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Tri-america Oil Co. v. Dept of Rev.

OPINION FILED MAY 25, 1984.

TRI-AMERICA OIL COMPANY, APPELLANT,

v.

THE DEPARTMENT OF REVENUE ET AL., APPELLEES.



Appeal from the Appellate Court for the First District; heard in that court on appeal from the circuit court of Cook County, the Hon. Earl Arkiss, Judge, presiding. JUSTICE SIMON DELIVERED THE OPINION OF THE COURT:

The plaintiff, Tri-America Oil Company, is both a wholesale and retail seller of gasoline. It owns and operates three gas stations from which it sells gasoline to the general public at retail. During the period in question here, January 1975 through December 1977, it also owned 20 to 25 other stations which it leased to independent dealers who purchased gasoline at wholesale from Tri-America and resold the gasoline at the leased stations at retail for use and consumption by the public.

Tri-America did not pay taxes under the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1975, ch. 120, par. 440 et seq.) and the Municipal Retailers' Occupation Tax Act (Ill. Rev. Stat. 1975, ch. 24, par. 8-11-1) on sales to any of the leased stations. It claimed that these were exempt from the taxing statutes as sales for resale and not sales for use and consumption. During an audit by the Department of Revenue, Tri-America produced proper resale or registration numbers issued by the Department for all but one station in Chicago. The exception was a station leased from Tri-America and operated by Miguel and Alfonso Chavez (Chavez). Chavez neither applied for nor received a resale tax number from the Department of Revenue, and it is clear that no taxes have been paid on the gasoline which Tri-America sold to the station operated by Chavez.

The Department made an administrative determination assessing unpaid taxes, interest and penalties under the above statutes against Tri-America on sales it made to Chavez. This determination was set aside by the circuit court of Cook County in a proceeding for administrative review filed by Tri-America. The decision of that court was in turn reversed by the appellate court (117 Ill. App.3d 774). We granted Tri-America leave to appeal to this court (87 Ill.2d R. 315).

Section 1 of the Retailers' Occupation Tax Act provides in pertinent part:

"`Sale at retail' means any transfer of the ownership of or title to tangible personal property to a purchaser, for the purpose of use or consumption, and not for the purpose of resale in any form * * *.

`Sale at retail' shall be construed to include any transfer * * * for resale in any form as tangible personal property unless made in compliance with Section 2c of this Act.

The isolated or occasional sale of tangible personal property at retail by a person who does not hold himself out as being engaged (or who does not habitually engage) in selling such tangible personal property at retail * * * does not constitute engaging in a business of selling such tangible personal property at retail within the meaning of this Act; * * *." (Emphasis added.) (Ill. Rev. Stat. 1975, ch. 120, par. 440.)

The Act further provides in section 2c:

"If the purchaser is not registered with the Department as a taxpayer, but claims to be a reseller of the tangible personal property in such a way that such resales are not taxable under this Act * * * such purchaser * * * shall apply to the Department for a resale number. * * *

Upon approval of the application, the Department shall assign a resale number to the applicant * * *.

Except as provided hereinabove in this Section, no sale shall be made tax-free on the ground of being a sale for resale unless the purchaser has an active registration number or resale number from the Department and furnishes that number to the seller in connection with certifying to the seller that any sale to such purchaser is nontaxable because of being a sale for resale." (Emphasis added.) Ill. Rev. Stat. 1975, ch. 120, par. 441c.

The questions raised by this appeal are: Is Tri-America exempt from retailers' occupation taxes under the holding of this court in Dearborn Wholesale Grocers, Inc. v. Whitler (1980), 82 Ill.2d 471, and Illinois Cereal Mills, Inc. v. Department of Revenue (1983), 99 Ill.2d 9? If not, can Tri-America avoid the assessment by demonstrating that the sales it made to Chavez were sales for resale at his gas station even though Chavez did not furnish Tri-America with any registration number or resale number issued by the Department to certify to Tri-America that its sales to Chavez were for resale?

The taxing statutes are designed to prevent retailers who are not registered with the Department from purchasing products from wholesalers. The registration or resale number issued by the Department is required in order to assure the wholesaler that the business to which he sells is properly registered with the Department, which can then look to the retailer to collect and pay the tax required on retail sales. If a wholesaler fails to cooperate with this collection scheme by selling his product to a retailer without requiring proof under section 1 of a registration or a resale number, the wholesaler may expose himself to payment of the taxes the retailer incurred for sales at retail.

In Dearborn Wholesale Grocers this court held that section 2c did not apply to those who sell exclusively at wholesale. The evidence there nevertheless showed that registration numbers or sales numbers assigned to the seller's customers had been furnished to the seller by each customer, although the seller was unable to locate them at the time the audit took place. In this case, of course, no number could have been furnished by Chavez to Tri-America because he had received none. In Illinois Cereal Mills we extended the Dearborn Wholesale Grocers exception to a wholesale seller who made only casual or isolated retail sales as an accommodation to its regular customers. ...


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