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Moody's Investors Service v. Dept of Rev.

OPINION FILED MARCH 23, 1984.

MOODY'S INVESTORS SERVICE, INC., APPELLEE,

v.

THE DEPARTMENT OF REVENUE ET AL., APPELLANTS.



Appeal from the Appellate Court for the Fourth District; heard in that court on appeal from the Circuit Court of Sangamon County, the Hon. Richard J. Cadigan, JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:

Plaintiff, Moody's Investors Service, filed suit in the circuit court of Sangamon County in March of 1980 to obtain administrative review of the Department of Revenue's tax assessment for the period from July 1970, through March 1974. The Department of Revenue claims that Moody's financial publications were subject to taxation pursuant to the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1979, ch. 120, par. 440 et seq.) and the Use Tax Act (Ill. Rev. Stat. 1979, ch. 120, par. 439.1). Moody's obtained a voluntary dismissal under the provisions of section 52 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 52), which is now section 2-1009 of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 2-1009(a)), and refiled its complaint within one year of the voluntary dismissal. On February 24, 1982, the circuit court held that Moody's was not subject to the tax assessment, and the Department appealed. The appellate court affirmed the judgment of the circuit court (112 Ill. App.3d 1024), and we granted defendant's petition for leave to appeal (87 Ill.2d R. 315(a)).

Three issues are presented for review: (1) Did the plaintiff's voluntary dismissal and subsequent refiling deprive the circuit court of jurisdiction? (2) Did the plaintiff's failure to post a bond in the first action preclude a successful second action? (3) Are the plaintiff's publications eligible for an exemption pursuant to the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1979, ch. 120, par. 440 et seq.)?

Resolution of this appeal involves analysis of the procedural history that begins with the enactment of the taxation statute under scrutiny. In Illinois, transactions involving tangible personal property are subject to State taxation, with certain exceptions, including the following:

"The purchase, employment and transfer of such tangible personal property as newsprint and ink for the primary purpose of conveying news (with or without other information) is not a purchase, use or sale of tangible personal property." Ill. Rev. Stat. 1979, ch. 120, par. 440.

This exception is grounded in the public policy behind dissemination of information and an informed citizenry, and makes it possible for an individual to purchase a newspaper, magazine or trade journal without paying the sales tax applicable to other consumer transactions. (See Chicago Tribune Co. v. Johnson (1983), 119 Ill. App.3d 270.) The crucial question in this appeal involves the characterization of Moody's publications. Moody's maintains that its publications should be exempt from taxation, while the Department maintains that the disputed publications do not qualify for the newsprint exemption. Moody's sells eight publications by subscription to residents of Illinois:

1. News Reports are issued twice a week and contain detailed descriptions of financial markets and investments. These reports are generally combined into manuals on an annual basis.

2. Bond Surveys are published weekly and describe the relative investment strengths of bond offerings.

3. Stock Surveys are published weekly and contain detailed information about the stock market and economic factors affecting stock trading.

4. Handbooks of Common Stocks are issued quarterly. Each issue supersedes the previous one, and provides background information on the performance of over 2,500 stocks.

5. Dividend Records are issued twice a week and describe the dividend performance of approximately 6,000 companies.

6. The Bond Record is issued each month and provides data on the performance of over 19,000 bonds.

7. Municipal Credit Reports are issued irregularly but are carefully followed in the financial community. A change in a municipal bond rating often produces headlines in the commercial press and a flurry of political activity.

8. Commercial Paper Reports are also published irregularly and contain evaluations of other forms of commercial paper.

The Illinois State Department of Revenue conducts periodic audits to determine if retailers have remitted the correct amount of tax revenue to the State. The Department issues a "Notice of Tax Liability," and retailers have the opportunity to contest this assessment by requesting a formal review before a hearing board of the Department of Revenue. The legislature has provided what appears to be a complicated scheme of administrative review. Since this procedure has not ...


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