Home > Legal Updates > Illinois: State Supreme Court determines that Chicago’s tax on suburban car rentals is unconstitutional

Illinois: State Supreme Court determines that Chicago’s tax on suburban car rentals is unconstitutional

In the case The Hertz Corporation v. The City of Chicago, the Illinois Supreme Court reversed the lower court’s conclusion, thus holding that the Personal Property Lease Transaction Tax that the Windy City imposes on suburban vehicle rental agencies located within three miles of Chicago’s borders is unconstitutional.

BACKGROUND

In May 2011, 0fficials issued Ruling 11, which established that as of July 1, 2011, Chicago’s Department of Revenue (Department) would hold suburban rental agencies responsible for paying the Personal Property Lease Transaction Tax, in the absence of written proof that the lessee was exempt from paying the tax. Exemption was available if the lessee used the vehicle outside the City of Chicago. Without written proof, the default assumption was that a customer who is a resident of Chicago would be driving the vehicle there, and that a non-resident lessee would be using the vehicle outside of the city.