Knowledge Center

Wednesday, August 06, 2014

HMB's Jordan Goodman and Chris Lutz Quoted in Tax Analysts Use Tax Article

"Illinois Appellate Court Invalidates County Use Tax on Personal Property"

By Maria Koklanaris and David Sawyer

Excerpt from Tax Notes/State Tax Today, Tuesday, August 5, 2014

The Appellate Court of Illinois, First Judicial District, on August 4 struck down Cook County's use tax on non-titled personal property brought into the county, upholding the circuit court's finding that the tax violates the Cook County Code as an improper use tax on the purchase price of personal property.

The appeal was a victory for both Reed Smith LLP and Horwood Marcus & Berk, who brought suit against the Cook County Department of Revenue on three grounds.

In October 2013 the firms prevailed in the Circuit Court of Cook County, which granted a motion for summary judgment permanently enjoining the imposition of the tax. In that decision, the court found for the plaintiffs on all three counts, determining that the tax violated the Illinois Counties Code by imposing tax on gross receipts from the sale of tangible personal property, the Illinois Constitution's prohibition on personal property ad valorem taxes, and the commerce clause of the U.S. Constitution. 

Christopher Lutz of Horwood Marcus & Berk said that if the county was unhappy about the prohibition on concurrent use taxes between counties and municipalities, the county should have gone to the General Assembly.

"There was an easy fix to this. Cook County could have gone to the legislature and said, 'Hey change the Illinois counties code,'" Lutz said. "They didn't do that; instead they tried to create this cute little way of getting around the prohibition that the General Assembly had created."

Lutz added that the tax was burdensome, especially for large companies that often bring in substantial amounts of property. "I can imagine a company that's bringing in tangible property all the time. The practical effect [of the decision] is that now all those companies . . . don't have to worry about it, and will either be getting a refund or will not be subject to tax and penalties," he said.

Lutz said companies also had to deal with an entirely new regulatory structure when paying the Cook County tax, as it is calculated differently from Illinois and Chicago taxes.

Jordan Goodman of Horwood Marcus & Berk said that although the law firms brought suit on behalf of themselves, they were also mindful of its effect on many clients. "A number of our clients have expressed support because they were dramatically affected but did not want to be seen as fighting a governmental entity on this basis, so they have been able to remain anonymous and reap the benefits of this litigation," he said.

Goodman said he thought it would be a challenge for the county to prevail in a higher court, given the history of the case. "The circuit court ruled on the three separate grounds that we had brought forth and they agreed with us on all three. We thought it would be challenging for the appellate court to reverse on all three," he said.

To read more, please visit the Tax Analysts website.

Copyright 2014 Tax Analysts. Reprinted with permission.

 

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