Illinois Official Reports

Supreme Court

City of Chicago v. City of Kankakee, 2019 IL 122878

Caption in Supreme

Court:

THE CITY OF CHICAGO et al., Appellees, v. THE CITY OF 

KANKAKEE et al., Appellants.

Docket No. 122878

Filed March 21, 2019

Decision Under 

Review

Appeal from the Appellate Court for the First District; heard in that 

court on appeal from the Circuit Court of Cook County, the Hon. Peter 

Flynn, Judge, presiding.

Judgment Appellate court judgment reversed.

Circuit court judgment affirmed. 

Counsel on

Appeal

Scott C. Solberg, of Eimer Stahl LLP, of Chicago, for appellant City 

of Kankakee.

James A. Murphy, of Mahoney, Silverman & Cross, LLC, of Joliet, 

for appellant Village of Channahon.

Scott A. Browdy and Brian L. Browdy, of Ryan Law Firm, LLP, of 

Chicago, for appellant Inspired Development LLC.
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Steven P. Blonder, of Much Shelist, P.C., of Chicago, for appellants 

MTS Consulting, LLC, et al.

Edward N. Siskel, Acting Corporation Counsel, of Chicago (Benna 

Ruth Solomon, Myriam Zreczny Kasper, and Julian N. Henriques Jr., 

Assistant Corporation Counsel, of counsel), for appellee City of 

Chicago.

Michael Lorge, Corporation Counsel, of Skokie (James McCarthy, 

Assistant Corporation Counsel, of counsel), for appellee Village of 

Skokie.

Kimball R. Anderson, Loren G. Rene, and Cara A. Lawson, of 

Winston & Strawn LLP, Mark P. Rotatori and Morgan R. Hirst, of 

Jones Day, Charles K. Schafer and Scott J. Heyman, of Sidley Austin 

LLP, Catherine A. Battin, of McDermott, Will & Emery LLP, and 

Daniel M. Blouin and William I. Goldberg, of Seyfarth Shaw LLP, all 

of Chicago, for amicus curiae Internet Retailers.

Gino L. DiVito, Daniel I. Konieczny, and Jordan E. Wilkow, of Tabet 

DiVito & Rothstein LLC, and Timothy L. Bertschy, John P. Heil Jr., 

and Brett M. Mares, of Heyl, Royster, Voelker & Allen, P.C., both of 

Chicago, for amicus curiae Regional Transportation Authority.

Justices JUSTICE THEIS delivered the judgment of the court, with opinion.

Chief Justice Karmeier and Justices Thomas, Kilbride, Garman, and 

Burke concurred in the judgment and opinion.

Justice Neville took no part in the decision.

OPINION

¶ 1 Plaintiff municipalities brought this cause of action against defendant municipalities and 

brokers seeking to recover tax revenue purportedly owed to them under the Use Tax Act (35 

ILCS 105/1 et seq. (West 2016)). The circuit court of Cook County dismissed plaintiffs’ claims 

with prejudice and denied plaintiffs leave to file a fourth amended complaint. The appellate 

court reversed and remanded. 2017 IL App (1st) 153531, ¶ 45. For the reasons that follow, we 

reverse the judgment of the appellate court and affirm the judgment of the circuit court.
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¶ 2 BACKGROUND

¶ 3 This case concerns two types of Illinois state taxes: a “retailers occupation tax,” more 

commonly known as “sales tax,” authorized by the Retailers’ Occupation Tax Act (ROTA) (35 

ILCS 120/1 et seq. (West 2016)), and the “use tax” authorized by the Use Tax Act (UTA) (35 

ILCS 105/1 et seq. (West 2016)). Sales tax is imposed on the sale of tangible personal property 

purchased in Illinois. 35 ILCS 120/2 (West 2016). In contrast, use tax is imposed on the

privilege of using in Illinois tangible personal property purchased at retail from a retailer 

outside the state. 35 ILCS 105/3 (West 2016). Pursuant to UTA, retailers who have a sufficient 

physical presence in Illinois and have out-of-state facilities from which Internet, telephone, 

and mail order sales are made of tangible personal property to be used in Illinois must collect 

a use tax from the purchaser, and that tax is remitted to the Illinois Department of Revenue 

