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Cottage Hill Op. Co. v. Dept. of Revenue

OPINION FILED JULY 18, 1985.

COTTAGE HILL OPERATING COMPANY, PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

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



Appeal from the Circuit Court of Du Page County; the Hon. Robert D. McLaren, Judge, presiding.

PRESIDING JUSTICE NASH DELIVERED THE OPINION OF THE COURT:

Rehearing denied August 16, 1985.

Defendant, Illinois Department of Revenue, appeals from a decision of the circuit court which denied the Department's motion to dismiss the complaint for administrative review of plaintiff, Cottage Hill Operating Company (taxpayer), for failure to timely file its appeal bond. The Department also appeals from the decision of the circuit court reversing, in part, final administrative decisions of the Department which had imposed additional liability for use and RTA taxes upon taxpayer. The plaintiff-taxpayer has cross-appealed from the decision of the circuit court affirming its liability for other additional taxes.

Taxpayer is a for-profit corporation which by contracts with several school districts provided bus transportation of children to and from school. During the period in question, taxpayer operated about 100 buses, most of which were owned by the school districts with which it contracted, and it also owned about 18-20 of the buses used in the business. Taxpayer provided drivers for the buses and cleaning, maintenance and storage services on its premises. It purchased gasoline from Texaco without payment of sales taxes and, under the provisions of its contracts with the school districts, taxpayer was reimbursed by the districts for the cost of the fuel.

In an audit of taxpayer's records, the Department found it owed $21,141.66 for unpaid use tax and $12,969.32 for unpaid RTA taxes for the period 1977-1980, including interest and penalties. Notices of assessment were issued, which taxpayer protested, and an administrative hearing was conducted in August 1981, at which evidence was received relating to the issue. The hearing officer thereafter found that taxpayer, which contended it was an agent for the schools, was improperly attempting to take advantage of the tax exemption granted to the schools. He concluded taxpayer was an independent contractor for profit which had purchased the gasoline in order to perform its contracts with the school district and the purchases were, therefore, not exempt from taxation. Final assessments of tax liability were thereafter issued by the Department on May 5, 1982, in the original sums assessed against taxpayer.

On June 9, 1982, taxpayer sought review of the administrative decision by filing a complaint in the circuit court pursuant to the Administrative Review Act (Ill. Rev. Stat. 1981, ch. 110, par. 264 et seq.). By motion filed July 13, 1982, the Department sought dismissal of the complaint and judgment because taxpayer had failed to file an appeal bond within 20 days of filing its complaint as is required by section 12 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1981, ch. 120, par. 451). On July 16 taxpayer sought leave to file a late bond, which was granted by the trial court, and the taxpayer then filed its bond in the sum of $40,000.

On review, the trial court reversed the administrative decision of the hearing officer as against the evidence as to all of the subject purchases of gasoline by taxpayer, except as to one school district. The court determined taxpayer had acted as purchasing agent for all of the districts, except one, and was thus exempt from taxes for those purchases. As to the remaining district, the cause was remanded for an administrative hearing to determine the amount of tax owed for those nonexempt purchases. After further hearing, a finding was made by the hearing officer that taxpayer owed the Department $2,473.71 for unpaid use tax and $986.49 for unpaid RTA tax, including interest and penalties. The circuit court thereafter affirmed those assessments and taxpayer appeals from that order.

• 1 We find the trial court erred in permitting taxpayer to file a late appeal bond and in not granting the Department's motion for dismissal of the complaint for administrative review and entering judgment for the Department.

Section 12 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1981, ch. 120, par. 451), which applies also to the use tax (Ill. Rev. Stat. 1981, ch. 120, par. 439.12) and the RTA tax (Ill. Rev. Stat. 1981, ch. 111 2/3, par. 704.03), provides in pertinent part:

"Any suit under the `Administrative Review Act' to review a final assessment or revised final assessment issued by the Department under this Act shall be dismissed on motion of the Department or by the court on its own motion, unless the person filing such suit files, with the court, within 20 days after the filing of the complaint and the issuance of the summons in the suit, a bond with good and sufficient surety or sureties residing in this State or licensed to do business in this State or unless the court, in lieu of said bond, shall enter an order imposing a lien upon the plaintiff's property as hereinafter provided. When dismissing the complaint, the court shall enter judgment against the taxpayer and in favor of the Department in the amount of the final assessment or revised final assessment, together with any interest which may have accrued since the Department issued the final assessment or revised final assessment, and for costs, upon which judgment execution may issue as in other cases."

Although the appeal bond requirement was not jurisdictional in this case *fn1, it is mandatory as a bond is necessary to protect the State against a taxpayer's dissipating or otherwise disposing of assets while review is pending before the circuit court. Glasco Electric Co. v. Department of Revenue (1981), 86 Ill.2d 346, 351, 427 N.E.2d 90; Collins Oil Co. v. Department of Revenue (1983), 119 Ill. App.3d 808, 813, 457 N.E.2d 118.

In Tick Brothers, Inc. v. Department of Revenue (1984), 104 Ill.2d 61, 63-64, 470 N.E.2d 313, our supreme court noted,

"Whatever may be the rule for an untimely bond tendered before a motion to dismiss, there can be no doubt that the Department is entitled to a dismissal if it so moves before an adequate bond is tendered. To let [the taxpayer] wait beyond the statutory period until the Department moves to dismiss, and produce a valid bond only in response to that motion, would distort section 12 beyond recognition."

Although, as the taxpayer here argues, there is a rule of statutory construction that courts will liberally construe a right to appeal so as to permit a case to be considered on its merits, the requirements of section 12 are mandatory and violation will ordinarily result in dismissal. (See Collins Oil Co. v. Department of Revenue (1983), 119 Ill. App.3d 808, 457 N.E.2d 118; Avondale Liquor Store, Inc. v. Department of Revenue (1983), 116 Ill. App.3d 804, 452 N.E.2d 607, appeal denied (1983), 96 Ill.2d 537.) One who seeks judicial review of an administrative decision must act ...


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