Docket No. 109300.



### IN THE SUPREME COURT OF THE STA TE OF IL LINOIS

IRW IN INDU ST RIAL T OOL COMPA NY, f/k/a American Tool Companies , Inc., a s Successor by Merge r to ATC Air , Inc ., Appell ant,
v. THE IL LI NOIS DEPARTMENT OF REVENUE et al. , Appelle es.
Opinion filed September 23, 2010.

JUSTICE KARMEIER delivered the judgment of the co urt, with opinion. Chief Justice Fitzgerald and

Justices Freeman, Thomas, Kilbride, Garman, and Burke concurr ed in the judgment and opinion.

OPINION This appea l conce rns the imp osition of a use tax, pursuant to
sec tion 3 of the Use Tax Act (35 ILCS 105/3 (West 2008)), b y th e defenda nts, the I llinois Department of Revenue (Department), Brian Hamer, as the Director of Revenue, and Alexi Giannoulias, as the Illinois State Treasurer, on the purchase price of an airplane acquired by ATC Air, Inc. (ATC Air), a former subsidiary

of American Tool Compani e s, Inc., now known as I rwin Industrial Tool Company (Irwin), the plaintiff. On ATC Ai r’s behal f, Irwin paid the total amount assessed

under pr otest, pursuant to se ction 2a. 1 of the Sta te Officers and Employ

ees Mone y D isposition A ct (30 I

LCS 2 30 /2a.1 (West 20 08 )), and f

iled a co mplaint se eking r eimburse ment. Only counts II I and I

V are relevant

to th is app eal . In c oun t III, Irwin allege d that the use ta

x impose d did n ot meet the requirements of the
commerce clause

of the Unite d States Con stitution ( U.S. Const. , art.-2- I, §8, cl. 3) beca

use there was no substantial nexus between the airplane and Illinois so as to permit the De partmen t to tax the airplane’s use in

Illinois. Alternatively , in count IV, I rwin argued that
even if there was a substantial nexus so as to subject the airplane to the Illinois use tax, the amount of tax imposed was unconstitutional under the commerce claus e (U.S . Const., a rt. I , §8, cl. 3 ) becau se it
was not “fairly a

pportioned,” i.e. , it was based on the airplane’s entire purchas e price

instead o f its actu

al use in I llinois. Oncross-mo tions for s

umm ary judgmen

t, the circu it court granted summary judgment in favor of th e Department on count II I, finding
a substantial nexus between the airplane and Illinois so as to subject ATC A ir to Illinois use tax liability. Howeve r, the circuit court granted summary judgmen t in favor of Irwin on

count IV, finding that the Department could

tax only 4% of the

airpla ne’s value based on the percentage of time it spent on the g round in I llinois. Both parties appealed. The appellat e cou rt affi rmed as to cou nt III, findi ng a sufficient physical conne ction betwe en both ATC Air and the airplane and Illinois, so as to satisfy the “substantial nexus” require ment and allow the Department to impose a use tax on the airplane. However, the app ell ate cou rt r eve rse d as to cou nt IV , finding that the c ircuit court erred

in limiting the use tax to 4% of the airplane’s value. For the following reasons, we affirm the judgment of the appella

te court

.

BACKGROUND Irwinis a multin ational corporation that manufactures and di stribu tes tools throu

gh var ious domes tic and f

oreign subsidiar ies. During the releva

nt time per

iod, I rwin’s he adquart

ers was i n Lincoln, Nebraska, but it also had a corpor at e offic e in Hoff man Estat

es, Illinois. Of its seven co rporate office rs, four had their

office s in Illinois, its chief executive officer (CEO), chief oper ating officer (COO)/pr esident, chi ef financial officer (CFO), and c orporate vice president (VP)/g eneral

counsel. In a

ddition, of

its four c orporat

e directo rs, two ha

d their of fices in I llinois. ATC Air was a wholly- owne d subsidiary of Ir win, and i

ts sole purpose was to provide ai r tr ansporta tion services to I

rwin and its affili atedc ompanies. Irwin’s CEO was ATC Air’ s only director, as well as its chairman and CEO. A T C Air’s oth er offic ers wer e also1 Although the app ellate opinion states that 269 of the 734 flight segm ents (36.6% ) ori ginated or ende d at an Illin ois airp ort, acc ording

to
our count based on the flight log, 27 1 of the 734 fligh t segm ents (36 .9%) originated an d/or end

ed at an Illin ois airp ort.
-3- Irwin’s office

rs. ATC Air’s CEO/only director/cha irman, CFO, and gener al counse l all had their

