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Lowe’s Liable in Illinois Sales Tax Fraud Action

April 7, 2021, 8:47 PM

The home improvement chain Lowe’s could be on the hook for millions of dollars in unpaid Illinois sales taxes and penalties under a court order that holds the retailer isn’t entitled to a tax benefit generally reserved for building contractors.

Cook County Circuit Court Judge James Snyder ruled Lowe’s engaged in a “material violation of the law” in avoiding taxes by portraying itself as a contractor when it sold and installed dishwashers and microwave ovens in the homes of Illinois customers.

Lowe’s Cos Inc. must be characterized as a retailer with a higher burden under the sales tax code, Snyder found. And the big box retailer should have known it under an opinion requested from the tax consulting firm PwC and a 2015 compliance alert from the Illinois Department of Revenue. Lowe’s conduct demonstrated “deliberate ignorance or reckless disregard of the information,” the judge concluded.

Snyder’s ruling, rendered March 31 but released this week, sets up the penalty phase in a tax whistleblower action brought by a small regional appliance retailer who complained of unfair competition. Lowe’s could face an assessment of more than $10 million after back taxes, treble damages, interest, and attorneys’ fees are assessed, said Paul Berks, a partner with Massey & Gail LLP in Chicago and counsel for the whistleblower.

Representatives for Lowe’s didn’t immediately respond to a request for comment.

Best Buy, Home Depot

Two more big box retailers—Best Buy Co. Inc. and Home Depot Inc.—could face a similar fate, Berks added.

All three were named as defendants in the original 2015 case under the Illinois False Claims Act. The case was broken into pieces with the Lowe’s portion proceeding to trial first. Judge Snyder is presiding in front of all three defendants. Sears Roebuck and Gregg Appliances initially were listed as defendants, but have been dismissed

The central tax question involves whether home improvement stores should be viewed as retailers or contractors when appliances are sold and installed. The contractor designation cuts their tax burdens in two ways. Sellers such as Lowe’s remitted taxes at Illinois’ 6.25% use tax, rather than at the sales tax rate, which could be as high as 11% depending on the locality. Lowe’s also benefited by imposing tax on the wholesale price for each transaction rather than the higher retail price.

After determining that Lowe’s acted as a retailer, Snyder focused on whether the retailer demonstrated reckless disregard of the tax code when it adopted the role of contractor. Snyder was particularly persuaded by Revenue Department alert, which in July 2015 warned retailers that “the sale of tangible personal property with a separate agreement to install does not convert the retail sale to a construction contract.”

Evidence showing the company disregarded the advice of its consultants at PwC also proved persuasive, Berks said.

“The judge found they went out looking for an opinion supporting their tax avoidance, and when they got contrary information from their advisers, they ignored it,” he said.

The case is Illinois ex rel. Lindblom v. Sears Roebuck and Co., Ill. Cir. Ct. of Cook County, No. 15 L 50776, Order 3/31/21.

To contact the reporter on this story: Michael J. Bologna in Chicago at

To contact the editors responsible for this story: Jeff Harrington at; David Jolly at

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