Appeal from the Circuit Court of Coles County; the Hon. Harry
J. Hannah, Judge, presiding.
MR. JUSTICE WARD DELIVERED THE OPINION OF THE COURT:
On November 3, 1972, the circuit court of Coles County on the petition of the Calderwood Corporation (hereafter Calderwood) enjoined the defendant, the Director of Revenue, from collecting certain amounts allegedly owed by Calderwood under the Illinois Retailers' Occupation Tax Act on sales by Calderwood to the Vesuvius Crucible Company (Vesuvius). The ground of the court's holding was that the sales by Calderwood were sales for resale and thus exempted from the provisions of the Retailers' Occupation Tax Act. The Director appealed to the appellate court, which transferred the case here, because it considered that the effect of the trial court's action was to hold a part of the statute unconstitutional.
Calderwood is an Illinois corporation which manufactures refractories used in the smelting and fashioning of metals. Under an exclusive sales contract Calderwood sells all of its production or output to Vesuvius, a Pennsylvania corporation. The defendant states Calderwood has no sales force and that it was organized solely for the purpose of supplying Vesuvius. Vesuvius does not use any of the refractories but sells them throughout the United States and abroad. When purchasing, Vesuvius instructs Calderwood where the refractories are to be shipped. Calderwood shipped certain refractories directly to customers of Vesuvius in Illinois and the assessment of the retailers' occupation tax by the Director on these sales developed the controversy in this case.
Section 1 of the Retailers' Occupation Tax Act provides in part: "`Sale at retail' means any transfer of the ownership of or title to tangible personal property to a purchaser, for the purpose of use or consumption, and not for the purpose of resale." However, that section also states, "Sale at retail shall be construed to include any transfer of the ownership of or title to tangible personal property to a purchaser, for use or consumption by any other person to whom such purchaser may transfer the tangible personal property without a valuable consideration, and to include any transfer, whether made for or without a valuable consideration, for resale in any form as tangible personal property unless made in compliance with Section 2(c) of this Act." Ill. Rev. Stat. 1969, ch. 120, par. 440.
"If the purchaser is not registered with the Department as a taxpayer, but claims to be a reseller of the tangible personal property in such a way that such resales are not taxable under this Act or under some other tax law which the Department may administer, such purchaser * * * shall apply to the Department for a resale number. * * *
Except as provided hereinabove in this Section, no sale shall be made tax-free on the ground of being a sale for resale unless the purchaser has an active registration number or resale number from the Department and furnishes that number to the seller in connection with certifying to the seller that any sale to such purchaser is nontaxable because of being a sale for resale." Ill. Rev. Stat. 1969, ch. 120, par. 441c."
Article 13 of the Department's Rules and Regulations provides:
"A person who sells tangible personal property to a purchaser who may use or consume such property within the meaning of the Act, but who also may resell such property, must determine, at the time he sells the property to such purchaser, whether the purchaser is buying the property `for use or consumption' within the meaning of the Act or whether the purchaser is buying the property `for resale'. This determination is required in order that the seller may properly file the returns required by the Act and compute his tax liability.
A certificate of Resale is a statement signed by the purchaser that the property purchased by him is purchased for purposes of resale. Provided that this statement is correct, the Department will accept Certificates of Resale as prima facie proof that sales covered thereby were made for resale.
Except as provided hereinabove in this regulation, no sale shall be made tax-free on the ground of being a sale for resale unless the purchaser has an active registration number or resale number from the Department and furnishes that number to the seller in connection with certifying to the seller that any sale to such purchaser is nontaxable because of being a sale for resale." Department of Revenue, Rules and Regulations, art. 13.
It is undisputed that Vesuvius did not obtain a resale number from the Department of Revenue and that it did not furnish a resale certificate to Calderwood.
In 1970 the Illinois Department of Revenue conducted an audit of Calderwood's records and thereafter, in an assessment, claimed the audit disclosed that Calderwood had a total tax liability of $3,227.95. The assessment stated that $1,101.21 of this amount represented liability under the Retailers' Occupation Tax Act. When Calderwood did not satisfy the claimed liability, the Department, on October 20, 1970, sent Calderwood a notice of tax liability for $3,461.28, the additional $233.33 being attributable to accumulating penalties and interest. The notice stated in part: "Unless you notify the Department of Revenue in writing, within 20 days after the date of this notice, that you protest this Notice of Tax Liability and request a hearing, this Notice will automatically become a Final Assessment without any further notice to you. Your failure to notify the Department of Revenue in the manner provided herein constitutes a waiver of your right to such hearing." Cf. Ill. Rev. Stat. 1969, ch. 120, par. 443.
Calderwood did not give any notification of protest or objection to the Department but on November 4, 1970, it filed a complaint in the circuit court of Coles County to enjoin the Department of Revenue from collecting the portion of the assessment attributable to its alleged liability under the Retailers' Occupation Tax Act, i.e., to the extent of $1,396.82. Calderwood acknowledged its liability for the balance of the assessment, which was based on liability for other classes of taxes, but denied liability under the Retailers' Occupation Tax Act. Calderwood ...