(IDOR). The purpose of the use tax is “ ‘primarily to prevent avoidance of [the sales] tax by 

people making out-of-State purchases, and to protect Illinois merchants against such diversion 

of business to retailers outside Illinois.’ ” Performance Marketing Ass’n v. Hamer, 2013 IL 

114496, ¶ 3 (quoting Klein Town Builders, Inc. v. Department of Revenue, 36 Ill. 2d 301, 303 

(1966)).

¶ 4 Under the respective statutes, the general rate set in Illinois for both sales tax and use tax 

is 6.25% of the sale price of the item with 5% allocated to the State. 35 ILCS 105/3-10 (West 

2016); 35 ILCS 120/2-10 (West 2016); 30 ILCS 105/6z-18 (West 2016). At issue here is a 

dispute about what happens to the remaining 1.25%. Under ROTA, the remaining amount is 

distributed geographically to the municipality (1%) and county (0.25%) where the sale of the 

item actually occurred. 30 ILCS 105/6z-18 (West 2016). 

¶ 5 The distribution of funds under UTA is more complicated. Unlike the local share of sales 

tax, which is distributed entirely where the sale takes place, under UTA, the remaining 1.25% 

share of the use tax is distributed in the following percentages: 20% of the fund goes to 

Chicago, 10% to the Regional Transportation Authority Occupation and Use Tax Replacement 

Fund (RTA Fund), 0.6% to the Madison County Mass Transit District, and $3.15 million to 

the Build Illinois Fund. The balance of the fund is distributed to all other municipalities (except 

Chicago) based on their proportionate share of the state population. Id. § 6z-17. Consequently, 

a municipality receives a larger amount from a local sale subject to the sales tax than from a 

comparable sale subject to the use tax. 

¶ 6 In 2011, this litigation began as three separate cases filed by the Regional Transportation 

Authority (RTA) (No. 11 CH 29744), the City of Chicago (No. 11 CH 29745), and Cook 

County (No. 11 CH 34266). The cases were consolidated by the trial court. This appeal 

concerns only the case brought by the City of Chicago and the Village of Skokie, which was 

added as a plaintiff in 2012.

¶ 7 In December 2013, plaintiffs filed their third amended complaint against the City of 

Kankakee and the Village of Channahon (municipal defendants) and MTS Consulting, LLC, 

Inspired Development, Minority Development Co., Corporate Funding Solutions, and Capital 

Funding Solutions (broker defendants). Plaintiffs claimed that defendants were unjustly 

enriched through a scheme under which the situs of retail sales was misreported, which 

deprived plaintiffs of their statutory share of the Illinois use tax. 

¶ 8 Plaintiffs alleged in the third amended complaint that beginning in 2000, in order to 

convince retailers to make sales that would be sourced to their towns, Kankakee and 
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Channahon, either directly or through the broker defendants, entered into rebate agreements 

with retailers under which the municipalities would return a portion of the sales tax to the 

retailer. Plaintiffs further alleged that defendants used the rebate agreements to divert tax 

revenue from plaintiffs through a wrongful “use tax-sales tax swap.” According to plaintiffs, 

defendants encouraged and assisted Internet retailers to manipulate the system by misreporting 

the situs of the sale in order to swap the state use tax for the state sales tax. 

¶ 9 Plaintiffs further alleged that little or no meaningful sales activity took place in the offices 

maintained in Kankakee and Channahon on behalf of the Internet retailers. They were 

maintained for the sole purpose of having the Internet retailers obtain a tax rebate from the 

municipality. Plaintiffs alleged that, although the Internet retailers’ acceptance of customer 

orders occurred outside of Illinois, they reported to IDOR that sales took place in Kankakee or 

Channahon, thus subjecting those sales to sales tax, rather than use tax. These activities, 

plaintiffs claimed, had the effect of wrongfully taking what should have been plaintiffs’ local 

share of the use tax and diverting it to defendant municipalities in the form of their share of the 

sales tax, thereby unjustly enriching defendants. 

