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Farm Prog. Show Concessions v. Dept. of Rev.

OPINION FILED APRIL 23, 1980.

FARM PROGRESS SHOW CONCESSIONS, PLAINTIFFS-APPELLEES,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Winnebago County; the Hon. ROBERT C. GILL, Judge, presiding.

MR. PRESIDING JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:

The Department of Revenue of the State of Illinois (the Department) appeals from a judgment entered in the circuit court on administrative review which reversed the Department's denial of a sales tax exemption. The plaintiffs are 14 churches who for convenience have adopted the title of Farm Progress Show Concessions (the Churches). The tax was assessed by the Department pursuant to the provisions of section 1 of the Illinois Retailers' Occupation Tax Act (Ill. Rev. Stat. 1977, ch. 120, par. 440) and pursuant to the interpretation of the rules promulgated by the Department.

The sales arose from the sale of food and soft drinks at a Farm Progress Show sponsored by the Prairie Farmer magazine. The Churches were solicited by the magazine to serve the food. The attendance was estimated at between 250,000 and 300,000 people. The Churches sold more than $200,000 worth of food. Volunteer workers were used, and no money was given to the Prairie Farmer magazine.

The 14 Churches were the only vendors of food at the show and none of them had ever been involved previously. The location of the show was 3 miles from the nearest town and the only commercial vendor of food within 3 miles of the show was a restaurant with a seating capacity of 10 chairs.

The Department assessed the tax in the amount of $11,449.27 on the Churches as a group. The tax was paid, and a claim for credit was filed. The Churches alleged that they should be exempt from taxation pursuant to the exception in section 1 of the Act for "occasional dinners, social or similar activities of a person organized and operating exclusively for charitable, religious or educational purposes, whether or not such activities are open to the public." A hearing was held by the Department in which the Churches' claim was denied because the hearing officer found the sales in question did not satisfy the noncompetitive requirement and that the dominant motive of the purchaser of the food was not to make a donation.

On administrative review the circuit court of Winnebago County reversed, finding that the Churches' activities "clearly and obviously come within the exceptions entitled occasional dinners, social, or similar activities." The court entered a judgment against the Department for $11,449.27 plus interest and costs of suit, from which the Department has appealed.

Section 1 of the Retailers' Occupation Tax Act generally includes the sales of tangible personal property by a not-for-profit service enterprise,

"* * * excepting only a person organized and operated exclusively for charitable, religious or educational purposes * * * (2), to the extent of sales by such person of tangible personal property which is not sold or offered for sale by persons organized for profit. * * * The provisions of this paragraph shall not apply to nor subject to taxation occasional dinner, socials or similar activities of a person organized and operated exclusively for charitable, religious or educational purposes, whether or not such activities are open to the public." Ill. Rev. Stat. 1977, ch. 120, par. 440.

Rule 38, promulgated by the Department on March 1, 1968, relates to taxing sales by not-for-profit organizations and notes that exclusively charitable, religious and educational organizations incur retailers' occupation tax liability when they engage in selling tangible personal property at retail except in three situations. The first exception relates to sales to members of the organization which is not involved here. The rule continues:

"NONCOMPETITIVE SALES

The second exception is that sales by exclusively charitable, religious or educational organizations are not subject to the retailers' occupation tax when it can be said that such selling is noncompetitive with business establishments. * * *

* * *

OCCASIONAL DINNERS AND SIMILAR ACTIVITIES

The third exception is that occasional dinners, social or other similar activities which are conducted by exclusively charitable, religious or educational organizations or institutions are not taxable, whether or not such activities are open to the public. This exemption extends to occasional dinners, ice cream socials, fun fairs, carnivals, rummage sales, bazaars, bake sales and the like, when conducted by exclusively charitable, religious or educational organizations or institutions, ...


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