Knowledge Center

Tuesday, June 04, 2013

Challenge to Cook County's Non-Titled Personal Property Use Tax

Memo to Clients and Friends

Horwood Marcus & Berk is pleased to announce that its challenge to Cook County Non-Titled Personal Property Use Tax is set for a hearing on July 24, 2013 on our motion for a preliminary injunction. This will be the first time that the viability of the Non-Titled Personal Property Use Tax is addressed by a court. If successful, the injunctive relief will benefit all businesses potentially subject to the tax.

The Cook County Non-Titled Personal Property Use Tax is imposed at 1.25% of the "value" of property when it is first brought into Cook County after being purchased elsewhere. In order to comply with the new tax ordinance beginning April 1, 2013, every person in Cook County who acquires non-titled personal property from locations outside of Cook County must register with the Cook County Department of Revenue, prepare a Cook County Non-Titled Personal Property Use Tax Return and pay tax on a monthly basis. HMB brought this lawsuit on May 14, 2013 seeking declaratory and injunctive relief based on its allegations that the Cook County imposition of a Non-Titled Personal Property Use Tax is unlawful as a matter of Illinois statutory and constitutional law. In its complaint, HMB contends that the defendants cannot impose a non-titled personal property use tax based on three interrelated arguments.

First, the Illinois County Code only permits a home rule county to impose a use tax on an item of personal property which is titled or registered. The code further provides that no home rule county may impose a use tax based upon the gross receipts or purchase price of tangible personal property. 

Second, even if the new tax is not a prohibited use tax as the term is used in the Illinois County Code, the tax is still in violation of the Illinois Constitution which prohibits a personal property tax. Illinois Constitution Article IX Section 5(a) provides that a personal property tax is one which is measured by the value of the personal property. Because the tax is based on the value of the property brought into Cook County, the tax violates the Illinois Constitution.

Finally, the Cook County Non-Titled Personal Property Use Tax violates the Commerce Clause of the United States Constitution because it imposes a higher tax on property bought outside of Illinois than it imposes on property bought inside Cook County. Cook County currently imposes a sales tax of .75% on sales of tangible property. The Non-Titled Personal Property Use Tax, however, is imposed at a rate of 1.25%.

HMB brought this suit in its own name as it is directly affected by the Cook County Non-Titled Personal Property Use Tax. More importantly, HMB knows this tax is a burden on all businesses, both large and small, that have a presence in Cook County.

HMB Comment

While the suit filed by HMB is focused on our own use tax liability, we recommend that all businesses, large and small, affected by the Cook County Non-Titled Personal Property Use Tax register and account for taxes due and report such taxes due on the monthly returns. HMB is also advising our clients that each return filed with Cook County contain the following language:

"Tax shown on the face of this return is being paid under protest. Tax is not authorized by state statute, and the imposition of the tax violates both the Illinois Constitution and the U.S. Constitution."

Questions regarding the challenge to or payment of Cook County Non-Titled Personal Property Use Tax should be directed to an HMB SALT attorney.

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