United States: Illinois Appeals Court Affirms Injunction Preventing State From Recouping Sales Tax Revenue From City

The Illinois Appellate Court has affirmed a trial court's decision to grant a preliminary injunction that prevented the Illinois Department of Revenue from recouping sales tax revenue from the City of Kankakee.1 On remand, the trial court will need to determine whether the Department should be permanently enjoined from adjusting Kankakee's sales tax revenue. This case is related to a sales tax sourcing dispute that is currently being considered by the Illinois Supreme Court.2


Last year, in Hartney Fuel Oil v. Hamer, the Illinois Appellate Court affirmed a trial court's decision that a taxpayer's sales were sitused to and taxable at its dedicated sales office for local Retailers' Occupation Tax (ROT) purposes.3 Although the taxpayer was headquartered in a locality that imposed local sales taxes, the taxpayer's sales were properly sitused to the sales office in a locality that did not impose local sales tax. According to the Court, proper sourcing for determining state and local ROT liability is based on a determination of where the acceptance of orders occurs. The Illinois Supreme Court has granted the Department's petition to appeal the Hartney decision.

In the instant case, the Illinois Department of Revenue sent a letter to the City of Kankakee asserting that it had erroneously disbursed $540,811 in sales tax revenue that should have been reported to the Village of Glendale Heights.4 The letter stated that the Department would recoup the erroneous distribution from Kankakee by deductions from future sales tax distributions. Also, the letter stated that it could not disclose any additional information due to the ROT's confidentiality provisions.

Kankakee filed a six-count complaint seeking administrative review of the Department's adjustment of tax revenue, a writ of prohibition, and the issuance of preliminary and permanent injunctions to stop the adjustment. The complaint challenged the Department's determination that the sales were located in Glendale Heights and not in Kankakee. Also, the complaint alleged that the tax adjustment would severely impact the safety and welfare of Kankakee's citizens. Following a hearing, the trial court preliminarily enjoined the Department from enforcing the revenue adjustment. After the trial court denied the Department's motion to dissolve or modify the preliminary injunction, the Department filed an appeal.

Department Enjoined from Adjusting City's Tax Revenue

The Illinois Appellate Court affirmed the trial court's order granting the preliminary injunction that prevented the Department from adjusting Kankakee's sales tax revenue. Although Kankakee was not entitled to administrative review and the trial court lacked special statutory jurisdiction, the trial court retained original jurisdiction to review Kankakee's complaint under common law certiorari. After determining that the trial court had subject matter jurisdiction and that Kankakee was entitled to a writ of prohibition regarding disclosure of the taxpayer's information, the Appellate Court considered the substantive arguments on appeal. In affirming the trial court, the Appellate Court rejected the Department's arguments that: (i) Kankakee was not entitled to the issuance of a preliminary injunction because it had no right to administrative review of the Department's adjustment determination; (ii) Kankakee's claim was barred by sovereign immunity; and (iii) the six-month limitations period found applicable by the trial court did not apply to this type of adjustment.

The Appellate Court found that Kankakee was entitled to the preliminary injunction because Kankakee established the following: (i) a clear, ascertainable right in need of protection; (ii) Kankakee would suffer irreparable harm if the injunction were not issued; (iii) Kankakee had no adequate remedy at law; and (iv) Kankakee likely would succeed on the merits.

To satisfy the likelihood of success element, Kankakee was required to raise a "fair question" concerning the existence of a claimed right and that it would be entitled to the requested relief. The Appellate Court determined that Kankakee raised a "fair question" of whether the Department was barred under the six-month statute of limitations for a reallocation based on errors in determining the taxpayer's location.5 Under Illinois law, errors in the distribution of taxes paid into the Local Government Fund may be corrected based on the taxpayer's location when certifying the municipality's disbursement amount and are limited to a six-month offset period.6 However, according to City of Champaign v. Department of Revenue,7 there is no limitation for corrections made as a result of tax record errors.8 The trial court determined that Champaign has been overruled by the Illinois General Assembly and the six month limitations period applies. The Appellate Court concluded that this finding was beyond the question raised on a motion for a preliminary injunction.

The Department also argued that the trial court should have granted its motion to modify the injunction to cover only the amount of offset based on the change in location of the retailer to Glendale Heights. According to the Department, Kankakee had standing to challenge only the reallocation of the tax revenue to Glendale Heights and not the refunds made to the taxpayer. In rejecting this argument, the Court explained that Kankakee had provided facts establishing that it would be injured were its sales tax revenue incorrectly adjusted and recouped by the Department. Furthermore, until the Department's calculations are verified, there was no adequate basis to modify the injunction to include only the amount the Department claimed was credited to Glendale Heights.

In a dissent, a justice disagreed with the majority that the trial court had original jurisdiction to consider Kankakee's complaint for an injunction.


This is the latest case concerning the ongoing dispute regarding the proper situsing of sales among localities in Illinois. Although this case does not address the substantive issue of how sales should be sourced, the case should be of interest to Illinois companies that have established sales centers in jurisdictions that do not impose local tax. To the extent that the Department were to appeal this decision and achieve a victory, it could have a chilling effect on the municipalities that have been aggressive in serving as a home to companies that seek to source sales to low-tax local jurisdictions.

The trial court will need to decide on remand whether the Department should be permanently enjoined from adjusting Kankakee's sales tax revenue. Based on the proceedings held for the preliminary injunction, Kankakee presumably will argue that the six-month limitation period bars the Department from redistributing the tax revenue. If the trial court accepts the Department's argument that it has more than six months to reallocate revenue, Kankakee and other low tax municipalities may be dissuaded from encouraging companies to open sales offices in their jurisdictions, for fear that such reallocations could make it difficult to create accurate local budgets, or satisfy existing budgets.


1 City of Kankakee v. Department of Revenue, Illinois Appellate Court, Third District, No. 3-12-0599, April 15, 2013.

2 See Hartney Fuel Oil Co. v. Hamer, 976 N.E.2d 682 (Ill. App. Ct. 2012), leave to appeal granted, 982 N.E.2d 768 (Ill. 2013).

3 Id. For further discussion of this case, see GT SALT Alert: Illinois Appellate Court Holds Acceptance of Sales Orders in Jurisdiction Is Necessary to Impose Local Sales Tax.

4 Note that Glendale Heights imposes local sales tax, but Kankakee does not.

5 The Appellate Court also determined that Kankakee raised a "fair question" concerning the amount of tax revenue that should possibly be reallocated to Glendale Heights and/or the taxpayer and the amount of the disbursements that it must contribute.

6 30 ILL. COMP. STAT. 105/6z-18.

7 412 N.E.2d 211 (Ill. App. Ct. 1980).

8 Under Champaign, there is no limitation for corrections made pursuant to 20 ILL. COMP. STAT. 2505/2505-475.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.