United States: 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 checks received for payment of the tax for any return date following the July 20, 2013 return date.17

On October 4, 2013, the Illinois Appellate Court granted the Cook County Department of Revenue's motion to stay one of the preliminary injunctions blocking imposition and enforcement of the Cook County use tax.18 This order stayed the preliminary injunction pending the outcome of the circuit court's proceedings on the claims and request for permanent injunction.19

Circuit Court's Decision Invalidating Tax

On October 11, 2013, Cook County Circuit Judge Robert Lopez Cepero granted the law firms' motions for summary judgment and held that the Cook County use tax on non-titled tangible personal property violates the Illinois Counties Code, the Illinois Constitution and the Commerce Clause of the U.S. Constitution.20 In granting the motion for summary judgment, the circuit court issued a permanent injunction against the tax. The circuit court subsequently denied the county's motion to stay enforcement of the permanent injunction. The county filed notices of appeal with respect to the circuit court's decision.

Court of Appeals Holds Tax Violates Illinois Counties Code

The Appellate Court affirmed the circuit court's permanent injunction because the Cook County use tax on non-titled tangible personal property violates the Illinois Counties Code. As a preliminary matter, the Appellate Court determined that the county's interlocutory appeals concerning the preliminary injunctions were moot due to the fact that they were terminated when the circuit court granted the permanent injunction.

Law Firm Had Standing to Challenge Ordinance

Cook County unsuccessfully argued that one of the law firms lacked standing to challenge the ordinance by failing to register or pay any tax due under the ordinance. Although the law firm did not pay the tax, it was subject to penalties and interest under the ordinance for failing to register or timely file the first tax return. The Appellate Court also rejected the county's argument that Wexler v. Wirtz21 supported its claim that the law firm lacked standing. In Wexler, the Illinois Supreme Court held that an individual consumer did not have standing to challenge a liquor tax imposed on a beverage distributor because it was not the party legally obligated to collect and remit the tax. In contrast, the law firm was the entity required to pay the Cook County tax. Finally, the Appellate Court rejected the county's contention that the common law voluntary payment doctrine barred the challenge.22 The fact that the law firm did not pay the tax precluded consideration of the voluntary payment doctrine.

Tax Improperly Based on Selling or Purchase Price

The Appellate Court affirmed the circuit court's holding that the Cook County use tax on the value of non-titled tangible personal is impermissibly based on the "selling or purchase price" of the property in violation of the Illinois Counties Code. Unless an exception applies, the Counties Code provides that "no home rule county has the authority to impose, pursuant to its home rule authority, a use tax, sales tax or other tax, on the use, sale or purchase of tangible personal property based on the gross receipts from such sales or the selling price or purchase price of said tangible personal property."23 The County argued that the by imposing the tax on the "value" of the property, the tax was not imposed on the sales price and, therefore, was permissible under the Counties Code. The Appellate Court rejected the county's argument that the ordinance did not impose a use tax on the sales price of non-titled personal property. As explained by the Appellate Court, the ordinance imposes a use tax on the "value" of non-titled personal property and defines "value" as "worth." Because the ordinance does not define "worth," the Appellate Court considered the dictionary definition of the term. However, the dictionary definition of "worth" uses the term "value." As a result, the Court determined that the meaning of "value" is "arguably ambiguous" and required a consideration of legislative intent.

To determine legislative intent, the Court reviewed the preamble to the ordinance. The preamble discusses the county's interest in closing a "loophole" that allows citizens to avoid the county sales tax on non-titled personal property used in the county. This "loophole" refers to the sales taxes on titled personal property that are allowed by the Counties Code, but that are imposed on the "selling price" of the titled personal property.24 The non-titled property is "first subject to use" in the county on the delivery date if either the property was delivered to a location in the county or the purchaser merely resides in the county. According to the Court, "the unmistakable conclusion is that this purposed 'use' tax is in reality a sales tax upon the purchase of the property."

The Appellate Court also rejected the county's argument that the ordinance is permissible because the county has provided a "guideline" document explaining four acceptable methods of determining value. As explained by the Court, two of these methods involve using the purchase price of the non-titled personal property and reducing this amount based upon depreciation. In practice, however, the depreciation would be insignificant and the "value" would be very similar to the purchase price. The other two methods in the guideline suggest using either an appraised value or the "fair market value." These values usually would be similar for non-titled personal property. In the rare cases where these amounts differ, the cost to obtain the estimates would be excessive.

Following this analysis, the Appellate Court agreed with the circuit court that the ordinance is an improper use tax on the selling or purchase price of non-titled personal property that is prohibited by the Counties Code. Therefore, the circuit court did not err in granting the law firms' motions for summary judgment. Because the Appellate Court held that the ordinance violated the Counties Code, it declined to consider the constitutional arguments.


