Appeal from the Appellate Court for the First District; heard
in that court on appeal from the Circuit Court of Cook County;
the Hon. Thomas C. Donovan, Judge, presiding.
MR. JUSTICE SCHAEFER DELIVERED THE OPINION OF THE COURT:
Rehearing denied November 27, 1974.
This case, like many others, involves problems that stem from the relationship between Illinois' basic "sales" tax the Retailers' Occupation Tax Act and other taxes designed to protect that basic tax from erosion. The complexity of this portion of the tax structure of the State of Illinois is due in large part to the view of the Constitution of 1870 that was expressed in a dictum in Bachrach v. Nelson (1932), 349 Ill. 579. (See Turner v. Wright (1957), 11 Ill.2d 161, and Thorpe v. Mahin (1969), 43 Ill.2d 36.) The complexity continues although the necessity for it no longer exists.
This case involves the basic Retailers' Occupation Tax Act (Ill. Rev. Stat. 1965, ch. 120, par. 440 et seq.) and its companion the Use Tax Act (Ill. Rev. Stat. 1965, ch. 120, par. 439.1 et seq.) as well as the Service Occupation Tax Act (Ill. Rev. Stat. 1965, ch. 120, par. 439.101 et seq.) and the accompanying Service Use Tax Act (Ill. Rev. Stat. 1965, ch. 120, par. 439.31 et seq.). A brief explanation of the operation of these taxes will assist in understanding the contentions of the parties.
The Retailers' Occupation Tax Act imposes a tax upon persons engaging in selling tangible personal property at retail. The amount of the tax is computed as a specified percentage of the gross receipts of such sales at retail. (Ill. Rev. Stat. 1965, ch. 120, par. 441.) A "sale at retail" is any transfer for a valuable consideration of the ownership of or title to tangible personal property to a purchaser for use or consumption and not for resale. (Ill. Rev. Stat. 1965, ch. 120, par. 440.) The retailer is required to remit the tax to the Illinois Department of Revenue. Ill. Rev. Stat. 1965, ch. 120, par. 442.
The Use Tax Act complements the Retailers' Occupation Tax Act. (See Turner v. Wright (1957), 11 Ill.2d 161.) It imposes a tax, at the same rate as the retailers' occupation tax, upon the privilege of using in this State tangible personal property purchased at retail. (Ill. Rev. Stat. 1965, ch. 120, par. 439.3.) In the usual situation the tax is collected from the purchaser by the retailer, but to the extent that the retailer remits to the Department of Revenue the tax imposed by the Retailers' Occupation Tax Act with respect to the sale of the same property, he is not required to remit the tax imposed by the Use Tax Act. Ill. Rev. Stat. 1965, ch. 120, par. 439.9.
The Service Occupation Tax Act is intended to place servicemen, as nearly as possible, on a tax parity with retailers to the extent they transfer tangible personal property to the ultimate consumer. (See Fiorito v. Jones (1968), 39 Ill.2d 531, 536.) It does so by imposing a tax upon all persons engaged in the business of making sales of service. The amount of the tax is computed as a specified percentage of the cost price to the serviceman of all tangible personal property transferred by such serviceman as an incident to a sale of service. (Ill. Rev. Stat. 1965, ch. 120, par. 439.103.) Depending on the circumstances, the tax is either collected from the serviceman by his supplier, who then remits it to the Department of Revenue, or is remitted directly to the Department by the serviceman after the transfer of the property to a purchaser. Ill. Rev. Stat. 1965, ch. 120, par. 439.103.
The Service Use Tax Act complements the Service Occupation Tax Act. It imposes a tax, at the same rate as the service occupation tax, upon the privilege of using in this State real or tangible personal property acquired as an incident to the purchase of a service from a serviceman. (Ill. Rev. Stat. 1965, ch. 120, par. 439.33.) In the usual situation the tax is collected from the purchaser by the serviceman, but to the extent that he pays the tax imposed by the Service Occupation Tax Act with respect to the sale of service involving the incidental transfer by him of the same property, he is not required to remit the tax imposed by the Service Use Tax Act. Ill. Rev. Stat. 1965, ch. 120, par. 439.39.
On February 13, 1967, the plaintiff, Julia Hagerty, authorized the Cadillac Motor Car Division of the defendant General Motors Corporation (GM) to install certain parts in her automobile, and to perform certain repair work upon it, including lubrication service, changing the oil filter, adjusting the carburetor, realigning the wheels and replacing the spark plugs. In connection with that work she was charged a total of $16.26 for an oil filter, spark plugs and a condenser. The cost of the labor was $30.05. The bill given to her showed the following breakdown of the total charge of $46.96:
Labor $30.05 Total Material 16.26 Sales Tax .65 ______ Total Amount $46.96
Thereafter on April 17, 1967, she filed this action alleging that GM has wrongfully charged her $.65 pursuant to the Use Tax Act instead of a lesser amount pursuant to the Service Use Tax Act. The relief sought was an injunction, an accounting and a refund of the alleged overpayment of taxes, and the action purported to be brought on behalf of all other customers of GM who were similarly situated.
GM's amended answer denied that it was a serviceman under the Service Use Tax Act and the Service Occupation Tax Act. It alleged that its transaction fell within the provisions of the Use Tax Act and the Retailers' Occupation Tax Act, and that it had remitted to the State the amount due under those statutes. The amended answer also raised other affirmative defenses. The Director of the Department of Revenue and the Treasurer of the State of Illinois were added as defendants. GM then filed a motion to strike the class action allegations of the complaint and a motion to dismiss the action. On the basis of the pleadings before it, the trial court entered judgment in favor of the plaintiff for 33 cents, ordered the class action allegations of the complaint stricken, denied the plaintiff's request for an accounting, and ordered that if GM continued to collect taxes from its customers based upon the Use Tax Act and the Retailers' Occupation Tax Act, it must pay one-half of the amounts collected into a protest fund to be set up by the State Treasurer.
The Appellate Court, First District, reversed the judgment of the circuit court and remanded the cause for further proceedings. (14 Ill. App.3d 33.) It held that if the plaintiff is determined to be a proper representative of the class she purports to represent, the class action allegations of the complaint should not have been stricken, but that the trial court erred in entering judgment for the plaintiff on the pleadings and in its determination of the amount of damages awarded to the plaintiff. We allowed GM's petition for leave to appeal.
The questions that concerned both courts relate to the plaintiff's right to recover and to maintain a class action. In order that a class action may be maintained, "all members of the class [must be] found to have a common interest in the questions involved and the results * * *." (Peoples Store of Roseland v. McKibbin (1942), 379 Ill. 148, 152-53; also see Fiorito v. Jones (1968), 39 Ill.2d 531, 541-44; Harrison Sheet Steel Co. v. Lyons (1959), 15 Ill.2d 532, 537-38.) The Peoples Store case involved a suit challenging the applicability of the Retailers' Occupation Tax Act to sales of food by retailers to hospitals and similar institutions. The action was brought by two named plaintiffs, individually, and ...