The Illinois Appellate Court recently considered a case involving a relatively new and little-known source of revenue for school districts—the County School Facility Tax. This tax is authorized by a provision of the Counties Code that allows county governments to impose a 1% sales tax for school facility purposes. The Court’s decision in P&S Grain, LLC v. County of Williamson , allows a challenge to the constitutionality of this tax to proceed.
In 2008, the voters of Williamson County approved a referendum authorizing the County Board of Commissioners to implement the School Facility Occupation Tax. Two retailers then filed suit to prevent the tax from being implemented. The thrust of the plaintiffs’ argument is that the County, which is non-home rule, may not preempt the home-rule authority of the City of Marion to impose a sales tax. The trial court dismissed the complaint on the grounds that the plaintiffs lacked standing to bring the lawsuit, and the plaintiffs appealed.
The central issue before the Appellate Court was whether the plaintiffs had standing to bring the lawsuit. The decision turns on the nature of the Illinois sales tax, which is a tax imposed on the occupation of being a retailer. Because the tax is on an occupation, the Court found that there is a definite harm stemming from the financial obligation on the retailer to pay the tax. According to the Court, this harm is not eliminated by any compensation or reimbursement retailers might receive for collecting the tax. An additional issue before the Court was whether the plaintiffs were “citizens” that could bring such a lawsuit. The Court found that corporate entities are indeed “citizens” with the right to bring a lawsuit challenging the tax under the Code of Civil Procedure. The Court then remanded the case to the trial court for consideration of the plaintiffs’ claims against the tax.
While the Appellate Court did not reach the merits of the plaintiffs’ claims against the School Facility Occupation Tax, it did allow the challenge to proceed in the trial court. This case is significant as it is the first one to yield an appellate court decision on this new source of revenue for school facilities purposes. We will continue to monitor this matter and advise you on subsequent developments, as the ultimate outcome of the case is of interest beyond the parties to this lawsuit.