office s in Il linois. ATC

Air maintained all of its business records at its office in Lincoln, Nebra ska, and had seven employee s, all of whom lived and worked in Nebraska. When ATC Air bought the airplane at issue here, i t paid $7,670,710 in addition to trading in its previously owned a i r plane. ATC Air did not pay any sales tax on the purc ha se. ATC Air’s VP/generalcounsel executed the contract to purchase th e airplane froma company

in Kansas. The contract, promissory no te , g ua ra nt y, se curity agreement, trade-in ag

reement, and bill of sale listed AT C Air’s address as 2800 West Higgi ns Road, H offman E states, I llinois, whichwas Irwin’s I

llinois office. ATC Air took de livery of the airplane in Arkansas and flew it to Lincoln, Nebr aska, where it was hangared. ATC Air registere d the airplane with the Federal Aviation Administration (FAA) by filing an aircraft bill of

sale and an aircraft registration

application. Both documents listed Irwin’s I llinois office address as ATC Air’s address. ATC Air subsequently filed an amendment

to both documen ts , changing its address from I rwin’s Illinois office to an address in L incoln, Nebraska. ATC Air owned the airplane for approximately two years–f

rom April 12, 2000, through April 30, 2002. The airplane was used fo r customer visi ts, t ransp ortin g I

rwin’s officers and employ ees from one locationto another , and matt ers rela ting to a cquisition s and law suits. ATC Air char

ged I rwin for the airplane’s use, and ATC Air reported its income on federal and state consolidated income tax returns. The airplane was flow

n on 290 days, fly

ing to locations throughout

the United States, Canada, and Mexico. On

143 of thos e day s, or 49.3% of the flight da ys, the a irplane flew to and/or from Illinois. There were a total of 734 flight seg ments, of which271, 1 or 36.9%, originated and/or ended in I llinois. The airplane flew to and fromIllinois so ofte

n becau se Ir

win’s pri ncipal o f ficers, who were-4- among the airplane ’s main passeng ers, wor

ked at I rwin’s I llinois office. The airplane often fle w empty to Ill inois wher

e it would pick up one of I

rwin’s c orporat

e offic ers, fly

him to vari ous locat

ions, return him to Illinois, and then fly empty back to i

t s hanga r in Nebraska. ATC Air filed a Ne braska personal property tax return and claimeda n exemption

for the a irplane . ATC Air w as not subj ect to Nebraska use tax on th e airpla

ne beca use it was an exempt carrier for Nebraska sales and use tax purposes

. ATC Air did not file a sales/use tax return in

Illinois on the air

plane. A fter ATC

Air sold the airplane, Irwin dissolve d ATC Air a nd assume d its liabili

ties. Meanwh ile, and unre lated to th e dissoluti on of ATC A ir, th e Department

audited the airplane’s purchas e and found that ATC A ir used the airplane in Illinois and was liabl e to the sta

te for un paid use ta x, which it assessed, pursuant to the Use Tax Act, based on th e airplane’s purchase price. According ly, the Depar tment issued a notice of tax liability to ATC Air, assessing $536,950 in use tax, $500 inpenalties, and $275 , 869.94 in accrued interest, for a total of $813,319.94. Irwin , a s successor by me rger to ATC Air, paid the amount assessed under

protest, pursuant

to section

2a.1 of th e State Officers and Employ

ees Mone y D isposition A ct, and ti

mely filed this action. Irwin made a sec ond payment to the Depa rtment under

protest inthe amount of $6,596.70, representing additiona l accrued inter

est. Irwinfile d a six- count complaint fo r declaratory judgment and
aninjunction against the defendants. Only counts III and I

V are relevant to this app eal. In count III , Irwin allege d that the Department sh ou ld be precluded from imposing a use tax on the airplane under the commerce clause of the United States Constitution (U.S. Const., art. I, §8, cl. 3) because the airplane did not have a “substantial nexus” to Illino is. In the alternative, in count IV, I rwin argued that
even if a use tax were permissible, under the comme

rce cla use (U.S. Const., art. I, §8, cl. 3), the amount assessed by the D epartment was improper and should have been based on the airplane’s ac tual use in Illinois instead o f its total p urchase price. I rwin subseque ntly filed a firs t ame nded complaint, raising the same argume nts but alleging additiona l facts. After stipulatin

g to fac ts and exhib i ts, including the airplane’s flight log, the parti es f iled cross-motions for summary judg ment on-5- counts III and I