¶ 10 Count I of the two-count third amended complaint was against defendants for unjust 

enrichment. Plaintiffs sought a declaration that certain Internet retailers were subject to the 

state use tax, rather than the state sales tax; the imposition of a constructive trust on all sales 

tax revenue received by Kankakee, Channahon, and the brokers as a result of the Internet 

retailers being subject to the state sales tax rather than the state use tax; and compensatory 

damages in the amount of use tax revenue plaintiffs lost as a result of the use tax-sales tax 

swap.1

¶ 11 In April 2015, plaintiffs sought leave to file a fourth amended complaint. The proposed 

fourth amended complaint asserted claims against four groups of defendants: the previously 

identified municipal defendants; the broker defendants;2 11 Internet retailer defendants;3 and 

three groups of operating and procurement company defendants.4 Counts I, III, V, and VII of 

the proposed fourth amended complaint sought declaratory relief. Specifically, plaintiffs 

sought a declaration that certain sales of Internet retailer defendants and certain purchases of 

operating procurement company defendants were subject to state use tax. Counts II, IV, VI, 

and VIII raised a claim for unjust enrichment and sought a constructive trust and restitution. 

In those counts, plaintiffs sought to impose a constructive trust on all sales tax revenue received 

by the municipal and broker defendants as a result of the purported unjust enrichment, an 

equitable accounting, and the return of the property to plaintiffs as restitution from the 

municipal and broker defendants. 

1

Count II of the third amended complaint sought relief against defendants for unjust enrichment 

with respect to transactions with “operating companies” and “procurement subsidiaries.” Count II 

claims were abandoned and are no longer part of the case. 

2

Plaintiffs added a new broker defendant, Ryan, LLC, and dropped all other broker defendants with 

the exception of MTS Consulting, LLC, and Capital Funding Solutions.

3

Cabela’s, Inc.; CompuCom Systems, Inc.; Dell Marketing, L.P.; Hewlett-Packard Company; HSN,

Inc.; Lenovo, Inc.; McKesson Purchasing Company, LLC; NCR Corp.; Shaw Industries, Inc.; Wesco 

Distribution, Inc.; and Williams-Sonoma, Inc. 

4 AT&T Network Procurement, LP; USCC Purchase, LLC; and Verizon Wireless Network 

Procurement, LP.
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¶ 12 On October 9, 2015, the trial court denied plaintiffs’ motion for leave to file their fourth 

amended complaint and dismissed plaintiffs’ claims with prejudice. The trial court found that 

plaintiffs’ claims for declaratory action failed because the conduct of which plaintiffs 

complained ceased in 2014. Thus, the purpose of the declaratory action—to allow the court to 

address a controversy after a dispute has arisen but before action is taken by the parties—would 

not be served.

¶ 13 As to plaintiffs’ claims against the municipal defendants, the trial court dismissed them 

because it found that IDOR has exclusive jurisdiction over tax distribution cases. It held that 

plaintiffs were attempting to judicially preempt IDOR’s authority to audit tax payments and to 

redistribute amounts collected, by attempting to bypass IDOR, which has both the authority 

and the expertise to do that job. The trial court also found that a ruling in plaintiffs’ favor would 

require defendant municipalities to repay IDOR the local share that purportedly was 

improperly distributed to them. IDOR then would have to redistribute those funds, not only to 

plaintiffs, but also to multiple governing bodies that are not even parties to the case, pursuant 

to the statutory use tax distribution provisions.

