Docket No. 109300.

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

IRWIN INDUSTRIAL TOOL COMPANY, f/k/a American Tool

Companies, Inc., as Successor by Merger to ATC Air, Inc., Appellant,

v. THE ILLINOIS DEPARTMENT OF REVENUEet al., Appellees.

Opinion filed September 23, 2010.

JUSTICE KARMEIER delivered the judgment of the court, with

opinion.

Chief Justice Fitzgerald and Justices Freeman, Thomas, Kilbride,

Garman, and Burke concurred in the judgment and opinion.

OPINION

This appeal concerns the imposition of a use tax, pursuant to

section 3 of the Use Tax Act (35 ILCS 105/3 (West 2008)), by the

defendants, the Illinois 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

Companies, Inc., now known as Irwin Industrial Tool Company

(Irwin), the plaintiff. On ATC Air’s behalf, Irwin paid the total

amount assessed under protest, pursuant to section 2a.1 of the State

Officers and Employees Money Disposition Act (30 ILCS 230/2a.1

(West 2008)), and filed a complaint seeking reimbursement. Only

counts III and IV are relevant to this appeal. In count III, Irwin alleged

that the use tax imposed did not meet the requirements of the

commerce clause of the United States Constitution (U.S. Const., art.
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I, §8, cl. 3) because there was no substantial nexus between the

airplane and Illinois so as to permit the Department to tax the

airplane’s use in Illinois. Alternatively, in count IV, Irwin 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 clause (U.S. Const., art. I, §8, cl. 3) because it

was not “fairly apportioned,” i.e., it was based on the airplane’s entire

purchase price instead of its actual use in Illinois.

On cross-motions for summaryjudgment,the circuit court granted

summary judgment in favor of the Department on count III, finding

a substantial nexus between the airplane and Illinois so as to subject

ATC Air to Illinois use tax liability. However, the circuit court

granted summary judgment in favor of Irwin on count IV, finding that

the Department could tax only 4% of the airplane’s value based on

the percentage of time it spent on the ground in Illinois. Both parties

appealed. The appellate court affirmed as to count III, finding a

sufficient physical connection between both ATC Air and the airplane

and Illinois, so as to satisfy the “substantial nexus” requirement and

allow the Department to impose a use tax on the airplane. However,

the appellate court reversed as to count IV, finding that the circuit

court erred in limiting the use tax to 4% of the airplane’s value. For

the following reasons, we affirm the judgment of the appellate court.

BACKGROUND

Irwin is a multinational corporation that manufactures and

distributes tools through various domestic and foreign subsidiaries.

During the relevant time period, Irwin’s headquarters was in Lincoln,

Nebraska, but it also had a corporate office in Hoffman Estates,

Illinois. Of its seven corporate officers, four had their offices in

Illinois, its chief executive officer (CEO), chief operating officer

(COO)/president, chief financial officer (CFO), and corporate vice

president (VP)/general counsel. In addition, of its four corporate

directors, two had their offices in Illinois.

ATC Air was a wholly-owned subsidiary of Irwin, and its sole

purpose was to provide air transportation services to Irwin and its

affiliated companies. Irwin’s CEO was ATC Air’s only director, as

well as its chairman and CEO. ATC Air’s other officers were also
 

1Although the appellate opinion states that 269 of the 734 flight

segments (36.6%) originated or ended at an Illinois airport, according to

our count based on the flight log, 271 of the 734 flight segments (36.9%)

originated and/or ended at an Illinois airport.

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Irwin’s officers. ATC Air’s CEO/only director/chairman, CFO, and

general counsel all had their offices in Illinois. ATC Air maintained

all of its business records at its office in Lincoln, Nebraska, and had

seven employees, all of whom lived and worked in Nebraska. 

When ATC Air bought the airplane at issue here, it paid

$7,670,710 in addition to trading in its previously owned airplane.

ATC Air did not pay any sales tax on the purchase. ATC Air’s

VP/general counsel executed the contract to purchase the airplane

from a company in Kansas. The contract, promissory note, guaranty,

security agreement, trade-in agreement, and bill of sale listed ATC

Air’s address as 2800 West Higgins Road, Hoffman Estates, Illinois,

which was Irwin’s Illinois office. ATC Air took delivery of the

airplane in Arkansas and flew it to Lincoln, Nebraska, where it was

hangared.