V. Irwin arg

ued that the commerce clause barred the Departme n tfrom imposing a use tax because the airplane lacke d a “subs tantial nexus” with Illinois. The airplane was hang ared a n d maintained

outside of

Illinois and only

made quick and

periodic trips to the State. The

flight lo g estab lished tha t it spent only

3.65% of i

ts time on the ground

in Ill inois and only

3.42% of i

ts nights in Ill inois. Inthe alternative, I

rwin a rgued

that the u se tax viola

ted the f air apportionment

requirement of the commerce clause be cause it was based on t he a irplane ’s purch ase pric e instea d of the a ctual time it was used in Ill inois. Inresponse , the Dep artment a rgued th at the airplane had sufficient connec tions with I

ll inois to justify a use tax under the
commerce clause. The flight log established that the airpl ane wa s flownto and/or from

Illinois on 49.3% of the day s it was in flight

to transport Irwin’s I llinois-based executives. The Department argued that ATC Air’s

and the a irplane ’s conta

cts with Illinois were repeated and prevale nt, and theref ore suff icient to s upport the

tax assessment. Inaddition, with

respect to the amount taxed, the Department argued that, under the plain language of the Use Tax Act, the amount of tax is to be determined based upon the airp lane’s pur chase pr ice or f air market value an d not the per centag e of time i t was used

in Ill inois. See 35 IL CS 105/3–10 (West 2008 ) (“the tax imposed by th

is Act is at the rate of 6.25% of

either the selling price or the fair market value, if any, of the tang

ible personal property

”). Th e Depa rtment argued that in requir ing “fa irly apportio ned” taxe s, the com merce c lause (U.S. Const., ar

t. I, § 8, cl. 3) i s primaril

y concerned with preventing multiple taxation by

differe nt states, whichis not an iss ue in this c ase because the airplane was never taxed in Nebraska or any other state

. The Department argued that I llinois’ use tax credit for

taxes paid

to another state was sufficient to avoid any threat of multiple taxation. Following a heari ng, the circuit court granted summary

judgment infavor o f the D epartm ent on count III, holding that there was a substantial nexus between the airplane and Illinois so as to permit the Departmentto impose a use tax. However, the circuit court gran te d summary judgmen t in favor of Ir win on cou

nt IV, find ing that the D epart ment

could tax only 4% of the airplane’ s value based on the percen tage of time the

airpla ne spent on the ground in Illinois. The Department

filed a motion to reconsider wi th resp ect to count IV,-6- whichwas denied. The circuit court issued a find ing, p ursuant t

o Supreme CourtRule 304(a) (210 Ill. 2d R. 304(a)), that there was no just cause f

or del ay in appea ling i ts rul ing. Both parties appealed. The appellate cour t affirmed

the ci rcuit court’s judgment with respect to count II I, finding a suffic ient physical connec tion betwe en both AT C Air and t he airpl ane with Illi nois, so as to meet the threshold requirement of “substantial nexus” and perm

it the Dep artment t

o impos e a use tax on the airplane. However, the appellate court re versed the judg

ment with respect to count IV, finding that the circuit court erred in limiting the
use tax to 4% of th e airplane’s value. This court allowed I rwin’s timely petition for leave to appe al. 210 Ill. 2d R. 315.

ANA LYSIS Standard of Review This matter comes before us in the context of cro ss-m otions for summary judgmen

t. Summary

judgmen

t is appro priate “if the pleading s, depositions, and ad missions on file, together with the affida vits, if any, show t

hat there is no genuine issue as to any material fact and that

the moving

party is entitled t

o a judg ment as a matter of law.” 735 IL CS 5/2–1005(c) (West 2008). The parties agree that there are no genuine issues of material fa ct raised in their crossmotions for

summary judgme

nt and that the case may

be resolved

as a matter of law. We review

appeal s from summ ary judgme nt rul ings de novo

. Lazenby v. Mark’s Construction, Inc. , 236 Ill. 2d 83, 93 (2010). The co nstitutionality of a statute is also reviewed de novo

. Statutes are pre sumed to be constituti onal, and we must construe a statute so as to uphold its con stitutiona lity if it is reas onably

possible to do so. The party cha

llenging the validity

of a statute has the burden of clearly es tablishing a constitutional violation. People v. Graves , 235 Ill. 2d 244, 249 (2009). Illinois’ Use Tax Illinois’ use tax is imposed “upon t h e privile ge of u sing in th is State tangible personal property purchased

at retail.” 35 IL CS 105/3 (West 2008). Th e tax comple

ments the R

etaile rs’ Occupation

Tax Act (35 IL CS 120/1 et seq . (West 2008)), Illinois’ primary means of-7- taxing the retail sale of tangible personal prope rt y. The primary purpose of the use

tax is to pre

vent avoi dance o f the retailers’ occupation

tax by those making out-of-state purchases and to protect Illinois retailers against diversion of business t

o out-of- state re

tailers. Brown’s Furniture, Inc. v. Wagner , 171 Ill. 2d 410, 418 (1996). The
use tax is imposed at

the same rate as the retailers’ occ upation tax. 35 IL CS 105/3–10 (West 2008); 35 ILCS 120/2–10 (West 2008). Where, as here, the retailer is located outside Illinois and

has no obligations under the Use Tax Act , the use r in Illinois must pay the
use tax directly

to the stat

e. 35 I LCS 105 /10 (West

2008). However,
a user is e xempt f

rom pay ing the u se tax for t

he use of “tangi ble personal property that

is acquir ed outside

this State and caused to be brought into this State by a person who has alre ady paid a t ax in another State in respect to the sale, purchase, or use of th at pr op er ty, to the extent of the amount of the tax properly due and p aid in the other State.” 35 IL CS 105/3–55(d)(West 2008).