¶ 14 Additionally, concerning plaintiffs’ claims against the nonmunicipal defendants—unjust 

enrichment, constructive trust, and restitution—the trial court found that those somewhat 

overlapping theories concerned remedies, not freestanding causes of action, and that plaintiffs 

had proposed a remedy without articulating an actionable wrong. The trial court found that 

plaintiffs could not state a viable cause of action against the nonmunicipal defendants because 

they had no dealings with plaintiffs, got nothing from plaintiffs, and did not have anything that

belonged to them. 

¶ 15 Plaintiffs moved to reconsider and provided a revised proposed fourth amended complaint 

that removed their declaratory judgment counts. Count I was for unjust enrichment, 

constructive trust, and restitution against the Internet retailer defendants. Count II was identical 

but against the municipal and broker defendants based on Internet retail sales. The trial court 

denied plaintiffs’ motion to reconsider. 

¶ 16 The appellate court reversed and remanded with directions to permit plaintiffs to file the 

claims set forth in counts I and II of the revised proposed fourth amended complaint. 2017 IL 

App (1st) 153531, ¶¶ 44-45. The appellate court found that plaintiffs’ third amended complaint 

and revised fourth amendment complaint stated valid claims for unjust enrichment against 

defendants and the proposed Internet retailer defendants. Id. ¶ 44. Further, the appellate court 

concluded that IDOR did not have exclusive jurisdiction over the unjust enrichment claims in 

plaintiffs’ third and fourth amended complaints. Id.

¶ 17 This court granted the petition for leave to appeal filed by the municipal defendants and 

four of the broker defendants (Inspired Development, MTS Consulting, LLC, Capital Funding 

Solutions, and Corporate Funding Solutions).5 Ill. S. Ct. R. 315 (eff. Nov. 1, 2017). We also 

allowed various Internet retailers6 identified in the proposed fourth amended complaint to file 

5

This court subsequently entered an agreed order recognizing that plaintiffs reached a settlement 

with the Village of Channahon and Inspired Development. All claims against Channahon and Inspired 

Development regarding sales processed through Channahon were dismissed with prejudice. The order 

did not affect plaintiffs’ claims relating to sales processed through Kankakee. 

6

Dell Marketing, L.P.; Williams-Sonoma, Inc.; NCR Corp.; Cabela’s, Inc.; and HSN, Inc.
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an amicus curiae brief in support of defendants. We further allowed the RTA to file an 

amicus curiae brief in support of plaintiffs. Ill. S. Ct. R. 345 (eff. Sept. 20, 2010). 

¶ 18 ANALYSIS

¶ 19 Defendants assert that the appellate court erred by reversing the circuit court’s denial of 

plaintiff’s motion for leave to file a fourth amended complaint because further amendment 

would not cure plaintiffs’ defective pleadings. Specifically, defendants contend that the circuit 

court lacked subject-matter jurisdiction to consider plaintiffs’ claims because IDOR has 

exclusive jurisdiction over this dispute, which concerns the assessment, collection, and 

distribution of Illinois taxes.

¶ 20 In determining whether a motion to amend should have been granted by the circuit court, 

we consider the following four factors: whether the proposed amendment would cure the 

defective pleading, whether the proposed amendment would surprise or prejudice the opposing 

party, whether the proposed amendment was timely filed, and whether the moving party had 

previous opportunities to amend. Sheffler v. Commonwealth Edison Co., 2011 IL 110166, ¶ 69. 

Although rulings on motions for leave to amend are reviewed for an abuse of discretion (id.), 

the purported defects here relate to the circuit court’s jurisdiction and require us to interpret 

the relevant statutory framework, all matters of law that are subject to de novo review (J&J 

Ventures Gaming, LLC v. Wild, Inc., 2016 IL 119870, ¶ 25).