ATC Air registered 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 Illinois office

address as ATC Air’s address. ATC Air subsequently filed an

amendment to both documents, changing its address from Irwin’s

Illinois office to an address in Lincoln, Nebraska.

ATC Air owned the airplane for approximately two years–from

April 12, 2000, through April 30, 2002. The airplane was used for

customer visits, transporting Irwin’s officers and employees from one

location to another, and matters relating to acquisitions and lawsuits.

ATC Air charged Irwin for the airplane’s use, and ATC Air reported

its income on federal and state consolidated income tax returns. 

The airplane was flown on 290 days, flying to locations

throughout the United States, Canada, and Mexico. On 143 of those

days, or 49.3% of the flight days, the airplane flew to and/or from

Illinois. There were a total of 734 flight segments, of which 271,1 or

36.9%, originated and/or ended in Illinois. The airplane flew to and

from Illinois so often because Irwin’s principal officers, who were
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among the airplane’s main passengers, worked at Irwin’s Illinois

office. The airplane often flew empty to Illinois where it would pick

up one of Irwin’s corporate officers, fly him to various locations,

return him to Illinois, and then fly empty back to its hangar in

Nebraska.

ATC Air filed a Nebraska personal property tax return and

claimed an exemption for the airplane. ATC Air was not subject to

Nebraska use tax on the airplane because 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 airplane. After ATC Air sold the airplane,

Irwin dissolved ATC Air and assumed its liabilities.

Meanwhile, and unrelated to the dissolution of ATC Air, the

Department audited the airplane’s purchase and found that ATC Air

used the airplane in Illinois and was liable to the state for unpaid use

tax, which it assessed, pursuant to the Use Tax Act, based on the

airplane’s purchase price. Accordingly, the Department issued a

notice of tax liability to ATC Air, assessing $536,950 in use tax, $500

in penalties, and $275,869.94 in accrued interest, for a total of

$813,319.94. Irwin, as successor by merger to ATC Air, paid the

amount assessed under protest, pursuant to section 2a.1 of the State

Officers and Employees Money Disposition Act, and timely filed this

action. Irwin made a second payment to the Department under protest

in the amount of $6,596.70, representing additional accrued interest.

Irwin filed a six-count complaintfor declaratory judgment and

an injunction against the defendants. Only counts III and IV are

relevant to this appeal. In count III, Irwin alleged that the Department

should 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 Illinois. In the alternative, in count IV, Irwin argued that

even if a use tax were permissible, under the commerce clause (U.S.

Const., art. I, §8, cl. 3), the amount assessed by the Department was

improper and should have been based on the airplane’s actual use in

Illinois instead of its total purchase price. Irwin subsequently filed a

first amended complaint, raising the same arguments but alleging

additional facts.

After stipulating to facts and exhibits, including the airplane’s

flight log, the parties filed cross-motions for summary judgment on
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counts III and IV. Irwin argued that the commerce clause barred the

Department from imposing a use tax because the airplane lacked a

“substantial nexus” with Illinois. The airplane was hangared and

maintained outside of Illinois and only made quick and periodic trips

to the State. The flight log established that it spent only 3.65% of its

time on the ground in Illinois and only 3.42% of its nights in Illinois.

In the alternative, Irwin argued that the use tax violated the fair

apportionment requirement of the commerce clause because it was

based on the airplane’s purchase price instead of the actual time it

was used in Illinois.

In response, the Department argued that the airplane had

sufficient connections with Illinois to justify a use tax under the

commerce clause. The flight log established that the airplane was

flown to and/or from Illinois on 49.3% of the days it was in flight to

transport Irwin’s Illinois-based executives. The Department argued

that ATC Air’s and the airplane’s contacts with Illinois were repeated

and prevalent, and therefore sufficient to support the tax assessment.

In addition, 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 airplane’s purchase price or fair

market value and not the percentage of time it was used in Illinois.