Commerce

Clause The commerc e clause

of the Un ited State s Constitution expressl y gives Congress the power to “r e gulate Commerce *** among the
severa l States.” U.S. Const. , art. I, §8 , cl. 3. Th e Supreme Court has consiste ntly interpreted this express grant of congressionalauthority
as implicitly containing a neg ative command, knownas the dormant
commerce clause, which limits the power of the states to tax inter state
commerce even whe

n Congre ss has fa

iled to leg islate on t he subjec t. This construction serve s the “Commerce Clause’s purpose of preventinga State from retreating into economic iso lation or jeopardizing the welfare of the Nation as a whole, as it would do if it
were free to place burdens on the flow of commerce ac ross its borders that commerce wholly

withi n th ose borders would not bear.” Oklahoma Tax Comm’n v. Jefferson Lines, Inc. , 514 U.S. 175, 179- 80, 131 L. Ed. 2d 261, 268, 115 S. Ct. 1331, 1335-36 (1995). Contemporary

dormant commerce clause an a lysis does not prohibit all state taxation of

intersta te commerce but

rather only tha

t whic h is unduly r estrictive or discriminatory . See Jefferson Lines , 514 U.S. at 179-83, 131 L. Ed. 2d at 268-71 , 115 S. Ct. at 1335-37. To withstand a claim th at it has u

n constituti onally

burdene d intersta

te-8- commerce, a state ta

x must satisfy

the four -part t es t enuncia

ted in Complete Auto Transit, Inc. v. Brady , 430 U.S. 274, 51 L. Ed. 2d 326, 97 S. Ct. 1076 (1977). Under Complete Auto , the tax must: (1) be applied to an activity with a subs tantial nexus with the taxing state; (2) be fairly a

pportioned; ( 3) not disc riminate agains t intersta

te commerce; and (4) be fairly related t o the services provided by the state. Complete

Auto , 430 U.S. at 279, 51 L. Ed . 2d at 331 , 97 S. Ct. at 1079. In the present case , Irwin arg ues that the use tax failed to satisfy the first two prongs of the Comple te A uto test. We begin by addressing the substantial nexus requirement.

Substantial Nexus Both the due pr

ocess an d commer

ce clau ses require a defini te link, or minimum connection, between a s tate and the person, pr op er ty, or transaction it seeks to tax. In t he case of a tax on an
ac ti vi ty, there must be a connection to the activity itself, rather than
a connection onl y to the individua l or corp oration the state se eks to tax. The state’s power to

tax an individual’s or corpora tion’s activity is justified by the protection, opportunities , and benefit s the state confers on that activity. Al lied- Signal, Inc. v. Director, Division of Taxation , 504 U.S. 76 8, 777-78 , 119 L . Ed. 2d 533 , 545-46, 112 S. Ct. 2251, 2258 (1992). Inorder to satisfy the substantial nexus requirement in the sales and use tax context, ph

ysi cal pre sence within the ta xing state

is
ne ce ss ar y. Quill Corp. v. North Dakota , 504 U.S. 298, 317-18, 119 L. Ed. 2d 91, 1 10, 112 S. Ct. 1904, 1916 (1992). Quill reaffirmed that the “slight

est” phy sical pre sence within a sta te is not en

ough to establish substantial nexus. Quill , 504 U.S. at 315 n.8, 119 L. Ed. 2d at 108 n.8, 112 S. Ct. at 1914 n.8. Left unclear a fter Quill , however,
was the extent of physical prese nce in a state necessar

y t o establish
more than a “s lig h t” physical pre sence. In Brown’s Fu rniture , we addressed the issue and concluded that the phy sical presence need not be “s ubstanti al” but must be more than a “slightest presence.” Brown’s Fu rniture , 171 Ill. 2d at 424. Withthe foregoing principles and d ecisions in mind, we now consider whether ATC Air and the airplane at issue had a sufficient2 Although the appellate opinion states that the airplane made 290 takeoffs a nd landings at I

llinois airports, according to our count based on th e fligh t log, the airplane actually made 272 take offs or landings (136 of each) at Illinois a

irports.
-9- physical presenc e in I llinois to establish a substantial nexus with the state. Even though the airplane was hang ared and maintained outside of Illinois, its flight log established that during the relevant two-y ear time period, it made a total of 272 2 take-of fs or landings at

