A new industry complaint has been lodged against Illinois's impending 0.2% digital asset tax, which is set to take effect on January 1, 2027. The tax has drawn criticism as brokers prepare for a levy calculated on the value of customer assets rather than on their profits or associated service fees.

New Legal Challenge Emerges

The Blockchain Association and the Crypto Council for Innovation stated that on August 21, they filed the complaint in Sangamon County's Circuit Court of the Seventh Judicial Circuit. This legal action was initiated one month after The Digital Chamber publicized a separate challenge in the same county.

Named as defendants in their official roles are David Harris, the Director of the Illinois Department of Revenue; Kwame Raoul, the Attorney General; and John Milhiser, the Sangamon County State’s Attorney. The plaintiffs are asking the court for a declaration that the Digital Asset Tax Act is invalid. Additionally, they are seeking both preliminary and permanent injunctions to prevent the law's implementation and enforcement.

Grounds for the Lawsuit

The complaint outlines seven distinct counts, which are allegations and not judicial determinations. These include claims of preemption by the federal Internet Tax Freedom Act, infringements of the Commerce Clause, and violations of due process protections under both federal and state law. The lawsuit also alleges breaches of the Illinois constitution's rules regarding tax uniformity, delegation of power, and the legislative process.

The two legal challenges have different captions and lists of defendants. Public materials from neither group indicate any joint schedule or court order to coordinate, join, or consolidate the cases. Furthermore, the version of the complaint posted online by the Blockchain Association and CCI has a blank field for the case number.

How the Tax Is Designed to Work

According to the enacted statute, the tax is set at a rate of 0.2% of the value of the asset involved when an Illinois customer receives a "covered digital asset business activity." The responsibility for collecting this tax falls on the broker who makes or facilitates the sale.

A "covered activity" is defined as a single instance of exchanging, transferring, or storing a digital asset as a business function or for a customer who has consented to receive such services. The regulation clarifies that not all direct self-custody transfers constitute a taxable, broker-collected event. A taxable transaction must involve activity provided by a digital asset broker in exchange for valuable consideration.

For remote brokers located outside of Illinois, a collection nexus is established if their gross receipts from sales of covered activities to Illinois customers total $100,000 or more over the previous 12-month period. Illinois mandates that this test be performed quarterly. Upon meeting this threshold, the broker is legally considered to have a place of business in the state and is required to collect, remit, and file returns for one year. Registration requirements are handled under a separate process.

Burden Shifts to Users if Tax Isn't Collected

A key provision of the law places the onus on the consumer if a broker fails to collect the tax. If an Illinois customer engages in a taxable digital asset business activity and the tax is not charged by the broker, that customer is obligated to remit the payment themselves. The deadline for this remittance is the 20th day of the month following the transaction, and it must be done in the format specified by the Department of Revenue.

While the new plaintiffs are seeking relief that could halt enforcement, the act of filing the complaint has not suspended the law. Their public statements do not mention any injunction or court-ordered timetable. Barring a court intervention or a change in the law, January 1, 2027, remains the effective date for compliance.