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Martin Oil Service, Inc. v. Dep't of Revenue

JULY 21, 1975.

MARTIN OIL SERVICE, INC., PLAINTIFF-APPELLEE,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT.



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

MR. JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

A final assessment of $106,274.57, including statutory penalties and covering the period from July 1968 through June 1971, was made by the Department of Revenue of the State of Illinois (Department) under the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1973, ch. 120, par. 440 et seq.), against Martin Oil Service, Inc. (plaintiff). Plaintiff obtained review of this action in the circuit court (Ill. Rev. Stat. 1973, ch. 110, par. 264 et seq.) which reversed the order. The Department appeals.

Plaintiff sells gasoline at retail in Illinois. At the hearing before the Department, the evidence showed that the single issue between the parties was disallowance by the Department of reduction of plaintiff's gross receipts by virtue of a stamp redemption plan used by plaintiff. Plaintiff issued stamps to its customers which were handled in books with a value of $2 each. In dealing with its customers, plaintiff treated these stamps as a volume discount. When a customer had filled a book with stamps, it could be redeemed upon his next purchase for the cash value thereof. Only full books could be redeemed except where the customer had more than one book. In this manner, the customers obtained cash discounts on purchases made with presentation of books of stamps. A certain number of stamps would never be redeemed, and the issue was presented only concerning books actually redeemed by customers. No other criticism was made against plaintiff by the Department.

After administrative review, the final order appealed from found the issues in favor of plaintiff and against the Department and determined that there was a fatal defect in the proceedings before the Department in that the hearing officer did not make findings of fact and conclusions of law. The court also found that the findings by the hearing officer were against the manifest weight of the evidence and were contrary to law.

In this court, the Department contends that cash rebates given upon redemption of stamp books are not a valid deduction from gross receipts under the Retailers' Occupation Tax Act; the decision of the Department should be affirmed since it is supported by competent, material evidence and specific findings of fact are not required of the administrative tribunal under the statute. Plaintiff contends that the discount given for quantity sales may be deducted from gross receipts for the tax computation and that the procedural defects in the administrative proceedings rendered them entirely void.

We find no dispute of fact presented by this record. It appears to us that the only difference between these parties arises upon issues of law. Resolution of these differences requires an examination and interpretation of the pertinent statutes and regulations of the Department. The Retailers' Occupation Tax Act of Illinois contains a number of definitions which are pertinent here (Ill. Rev. Stat. 1973, ch. 120, par. 440):

"`Gross receipts' from the sales of tangible personal property at retail means the total selling price or the amount of such sales, as hereinbefore defined. In the case of charge and times sales, the amount thereof shall be included only as and when payments are received by the seller."

"`Selling price' or the `amount of sale' means the consideration for a sale valued in money whether received in money or otherwise, including cash, credits, property, other than as hereinafter provided, and services, * * * 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 * * *."

The tax is to be imposed at the specified rate of percentage "of the gross receipts from such sales of tangible personal property * * *." (Ill. Rev. Stat. 1973, ch. 120, par. 441.) Thus, "the tax is measured by the gross receipts * * *" from sales. (Superior Coal Co. v. Department of Revenue, 4 Ill.2d 459, 465, 123 N.E.2d 713.) In addition, "The Department is authorized to make, promulgate and enforce such reasonable rules and regulations relating to the administration and enforcement of the provisions of this Act as may be deemed expedient." (See also Ill. Rev. Stat. 1973, ch. 120, par. 451.) However, the Department is "without legal authority to limit or extend the statutory definition by its own Rules and Regulations." (Gapers, Inc. v. Department of Revenue, 13 Ill. App.3d 199, 202, 300 N.E.2d 779, citing Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 50 N.E.2d 505.) The statute "may not be altered or added to by the exercise of a power to make regulations thereunder." (Reynolds v. Department of Public Aid, 26 Ill. App.3d 933, 937, 326 N.E.2d 109.) Pertinent regulations adopted by the Department are as follows:

Article III, section 3:

"3. COST OF DOING BUSINESS NOT DEDUCTIBLE

In computing retailers' occupation tax liability, no deductions 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 salesmen's commissions, interest paid by the seller, or any other expenses whatsoever."

Article III, ...


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