Cook County Use Tax Suspended

The imposition of the Cook County Non-Titled Personal Property Use Tax (“Use Tax”) has been successfully enjoined through Reed Smith’s efforts. After oral argument was heard yesterday, Judge Lopez Cepero granted Reed Smith’s motion for preliminary injunction in the matter of Reed Smith LLP and the Chicagoland Chamber of Commerce v. Zahra Ali*, which asserted that the Use Tax imposed on the value of personal property purchased for use in Cook County violated: (i) the Illinois Counties Code disallowing a home-rule unit from imposing a use tax on the selling or purchase price; (ii) the Illinois Constitution’s prohibition against imposition of an ad valorem tax on personal property; and (iii) the Commerce Clause of the United States Constitution. Each of these arguments against the Use Tax has been discussed in detail in our earlier Alerts issued in May and June.

The Circuit Court’s order effectively halts the imposition of the Use Tax by the county, and by agreeing with all three arguments as to why the Use Tax is invalid, the court has put the county in a position where it must defend all the arguments on appeal. The county has 30 days to move to reconsider or to appeal Judge Cepero’s ruling, and it is unclear whether an appeal will be taken.

As also discussed in a previous Alert, Reed Smith had filed an additional challenge to the County Refund Ordinance, on behalf of the Chicagoland Chamber of Commerce, requesting the court to clarify that taxpayers can obtain refunds if the Use Tax is declared illegal. This additional challenge was not a subject of the hearing and will be addressed by the Circuit Court after all appeal rights on the Preliminary Injunction have been exhausted or allowed to lapse.

* Reed Smith, LLP v. Ali Zahra and the Cook County Department of Revenue, Cook County Circuit Court, Docket No. 2013 L 050454


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