¶ 21 We initially note that this case concerns conduct that occurred prior to this court’s decision 

in Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130. There, we determined that the “business 

of selling” for purposes of retailer occupation taxes is a fact-intensive inquiry requiring a 

totality-of-the-circumstances analysis. We held that certain IDOR regulations were invalid 

because they did not amply prescribe this fact-intensive inquiry and allowed for only one minor 

step in the business of selling to conclusively govern tax situs. Id. ¶¶ 32-34, 64. Prior to 2014, 

the Illinois Administrative Code had provided, in pertinent part, that where an authorized 

representative within Illinois accepts orders on behalf of businesses, those sales would be 

subject to sales tax in the municipalities where the orders were accepted. See 86 Ill. Adm. Code 

130.610, amended at 36 Ill. Reg. 6662 (eff. Apr. 12, 2012). Following Hartney, IDOR repealed 

section 130.610 of the Illinois Administrative Code. See 86 Ill. Adm. Code 130.610, repealed 

at 38 Ill. Reg. 19998 (eff. Oct. 1, 2014). With the repeal of the regulation, the conduct 

complained of here is no longer possible. The question in this appeal concerns whether the 

circuit court can assess the propriety of the challenged pre-Hartney transactions or if that 

responsibility falls under the exclusive authority of IDOR. 

¶ 22 Subject-matter jurisdiction refers to a tribunal’s power to hear and determine cases of the 

general class to which the proceeding in question belongs. Crossroads Ford Truck Sales, Inc. 

v. Sterling Truck Corp., 2011 IL 111611, ¶ 27. Generally, under the Illinois Constitution, 

circuit courts have original jurisdiction over all justiciable matters, except in certain 

circumstances where this court has exclusive and original jurisdiction. Ill. Const. 1970, art. VI, 

§ 9. This court has recognized a line of cases “holding that our General Assembly may vest 

original jurisdiction in an administrative agency rather than the courts when it enacts a 

comprehensive statutory scheme that creates rights and duties that have no counterpart in 

common law or equity.” Zahn v. North American Power & Gas, LLC, 2016 IL 120526, ¶ 14 
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(citing J&J Ventures, 2016 IL 119870, ¶ 23).7 In other words, the legislature may define a 

justiciable matter in such a way as to preclude or limit the circuit court’s jurisdiction. People 

v. NL Industries, 152 Ill. 2d 82, 97 (1992). 

¶ 23 There is no dispute in this case as to justiciability, and the matter is not one that falls within 

this court’s original and exclusive jurisdiction. Similarly, there is no dispute that the State has 

the authority to levy, assess, and collect sales taxes and use taxes, and no counterpart exists at 

common law. See People ex rel. Shirk v. Glass, 9 Ill. 2d 302, 311 (1956) (“The levy, 

assessment and collection of taxes are purely statutory and the levy, assessment and collection 

of taxes can only be made as expressly pointed out in the statute.”).

¶ 24 Defendants argue, however, that, although plaintiffs attempt to cloak their cause of action 

in the attire of equity, their claims are purely statutory and under the applicable framework the 

legislature has vested IDOR with the exclusive authority to act.8

¶ 25 In J&J Ventures, relied upon by defendants, the parties argued that the circuit court had 

subject-matter jurisdiction to determine the validity of location agreements for video gaming 

machines between the plaintiffs and the defendants because the legislature had not explicitly 

divested the circuit court of jurisdiction in the Video Gaming Act (230 ILCS 40/1 et seq. (West 

2014)). J&J Ventures, 2016 IL 119870, ¶¶ 21, 24. We disagreed, finding that the Illinois 

Gaming Board had exclusive jurisdiction to determine the validity of the agreements between 

the plaintiffs and the defendants and that the circuit court had no jurisdiction to decide 

plaintiffs’ actions for declaratory judgment related to those contracts. Id. ¶¶ 32-33. 

¶ 26 In so holding, we recognized that the absence of an explicit divestiture of circuit court 

jurisdiction did not mean that the legislature did not intend to divest the court of jurisdiction. 

Id. ¶ 24. We held that, under our case law, “legislative intent to divest circuit courts of 

jurisdiction may be discerned by considering the statute as a whole.” Id.

