Appeal from the Appellate Court for the First District; heard
in that court on appeal from the Circuit
MR. JUSTICE GOLDENHERSH DELIVERED THE OPINION OF THE COURT:
Rehearing denied November 23, 1977.
Plaintiff, GTE Automatic Electric, a Delaware corporation, appealed from the judgment of the circuit court of Cook County entered in favor of defendant, Robert H. Allphin, Director of Revenue, upon allowance of his motion to dismiss. This action, brought by plaintiff "in its own behalf and in a representative capacity on behalf of a class of all similarly situated taxpayers" seeks a judgment declaring that certain of its sales should be excluded in computing the fraction of its business income to be allocated to Illinois under article 3 of the Illinois Income Tax Act (Ill. Rev. Stat. 1973, ch. 120, pars. 3-301 through 3-307) and to enjoin defendant from so allocating its income. Holding that plaintiff had not exhausted its administrative remedy and that this was not a proper class action, the circuit court dismissed, the appellate court affirmed (38 Ill. App.3d 910), and we allowed plaintiff's petition for leave to appeal.
Involved here are the construction of section 304(a) of the Illinois Income Tax Act (ch. 120, par. 1-101 et seq.) and Regulation 304-4(d) promulgated by the Department of Revenue pursuant to section 1401 of the Act (ch. 120, par. 14-1401). In pertinent part section 304(a) provides that the multistate business income of a person other than a resident of Illinois (under section 1501(a)(20) (ch. 120, par. 15-1501(a)(20)) of the Act every corporation is a person "other than a resident") "shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the sum of the property factor (if any), the payroll factor (if any) and the sales factor (if any), and the denominator of which is 3 reduced by the number of factors which have a denominator of zero." Section 304(a)(3) defines the sales factor as follows:
(A) The sales factor is a fraction, the numerator of which is the total sales of the person in this State during the taxable year, and the denominator of which is the total sales of the person everywhere during the taxable year.
(B) Sales of tangible personal property are in this State if:
(i) The property is delivered or shipped to a purchaser, other than the United States government, within this State regardless of the f.o.b. point or other conditions of the sale; or
(ii) The property is shipped from an office, store, warehouse, factory or other place of storage in this State and either the purchaser is the United States government or the person is not taxable in the state of the purchaser.
(C) * * *" Ill. Rev. Stat. 1973, ch. 120, par. 3-304.
In its complaint, plaintiff alleged that pursuant to section 304(a)(3) and regulations 304-4(d)(1)(A) and (B), in computing its Illinois business income for each of its taxable years ended December 31, 1969, 1970 and 1971, it included in the numerator of its sales factor all sales of tangible personal property delivered to or shipped to purchasers in Illinois and all sales of such property shipped from its Illinois inventory to purchasers in States in which it is not taxable; that in an audit of plaintiff's Illinois income tax returns for those taxable years the Department of Revenue had taken the position that the numerator of plaintiff's sales factor should be increased by including (1) all sales of tangible personal property shipped by plaintiff's supplier from the supplier's inventory in Illinois to purchasers in States in which plaintiff is not taxable and (2) all sales of tangible personal property shipped by plaintiff's supplier from the supplier's inventory in a State in which plaintiff is not taxable to purchasers in States in which plaintiff is not taxable and that the Department demanded that plaintiff supply it with the amounts of those sales. Plaintiff alleged that its records "are not sufficient for it readily to determine the amounts of these two classes of sales" and that the determination of the amounts would cost many thousands of dollars, would require months to complete and "would be a useless act if such sales are not required to be included in the numerator of [its] sales factor." It alleged further that an actual controversy, within the meaning of section 57.1 of the Civil Practice Act (Ill. Rev. Stat. 1971, ch. 110, par. 57.1), exists between plaintiff and defendant as to whether the Act requires plaintiff to include in the numerator of its sales factor either of those classes of sales, and that if the Act does require that either of them be included, there is an actual controversy between plaintiff and defendant as to whether the Act in this respect is unconstitutional, in that it violates the commerce clause of the Federal Constitution and the due process clause of the Federal and Illinois constitutions. Plaintiff asked that the Act be construed as not requiring that either of the two classes of sales be included in the numerator of its Illinois sales factor or alternatively that any requirement of such inclusion be declared unconstitutional; that defendant be permanently enjoined from requiring plaintiff to determine the amounts of the classes of sales in dispute; and that the court find this to be a proper class action.
Defendant moved to dismiss on the grounds that the action was premature because plaintiff had not permitted the Department to conduct an examination to determine the correct amount of tax liability pursuant to section 904(a) of the Act (ch. 120, par. 9-904(a)) nor given the Department access to information or records necessary to make an administrative determination (ch. 120, par. 12-1201); that plaintiff had neither exhausted its administrative remedy under the Act nor alleged facts sufficient to excuse its failure to do so; that plaintiff was seeking an audit of its returns by the court as a substitute for an audit by defendant; "that declaratory judgment is not an available remedy for an anticipated interpretation or administrative determination"; and that this is an improper class action.
The circuit court denied the motion, defendant answered, plaintiff moved for summary judgment, and defendant filed objections to plaintiff's motion. After considering memoranda and oral argument the circuit court denied plaintiff's motion for summary judgment and dismissed the action. Plaintiff appealed and the appellate court affirmed.
We consider first whether the appellate and circuit courts> correctly held that this action was premature because plaintiff had failed to exhaust its remedy at law by way of the administrative procedures provided in the Act (ch. 120, pars. 12-1201 through 12-1204) and the Administrative Review Act (Ill. Rev. Stat. 1971, ch. 110, par. 264 et seq.). Plaintiff contends that in bringing this action it had relied upon the "Owens exception" and that under Sta-Ru Corp. v. Mahin, 64 Ill.2d 330, 334, "the merits of this case should be ...