Effective April 1, 2013, Cook County, Illinois (the “County”) will impose a tax on the use in the County of non-titled tangible personal property which was purchased outside the County. The tax will be imposed at a rate of 1.25 percent of the property’s value when first subject to use in the County. The tax is imposed on the purchaser or user of the property. Sellers are not required to collect and remit the tax on behalf of purchasers. Evidence that the purchaser resides in the County or that the property was delivered to a location in the County is prima facie evidence that the property was first used in the County on the date of delivery.
Registration, Returns and Payments
Any person who, in the course of business, acquires property subject to the tax is required to register with the County Department of Revenue. An annual nonrefundable tax credit is provided for otherwise taxable property with a value of $3,500. Any person liable for the tax in an amount greater than the annual tax credit must, on or before the 20th day of each month, file a return and remit the tax due for the immediately preceding month. The failure to register, file a return or pay the tax when due is subject to penalties.
Certain items and uses are exempt from the tax, including items exempt from the Illinois use tax. Examples of exempt uses include the temporary storage of property in the County, and the use of property in the course of business by a person who relocates to the County, or opens an office, plant or other facility in the County, if the property has been used at least three months outside the County by the person before being moved into the County.
Potential Legal Challenges
The new tax is subject to several potential legal challenges. For example, Illinois statutes specifically prohibit a home-rule county (i.e., Cook County) from imposing a use tax on non-titled tangible personal property based on the selling or purchase price of the property. Although the County ordinance provides that the tax is based on the “value” of the property, the value of the property in most cases will likely be based on the selling or purchase price of the property. To the extent that the tax is not based on the selling or purchase price of the property, it may run afoul of Illinois Constitution and statutory provisions that prohibit ad valorem personal property taxes. The tax also may discriminate against interstate commerce in violation of the U.S. Constitution’s Commerce Clause. In particular, the use tax rate exceeds the County’s sales tax rate, thereby imposing a higher tax on purchases made outside the State (or County) than on purchases made in the County. The tax also does not include a credit for taxes paid to other jurisdictions to avoid double taxation.