Reed Smith Client Alert

Cook County, Illinois, has enacted a 1.25 percent use tax on the "value" of non-titled personal property (i.e., personal property other than motor vehicles) purchased outside Cook County, not subject to Cook County sales tax, and first subjected to use in the county. The tax ordinance does not provide any credit mechanism for sales taxes already paid to other jurisdictions. This tax is scheduled to go into effect April 1, 2013.1 Despite the April 1 effective date, the tax is no joking matter. Cook County includes the City of Chicago, which already imposes its own 1 percent use tax. As a consequence, the tax would result in some businesses located in Cook County paying total sales and use taxes in excess of 10 percent for their purchases from outside the county.2 However, in the end, the joke may be on Cook County. The tax has multiple constitutional flaws, and it seems unlikely that the tax will survive the judicial challenges, some of which are already in progress.

Value-Based Property Taxes are Not Allowed Under the Illinois Constitution

The Illinois Constitution provides that: "Any ad valorem personal property tax abolished on or before the effective date of this Constitution shall not be reinstated," and that "[o]n or before January 1, 1979, the General Assembly by law shall abolish all ad valorem personal property taxes."3 The Cook County Board of Commissioners seems to have missed this clear constitutional prohibition when it enacted a tax that, by its terms is based on the "value" of personal property when first subjected to use in the county.4

Home Rule Units Cannot Impose a Sales or Use Tax Based on Purchase Price Under Illinois Law

The Illinois Constitution grants the General Assembly the power to limit the taxing power of home rule units (which would include Cook County) by enacting a law approved by three-fifths of the members of each house.5 The General Assembly exercised this power in 1990, when it enacted a law that took away the power of home rule units to impose a general sales or use tax based on the sales or purchase price of tangible personal property.6 Cook County may argue that its use tax falls outside the legislature’s prohibition, because the tax is nominally based on "value." However, it seems highly unlikely that a court would respect this distinction, given the fact that, in most cases, the best measure of the "value" of property when first subject to use within the county would be its purchase price.

Registration Notices

The fairly obvious constitutional flaws of the use tax ordinance have not deterred the Cook County Department of Revenue from proceeding with enforcement. Businesses located in Cook County have already started receiving notices from the Department. These notices instruct businesses of their responsibility to register for the use tax within 20 days of receipt of the notice, and threaten penalties for those businesses that do not comply with the registration requirement.

Reed Smith’s Take-Away

If your business has received a registration notice from the Cook County Department of Revenue, register for the tax. However, when it comes time for your business to file its first use tax return with Cook County, report zero taxable purchases, citing section 74-652(d) of the use tax ordinance, which provides that: "Nothing in this article shall be construed to impose a tax upon any business activity which, under the constitution and laws of the United States or the State of Illinois, may not be made subject to taxation by the County."7 A number of our clients are challenging both the registration requirement and the tax, and we will provide updates on any developments.

For more information on the Cook County use tax and taxpayer challenges to the tax, contact the authors of this Alert or another member of the Reed Smith State Tax Group. For more information on Reed Smith’s Illinois tax practice, visit


1. Cook County Code, Sec. 74-650, et seq. The tax is due upon evidence that the purchaser "resides" in Cook County, or that the item of property was delivered to the County, and payable on the aggregate value of such purchases in excess of $3,500 annually. Id. at 74-652(c); 74-654.
2. Cook County Code, Sec. 74-653 specifies that the county tax is in addition to any other state and local tax, so the 1.25 percent Cook County use tax rate would apply in addition to the City of Chicago 1.00 percent use tax, the State of Illinois 6.25 percent sales tax rate, and the local sales tax rate applicable at the point of sale outside Cook County. These local sales tax rates can range from 0.25 percent to 3.00 percent.
3. Ill. Const. 1970, Art. IX, Sec. 5(b).
4. Cook County Code, Sec. 74-651(a).
5. Ill. Const. 1970, Art. VII, Sec. 6(g).
6. 55 ILCS 5/5-1009.
7. Cook County Code, Sec. 74-652(d) (emphasis added).



Client Alert 2013-079