On February 8, 2010 we reported on a case from the Illinois Appellate Court which imposed Illinois use tax on the purchase and sale of an airplane that was, at least partially, used in Illinois. (Irwin Industrial Tool v. Illinois Department of Revenue, Illinois Appellate Court, No. 04 L 50666, September 11, 2009). The appellate court declined to apportion the tax on a basis that would be "fair" or "equitable." Since no other state imposed use tax on the transaction, Illinois was able to impose use tax on the entire purchase price, and not just a portion of the purchase price allocated to Illinois.

The losing taxpayer appealed. Not surprisingly, the Illinois Supreme Court affirmed and imposed use tax on the full purchase price of the airplane, thereby adding some revenue to Illinois' nearly empty coffers. The Illinois Supreme Court opinion closely followed the reasoning of the lower court. (Irwin Industrial Tool Company v. Illinois Department of Revenue, Illinois Supreme Court, Docket No. 109300, September 23, 2010).

For a discussion of the Illinois Appellate Court case, see our February 8, 2010 update at: http://www.masudafunai.com/Files/9724_Business_Update_2_8_10.pdf ).