¶ 27 Plaintiffs rely on Village of Itasca v. Village of Lisle, 352 Ill. App. 3d 847 (2004), and State 

ex rel. Beeler, Schad & Diamond, P.C. v. Ritz Camera Centers, Inc., 377 Ill. App. 3d 990 

(2007), for the proposition that the circuit court had subject-matter jurisdiction over their 

claims. Neither case informs our decision here. The appellate court in both cases relied on the 

rule in Employers Mutual Cos. v. Skilling, 163 Ill. 2d 284 (1994), that the legislature’s 

divestment of circuit court jurisdiction must be explicit. However, in J&J Ventures this court 

clarified that the absence of an explicit divestiture of circuit court jurisdiction is not dispositive. 

J&J Ventures, 2016 IL 119870, ¶ 24; see also Zahn, 2016 IL 120526, ¶¶ 14-16. Further, we 

note that Itasca, which Ritz Camera simply followed on the issue of subject-matter jurisdiction, 

involved an issue over the proper situs of sales tax between two municipalities, while Ritz 

Camera concerned a claim brought under the Whistleblower Reward and Protection Act (740 

ILCS 175/1 et seq. (West 2002)9

). Village of Itasca, 352 Ill. App. 3d at 853; Ritz Camera, 377 

7 This court has also recognized that, while our precedent refers to the “jurisdiction” of 

administrative agencies, the term is not strictly applicable when referring to an administrative agency. 

The term “jurisdiction” is used as shorthand for describing the agency’s authority to act. Zahn, 2016 IL 

120526, ¶ 14 n.2. 

8

The Internet retailers, in their amicus curiae brief, join in this argument.

9

The Whistleblower Reward and Protection Act has since been amended and renamed the Illinois 

False Claims Act. Pub. Act 96-1304 (eff. July 27, 2010).
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Ill. App. 3d at 993, 1006-07. In contrast to plaintiffs’ complaint, neither case concerned the 

proper distribution of use taxes over a multiyear period, impacting multiple municipalities and 

other entities that receive a proportionate share of use tax receipts.

¶ 28 J&J Ventures illustrates that even if the task before the circuit court is one courts perform 

frequently, such as interpreting a contract, that is not dispositive of whether the court has 

jurisdiction. Rather, legislative intent to vest jurisdiction in an administrative agency may be 

discerned by considering the statutory framework as a whole. J&J Ventures, 2016 IL 119870,

¶¶ 24-25. When interpreting a statute, this court’s primary objective is to ascertain and give 

effect to the intent of the legislature. Id. ¶ 25. All provisions of a statute must be viewed as a 

whole, with the relevant statutory provisions construed together and not in isolation. Id. “In 

addition, the court may consider the reason for the law, the problems sought to be remedied, 

the purposes to be achieved, and the consequences of construing the statute in one way or 

another.” Id.

¶ 29 Turning to the statutory framework at issue, IDOR’s authority in this area of taxation is 

spread among the Department of Revenue Law (Revenue Law) (20 ILCS 2505/2505-1 et seq.

(West 2016)), the State Finance Act (Finance Act) (30 ILCS 105/1 et seq. (West 2016)), and 

the Illinois Municipal Code (65 ILCS 5/1-1-1 et seq. (West 2016)).

¶ 30 For purposes of administering ROTA, the legislature has provided IDOR with “the power 

to administer and enforce all the rights, powers, and duties contained in [ROTA] to collect all 

revenues thereunder and to succeed to all the rights, powers, and duties previously exercised 

by the Department of Finance in connection therewith.” 20 ILCS 2505/2505-25 (West 2016). 

Similarly, IDOR, for purposes of administering UTA, “has the power to exercise all the rights, 

powers, and duties vested in [IDOR] by the [UTA].” Id. § 2505-90. IDOR also has “the power 

to make reasonable rules and regulations that may be necessary to effectively enforce” its 

powers under ROTA and UTA. Id. § 2505-795.

