Illinois” Cook County has passed an ordinance that imposes a 1.25% use tax on non-titled personal property purchased outside of Cook County and subsequently used in Cook County. This tax is in addition to the Illinois use tax and the City of Chicago Non-Titled Personal Property Use Tax. The Cook County use tax is effective April 1, 2013, and the rate is imposed on the property’s value when first subject to use in Cook County. The tax is imposed on the purchaser or user and is payable when the property is first subject to use in the county. The seller should not collect the tax – it is strictly a purchaser self-assessed use tax. If the purchaser resides in Cook County or the property was delivered to a location in the county, the property will be considered for use in the county and first used on the delivery date. The ordinance also imposes a registration obligation on every person who acquires non-titled personal property subject to the use tax. The person must register with the Cook County Department of Revenue. Click here or here to access the Cook County registration web page. Individuals with a tax liability under the ordinance will receive an annual tax credit for the first $3,500 of non-titled personal property purchased outside Cook County. The credit will be applied against the person’s tax liability arising under the ordinance each year and cannot be used against tax liability arising in another tax year.
The following items are exempt from the tax: items of non-titled personal property exempt from tax under the Illinois Use Tax Act; food for human consumption that is to be consumed off the premises where it is sold, other than alcoholic beverages, soft drinks, and food which has been prepared for immediate consumption within the county; and prescription and non-prescription medicines, drugs, medical appliances used by persons who are public aid recipients in nursing homes, as well as insulin, urine testing materials, syringes, and needles used by natural persons who are diabetics for personal use.
The following uses are exempt from the tax: the use in the county of non-titled personal property acquired outside the county by a nonresident natural person if the property is brought into the county by the person for his or her own use while temporarily in the county or while passing through the county; the use of non-titled personal property by (1) an interstate carrier for hire as rolling stock moving in interstate commerce; or (2) the lessor under a lease of at least one year, executed or in effect at the time of purchase of the property, to an interstate carrier for hire as rolling stock moving in interstate commerce, but only so long as the property is used by the interstate carrier for hire; the use by an owner, lessor, or shipper of non-titled personal property that is utilized by interstate carriers for hire as rolling stock moving in interstate commerce as so used by interstate carriers for hire; the temporary storage in the county of non-titled personal property that is acquired outside the county and that, after being brought into the county and stored temporarily in the county is (1) used solely outside the county; (2) physically attached to, or incorporated into, other tangible personal property that is used solely outside the county; or (3) altered by converting, fabricating, manufacturing, printing, processing, or shaping and, as altered, is used solely outside the county; the temporary storage in the county of building materials and fixtures by a combination retailer and construction contractor registered with the state, but only if the contractor thereafter incorporates the building materials and fixtures into real estate located outside the county; the purchase or use of non-titled personal property by a common carrier by rail that receives possession of the property in the county and that transports the property, or shares with another common carrier in the transportation of the property, out of the county on a standard uniform bill of lading showing the seller of the property as the shipper or consignor of the property to a destination outside the county, for use outside the county; the personal use in the county of non-titled personal property acquired outside the county by a natural person who, at the time of acquisition, was not a resident of the county, and who used the property outside the county for at least three months prior to bringing the property into the county; and the use in the county of non-titled personal property by a person who uses said property in the course of business and 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.
Additionally the ordinance provides rules for the filing of returns, tax payments and remittances, as well as the required books and records, and violations and penalties. The County will be notifying taxpayers they believe are subject to the tax and these taxpayers must register within the notification period. Although there are significant issues with the imposition and administration of the tax that are not yet resolved, it is advisable for taxpayers to proceed with registration to minimize their risk. (Cook County Ordinance 12-O-63, adopted November 9, 2012)
UPDATE: On June 19, 2013, the Cook County Board voted to amend the ordinance establishing a use tax on non-titled personal property purchased outside the County. The amendments lower the tax on purchases made outside Cook County from 1.25 percent to .75 percent, the same rate for purchases within the County, and provide taxpayers with a credit against the Chicago non-titled personal property use tax in the amount of sales taxes paid on property purchased in another county. The amendments are effective June 19, 2013. Three lawsuits have been filed against the County in regards to the constitutionality of the law and whether the County has the authority under Illinois law to impose this tax. We will continue to monitor the activities. It is recommended that any funds remitted under the law be filed under protest in order to protect your rights to a refund the tax is repealed.
UPDATE: A Cook County trial court has issued a preliminary injunction enjoining Cook County’s imposition of the non-titled personal property use tax. Two law firms have filed suit against the county. The law firms claim that the use tax violates the state counties code by imposing a tax on the use of personal property that is based on the selling or purchase price of the property; the Illinois Constitution by imposing an ad valorem tax on personal property; and the dormant Commerce Clause of the U.S. Constitution. A hearing is set for August 15, 2013 for the court to hear a motion made by the county to stay the injunction. (Preliminary Injunction Orders, Circuit Court of Cook County, August 1, 2013)
UPDATE: An Illinois Cook County trial court has granted summary judgment to the two law firms and ruled that Cook County’s nontitled personal property use tax ordinance is invalid. The court held that the tax violated state law prohibiting a home rule county from imposing, under its home rule authority, a use tax, sales tax or other tax on the use, sale or purchase of tangible property based on the gross receipts from such sales or the selling price of the property. The court also held that the tax is an ad valorem tax on personal property in violation of the Illinois Constitution and is per se discriminatory against interstate commerce in violation of the U.S. Constitution. (Reed Smith, LLP et al. v. Ali, Director of the Cook County Department of Revenue, et al., Nos. 13 L 050454 and 13 L 050470, Circuit Court of Cook County, October 11, 2013)
UPDATE:The Illinois Cook County trial court’s ruling against enforcement of Cook County’s nontitled personal property use tax ordinance has been affirmedby the Illinois Appellate Court. The Cook County Department of Revenue argued that the tax was not prohibited by state law because it was imposed on the value of the property, not on the sales price. The court determined that it needed to look into the intent of the county ordinance to determine the meaning of “value” because its meaning could be vague as it was used in the ordinance. The court concluded that the use tax was a sales tax upon the purchase of the propertywhich the County is prohibited from imposing. The Court dismissed the County’s “guidelines” which established four acceptable methods of determining value of the property. Since the tax was “plainly prohibited” under the state statute, the court declined to address whether it violated either the U.S. Constitution or the Illinois Constitution. Therefore the tax is an illegal tax. Any taxpayers that remitted any Cook County Use Tax since it was effective April 1, 2013 should file a refund claim with the County. (Reed Smith LLP v. Ali, and Horwood Marcus & Berk, Chtd. V. Ali and the Cook County Department of Revenue, Appellate Court of Illinois, First District, Nos. 1-13-2646, 1-13-2654, 1-13-3350, 1-13-3352, August 4, 2014)
UPDATE: On September 17, 2014, the Circuit Court of Cook County entered summary judgment in favor of the Chicagoland Chamber of Commerce on the remaining count of their complaint challenging the Cook County Non-Titled Personal Property Use Tax. The court ordered Cook County tax authorities to process refund claims received from use tax taxpayers filing claims pursuant to the Uniform Penalties and Procedures Ordinance, starting no later than September 24, 2014. A claim for credit or refund may be filed on a form provided by the Cook County Department of Revenue within four years from the date of the remittance of the tax. If a taxpayer receives a written notice of tentative determination denying the claim, a written protest must be filed within 20 days of mailing of the written notice of tentative determination of the claim.