See 35 ILCS 105/3–10 (West 2008) (“the tax imposed by this Act is

at the rate of 6.25% of either the selling price or the fair market value,

if any, of the tangible personal property”). The Department argued

that in requiring “fairly apportioned” taxes, the commerce clause

(U.S. Const., art. I, §8, cl. 3) is primarily concerned with preventing

multiple taxation by different states, which is not an issue in this case

because the airplane was never taxed in Nebraska or any other state.

The Department argued that Illinois’ use tax credit for taxes paid to

another state was sufficient to avoid any threat of multiple taxation.

Following a hearing, the circuit court granted summary judgment

in favor of the Department on count III, holding that there was a

substantial nexus between the airplane and Illinois so as to permit the

Department to impose a use tax. However, the circuit court granted

summary judgment in favor of Irwin on count IV, finding that the

Department could tax only 4% of the airplane’s value based on the

percentage of time the airplane spent on the ground in Illinois. The

Department filed a motion to reconsider with respect to count IV,
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which was denied. The circuit court issued a finding, pursuant to

Supreme Court Rule 304(a) (210 Ill. 2d R. 304(a)), that there was no

just cause for delay in appealing its ruling.

Both parties appealed. The appellate court affirmed the circuit

court’s judgment with respect to count III, finding a sufficient

physical connection between both ATC Air and the airplane with

Illinois, so as to meet the threshold requirement of “substantial

nexus” and permit the Department to impose a use tax on the

airplane. However, the appellate court reversed the judgment with

respect to count IV, finding that the circuit court erred in limiting the

use tax to 4% of the airplane’s value. This court allowed Irwin’s

timely petition for leave to appeal. 210 Ill. 2d R. 315.

ANALYSIS

Standard of Review

This matter comes before us in the context of cross-motions for

summary judgment. Summary judgment is appropriate “if the

pleadings, depositions, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a

matter of law.” 735 ILCS 5/2–1005(c) (West 2008). The parties agree

that there are no genuine issues of material fact raised in their crossmotions for summary judgment and that the case may be resolved as

a matter of law. We review appeals from summary judgment rulings

de novo. Lazenby v. Mark’s Construction, Inc., 236 Ill. 2d 83, 93

(2010). 

The constitutionality of a statute is also reviewed de novo.

Statutes are presumed to be constitutional, and we must construe a

statute so as to uphold its constitutionality if it is reasonably possible

to do so. The party challenging the validity of a statute has the burden

of clearly establishing a constitutional violation. People v. Graves,

235 Ill. 2d 244, 249 (2009).

Illinois’ Use Tax

Illinois’ use tax is imposed “upon the privilege of using in this

State tangible personal property purchased at retail.” 35 ILCS 105/3

(West 2008). The tax complements the Retailers’Occupation Tax Act

(35 ILCS 120/1 et seq. (West 2008)), Illinois’ primary means of
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taxing the retail sale of tangible personal property. The primary

purpose of the use tax is to prevent avoidance of the retailers’

occupation tax by those making out-of-state purchases and to protect

Illinois retailers against diversion of business to out-of-state retailers.

Brown’s Furniture, Inc. v. Wagner, 171 Ill. 2d 410, 418 (1996). The

use tax is imposed at the same rate as the retailers’ occupation tax. 35

ILCS 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 user in Illinois must pay the

use tax directly to the state. 35 ILCS 105/10 (West 2008). However,

a user is exempt from paying the use tax for the use of “tangible

personal property that is acquired outside this State and caused to be

brought into this State by a person who has already paid a tax in

another State in respect to the sale, purchase, or use of that property,

to the extent of the amount of the tax properly due and paid in the

other State.” 35 ILCS 105/3–55(d)(West 2008).

Commerce Clause

The commerce clause of the United States Constitution expressly

gives Congress the power to “regulate Commerce *** among the

several States.” U.S. Const., art. I, §8, cl. 3. The Supreme Court has

consistently interpreted this express grant of congressional authority

as implicitly containing a negative command, known as the dormant

commerce clause, which limits the power of the states to tax interstate

commerce even when Congress has failed to legislate on the subject.

