Hertz Corp. v. City of Chicago

As a home-rule municipality in Illinois, the City of Chicago (city) (defendant) had authority to manage its own local affairs. Under that authority, the city imposed a tax on the use of personal property within the city’s borders. For personal property that was leased, the tax applied to both property leased within the city and property leased outside the city but used in the city. In 2011, the city issued Ruling 11, which stated that vehicle-rental agencies located within three miles of the city would be responsible for paying the tax if it was likely that a renter would use the rented vehicle in the city. Absent a written statement from a renter to the contrary, it was presumed that a renter who was a city resident would use the vehicle primarily in the city, while a renter from elsewhere would use the vehicle primarily outside the city. Hertz Corporation (plaintiff), which operated a suburban vehicle-rental agency within the prescribed taxing radius, filed suit against the city. Hertz argued that the taxing scheme adopted in Ruling 11 violated the state constitution because it extended the city’s taxing authority beyond the city’s borders. The city countered that by setting up a rental business close to the city’s borders, Hertz was effectively doing business in the city, and that because Hertz’s customers would use rented vehicles in the city, benefiting from city services and road maintenance, the imposition of taxes was proper. The trial court granted summary judgment in Hertz’s favor, but the state appeals court reversed. Hertz appealed to the Illinois Supreme Court.