Retailers can continue suit vs Home Depot on behalf of IL over alleged failure to pay tax on appliance installs

By Scott Holland | Apr 26, 2019

CHICAGO — A state appeals panel has ruled that the owners of an appliance store may continue their lawsuit against Home Depot, on behalf of the state, over claims the chain did not collect sales tax it should’ve charged for appliance installations.

Brothers Richard and Ralph Lindblom, who own the Advanced Maytag Home Appliance Center in Schaumburg, contacted the Illinois Department of Revenue in 2015, accusing several large retailers of essentially cheating the state out of sales tax by classifying appliance sales as "construction installations." This, they argued, allowed the retailers to charge customers less.

The report triggered audits and investigations by state regulators. In late 2015, the Lindbloms filed suit in Cook County Circuit Court, launching a so-called qui tam action against a number of retailers. Under a qui tam action, private entities bring suit, ostensibly on behalf of the state or other government body, to recover taxes or other damages that have been allegedly wrongly withheld, either by intransigence or deceit.

In April 2018, three Illinois First District Appellate Court justices overturned a Cook County judge’s dismissal of one such action against Best Buy. Those same three justices — Mary Anne Mason, Aurelia Pucinski and Michael Hyman — issued an opinion on April 23 of this year reversing the decision of Cook County Judge James Snyder to dismiss the portion of the complaint affecting Home Depot. 

Mason authored both opinions.

In pleadings, the Lindblom brothers said their father worked for Home Depot from 2000-2005 and said the chain’s policy was to not charge sales tax when customers bought, with delivery and installation, over-range microwaves and dishwashers. Richard Lindblom said he got a quote to that effect from Home Depot in September 2015. Home Depot has responded that the lawsuit was invalid because it wasn't based on a completed transaction.

“While sales floor personnel may not make admissions regarding tax matters that would bind Home Depot,” Mason wrote, “they would nevertheless be familiar with Home Depot’s practice of refraining from charging sales tax on installed dishwashers and over-the-range microwaves.”

She further explained the Lindbloms’ complaint adequately alleged Home Depot was acting as a contractor instead of a retailer. The panel noted Home Depot’s argument that the Lindbloms were violating the law by charging sales tax they weren’t obligated to collect. But Mason explained that position doesn’t address the sufficiency of the complaint’s allegations, only the merits of their claims under the state law.

Home Depot, like Best Buy, also said the lawsuit should be barred because the Revenue Department was auditing sales transactions from January 2008-June 2013, “which it argued constituted an administrative civil money penalty proceeding in which the State was already a party."

The panel rejected Home Depot’s argument under the same reasoning used against Best Buy. It reiterated a Revenue Department audit is not a civil money penalty proceeding, nor would allowing the Linbloms’ suit to proceed duplicate any of the audit’s efforts.

Home Depot also argued the Lindbloms weren’t allowed to act as relators because the sales tax policy was publicly known via a 2011 Milwaukee Journal Sentinel article. But Mason said that article contained no reference to Illinois sales tax law, and, further, the Lindbloms’ lawsuit “included sufficient allegations that they were the original source that unveiled Home Depot’s fraudulent scheme to the Department based on letters they sent to the Department in 2004 and 2015,” according to Mason.

The panel noted it expressed no opinion as to the merit of the Lindbloms’ claim, only that it provided enough details to persist in circuit court as a fraud allegation.

According to Cook County Court records, the Lindbloms are represented by attorneys with the firm of Massey & Gail LLP, of Chicago.

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Circuit Court of Cook County Illinois Department of Revenue Illinois First District Appellate Court The Home Depot

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