This construction serves the “Commerce Clause’s purpose of

preventing a State from retreating into economic isolation 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 across its borders

that commerce wholly within those 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 analysis does not

prohibit all state taxation of interstate commerce but rather only that

which is undulyrestrictive 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 that it has unconstitutionally burdened interstate
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commerce, a state tax must satisfy the four-part test enunciated 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 substantial nexus with the taxing state;

(2) be fairly apportioned; (3) not discriminate against interstate

commerce; and (4) be fairly related to 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 argues that the use tax failed to satisfy

the first two prongs of the Complete Auto test. We begin by

addressing the substantial nexus requirement. 

Substantial Nexus

Both the due process and commerce clauses require a definite

link, or minimum connection, between a state and the person,

property, or transaction it seeks to tax. In the case of a tax on an

activity, there must be a connection to the activity itself, rather than

a connection only to the individual or corporation the state seeks to

tax. The state’s power to tax an individual’s or corporation’s activity

is justified by the protection, opportunities, and benefits the state

confers on that activity. Allied-Signal, Inc. v. Director, Division of

Taxation, 504 U.S. 768, 777-78, 119 L. Ed. 2d 533, 545-46, 112 S.

Ct. 2251, 2258 (1992). 

In order to satisfy the substantial nexus requirement in the sales

and use tax context, physical presence within the taxing state is

necessary. Quill Corp. v. North Dakota, 504 U.S. 298, 317-18, 119

L. Ed. 2d 91, 110, 112 S. Ct. 1904, 1916 (1992). Quill reaffirmed that

the “slightest” physical presence within a state is not enough 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 after Quill, however,

was the extent of physical presence in a state necessary to establish

more than a “slight” physical presence. In Brown’s Furniture, we

addressed the issue and concluded that the physical presence need not

be “substantial” but must be more than a “slightest presence.”

Brown’s Furniture, 171 Ill. 2d at 424.

With the foregoing principles and decisions in mind, we now

consider whether ATC Air and the airplane at issue had a sufficient
 

2Although the appellate opinion states that the airplane made 290 takeoffs and landings at Illinois airports, according to our count based on the

flight log, the airplane actually made 272 take offs or landings (136 of

each) at Illinois airports. 

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physical presence in Illinois to establish a substantial nexus with the

state. Even though the airplane was hangared and maintained outside

of Illinois, its flight log established that during the relevant two-year

time period, it made a total of 2722 take-offs or landings at Illinois

airports, which included flights in and/or out of Illinois on nearly half

of the days on which any flights were made. In fact, the flight 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 airplane

was present overnight at one of Illinois’ airports on 25 occasions. 

The airplane’s frequent physical presence in Illinois, through the

many take-offs and landings from Illinois runways, as well as the

nights that it spent in Illinois, was not coincidental, but was inherent

in its basic purpose and function in this state. The airplane was owned

by ATC Air, whose corporate purpose was to provide transportation

services to Irwin’s officers and employees. Thus, the airplane

frequently and regularly flew to Illinois at the behest of Irwin’s

corporate officers (four of whom had their offices in Illinois) to

transport them to and from destinations throughout the United States.

Moreover, when the airplane was initially purchased, the purchase

agreement, as well as the bill of sale and registration application filed

with the FAA, all listed Irwin’s Illinois corporate office as ATC Air’s

primary address. 

In Director of Revenue v. Superior Aircraft Leasing Co., 734

S.W.2d 504 (Mo. 1987), the Missouri Supreme Court addressed a

case with facts very similar to those in the present case. There, a

Missouri corporation, with its principal place of business in Ohio,

purchased and took delivery of an airplane in Kansas. The airplane

was hangared in Ohio. When the Missouri Department of Revenue

imposed a use tax on the airplane’s purchase, the corporation objected

on commerce clause grounds. Superior Aircraft Leasing, 734 S.W.2d

at 505. The Missouri Supreme Court held that, although the airplane

was hangared and maintained in Ohio, there were sufficient contacts

with Missouri to satisfy the substantial nexus requirement. The court
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noted that 17.7% of the airplane’s total flight hours were logged on

flights to Missouri for the corporation’s business. The time spent in

Missouri for each of those trips ranged from several days to

approximately a week. Superior Aircraft Leasing, 734 S.W.2d at 507.