As a result of the Appellate Court affirming the circuit court's decision that the Cook County use tax on non-titled tangible personal property violates the Illinois Counties Code, the tax continues to be permanently enjoined. The status of the ordinance has not changed and taxpayers still are not required to file returns or remit payment of the tax. Because a higher court has determined that the tax is invalid, the probability that Cook County will be able to impose this tax in the future is greatly reduced. However, there is a possibility that Cook County may ask the Appellate Court to reconsider this decision or the Illinois Supreme Court to review the case.

The courts have not addressed the topic of taxpayer refunds. We are advised that the county has contended in the circuit court that it should not be required to pay refunds, despite the fact that the Appellate Court struck down the tax. It is our understanding that the county has taken the position thus far that the taxes were not paid under "a mistake of fact or law" and therefore, no refunds need to be paid. Therefore, the circuit court will need to address whether taxpayers are entitled to receive refunds of taxes paid during the brief period before the tax was enjoined. A victory by the county on this issue would call into question the tax policy. A ruling that the county does not have to pay refunds would implicitly sanction the enactment of illegal taxes by providing a tax authority the assurance that it could collect such taxes until the courts eventually struck down the illegal tax. It would also place taxpayers in a difficult position – they would either have to pay the illegal tax with the knowledge that they would not be entitled to a refund, or not pay the tax and run the risk of having to contend with the enforcement of the taxing authority.


1. Reed Smith LLP v. Ali, Appellate Court of Illinois, First District, Nos. 1-13-2646, 1-13-2654, 1-13- 3350, 1-13-3352, Aug. 4, 2014. This order was filed under Illinois Supreme Court Rule 23 and may not be cited as precedent except in certain limited circumstances.

2. Cook County Ordinance 12-O-63, enacted Nov. 9, 2012 and amended by Cook County Ordinance 13-O-30, enacted on June 19, 2013. The full name of the ordinance is the "Cook County Use of Non-Titled Personal Property Tax Ordinance" and was enacted as Cook County Code §§ 74-650–74-662. The tax has been enjoined, but the ordinance has not been repealed.

3. Cook County Code § 74-652. "Non-titled personal property" means "tangible personal property, as set forth in the Illinois Use Tax Act, other than tangible personal property that is registered or titled with an agency of the State." Cook County Code § 74-651.

4. "Value" is defined as "an accurate assessment or evaluation of a non-titled personal property's worth when first subject to use in the county." Cook County Code § 74-651.

5. Cook County Code § 74-652(c).

6. Cook County Code § 74-652(b).

7. Because the tax is on purchases from retailers located outside the county, the county would have no authority to attempt to mandate collection from any sellers.

8. Cook County Code § 74-653.

9. Cook County Code § 74-657.

10. Cook County Code § 74-654.

11. The two law firms that initiated litigation on these matters were Reed Smith LLP and Horwood Marcus & Berk Chtd. These firms sued both the Cook County Department of Revenue and the Department's Director, in her capacity as Director. The Chicagoland Chamber of Commerce also joined the Reed Smith LLP litigation as a "plaintiff-in-intervention."

12. Cook County Ordinance 13-O-30, enacted on June 19, 2013.

13. Cook County Code § 74-652(a).

14. Cook County Code § 74-652(d). Both of these changes were effective "upon passage" and were apparently designed to address the discrimination argument under the Commerce Clause.

15. Preliminary Injunction Orders No. 13 L 050454 and No. 13 L 050470, Circuit Court of Cook County, Aug. 1, 2013, Sections A and B.

16. Id., Section A.

17. Id., Section C. The court directed the county to supply a confidential listing of the collections of the new tax through July 30, 2013.

18. Horwood, Marcus & Berk, Chtd. v. Cook County Department of Revenue, Illinois Appellate Court, 1st Dist., No. 1-13-2654, order staying preliminary injunction, Oct. 4, 2013.

19. Because the circuit court has issued a final decision, this Appellate Court order is no longer in effect.

20. Reed Smith LLP v. Ali, Cook County Circuit Court, Nos. 13 L 050454, 13 L 050470, order granting plaintiffs' motions for summary judgment, Oct. 11, 2013. For further discussion of the circuit court's decision, see GT SALT Alert: Illinois Trial Court Holds Cook County Use Tax on Non-Titled Tangible Personal Property Is Unconstitutional.

21. 809 N.E.2d 1240 (Ill. 2004).

22. Under this common law doctrine, a taxpayer may not recover taxes voluntarily paid, even if the taxes paid were illegally imposed.

23. 55 ILL. COMP. STAT. 5/5-1009. Note that Cook County is a home rule county. Also, note that an exception allows home rule counties to impose use tax on titled tangible personal property. 55 ILL. COMP. STAT. 5/5-1008.

24. 55 ILL. COMP. STAT. 5/5-1008.

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