Heyl Royster

 

News

Illinois Supreme Court Victory for Firm Client RTA

12/06/2013

Heyl Royster was part of the legal team that prevailed for our client, the Regional Transportation Authority (RTA), before the Illinois Supreme Court in the case of Hartney Fuel Oil Company, et al v. Hamer, et al. This case addressed the sourcing of sales taxes in Illinois, specifically the question of where a sale would be deemed to have occurred for purposes of receiving the local share of the sales tax. Appellee, Hartney Fuel, with its office and primary facilities in Forest View Illinois (Cook County), had leased a purported “sales acceptance” office in Mark, Illinois (Putnam County) where acceptance calls for fuel purchases were routed. Hartney Fuel then claimed that its fuel sales should be taxed at the sales tax rate applying in Mark rather than in Forest View. The Illinois Department of Revenue (IDOR) audited Hartney Fuel and determined it owed $20+ million in back sales taxes.

Hartney filed suit in Putnam County against IDOR, the RTA, and Forest View asserting that it owed no back taxes. Our firm tried the case in the circuit court for the RTA—one of the taxing bodies that asserted lost taxes from this practice. The trial court entered judgment against the defendant taxing authorities, and this decision was upheld on the initial appeal by a 2-1 decision.

On further appeal to the Illinois Supreme Court, the court adopted the firm’s argument that a multi-factor test applied to sales-tax sourcing decisions, bringing an end to a sales tax avoidance practice that was widespread in Illinois and believed to have affected hundreds of millions of dollars in sales tax revenues. The Supreme Court also concluded that the Taxpayer Bill of Rights prohibited a recovery of back taxes from Hartney Fuel because of erroneous IDOR regulations.

The case was the subject of widespread media coverage, including a series of articles by the Chicago Tribune. In one article the Tribune quoted the RTA as calling the Supreme Court result a "tremendous victory for transit riders and taxpayers in northeastern Illinois." The article further quoted Jordan Matyas, the RTA's chief of staff, as saying "Moving forward, the court was very clear that these kinds of tax games will not be tolerated anymore.”

Our firm has several other cases pending on behalf of RTA relating to this practice. Working on the Hartney Fuel case for Heyl Royster were Tim Bertschy, Maura Yusof and Brad Elward.