Irwin attempts to distinguish Superior Aircraft Leasing by

pointing out that the airplane in that case occasionally spent several

days or a week on the ground in Missouri. However, the time the

airplane spent on the ground in Missouri was much less significant to

the Superior Aircraft court’s decision than the time the airplane spent

in flight between Missouri and other destinations, which

demonstrated the significance of the airplane’s presence inside the

state, as it related to its purpose, function, and use. Similarly, in the

present case, the time the airplane spent on the ground in Illinois is

much less significant to our decision than the time the airplane spent

in flight between Illinois and other destinations, which demonstrates

the significance of the airplane’s presence inside Illinois, as it relates

to its purpose, function, and use. Moreover, in the present case, in

addition to the time spent in take-offs and landings on Illinois

runways, the airplane spent 25 full nights in Illinois.

Irwin also attempts to distinguish Superior Aircraft Leasing by

arguing that, in that case, the taxpayer was a Missouri corporation and

therefore had obvious contacts with Missouri so as to meet the

substantial nexus requirement, whereas, in this case, ATC Air was not

an Illinois corporation. We find this distinction unpersuasive. First,

we note that, although Superior Aircraft Leasing was a Missouri

corporation, its principal place of business was in Ohio, and the

airplane was hangared and maintained there. Similarly, here, ATC

Air’s principal place of business was in Nebraska, and the airplane

was hangared and maintained there. In addition, although ATC Air

was not an Illinois corporation, the record establishes that ATC Air

had a demonstrated physical presence in Illinois. ATC Air’s sole

director, and its chairman and CEO, had his office in Illinois, as did

its CFO and its general counsel. Moreover, ATC Air did a substantial

portion of its business in Illinois, in that its pilot-employees

frequently and regularly flew its airplane into and out of Illinois to

transport Irwin’s corporate officers and directors to and from their

offices in Illinois.

Accordingly, we find that both ATC Air and the airplane had
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more than a “slight” physical presence in Illinois and met Complete

Auto’s substantial nexus requirement so as to allow the Department

to impose a use tax on the airplane. We thus proceed to the fair

apportionment argument.

Fair Apportionment

The primary purpose 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 an interstate transaction.”

Goldberg v. Sweet, 488 U.S. 252, 260-61, 102 L. Ed. 2d 607, 616,

109 S. Ct. 582, 588 (1989). However, the Supreme Court has long

held that the Constitution imposes no single apportionment formula

on the states and has therefore declined to undertake the essentially

legislative task of establishing a single constitutionally mandated

method of taxation. Instead, the Court has determined whether a tax

is fairly apportioned by examining whether the tax is internally and

externally consistent. Goldberg, 488 U.S. at 261, 102 L. Ed. 2d at

616, 109 S. Ct. at 588-89. “To be internally consistent, a tax must be

structured so that if every State were to impose an identical tax, no

multiple taxation would result.” Goldberg, 488 U.S. at 261, 102 L.

Ed. 2d at 617, 109 S. Ct. at 589, citing Container Corp. of America

v. Franchise Tax Board, 463 U.S. 159, 169, 77 L. Ed. 2d 545, 556,

103 S. Ct. 2933, 2942 (1983). “The external consistency test asks

whether the State has taxed only that portion of the revenues from the

interstate activity which reasonably reflects the in-state component of

the activity being taxed.” Goldberg, 488 U.S. at 262, 102 L. Ed. 2d

at 617, 109 S. Ct. at 589, citing 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-state business activity which triggers 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. 

In the present case, Irwin concedes that the use tax imposed on the

full value of the airplane is internally consistent because the Use Tax

Act contains an exemption from use tax fortangible personal property

that has been subjected to sales or use taxes in other states (see 35

ILCS 105/3–55(d) (West 2008)). However, Irwin argues that the use

tax is not externally consistent. Irwin argues that because the airplane

was hangared and maintained in Nebraska, and traveled to more than
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30 states and jurisdictions, spending less than 4% of its total time on

the ground in Illinois, the tax on the airplane’s full value is not fairly

apportioned. For the reasons that follow, we disagree.

