding that the so-called "use tax" was really a sales tax on the purchase of personal property.  The counties code expressly provides that "no home rule county has the authority to impose, pursuant to its home rule authority, a ... use tax based on...the selling or purchase of said tangible personal property."  The court determined that Cook County's "use tax" fell squarely within this statutory prohibition and was, therefore, is improper and not authorized.

Post Authored by Julie Tappendorf, Ancel Glink


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