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Material Service Corp. v. Dept. of Revenue

OPINION FILED FEBRUARY 19, 1982.

MATERIAL SERVICE CORPORATION, PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT AND CROSS-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. EARL ARKISS, Judge, presiding.

JUSTICE MEJDA DELIVERED THE OPINION OF THE COURT:

JUSTICE MEJDA delivered the opinion of the court:

An assessment of $25,301.58, including penalties and interest, covering the period from July 1973 through December 1976, was made by the Department of Revenue of the State of Illinois (Department) against plaintiff, Material Service Corporation, under the Retailers' Occupation Tax Act. (Ill. Rev. Stat. 1979, ch. 120, par. 440 et seq.) On administrative review the circuit court of Cook County (Ill. Rev. Stat. 1979, ch. 110, par. 264 et seq.) held that the "minimum load charges" collected by plaintiff from its customers were not lawfully excludable from gross receipts under the Act, but that the court's decision would not be applied to plaintiff retroactively. Accordingly, the court set aside the final assessment against plaintiff and enjoined the collection thereof. The Department appealed from the latter portion of the order and plaintiff cross-appealed, challenging the portion of the order which held that the charges at issue are not excludable from gross receipts.

The essential question raised by the Department's appeal is whether under the circumstances presented here, the State is estopped from collecting a tax, held to be lawfully owing under the Retailers' Occupation Tax Act, because of plaintiff's reliance upon a prior erroneous letter ruling issued by the Department to the plaintiff.

Plaintiff is engaged in the business of manufacturing and selling concrete. It supplies ready-mix concrete to its customers utilizing ready-mix trucks fitted with rotating drums to insure the concrete is properly mixed when poured at the job site. Plaintiff's selling price for a cubic yard of concrete is the same whether the sale is for one yard or many yards. In any sale of less than five yards of concrete, however, plaintiff charges its customer a flat "minimum load" fee of $27. Plaintiff also charges its customers a waiting time charge in the event that delivery trucks are delayed at the job site prior to pouring the concrete. *fn1

In 1966, plaintiff addressed an inquiry to the Department regarding the includability of the minimum load and waiting time charges under the Retailers' Occupation Tax Act. (Ill. Rev. Stat. 1979, ch. 120, par. 440 et seq.) The Department responded in April 1966 in the form of a letter ruling addressed to plaintiff stating in part:

"In reply to your request for a ruling concerning minimum load charges and waiting time which are separately contracted for and separately charged, please be advised that they are excludable in the computation of retailers' occupation tax."

To the present date, this letter ruling remains unrescinded by the Department by means of written notice to plaintiff, by bulletin or any form of public notice.

On December 8, 1977, the Department issued a notice of tax liability against plaintiff for Retailers' Occupation Taxes in the amount of $22,947.95, including penalties and interest, computed for the period of July 1973 through December 1976. The deficiency assessment covered minimum load charges collected by plaintiff from its customers during this period.

Pursuant to plaintiff's request, a hearing was held on November 1, 1978. The Department's hearing referee concluded that the Department was not bound by the letter ruling. A final assessment was issued in the amount of $25,301.58, including interest through February 28, 1979.

On May 9, 1979, plaintiff filed a complaint for administrative review in the circuit court.

On January 11, 1980, a final order was entered sustaining the tax assessment and entering judgment in favor of the Department in the amount of the assessment plus accrued interest. In the memorandum of judgment incorporated therein, the court deduced that the minimum load charge was functionally part of the selling price of the quantities of less than five cubic yards of concrete, and therefore part of the gross receipts of the sale.

On February 7, 1980, plaintiff filed its motion to vacate the final order on the grounds that the Department was bound by its prior letter ruling, and was therefore estopped from collecting the instant assessment. This motion was denied, and the judgment confirmed, on September 17, 1980. In denying the motion the court ruled that plaintiff could not invoke the protective mantle of the instant letter ruling where it had failed to comply with the conditions of said letter ruling. The court noted that plaintiff had not shown that the minimum load charge was for a service "separate and apart from the transfer" of concrete as required by the letter ruling.

Then, on October 17, 1980, upon plaintiff's motion to reconsider the September 17 ruling, the court entered an amended final order holding the minimum load charges includable in gross receipts for determining tax liability under the Act, but also reversing and vacating the ...


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