¶ 31 IDOR is responsible for accepting the receipt of state sales and use taxes. Pursuant to 

section 3 of ROTA, a retailer engaged in the business of selling tangible personal property in 

Illinois must remit to IDOR the sales tax owed on the sale of that property. 35 ILCS 120/3 

(West 2016). The retailer must also file a tax return with IDOR that reports the total amount 

of its gross receipts during the preceding calendar month or quarter and upon the basis of which 

the tax is imposed. Id. It must additionally provide IDOR with the address of the principal 

place of business from which the retailer engages in the business of selling tangible personal 

property in Illinois. Id. Likewise, under section 9 of UTA, all retailers that are required to 

collect use tax must file tax returns with IDOR declaring the amount of use tax collected during 

the applicable period and remit the collected tax to IDOR. 35 ILCS 105/9 (West 2016). 

¶ 32 The legislature has also provided IDOR, for purposes of administering and enforcing 

ROTA and UTA, with the power to examine and correct tax returns, conduct investigations 

and hearings, and to make corrections in records and disbursements. 

¶ 33 Section 8 of ROTA provides, in pertinent part:

“[IDOR] *** may hold investigations and hearings *** concerning any matters covered 

by this Act and may examine any books, papers, records or memoranda bearing upon 

the sales of tangible personal property or services of any such person, and may require 

the attendance of such person or any officer or employee of such person, or of any 
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person having knowledge of such business, and may take testimony and require proof 

of its information.” 35 ILCS 120/8 (West 2016).

¶ 34 Section 11 of UTA, in turn, provides:

“Every retailer required or authorized to collect taxes hereunder *** shall keep such 

records, receipts, invoices and other pertinent books, documents, memoranda and 

papers as [IDOR] shall require, in such form as [IDOR] shall require. *** [IDOR] *** 

may hold investigations and hearings concerning any matters covered herein and may 

examine any books, papers, records, documents or memoranda of any retailer or 

purchaser bearing upon the sales or purchases of tangible personal property, the 

privilege of using which is taxed hereunder, and may require the attendance of such 

person or any officer or employee of such person, or any person having knowledge of 

the facts, and may take testimony and require proof for its information.” 35 ILCS 

105/11 (West 2016). 

¶ 35 IDOR has additionally been vested with the authority to examine tax returns and to make 

corrections according to its best judgment and information, to issue notices of tax liability, to 

impose penalties, to entertain protests and requests for hearings and rehearings, and to issue 

final assessments. See id. § 12; 35 ILCS 120/4 (West 2016). IDOR also has the responsibility 

to correct errors in its records, and if an error is due to a mistake in reporting by the taxpayer 

and the taxpayer agrees that he or she has made a reporting error that should be corrected, 

IDOR has the authority to correct the records accordingly. 20 ILCS 2505/2505-475 (West 

2016). 

¶ 36 The legislature has also made IDOR responsible for the distribution of the sales and use 

taxes it collects. 

¶ 37 For retail sales subject to the sales tax, the municipality in which the sale actually occurs 

receives revenue equal to 1% of the retail price, while the county in which the sale occurs 

receives the remaining 0.25% of the retail price. 30 ILCS 105/6z-18 (West 2016). For retail 

sales that are subject to the use tax, the 1.25% is deposited into the State and Local Sales Tax 

Reform Fund, a fund administered by IDOR. Id. § 6z-17. IDOR is then responsible under the 

Finance Act to disburse those funds on a monthly basis as follows: 20% to Chicago, 10% to 

the RTA Fund, 0.6% to the Madison County Mass Transit District, $3.15 million to the Build 

Illinois Fund, and the remainder of the fund to all other municipalities (except Chicago) based 

on their proportionate share as provided by statute. Id.

¶ 38 Additionally, the legislature has vested IDOR under section 6z-18 of the Finance Act, 

which controls disbursements by IDOR from the applicable tax fund, with the following duty:

“When certifying the amount of monthly disbursement to a municipality or county 

under this Section, [IDOR] shall increase or decrease that amount by an amount 

necessary to offset any misallocation of previous disbursements. The offset amount 

shall be the amount erroneously disbursed within the 6 months preceding the time a 

misallocation is discovered.” Id. § 6z-18. 