The Supreme Court has consistently approved taxation of sales

without any division of the tax base among different states and has

instead held such taxes properly measurable by the gross charge for

the purchase. Jefferson Lines, 514 U.S. at 186, 131 L. Ed. 2d at 272,

115 S. Ct. at 1339. Because a use tax is generally levied to

compensate the taxing state for its incapacity to reach the

corresponding sale, it is commonly paired with a sales tax and is

applicable only when no sales tax has been paid or subject to a credit

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 states that 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. 

These credit or exemption provisions create a national system

where the state of purchase or first use imposes the tax. No other state

taxes the transaction unless no prior tax has been imposed or if the

tax rate of the prior taxing state is less, in which case the subsequent

taxing state imposes a tax measured only by the differential rate.

Jefferson Lines, 514 U.S. at 194, 131 L. Ed. 2d at 277-78, 115 S. Ct.

at 1343, quoting KSS Transportation Corp. v. Baldwin, 9 N.J. Tax

273, 285 (1987).

The Supreme Court has indicated that such credit provisions

resolve the problem of multiple taxation 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 calls did not violate the

external consistency requirement, the Court noted that “[t]o the extent

that other States’ telecommunications taxes pose a risk of multiple

taxation, the credit provision contained in the Tax Act operates to

avoid actual multiple taxation”); 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 doubt that the second *** element[ ] of [Complete Auto

is] satisfied. The Louisiana taxing scheme is fairly apportioned, for

it provides a credit against its use tax for sales taxes that have been

paid in other States”); Tyler Pipe Industries, Inc. v. Washington State
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Department of Revenue, 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 alleviate or eliminate the potential multiple taxation

that results when two or more sovereigns have jurisdiction to tax parts

of the same chain of commercial events”); Henneford v. Silas Mason

Co., 300 U.S. 577, 81 L. Ed. 814, 57 S. Ct. 524 (1937) (upholding a

use tax that contained an exemption for property that had already

been subject to a sales or use tax in another state).

Accordingly, Illinois courts have held, as the appellate court did

here, that such credit or exemption provisions resolve the problem of

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 same interstate telecommunication cured any

possible constitutional infirmity resulting from multiple taxation);

American River Transportation Co. v. Bower, 351 Ill. App. 3d 208,

213 (2004) (finding Illinois’ use tax fairly apportioned 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 that had been paid); Square D Co. v. Johnson, 233

Ill. App. 3d 1070, 1080 (1992) (same).

InArcher Daniels Midland Co. v. Department of Revenue, 170 Ill.

App. 3d 1014 (1988), a case factually similar to the present case, the

appellate court rejected a Delaware corporation’s argument that

Illinois’ use tax should not have been based on the full value of three

airplanes purchased outside of Illinois but instead that the tax should

have been based upon the proportion of take-offs and landings from

or in Illinois compared to total flight take-offs and landings. Archer

Daniels Midland, 170 Ill. App. 3d at 1015, 1022. The appellate court

further rejected the corporation’s argument that flight segments that

had no connection with Illinois should not have been taxed, because

they were not related to any service provided by Illinois, and taxing

the full purchase price in essence taxed the corporation for activities

unrelated to the state. Archer Daniels Midland, 170 Ill. App. 3d at

1022. The appellate court agreed with the Department that Illinois’

use tax on the full value of the airplanes was fairly apportioned

because the statute exempts property where a sales or use tax has

been paid in another state. Archer Daniels Midland, 170 Ill. App. 3d
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at 1022. In holding that the Department could impose a use tax on the

full value of the airplanes, the appellate court explained:

“[The corporation] has not claimed that it paid taxes on its

planes elsewhere; therefore, it has not been subject to

multistate taxation. The sales and use taxes are

complementary and equalize the burden on interstate and

intrastate transactions. The sales tax is measured by the

purchase 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 State. [The

corporation] enjoys the protection of Illinois laws, access to

its legal system, and innumerable other services. Because [the

corporation] receives all these benefits, it is properly subject

to taxation in this State.” Archer Daniels Midland, 170 Ill.

