APPEAL from the Circuit Court of Du Page County; the Hon.
HELEN C. KINNEY, Judge, presiding.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:
The plaintiff sought administrative review of an order of the Illinois Department of Revenue which assessed retailers' occupation tax against the plaintiff on receipts from the installation of wall to wall carpeting in the amount of $22,395, including interest and statutory penalties. The circuit court reversed and entered judgment for the plaintiff. The Department appeals contending that the taxpayer's expense of installation of the carpeting was not a valid deduction from gross receipts because there was no evidence that the work was separately contracted for by customers.
The taxpayer is engaged in the retail sale of wall to wall carpeting. The deductions for labor for installing the carpeting sold for the period from January 1970 through October 1972 were disallowed by an auditor for the Department because the taxpayer had either billed the customer for the carpet and labor in a lump sum or had billed the customer separately but with no separate billing agreement having been signed by the customer.
There is testimony that the plaintiff employed five or six special carpet installers during the tax period who were specially trained members of the Carpenters' Union doing only the installation work at the customers' homes. It further appears that the labor charges for installation averaged approximately one-fourth of the total bills. A substantial number of plaintiff's customers purchased wall to wall carpeting on special order. The installers would first visit the customer's home, measure the rooms, make a diagram, and later install the carpeting after it had been cut at the plaintiff's store. No tax was collected from customers on the installation charges.
The Retailers' Occupation Tax Act imposes a tax upon persons engaged in the business of selling tangible personal property at retail based on a percentage of the gross receipts measured by the total selling price of such sales with certain exclusions. (Ill. Rev. Stat. 1973, ch. 120, par. 441.) Selling price is defined as:
"* * * 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 * * *." (Ill. Rev. Stat. 1973, ch. 120, par. 440.) (Emphasis added.)
Under statutory authority to "make, promulgate and enforce such reasonable rules and regulations * * * as may be deemed expedient" (Ill. Rev. Stat. 1973, ch. 120, par. 451), the Department issued its Rule 20 which was introduced at the hearing and provides as pertinent:
VENDORS OF CURTAINS, SLIP COVERS, FLOOR COVERING AND OTHER SIMILAR ITEMS MADE TO ORDER
Persons who engage in the business of selling portieres, drapes, curtains, marquee curtains, slip covers, floor covering, tents, tarpaulins and other similar items incur retailers' occupation tax liability when selling such items (with or without installation by the seller) to purchasers for use or consumption and not for resale whether such items are sold as stock or standard items or whether the seller produces such items on special order for the purchaser.
The same is true when custom-made Venetian blinds, window shades, awnings, screen doors, window screens, storm doors and storm windows are sold at retail `over-the-counter' without installation by the seller as a construction contractor under paragraph 3 of Rule No. 6 of the retailers' occupation tax Rules and Regulations. This is true because such items, when produced on special order, serve substantially the same function as stock or standard items of tangible personal property which is sold at retail.
In computing retailers' occupation tax liability on the retail sale of custom-made items, no deduction may be taken for the cost of labor involved in producing the finished item for sale. This is true whether such production labor is included in a lump sum price with the tangible personal property or whether such production labor is priced separately from the tangible personal property. The thing that is being sold is the finished item (drapes, carpeting, etc.), and the cost of labor involved in ...