Dick's Vending Service, Inc. v. Department of Revenue

MR. CHIEF JUSTICE UNDERWOOD delivered the opinion of the court: Plaintiff, Dick’s Vending Service, Inc., an Illinois retailer of cigarettes, appeals from the order of the Kane County circuit court affirming the Illinois Department of Revenue’s denial of plaintiff’s claims for credit (Ill.Rev. Stat. 1969, ch. 120, par. 445) for alleged overpayment of retailers’ occupation taxes (Illinois Retailers’ Occupation Tax Act, Ill.Rev.Stat. 1969, ch. 120, par. 440 et seq.; County Retailers’ Occupation Tax Act, Ill.Rev.Stat. 1969, ch. 34, par. 409.1; Municipal Retailers’ Occupation Tax Act, Ill.Rev.Stat. 1969, ch. 24, par. 8—11—1) for the period of July, 1966, through November, 1969. Plaintiff sells various products including cigarettes at retail through vending machines, and, as a retailer, is subject to retailers’ occupation taxes. As a retailer of cigarettes Dick’s Vending Service is subject to the Illinois Cigarette Tax Act. Ill.Rev.Stat. 1969, ch. 120, par. 453.1 et seq. During the period for which claim is made, the Illinois Department of Revenue in Rule 52 of its Retailers’ Occupation Tax Rules and Regulations prescribed in part that “[i]n computing retailers’ occupation tax liability, *** no amounts may be deducted to cover taxes paid by distributors of cigarettes under the Cigarette Tax Act, even though the person who is paying the retailers’ occupation tax may happen also to be *** the distributor of the cigarettes which are sold at retail***”. Plaintiff’s claims for credit for the overpayment of retailers’ occupation tax arise from the fact that it followed the requirements of this allegedly erroneous rule. It argues that inasmuch as the Illinois cigarette use tax is a tax upon the consumer, that portion of the sales receipts attributable to the collection of the cigarette use tax should not be included within the plaintiff’s gross receipts which are subject to the retailers’ occupation tax. In our judgment the plaintiff is correct. As we have stated before: “The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in the business of selling tangible personal property at retail, measured by ‘the gross receipts from such sales of tangible personal property’ (Ill.Rev.Stat. 1969, ch. 120, par. 441), which are defined to mean ‘the total selling price or the amount of such sales.’ (Ill.Rev.Stat. 1969, ch. 120, par. 440.) ‘Selling price’ or the ‘amount of sale’ is defined as the consideration for a sale valued in money whether received in money or otherwise. Ill.Rev.Stat. 1969, ch. 120, par. 440.” American Oil Co. v. Mahin, 49 Ill.2d 199, 203. The Illinois Cigarette Use Tax Act (Ill.Rev.Stat. 1969, ch. 120, par. 453.31 et seq.) imposes a tax on the privilege of using cigarettes in Illinois regardless of where such cigarettes are acquired; the Act provides that the legal incidence of the tax is upon the consumer-user and that the cigarette distributor merely collects this tax for the State by adding the amount of the tax to the price of the cigarettes sold. Section 453.33 of the Act reads in part as follows: “The tax hereby imposed shall be collected by a distributor maintaining a place of business in this State or a distributor authorized by the Department pursuant to Section 7 hereof to collect said tax, and the amount of the tax shall be added to the price of the cigarettes sold by such distributor. * * * ***A11 taxes upon cigarettes under this Act are declared to be a direct tax upon the retail consumer and shall conclusively be presumed to be pre-collected for the purpose of convenience and facility only. * * * The tax hereby imposed and not paid pursuant to this Section shall be paid to the Department directly by any person using such cigarettes within this State ***.” And this court in interpreting the Act has held “*** that the legal and economic burden of the cigarette use tax is laid upon all Illinois users ***.” (Emphasis added.) Johnson v. Halpin, 413 Ill. 257, 272. Notably in American Oil Co. v. Mahin we held that the Illinois motor fuel tax (Ill.Rev.Stat. 1969, ch. 120, par. 417 et seq.) is a tax on the privilege of operating motor vehicles on public highways and waterways based on the consumption of motor fuel, that the legal incidence of the motor fuel tax is on the consumer of the motor fuel and not on the retailer or distributor, that the retailer or distributor acts only as a collection agent for the State and thus that portion of the receipts attributable to the collection of the motor fuel tax is not “consideration” received by the retailer for the sale of the fuel. Accordingly, we held that the longstanding Department of Revenue Retailers’ Occupation Tax Rule 52, which had provided that in computing retailers’ occupation tax liability “persons who sell motor fuel for use or consumption may deduct the Illinois motor fuel tax collected with respect to such sales, because the Illinois motor fuel tax is on the consumer and is not considered to be a part of the ‘selling price’ of the motor fuel,” to have been the correct interpretation of the statutes involved. We regard that reasoning as controlling here and conclude that the portion of the gross receipts representing the collection of Illinois cigarette use tax is not “consideration” received by the retailer for the sale of the cigarettes, and therefore is not a part of the “gross receipts” under the Retailers’ Occupation Tax Act (Ill.Rev.Stat. 1969, ch. 120, par. 440). Accordingly, it is not to be included in the base upon which the retailer’s occupation tax is computed. The State notes that the plaintiff as a cigarette retailer is directly subject to Illinois cigarette tax and that the Illinois Cigarette Use Tax Act provides: “ *** a distributor need not remit to the Department the tax so collected by him from purchasers under this Act to the extent to which such distributor is required to remit the tax imposed by the Cigarette Tax Act to the Department with respect to the same cigarettes” (Ill.Rev.Stat. 1969, ch. 120, par. 453.33); that plaintiff therefore need not remit to the State Illinois cigarette use tax collected by it from purchasers to the extent that plaintiff is required to remit to the State the tax imposed upon it with respect to the same cigarettes by the Illinois cigarette tax. From this the State argues that the tax collected from the consumer by a retailer such as plaintiff who is subject to the Illinois Cigarette Tax Act is in fact not the Illinois cigarette use tax but the Illinois cigarette tax imposed on the retailer and that it is merely the economic burden of the Illinois cigarette tax which is being passed along to the consumer. We cannot agree, for this argument is predicated on the erroneous premise that users of cigarettes which áre purchased from Illinois retailers are not subject to the Cigarette Use Tax Act but merely bear the economic burden of the Illinois cigarette tax—the cigarette retailers’ privilege tax. The Cigarette Use Tax Act expressly declares (Ill.Rev.Stat. 1969, ch. 120, par. 453.33) and this court has clearly held otherwise, and necessarily so, to avoid constitutional infirmities which would exist if the Cigarette Use Tax Act applied only to out-of-state purchases. In Johnson v. Halpin, 413 Ill. 257, 271, this court stated: “Plaintiff’s contention that the cigarette use tax lacks uniformity is untenable, inasmuch as the statute taxes all users of cigarettes in Illinois in the same amount irrespective of where such cigarettes were purchased. The statute does not tax only those users who buy their cigarettes out of the State.” Thus, in our judgment, the Department of Revenue improperly denied plaintiff’s claim for credit for that amount of retailers’ occupation tax which was computed on the Illinois cigarette use tax. Accordingly, the judgment of the circuit court of Kane County is reversed, and the cause remanded for further proceedings consistent with this opinion. Reversed and remanded.