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Pierce v. Pacini

JUNE 4, 1970.

WILLIAM PIERCE, PLAINTIFF-APPELLEE,

v.

LAWRENCE G. PACINI, D/B/A LARRY'S STANDARD STATION, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. WILLIAM B. KANE, Judge, presiding. Affirmed.

MR. PRESIDING JUSTICE DEMPSEY DELIVERED THE OPINION OF THE COURT.

The amount of money involved in this litigation is 70 cents. The legal question involved is whether a repairman in a gasoline station who added parts to a motor vehicle as a necessary incident to its repair, was engaged in the sale of service under the Service Occupation Tax Act or in the business of selling tangible personal property at retail under the Retailers' Occupation Tax Act. The appeal comes to us from the Supreme Court to which it was originally taken. The transfer order stated that the controversy did not concern State revenue and that there was no other basis for the court's jurisdiction.

The defendant, an owner of a gasoline service station, repaired the plaintiff's motor vehicle in November 1968 and in doing so installed a rebuilt starter and solenoid. He billed the plaintiff for his labor and charged $28.10 for the parts. To this charge he added a $1.40 tax based on 5% of his selling price — the amount called for by the retailers' occupation tax. The plaintiff protested that the tax should have been 70 cents — the amount the defendant was allowed to pass on to his customers under the service occupation tax. The defendant refused to rebate the difference and the plaintiff brought this action.

The complaint alleged that the defendant was a serviceman, not a retailer, and as such could only charge a 5% tax based on the cost price of the items he sold. The complaint also alleged that the plaintiff was unable to carry on his business without the repaired vehicle and, therefore, had paid the excessive tax under duress. The defendant moved to strike the complaint. He admitted collecting the $1.40 tax, stated it had been forwarded to the State Revenue Department and asserted that the plaintiff was suing the wrong party. He contended that in charging a tax of 5% of his selling price he did what he was required to do under the Retailers' Occupation Tax Act because he had transferred tangible personal property to the plaintiff. The trial court denied the motion and granted judgment to the plaintiff.

The Retailers' Occupation Tax Act (Ill Rev Stats 1967, c 120, par 440 et seq.) provides in paragraph 441 that:

"A tax is imposed upon persons engaged in the business of selling tangible personal property at retail at the rate of [4 1/4%] of the gross receipts from such sales of tangible personal property made in the course of such business. . . ."

A sale at retail is any transfer of the ownership of or title to tangible personal property to a purchaser for use or consumption for a valuable consideration. Paragraph 440.

The Service Occupation Tax Act (Ill Rev Stats 1967, c 120, par 439.101 et seq.) provides in paragraph 439.103:

"A tax is imposed upon all persons engaged in the business of making sales of service . . . at the rate of [4 1/4%] of the cost price of all tangible personal property transferred by said servicemen . . . as an incident to a `sale of service'". . . .

"Sales of service" is a transaction which is not a retail sale of tangible personal property under the Retailers' Occupation Tax Act or under the Use Tax Act. Paragraph 439.102.

Municipal and county governments are authorized to levy additional retailers' and service occupation taxes on the same personal property upon which the State has imposed a tax. Ill Rev Stats 1967, c 24, pars 8-11-1, 8-11-5; c 34, pars 409.1, 409.2.

Both the retailers' and servicemen's taxes are taxes on occupations — excise taxes imposed for the privilege of engaging in the designated occupation — and are not taxes on the sale of goods, even though they are measured by the receipts from such sales. Snite v. Department of Revenue, 398 Ill. 41, 74 N.E.2d 877 (1947). The object of the Service Occupation Tax Act is to place servicemen on a tax parity with retailers to the extent that they transfer tangible personal property to the ultimate consumer. Fiorito v. Jones, 39 Ill.2d 531, 236 N.E.2d 698 (1968).

The question of whether a businessman is engaged in a service occupation or a retail occupation has been before the courts in numerous cases construing the Retailers' Occupation Tax Act. See, e.g., J.H. Walters & Co. v. Department of Revenue, 44 Ill.2d 95, 254 N.E.2d 485 (1969); Central Television Service, Inc. v. Isaacs, 27 Ill.2d 420, 189 N.E.2d 333 (1963). In Sterling Steel Casting Co. v. Department of Revenue, 7 Ill.2d 244, 130 N.E.2d 262 (1955) the court stated, "To be taxable [under the retailers' tax], the business of the taxpayer must be that of selling tangible personal property rather than that of rendering service. Where the business is that of furnishing service to which a sale at retail is incidental, the occupation has been held not taxable." In Mahon v. Nudelman, 377 Ill. 331, 36 N.E.2d 550 (1941), the plaintiffs engaged in repairing and restyling fur garments and in the course of business furnished the fur pieces or strips and lining necessary to the task. Customers retained the plaintiffs for the purpose of repair, and the plaintiffs used their skill to choose and fit the fur pieces or lining. The court found from the evidence that they were primarily selling services, and the materials used were incidental to this purpose. In Central Television Service, Inc. v. Isaacs, supra, the plaintiffs engaged in servicing and repairing television sets and electronic equipment. In the course of business they frequently incorporated parts into the repaired articles. At trial it was found that the plaintiffs' employees possessed special training for their jobs. The customers relied on the plaintiffs' skill in making the repairs and left the selection of the repair parts to them. The reviewing court found that the customers were contracting for repair and restoration of function rather than for the purchase of parts and materials. It upheld the trial court's finding that the plaintiffs were engaged primarily in a service occupation in which the transfer of tangible personalty was incidental, and that they were not selling such property at retail within the meaning of the Retailers' Occupation Tax Act.

Regulations issued by the State Department of Revenue also throw light on the problem of sales made by automobile repairmen. Although these regulations are not binding on this court, it is appropriate to consider them in resolving the problem at hand. Oscar L. Paris Co. v. Lyons, 8 Ill.2d 590, 134 N.E.2d 755 ...


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