APPEAL from the Circuit Court of Cook County; the Hon. WILLIAM
V. BROTHERS, Judge, presiding.
MR. JUSTICE BRISTOW DELIVERED THE OPINION OF THE COURT:
Plaintiff, Valier Coal Company, instituted proceedings in the circuit court of Cook County under the Administrative Review Act to review a retailer's occupation tax assessment of $90,093.83 by defendant Department of Revenue. The court confirmed the action of the Department of Revenue and entered judgment against plaintiff in the amount of the assessment, from which judgment plaintiff has appealed to this court.
The facts are uncontroverted, and the cause presents the question of law of whether plaintiff's operation of selling coal to the Chicago, Burlington and Quincy Railroad Company, its parent corporation, under the conditions imposed by the Illinois Public Utilities Commission, constituted being engaged in the business of selling tangible personal property at retail within the terms of the Retailers' Occupation Tax Act. Ill. Rev. Stat. 1951, chap. 120, pars. 440-453.
From the record it appears that some time prior to 1917 the Chicago, Burlington and Quincy Railroad Company, hereinafter referred to as the Burlington, had acquired beneficial ownership of coal lands in southern Illinois in order to have an assured source of coal supply. When a coal shortage threatened in 1917, it was decided that the lands would be utilized, and the plaintiff, Valier Coal Company, was organized by the Burlington as a wholly-owned subsidiary under the General Corporation Act. However, before the Burlington-owned coal properties could be transferred to plaintiff, it was necessary to have the approval of the Illinois Public Utilities Commission, predecessor of the present Illinois Commerce Commission. The commission's order of approval, however, imposed the following restrictive conditions:
"(3) This order is issued on condition that the price to be paid by the Chicago, Burlington & Quincy Railroad Company for coal purchased from the Valier Coal Company shall not exceed the actual cost of production to the coal company plus an amount sufficient to pay interest on the investment and to provide a sinking fund.
"(4) It is further ordered that this order is granted upon the further condition that the Valier Coal Company shall not sell or supply coal to the general commercial trade."
Several supplemental orders were issued by the commission which in no way modified these conditions, but merely allowed exchange operations with other coal mine operators. However, under union agreements, and in accordance with the common practice of the industry, plaintiff was required to sell small amounts of coal to its employees, on which it paid the retailers' occupation tax after that statute was enacted.
Production of coal by plaintiff was commenced in 1920 and ended on August 15, 1949, when plaintiff closed its mine pending completion of its sale to the Old Ben Coal Company. The sale was approved by the Illinois Commerce Commission on September 16, 1949, and was consummated by conveyance on January 15, 1952.
Between 1920 and 1949, plaintiff sold coal to the Burlington at a price determined by the actual cost of production, without taking into consideration any element of profit. Moreover, since income realized by plaintiff from other sources was deducted from the cost of operation in computing that net cost, plaintiff did not even recover the full cost of operation; consequently, until production of coal ended on August 15, 1949, plaintiff had no net income. This low cost of fuel, paid by the Burlington, insofar as it affected the railroad's production cost and rates, did confer a public benefit.
Prior to 1951 no claim for retailers' occupation tax, predicated upon the sales to the Burlington, was ever asserted by the defendant Department. However, on December 31, 1951, a notice of proposed assessment was mailed, covering the retailers' occupation taxes on such operations for the period extending from July 1, 1948, to and including July 31, 1951. The notice was received by plaintiff on January 2, 1952, and a protest filed on January 16, 1952. After a hearing by an examiner for defendant on December 19, 1952, a final assessment was sent to plaintiff on March 25, 1953, which, together with penalties, amounted to $90,093.83.
In a proceeding to review that assessment in the circuit court under the Administrative Review Act, plaintiff argued that the assessment was illegal and void under the act, and also that the part of the assessment relating to transactions which occurred more than 3 years prior to January 2, 1952, was barred by the terms of the Retailers' Occupation Tax Act.
The circuit court, however, ordered that plaintiff's complaint for relief be denied, that the action of the Department of Revenue be confirmed, and that judgment be entered in favor of defendant and against plaintiff in the amount of $90,093.83.
The propriety of this judgment depends essentially upon whether plaintiff's operations were subject to the terms of the Retailers' Occupation Tax Act. Under section 2 of the act (par. 441,) insofar as applicable to the present inquiry, the tax is levied upon persons engaged in the business of selling tangible personal property for use or consumption and not for resale.
Plaintiff contends that it was not engaged in "business" at retail under the terms of the act, and, therefore, was not subject to the tax. The act, however, does not define the phrase "engaged in the business," and courts, in ascertaining its meaning, have sought guidance from the statutory purpose (Svithiod Singing Club v. McKibbin, 381 Ill. 194,) and from other sections of the act. (Continental Can Co. v. Nudelman, 376 Ill. 446.) The only portion of the act relevant to this inquiry is the provision in section 1 (par. 440) that the "isolated or occasional sale of tangible personal property at retail by a person who does not hold himself out as being engaged in * * * selling such tangible personal property ...