Reed Smith has been advised, by representatives of Cook County (the “County”), that the County will be revising the language of the County Ordinance implementing the Cook County Non-Titled Personal Property Use Tax (the “Use Tax”). These revisions come in response to Reed Smith’s lawsuit and pending motion for preliminary injunction against enforcement of the Use Tax in Reed Smith v. Zahra Ali.1 Reed Smith’s suit includes a challenge to the Use Tax under the Commerce Clause of the U.S. Constitution. Although no legislative language has been circulated by the County, our understanding is that two principal changes are being made to the County Ordinance: (i) the tax rate under the Use Tax will be reduced from 1.25 percent to .75 percent, which would make the tax rate under the Use Tax equal to the current sales tax rate imposed by the County, and (ii) taxpayers would receive a credit against the Use Tax for sales taxes paid at the vendor location outside of Cook County. These changes appear to be designed to address one issue raised by Reed Smith in its suit – the per se violation of the Commerce Clause that was triggered by purposefully setting the tax rate under the Use Tax higher than the County sales tax rate.
However, these changes, if implemented, will do nothing to cure the violations of the Illinois Constitution and the Illinois County’s Code that the Use Tax presents. These violations are also being challenged as part of Reed Smith’s suit.
We will update this Alert when the proposed language is available. We do not expect that the County’s legislative action will have any impact on the already-scheduled hearing dates for Reed Smith’s pending preliminary injunction motion.
For more information on the Use Tax and Reed Smith’s challenge to the Use 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 www.reedsmith.com/iltax.
1. For more information on Reed Smith’s lawsuit, see our earlier alert.
Client Alert 2013-165