Illinois airports , which included

flights i n and/or ou

t of I llinois on ne arly

half of the days on which a

ny flights we

re made . In fact, the flig

ht log established

that 36.9% of the total flight segments for the airplane
were logged on flights to and/or from Illinois. In addition, the air plane was present overnight at one of I llinois’ airports on 25 occasions. The airpl ane’s f

requen t physica l pres ence in Illino is, t hrough the many take-offs an d landing s from Illinois runway s, as well as the nights that it spent in Illinois, was not coincidental, but was inherent inits basic purpose and function in this state. The airplane was owned by ATC Air, w

hose cor porate p urpose w as to provide transportation services to Ir

win’s off ic er s and employees. Thus, the airplane freque ntly and regularly

fl ew t o Il linois at the behest of Irwin’s corpora te off icers (fo ur of who m had thei r office s in Il linois) to transport them to and from

destinati ons throug

hout the U

nited State s. Moreover, when the airplane was initially purchased , the purchas e agree ment, as well as the bill of sale and registration application filed with the FAA, all listed

Irwin’s I llinois corporate office as ATC Air’s primary addr

ess. In Director of Revenue v. Superior Ai rcraft Leasing Co. , 734 S.W.2d 504 (Mo . 1987), the Missouri Supreme Court addressed a
casewith facts very

similar to those in the pre sent case. There, a Missouri corpora

tion, with i

ts p rincipal place of business in Ohio, purchased

an d t oo k d el iv er y o f an airplane in Kansas. The airplane
was h angared in Ohio. When the Missouri Department of Reven u e imposed a use t ax o n the airplane’s purchase, the corpora tion objected
on commerce clause grounds. Superior A ircraft Leasing , 734 S.W.2d at 505. The Missouri Supreme Court held that, although the airplane
was hanga

red and maintaine d in

Ohio, there were sufficient contact s with Missouri to satisfy the substantial nexus requirement. The court-10- noted that 17.7% o f the a irplane’s total flight hours were logg ed on flights to Missouri for the corporation’s business. The time spent in Missouri for eac

h of those

trips ran

ged fr om sever al day s to approxima

tely a week. Superior Aircraft Leasing , 734 S.W.2d at 507. Irwinattempts to distinguish Superior Aircraft Leasing by pointing out that the

airplan e in

that cas e occasionally spe nt several da ys or a week on the ground in Missouri. However, the time the airplane spent

on the ground in Missouri was much less signific ant to the Superior

Aircraft court’s decision than the time the airplane spent inflight between Missouri and other destinations, which demonstrated

the significance of the airplane’ s pre sence inside the state, as i t related to its purpose, function, and use. Similarly , in the p resent case, th e time the

airplan e spent on

the gro und in I lli nois i s much less significant to our decision than the time the airplane spent inflight between I llinois andother destinations, which demonstrates the significance of the ai

rplane’ s presen

ce inside Illinois, as it relates to its purpose, function, and use. More over, in t he prese nt case, in additi on to the time spent in take-offs and landings on I llinoi s runway s, the air plane spe nt 25 full n

ights in I llinois. Irwinalso attem pts to distinguish Superior Aircraft Leasing by arguing that, in that case, the taxpayer was a Missouri corporation and therefo re had obvious contacts with Missouri so as to meet the substan tial n exus requirement, whereas, in this case, ATC Air was not
anIllinois corporation. We find this distinction unper s uasive. F irst,
we note that, although Superior A i rcraft Lea sing was a Missouri
c orporation, its princi

pal plac e of business was in Ohio , and th e airplane was hangared and maintained ther e. Similarly, here, A TC Air’s p rincipal place of business was in Nebraska, and the airplane
was hangared and maintained there . In add i tion, altho

ugh ATC A

ir
was not an I llinois cor

poration , the rec ord esta

blishes tha

t ATC Air had a demonstrated ph

ysi cal pre sence in

Illinois. ATC Ai

r’s sole directo r, and its

chairma n and CEO, had his office in Ill inois, as did its CFO and its general counsel. Moreove r, ATC Air did a

substantial portion of its business in I llinois, in t hat its pilo t- emplo yees freque ntly and regularl y f

lew its airplan e into and

out of I llinois to transport Irwin’s corpora

te officers and direct ors to a nd from th eir office s in Il linois. Ac co rd in gl y, we find th at both ATC Air and the airplane had-11- more than a “slight” phy sical presence in Illinois and met Complete Auto ’s substantia

