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Gapers, Inc. v. Dept. of Revenue

JULY 2, 1973.

GAPERS, INC., PLAINTIFF-APPELLANT,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND SARNOW, Judge, presiding.

MR. JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

Rehearing denied July 23, 1973.

An assessment of $12,040.88, plus statutory penalties, covering the period from February 5, 1966 through December 14, 1968, was made by the Department of Revenue of the State of Illinois (Department) under the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1961, ch. 120, par. 440 et seq.), against Gapers, Inc. (plaintiff). This action was reviewed in the circuit court of Cook County (Ill. Rev. Stat. 1969, ch. 110, par. 264 et seq.) and was affirmed. Plaintiff appeals.

Plaintiff operates a home catering business. It arranges parties at the homes of its customers for which it provides all necessary food, beverages, linen, glassware and personnel. All of these items are delivered to the home by truck which remains until conclusion of the meal. The truck then returns unused items as well as equipment supplied by plaintiff.

As a general custom, a representative of plaintiff confers with the customer at the home of the latter. They agree upon the number of guests; number of required personnel; whether necessary equipment, such as glassware, chairs and linen, is to be furnished by the customer or delivered by plaintiff; the menu; nature and quantity of beverages and the charge. There is also discussion at this meeting regarding the cost of trucking involved in transporting the food and equipment to and from the customer's home. The hearing referee of the Department, who heard detailed evidence in the case, noted as one of his findings:

"It would also appear that although the taxpayer, in sending invoices to his [sic] customers, did not segregate the trucking charges, there is substantial proof that those charges were separately contracted for when the taxpayer's consultant met with the ultimate customer."

Examination of many of the invoices shows the factual basis for this finding. There are charges made for provisions and other items; and, as a general matter, the tax is computed only on these amounts and not on the trucking charges, which are separately shown. It is undisputed by the parties that, in preparing its tax returns for the period in issue for computation of the tax, plaintiff deducted the total cost of trucking services from its gross receipts.

In this court, plaintiff contends that, under the rules and regulations of the Department, plaintiff was entitled to deduct the trucking expense. The Department insists that delivery charges are part of plaintiff's cost of doing business and therefore may not be deducted from gross receipts prior to computation of the Retailers' Occupation Tax.

There is no dispute between the parties concerning the facts. The issue for resolution is entirely one of law and necessitates interpretation of the pertinent statute and of the applicable regulations of the Department to determine whether plaintiff is authorized to deduct trucking expense.

The pertinent statute provides (Retailers' Occupation Tax Act, Ill. Rev. Stat. 1971, ch. 120, par. 440):

"`Selling price' or the `amount of sale' means the consideration for a sale valued in money * * * and shall be determined without any deduction on account of the cost of the property sold, the cost of materials used, labor or service cost or any other expense whatsoever, * * *."

In administering this statute, the Department has promulgated articles commonly known as the Rules and Regulations of the Illinois Department of Revenue. Two of these articles are pertinent here and will be quoted. Article III, § 3 reads as follows:

"Cost of Doing Business Not Deductible

In computing retailers' occupation tax liability, no deduction shall be made by a taxpayer from gross receipts or selling prices on account of the cost of property sold, the cost of materials used, labor or service costs, freight or transportation costs, overhead costs, clerk hire or salesman's ...


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