No. 48399. Appeal from the Appellate Court for the First
District; heard in that court on appeal from the Circuit Court of
Cook County; the Hon. Daniel A. Covelli, Judge, presiding.
No. 48611. Appeal from the Circuit Court of Cook County; the
Hon. Walter P. Dahl, Judge, presiding.
MR. JUSTICE UNDERWOOD DELIVERED THE OPINION OF THE COURT:
Rehearing denied May 26, 1977.
William R. Quinlan, Corporation Counsel, of Chicago (Daniel Pascale and Richard F. Friedman, Assistant Corporation Counsel, of counsel), for appellants.
Asher, Greenfield, Goodstein, Pavalon & Segall, Ltd., of Chicago (Eugene I. Pavalon, Peter B. Carey, and Joseph J. Butler, Jr., of counsel), for appellees.
These consolidated appeals are concerned with the constitutionality of the Chicago Transaction Tax Ordinance, which imposes a tax on transactions consummated in the city of Chicago involving the transfer of real estate and the lease or rental of certain types of personal property. (Municipal Code of Chicago, ch. 200.1.) The plaintiffs brought separate class actions in the circuit court of Cook County for a declaratory judgment and injunctive relief against defendants, the city of Chicago and its Director of Revenue, challenging the constitutionality of the ordinance on various grounds. Cause No. 48399 involves a suit filed by plaintiffs Richard B. Williams and Pearl Johnson attacking those portions of the ordinance dealing with the tax on the lease or rental of personal property. The trial court denied the defendants' motion to dismiss the complaint, and on interlocutory appeal the appellate court held the tax ordinance invalid on the grounds that it created an unconstitutional classification in defining the types of personal property transactions subject to the tax. (Williams v. City of Chicago (1976), 36 Ill. App.3d 216.) We allowed defendants' petition for leave to appeal. In cause No. 48611, plaintiffs Patrick E. Gorman and Dorothy Gorman brought suit challenging those provisions of the ordinance relating to the tax on real estate transfers. The trial court allowed plaintiffs' motion for summary judgment and entered an order declaring the ordinance unconstitutional as applied to transfers of real property on the grounds that it arbitrarily taxed nonresidents of the city at a lower rate than residents and was vague as to the circumstances which would make the lower tax rate applicable. The court enjoined the city from further collecting the tax on real estate transfers or from disbursing taxes already collected except into a segregated fund. The court further determined that those who had paid the tax constituted a class of persons entitled to a refund of the taxes they had paid. The defendants filed notice of appeal, and we allowed plaintiffs' motion for direct appeal to this court pursuant to Supreme Court Rule 302(b) (58 Ill.2d R. 302(b)) and for consolidation with the appeal in Williams.
The Chicago Transaction Tax Ordinance was enacted by the city of Chicago pursuant to its home rule powers under the 1970 State Constitution. It imposes a tax based on the dollar amount of all transactions consummated in the city of Chicago after January 1, 1974, involving the transfer of title to real property situated within the city and the lease or rental of specified items of personal property. Transactions made by nonresidents of the city are taxed at lower rates than transactions made by residents. Commencing January 1, 1974, the rate applicable to nonresidents is 95% of the tax rate applied to residents. The nonresident rate decreases each year on a sliding scale until January 1, 1978, when it reaches a permanent level of 50% of the rate paid by residents. The ordinance specifies that the "ultimate incidence of and liability for payment of said tax shall be borne by" the lessee of personal property or the grantee or purchaser of real property, respectively. However, the lessor or grantor has the duty of collecting the tax and remitting it to the city. In cases where taxes "have been paid in error" to the city, a procedure is set forth for credits and refunds to persons who have collected and remitted the tax. However, there are no provisions authorizing lessees or grantees who bear the burden of the tax to file claims for refunds or pay taxes under protest.
In view of the conclusions reached by the appellate court concerning the classifications of personal property set forth in the ordinance, it is appropriate to examine those provisions in some detail. Section 200.1-2 provides in pertinent part:
"200.1-2. There is hereby imposed and shall immediately accrue and be collected a tax, as herein provided, on all transactions designated herein, including sales, agreements of sale, agreements to sell, memoranda of sales, deliveries or transfers of the objects of such sales, agreements, or memoranda, leases and lease or rental agreements and memoranda, as follows:
A. Transactions consummated in the City of Chicago involving the lease or rental of any personal property, valued in money, * * * made after the 1st day of January, 1974 * * *."
Section 200.1-2(A) contains 5 subsections. Subsection 1 specifies the tax rate; subsection 2 provides that the incidence of tax and liability for its payment shall be borne by the lessee but that the person making or effectuating the lease or rental has the duty to pay the tax to the city; subsection 3 provides for payment of the tax through purchase of tax stamps, subsection 4 specifies that lease or rental agreements must contain certain information including an identifying number; and subsection 5 defines the personal property subject to the tax as follows:
"5 (a) As used in paragraph 200.1-2A, personal property means motor and other vehicles, which shall include but are not limited to automobiles, automobile trailers, bicycles, motor driven bicycles, motorcycles, buses, trucks, truck tractors, truck trailers, construction and demolition equipment, which shall include but is not limited to ditch digging equipment, well boring apparatus, road construction and maintenance equipment such as spreaders, mixers, loaders, graders, rollers, scarifiers, scrapers, earth movers, power shovels, cranes, compressors, concrete mixers, garden and landscaping equipment, ladders, floor machines, searchlights, floodlights, hand and electrical tools, spraying equipment, and scaffolding; household and office equipment, which shall include but is not limited to carpets and rugs, chairs and tables, chinaware and glassware, furniture, beds, television and radio, washing machines, dryers and ironers, water softening equipment; clothing, including but not limited to formal wear and other types of clothing; office and computing equipment, including but not limited to data processing equipment, computers, accounting and bookkeeping machines, adding and calculating machines, typewriters, addressing machines, dictating machines, duplicating machines, mailing machines, copy machines; and such miscellaneous equipment as musical instruments.
(b) As used in paragraph 200.1-2A, personal property shall also mean leased time on equipment not otherwise itself rented, such as leased time for use of calculators, computers, data processing equipment, tabulating equipment, accounting equipment, copying machines, duplicating machines, ...