Appeal from the Appellate Court for the First District; heard
in that court on appeal from the Circuit Court of Cook County,
the Hon. Donald J. O'Brien and Thomas C. Donovan, Judges,
MR. JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:
On September 11, 1972, the plaintiff, Saxon-Western Corp., an Illinois corporation, filed a complaint in the circuit court of Cook County seeking a declaratory judgment and injunctive relief for itself and on behalf of all retail merchants similarly situated. Named as defendants were George E. Mahin, then Director of the Department of Revenue, William J. Scott, Attorney General of the State of Illinois, and Alan J. Dixon, then the State Treasurer.
The complaint sought, inter alia, to enjoin the Director of Revenue from assessing or collecting from the plaintiff or other members of the class the retailers' occupation tax upon discount coupons as provided by the Department of Revenue's revised Rule 46. It also requested a declaration that Rule 46 was contrary to law and violative of the constitutions of the United States and Illinois.
Initially, the trial court issued a temporary injunction preventing the Department from collecting the tax from the plaintiff. Subsequently, on the Department's motion, the court dismissed the complaint and dissolved the injunction on the ground that the plaintiff had failed to exhaust its administrative remedies. That order was appealed and reversed and the cause remanded for further proceedings. 39 Ill. App.3d 100.
Cross motions for summary judgment were then filed. The plaintiff's motion requested only that Rule 46 be declared illegal and that the Department of Revenue be enjoined from collecting any tax pursuant to it. The circuit court granted the Department's motion for summary judgment, dismissed the plaintiff's complaint, and enjoined the Department from proceeding to collect the tax against the plaintiff pending appeal to this court. No finding as to the propriety of maintaining this action as a class action was ever made by the circuit court. The appellate court held that Rule 46 is unauthorized by the Retailers' Occupation Tax Act and enjoined the Department of Revenue from collecting the tax. The court stated that since the relief granted would inure to the benefit of the plaintiff and all other retailers similarly situated, no useful purpose would be served by remanding the cause for a determination as to whether it was properly a class action. (78 Ill. App.3d 125.) The defendants appealed. We allowed their petition for leave to appeal pursuant to Rule 315. 73 Ill.2d R. 315.
The plaintiff issues discount coupons to the general public through newspaper advertising and mailing circulars. A discount coupon will typically indicate a manufacturer's suggested retail price, the plaintiff's nondiscount retail price, and a discount price, available upon presentation of the coupon. The discount is restricted to the specific merchandise identified in the coupon, and the coupons usually contain an expiration date. The plaintiff prints and distributes the coupons itself. The plaintiff collects the used discount coupons from each store, and the plaintiff's advertising department makes a statistical tabulation to determine how effective each advertising campaign has been. The plaintiff does not thereafter tender the coupons to a manufacturer for a redemption. Instead all coupons are destroyed after the tabulations are complete.
The Department of Revenue's Rule 46 was adopted in 1964 in an effort to collect a tax on retailers engaged in the business of redeeming trading stamps for tangible personal property. Rule 46 provided at that time:
"Persons who engage in the business of transferring tangible personal property upon the redemption of trading stamps shall be deemed to be engaged in the business of selling such property at retail and shall be liable for and shall pay the tax imposed by the Retailers' Occupation Tax Act on the basis of the retail value of the property transferred upon redemption of such stamps. When merchandise is paid for partly in cash and partly by surrendering a trading stamp valued at a specific amount, the total amount (including the value of the surrendered trading stamp) is subject to retailers' occupation tax."
In a 1971 amendment the Department extended the rule to trading coupons stating as follows:
"The same principles apply to trading coupons. Also, it does not matter how or where the consumer obtained the coupon in the first place (i.e., from a manufacturer or other supplier of the retailer, from the retailer himself or from an advertisement placed in a newspaper by such retailer or his supplier). The measure of the tax in trading coupon redemptions is the value of the merchandise transferred for the surrendered coupon, which value would normally be presumed to be the stated value of the coupon plus whatever cash receipts the retailer receives in the transaction. This is true even if the retailer absorbs all of the cost, or if the retailer absorbs a part of the cost, as where a manufacturer only partially reimburses the retailer for the value of the merchandise transferred."
In 1972 the Department of Revenue conducted a retailer's occupation tax audit of the plaintiff. The Department subsequently issued a notice of tax liability for the period March 15, 1971, through April 30, 1972. The plaintiff then commenced this action.
The sole issue presented on appeal is whether the non-reimbursable discount coupons distributed by the plaintiff are taxable as part of the plaintiff's gross receipts. For the reasons stated by the appellate court, we think they are not. The Retailers' Occupation Tax Act (Ill. Rev. Stat. 1977, ch. 120, par. 441) imposes a tax upon persons engaged in the selling of tangible personal property at retail based upon a percentage of the gross receipts from such sales. Gross receipts are defined as "the total selling price or the amount of such sales." (Ill. Rev. Stat. 1977, ch. 120, par. 440.) That same section also defines "selling price" or the "amount of sale" as "the consideration for a sale valued in money whether received in money or otherwise, including cash, credits, property * * * and services * * *." (Ill. Rev. Stat. 1977, ch. 120, par. 440.) The foregoing section was amended in 1963 to include the following provision:
"Persons who engage in the business of transferring tangible personal property upon the redemption of trading stamps shall be deemed to be engaged in the business of selling such property at retail and shall be liable for and shall pay the tax imposed by this Act on the basis of the retail value of the property transferred upon redemption of such stamps." ...