l nexus req

uiremen t so as to allow the Department to impose a use tax on the airplane. We thus proceed to the fa i r apportio nment ar

gument.
Fair Apportionment The primary pu

r pose of the fair apportionment prong of the Complete Auto test is to prevent multiple taxation by “ensur[ing] that each State taxes only its fair share of a n interstate trans acti on.” Goldberg v . Sweet , 488 U.S. 252, 260-61, 102 L. Ed. 2d 607, 61 6 , 109 S. Ct. 582, 588 (1989). However, the S upreme Co urt has long held that the Constitution imposes no single apportionment formula
on the state s and has t

herefore decl ined to und

ertake the esse ntially legislative task of establishing a single cons tituti onally mandated method of taxation. Instead, the Court has determined whether a tax is fairly appor

tioned by exam ining whether the tax is internally a nd externall y consistent. Goldberg

, 488 U.S. at 261, 102 L. Ed. 2d at 616, 109 S. Ct. at 588-89. “To be inter nally consistent, a tax must be structured so that if e

very State wer

e to impose an identical tax, no multiple taxation would

result.” Goldberg

, 48 8 U. S. at 2 61, 102 L. E d

. 2d at 6 17, 10 9 S. C t. at 5 89, ci ting Container Corp. of America

v. Franchise

Tax Board

, 463 U.S. 159, 169, 77 L. Ed. 2d 545, 5 56 , 103 S. Ct. 2933, 2 942 (1983 ). “The external c onsis tency

te st asks whether the State has taxed only that portion of the revenues from the intersta te activity which rea sonably refle cts the in-state component of the activity being

taxed.” Goldberg

, 488 U.S. at 262, 1 02 L. Ed. 2d at 617, 109 S. Ct. at 589, c itin g Container Corp. , 463 U.S at 169-70, 77 L. Ed. 2d at 556, 103 S. Ct. at 2942. The Court thus examines “the in-stat e busi ness activity which trig gers the taxable event and the practical or economic effect of the tax on that interstate activity .” Goldberg , 488 U.S. at 262, 102 L. Ed. 2d at 617, 109 S. Ct. at 589. Inthe present case, Irwin concede s thatthe use tax imposed on the full value of the airplan e is inter nally consiste nt becau se the Use

Tax Act contains an exemption from use tax fo r tan gible pe rsonal pr operty that has been subject ed to sales or use taxes in other states (see 35 IL CS 105/3–55(d) (West 2008)). However, Irwin argu es that the use tax is not externally consistent. I rwin argues that

because the airplane
was hanga

red and maintaine d in

Nebraska, and traveled to more than-12- 30 states an

d jurisdic tions, spe

nding le ss than 4%

of its total time on the ground

in Ill inois, the

tax on the a

irplane ’s full

value isnot fairl

y apportioned. For the reasons that follow, we disag ree. The Supre m e Court has consistently approve d taxation of sales without a ny d ivision of the tax base among different states and has instead held such

taxes prop erly

measura ble by the gross charge for the purchase. Jefferson Lines , 514 U.S. at 186, 131 L. Ed. 2d at 272, 115 S. Ct . at 13 39. Bec ause a u se tax is ge neral ly le vied to compensa te the taxing

state for

it s incapacity to re ach the corresponding

sale, it is com mo nl y p aired wi th a sale s tax and is applica ble only when nosales tax has bee n paid or s

ubject to a credi t for any such tax paid. Jefferson Lines , 514 U.S. at 193-94, 131 L. Ed. 2d at 277, 115 S. Ct. at 1342-43. The District of Columbia and 44 of the 45 stat es t hat impose sales and use taxes allow such a credit or exemption for similar

taxes paid to other states. Jefferson Lines , 514 U.S. at 194, 131 L. Ed. 2d at 277, 115 S. Ct. at 1343. Thesecredit or exemption provisions creat e a national system where the state of purchase or first use imposes the tax. No othe

r state taxes the transact ion unless no prior tax has been imposed or if the tax rate of the prior taxing sta

te is less, in which c ase the subsequent taxing state imposes a tax measured only by the differen tial rate. Jefferson Lines , 514 U.S . at 194 , 13 1 L. Ed. 2d at 2 77-78, 11 5 S. Ct. at 1343, quot ing KSS Transportation C orp. v. Baldwin , 9 N.J. Tax 273, 285 (1987). The Supreme Court has indicated that such credit provisions resolve the probl em of multi p le tax ation and

satisfy the fair apportionment

requirement. See, e.g. , Goldberg , 488 U.S. at 264-65, 102 L. Ed. 2d

at 618-19, 109 S. Ct. at 590-91 (in holding that a tax on the full amount of interstate telephone cal ls did no t violate the extern al cons istency require ment, the Court noted that “[t]o the extent that other Stat

es’ telec ommun

icat ions taxe s pose a risk of

multiple taxation, the credit provi sion co ntained i n the Tax Ac

t operat es to avoid actual multiple ta

xation”); D.H. Holmes Co. v. McNamara , 486 U.S. 24, 31, 100 L. Ed. 2d 21, 28 , 108 S. Ct. 1619, 1623-24 (1988) (“We have no d oubt that the second