App. 3d at 1022-23.

Similarly, in Frank W. Whitcomb Construction Corp. v.

Commissioner of Taxes, 144 Vt. 466, 467-68, 479 A.2d 164, 165

(1984), the Vermont Supreme Court upheld the imposition of

Vermont’s use tax on the full value of a New Hampshire owned

airplane that spent 17% of its flight time in Vermont. In doing so, the

court overruled the circuit court’s decision to apportion the taxpayer’s

liability based on the amount of time the airplane spent in Vermont.

Frank W. Whitcomb Construction Corp., 144 Vt. at 467, 479 A.2d at

165. The court explained:

“The Commerce Clause does not require an

apportionment in addition to a tax credit. The rule of

Complete Auto [citation] requiring a tax on interstate

commerce to be ‘fairly apportioned’ is satisfied here. The

state has provided a tax credit in lieu of apportionment. This

credit, not unlike a proportionate tax, eliminates the

possibility of cumulative use tax liability. The Vermont

legislature has chosen not to incorporate apportionment

within the use tax scheme. This Court, therefore, is without

power to impose such a requirement. [Citation.] We agree

with the Commissioner that apportionment of this tax is

neither constitutionally required nor legislatively 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 apportioned where a system

of credits is in place. See, e.g., Ex Parte Fleming Foods of Alabama,

Inc., 648 So. 2d 577 (Ala. 1994); Service Merchandise Co. v. Arizona

Department of Revenue, 188 Ariz. 414, 937 P.2d 336 (App. 1996);

Pledger v. Brunner & Lay, Inc., 308 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 (1999); General Motors

Corp. v. City & County of Denver, 990 P.2d 59 (Colo. 1999); In re

Tax Appeal of Taylor Crane & Rigging, Inc., 22 Kan. App. 2d 27,

913 P.2d 204 (1995); 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);

Kellogg Co. v. Department of Treasury, 204 Mich. App. 489, 516

N.W.2d 108 (1994); Miller v. Commissioner of Revenue, 359 N.W.2d

620 (Minn. 1985); Tennessee Gas Pipeline Co. v. Marx, 594 So. 2d

615 (Miss. 1992); Director of Revenue v. Superior Aircraft Leasing

Co., 734 S.W.2d 504 (Mo. 1987); KSS Transportation Corp. v.

Baldwin, 9 N.J. Tax 273 (1987); PPG Industries, Inc. v. Tracy, 74

Ohio St. 3d 449, 1996–Ohio–116 ; House of Lloyd v. Commonwealth,

684 A.2d 213 (Pa. 1996).

In opposition to this overwhelming weight of authority, Irwin

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

v. State Department of Revenue, 976 So. 2d 471, 482 (Ala. App.

2007), where the appellate court held that an unapportioned flat use

tax on the value of trucks discriminated against interstate commerce.

We find, however, that the appellate court in Boyd Brothers deviated

from a decision of its own supreme court, which expressly rejected an

apportionment claim where a credit system was in place. See Ex

Parte Fleming Foods of Alabama, Inc v. Department of Revenue, 648

So. 2d 577, 579 (Ala. 1994) (“ ‘The provision of a credit in a use tax

statute for sales or use tax paid to another state makes a use tax

externally consistent, as much as such a provision avoids actual

multiple taxation’ ” (emphasis in original)), quoting 68 Am. Jur. 2d

Sales & Use Tax §188 (1973). Moreover, while Boyd Brothers was

decided after Fleming Foods, the decision did not even address the

issue of credit provisions in lieu of apportionment.
-16-

Consequently, we conclude that Illinois’ use tax based on the full

purchase price of the airplane is externally consistent and thus fairly

apportioned because no tax has been paid on the airplane to any other

state, and even if it had been, the Use Tax Act provides an exemption

for sales or use taxes paid to other states. Accordingly, we find that

the appellate court properly reversed that portion of the circuit court’s

judgment limiting the use tax to 4% of the airplane’s purchase price.

CONCLUSION

For the foregoing reasons, we affirm the judgment of the appellate

court.

Affirmed.