APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND
S. SARNOW, Judge, presiding.
MR. PRESIDING JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:
This appeal is taken from an order entered by the circuit court of Cook County affirming the action of the Department of Revenue of the State of Illinois (Department) which adopted the recommendations of its hearing examiner as to assessments made against the taxpayer-plaintiff, Burlington Northern, Inc., for its having failed to pay a use tax in Illinois on certain equipment owned and used by the plaintiff as an interstate carrier for hire. The assessments are based on an audit made by the Department of the taxpayer's records for November 1, 1964, to June 30, 1967. Of the several categories of equipment which were the subject of this audit, only three are presented for review by this court: 34 double-deck passenger cars (hereafter commuter cars), four diesel switching engines (hereafter locomotives) and certain containers and trailers used by the plaintiff and others in connection with trailer-on-flat-car (TOFC) and container-on-flat-car (COFC) services. Since taxation of each of these categories creates and presents different legal issues for the court, each will be discussed separately in this opinion.
The following issues are raised by this appeal:
(1) whether the proposed tax causes a multiple burden on interstate commerce;
(2) whether the plaintiff's contested transportation vehicles are exempt from the Illinois Use Tax Act under the statutory rolling stock exemption; and
(3) are the findings of fact that there was a taxable use of the contested property within Illinois against the manifest weight of the evidence.
The final use tax assessments exclusive of penalties and interest are:
11/1/64 thru 6/30/65 $147,619.12 7/1/65 thru 12/31/65 225,048.06 1/1/66 thru 6/30/67 124,863.37 ___________ Total $497,530.55
The tax assessments for the equipment at issue on this appeal as recommended by the hearing examiner are as follows:
Commuter Cars $277,370.09 Containers and Trailers 32,468.93 Switch Locomotives 17,898.72 ___________ Total $327,737.74
The only indication in the record that the Department approved the recommendations of the hearing examiner was the final tax assessments. Though the amounts finally assessed differed somewhat from the amounts recommended to be assessed, it is assumed that the Department accepted the examiner's reasoning in so approving the recommendations.
In 1965, plaintiff purchased 34 passenger cars (also referred to in the record as double-deck, gallery and commuter cars) from a company in Pennsylvania, taking delivery at Lincoln, Nebraska. After delivery in Nebraska, all the cars were transferred on the same day to Chicago. The cars were, as plaintiff alleges, involved in interstate commerce from the time they entered Illinois through the audit period, though the extent of involvement is disputed. The hearing examiner made a finding of fact that the cars were not includible under the rolling stock exemption to the Illinois Use Tax Act (Ill. Rev. Stat. 1971, ch. 120, par. 439.3(b)), *fn1 in that the original intent and primary purpose of purchasing the cars was to move them in commerce within Illinois. No reference is made, in applying this standard, to actual, much less primary, use. The standard, though not found in either the statute or the Department's own rule 3 *fn2 interpreting that statute, was deemed by the examiner to be necessary to avoid what he characterized as an impossible task of weighing "endless" variables to determine whether the interstate purpose of instrumentalities mainly purchased for intrastate use is significant enough to merit exemption.
The examiner made an additional finding that the commuter cars could not be characterized as rolling stock within the meaning of the exemption, a finding not only wholly unsupported by the record but also directly in conflict with the examiner's own comment at the hearing that the commuter cars were rolling stock.
The plaintiff presented evidence of substantial interstate use and involvement of these cars. Specifically there was evidence that the commuter cars themselves moved across State lines with paying passengers aboard on a number of occasions, and, that while on the Chicago to Aurora runs within Illinois on which these cars were mainly used, they carried both passengers who either originated or culminated their journeys in other States, and mail and express packages which, stored just inside the doors of the cars, were delivered along the route. Revenues from transporting express packages over the three years included in the audit were totaled at $24,682 and mail revenues at $98,845. In spite of the evidence of the extent and nature of interstate use and involvement of these cars, plaintiff alleged that there is no practicable manner of determining the total amount of revenue each car produces, much less that produced in interstate use and involvement, and this court can find no basis in the record to dispute that allegation.
The diesel switching engines were purchased in Illinois, delivered in Iowa, and initially used for a year in Nebraska for switching and, allegedly, interstate uses. The auditor concluded that the engines were then "permanently assigned" to Illinois a conclusion not apparently concurred in by the examiner. This conclusion was based solely on a letter obtained from the files of the plaintiff stating that they had been "assigned" to Illinois. At the hearing plaintiff alleged that such terminology may have been used simply for Federal inspection purposes. The locomotives, though defined by C.J. Bryan, manager of operations for the plaintiff, as "any motive power that would be used to switch, [and] classify box cars, flat cars, any type of rolling stock, and assembly into a train," were also capable of and were, in fact, used on an unspecified number of occasions for interstate travel. No sales or use taxes were paid on these locomotives in any State. The examiner found these locomotives not to be within the rolling stock exemption since they were not "for hire" as, ...