*** eleme

nt[ ] of [ Complete

Auto is] satisfie d. The L ouisiana taxing scheme is fair ly apportioned, for it provides a credi t again st its use ta

x for sales tax es that have been paid in other St

ates”) ; Tyler Pipe Industrie s, Inc. v . Was hington Sta te-13- Department

of Reve nue , 483 U. S. 232, 245 n.13, 97 L. Ed. 2d 199, 212 n.13, 107 S. Ct. 2810, 2819 n.13 (1987) (“Many States provide tax credits that

alle viate or eliminate the potential multiple taxation that results when

two or more sovereigns have jurisdict ion to tax pa

rts of the same chain of commercial events”); Henneford v. Silas Mason Co. , 300 U. S. 57 7, 81 L. E d. 814 , 57 S . Ct. 524 (1 937) ( uphol ding a
use tax that contained an exemption for pr oper ty that had alrea dy been subject to a sales or use tax in another state). Accord ingly , Illi nois cour ts have held, as the appella te court did here, that such credit or

exemption provisions resolve the problemof multiple taxation and satisfy

the fair apportionment requirement. See, e.g. , Goldberg v. Johnson , 117 Ill. 2d 493, 503 (1987) (finding that Illinois’ credit against any tax due from a taxpayer who had paid two
or more taxes

on the sam e interst

ate te lecomm

unication cured any possible constitutional infirmity resulting from multiple tax ati on); American River Transportation Co. v. Bower , 351 I ll. App. 3d 208, 213 (2004) (finding Illinois’ use tax fairly appor

tioned because no tax
was paid in another state, and if a tax had been paid in another state, the Use Tax Act would exempt the taxpayer from the Illinois use tax for any amounts th at had be en paid) ; Sq uar e D Co. v. Johnson , 233 Ill. App. 3d 1070, 1080 (1992) (same). In Archer Daniels Midland Co. v. Department of Revenue , 170 Ill. App. 3d 1014 (1988), a case factually similar to the present

case, the appella te court rejected a Delaware corpo r ation’s argument that Illinois’ use tax shou

ld nothave been based on the full value of three airplanes purchased

outside of Il linois but in stead tha t the tax shou

ld have been based upon the proportion of take-offs and la ndings from
or inIllinois compared to total flight take-of fs and landings. Archer Daniels Midland , 170 Ill. App. 3d at 1015, 1022. The appellate court further rejected the corpora

tion’s ar gument t hat flig ht segme nts that had no conne ction with

Illinois should n

ot have be en taxed, b ecause they were not related to any service

provided by I

llinois, and taxing the full purchase price in essence taxed the corporation for

activities unrelated to the state. Archer DanielsMidland , 170 Ill. App. 3d at 1022. The appellate co urt agree d with the D epartme nt that I llinois’
u se tax on the full value of the airplanes was fairly apportioned because the statute exempts property wher e a sales or use tax has been paid in another state. Archer Daniels Midland , 170 Ill. App. 3d-14- at 1022. In holding

that the D epartme

nt could imp ose a use

tax on the full value of the airplanes, the appellate court explained:

“ [The corporation] has not claimed that it paid taxes on it s planes else where ; theref ore, it ha s not been

subject to multistate ta xati on. The sales and use taxes are complementary

and equalize th e burden on interstate and intrasta te transactions. The sales tax is measured by the purchas e price of an item, without regard to the amount of

use the item will receive, and so is the use tax. Nor is the use tax
a precise charge for

benefits provided by the St ate. [The corporation] enjoy s the prot ection of Illinois laws, a

ccess to its legal s yst

em, and in numerab le other se

rvices. Becau se [the corporation] receiv es all the se benef its, it is properly subject to taxation in this State.” Arc her D aniels Midland , 170 I ll. App. 3d at 1022-23. Si mi la rl y, in Frank W. W hitcomb Cons truc tion Corp. v. Commissioner

of Taxes , 144 Vt. 466, 467-68 , 479 A.2d 164, 165 (1984), the V erm ont Supreme Court upheld the imposition of Vermont’s use tax on the full value of a New Ham pshire owned airplane th at s pen t 1 7% o f it s fl igh t t im e in Ver mo nt . In doing so, the court overruled the circuit court’s decision to apportion the tax payer ’s liability based on the amoun

t of time the airp lane spe

nt in Verm

ont. Frank W. Whitcomb Construction Corp. , 144 Vt. at 467, 479 A.2d at 165. The court explained:

“The Commerce Clause does not require an apport ionment in addition to a tax credit. The rule of Complete Auto [citation] r

equiring a tax on inte

rstate
commerce t o be ‘fairly

apportioned’ is satisfied here. The state has provided a tax credit in lieu of apportio nment. Thi s credit, not unlike

a propor

tionate ta

x, elimin ate s the p ossibility

of cumulative use tax liability. The Vermont legisla tu re has chosen not to incorporate apportionment within the use tax scheme. This Court, t he refore, is without power to impose su

c h a requirement. [Citation.] We agree with the Commissioner that appo rtion ment of thi s tax is neither constitutionally required nor legisla tively authorized.” Frank W. Whitcomb Construction Corp. , 144 Vt. at 473, 479 A.2d at 168.-15- Following the same rationale, other jurisdictions throughout the United States have found use taxes fairly appor tioned where a sy stem of credits is in place. See, e.g. , Ex Parte Fleming Foods of Alabama, Inc. , 648 So. 2d 57 7 (Ala. 1 994); Service Merchandise Co. v. Arizona Department

of Revenu e , 188 Ariz. 414, 937 P.2d 336 (App. 1996); Pledger v. Brunner &Lay

, Inc. , 30 8 Ark. 512, 825 S.W.2d 599 (1992); Yamaha Corp. of America v. State Board of Equalization , 73 Cal. App. 4th 338, 86 Cal. Rptr. 2d 362 (199 9) ; General Motors Corp. v. City &

Co unty of Denv er , 990 P.2d 59(Colo. 199 9); In re Tax Appeal of Taylor Crane & Rigging, Inc. , 22 Ka n. App. 2d 27, 913 P.2d 20 4 (1 995); Wabash Power Equipment Co. v. Lindsey , 2003–2196 (La. App. 1 Cir. 9/17/04); 897 So. 2d 621; Chesapeake & Potomac Telephone Co. of Maryland v. Comptroller of the Treasury, Retail Sales Tax Division , 317 Md. 3, 561 A.2d 1034 (App. 1989); Ke llo gg Co. v. De

partment o

f Treasury , 204 Mich. App. 489, 516 N.W.2d108 (1994 ); Miller v. Commissioner of Revenue , 359 N.W.2d 620 (Minn. 1985); Tennessee Gas Pipel ine Co. v. Marx , 594 So. 2d 615 (Miss. 1992); Director of Revenue v. Superior Aircraft Leasing Co. , 734 S.W.2d 50 4 (Mo. 198 7); KSS Transportation Corp. v. Baldwin , 9 N.J. T ax 273 (198 7); PPG Industries, Inc. v. Tracy , 74 Ohio St. 3d 449, 1996–Ohio–116 ; House of Lloyd v. Commonwealth , 684 A.2d 213 (Pa. 1996). Inopposition

to this ove

rwhelmin g weig ht of authority , Irw

in cites to only one Alabama case, Boyd Brothers Transportation, Inc.

v. State Department of Reve nu e , 976 So. 2d 471, 482 (Ala. App. 2007), where the appellate court held that an unappor tioned fla t use tax on the value of trucks discriminated against interstate c ommerce. We find, however, that

the appellate court in Boyd Brot hers deviated froma decision of

its own supreme court, which expressly r ejected an apporti onment

claim where a credit system was in place. See E x Parte Fleming Foods of Alabama, Inc v. Department of Revenue , 648 So. 2d 577, 579 (Ala. 1994) (“ ‘The provision of a credit ina use tax statute for sale s or use ta

x paid to ano ther stat

e ma kes a use tax externall y consistent, as much as such a provision avoids actual multiple taxation’ ”

(emphas is in original)), quoting 68 Am. Jur. 2d Sales & Use

Tax §188 (1 973). Mor eover, while Boyd Brot hers was decided after Fleming Foods , the decision did not even address the issue of c redit provisions in li eu of app ortionmen t.-16- Co ns eq ue nt ly, we conclude that I llinois’ use tax bas ed on the f ull purchas e price of

the airplane is externally c onsistent and thus fairly apportioned

because no tax has be en paid

on the airplane to any other state, and even if it had been, the Use Tax Act provides an exemption for sa les or use taxes paid to other states. Accordingly , we find that the appellate court properly reversed that porti on of the c ircuit

court’s judgment limiting the use tax to 4% of the airplane’s purchas e price.

CONCLUSIO

N For the foregoing reasons, we affirm the judgmen

t of the a ppellate court.
Affirmed

.