¶ 39 Based upon the statutory framework above, we find that IDOR has been vested, for 

purposes of plaintiffs’ claims, with the exclusive authority to audit the reported transactions 

that plaintiffs dispute and to distribute or redistribute the tax revenue due to any error. The 

legislature has empowered IDOR with broad investigatory authority, including the right to 

examine, correct, and adjust errors in tax reporting. IDOR has the power to review records in 
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connection with previously filed tax returns, to issue refunds or notices of tax liability, and to 

adjust current tax liability based on changes it may make to prior tax returns. IDOR is also 

authorized to conduct hearings and issue final assessments concerning tax liability. 

¶ 40 Here, the municipal defendants obtained certain tax distributions based upon allegedly 

missourced sales taxes going back to 2000, which plaintiffs now seek to recover as a 

proportionate share of the use taxes owed to them under UTA. The alleged enrichment of the 

nonmunicipal defendants occurred because of the rebate agreements entered into with the 

municipal defendants and not due to any direct dealings with plaintiffs. 

¶ 41 To resolve plaintiffs’ claims, the circuit court would have to determine the proper tax situs 

of thousands of pre-Hartney retail sales stretching back at least 14 years. If plaintiffs prevailed 

on liability, the circuit court would then have to determine the amount of tax revenues plaintiffs 

would have received on each of the applicable transactions had the Internet retailers reported 

use tax rather than sales tax to IDOR. Plaintiffs assert that such a determination falls within 

the conventional competence of the courts and requires mere arithmetic calculations. We 

disagree. 

¶ 42 As the circuit court emphasized, plaintiffs, in essence, are seeking to use the circuit court 

to conduct a full-scale audit and redistribution of state taxes. IDOR has been given that 

authority by the legislature, not the circuit court. IDOR has also been provided by the 

legislature with the resources, and by extension the expertise, to conduct such an audit. 

Furthermore, for purposes of plaintiffs’ claims, IDOR has the exclusive authority under the 

Finance Act to distribute or redistribute tax revenue collected under UTA to the other 

numerous local governing bodies who are not parties to this case. IDOR has specifically been 

tasked with correcting errors in past use tax distributions to these governing bodies, while the 

circuit court has not.

¶ 43 Section 8-11-21(a) of the Municipal Code (65 ILCS 5/8-11-21(a) (West 2016)) supports 

our determination that the circuit court lacks subject-matter jurisdiction to consider plaintiffs’ 

claims. This section allows a municipality that has been denied sales tax revenue because of a 

rebate agreement in violation of the Municipal Code to file an action in the circuit court against 

only the offending municipality. Id.

¶ 44 We find that section 8-11-21 of the Municipal Code shows that, in order for a municipality 

to have the right to bring a cause of action in court about missourcing or misreporting of use

taxes, the municipality must be given that right by the General Assembly. Our legislature, 

however, has not authorized such suits. It has chosen to only permit municipalities to bring a 

cause of action in the circuit court for missourced sales tax, and then only as a result of a rebate 

agreement entered after June 1, 2004. Id. No similar provision authorizes suits for the denial 

of use tax revenue due to alleged misreporting. 

¶ 45 For the foregoing reasons, we hold that IDOR has exclusive authority over plaintiffs’ 

claims against defendants.

¶ 46 CONCLUSION

¶ 47 Accordingly, the judgment of the appellate court is reversed, and the judgment of the circuit 

court, dismissing plaintiffs’ claims with prejudice and denying plaintiffs leave to file a fourth 

amended complaint, is affirmed.
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¶ 48 Appellate court judgment reversed.

¶ 49 Circuit court judgment affirmed. 

¶ 50 JUSTICE NEVILLE took no part in the consideration or decision of this case.