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Smith v. Department of Revenue

OPINION FILED MAY 14, 1986.

GENE SMITH ET AL., PLAINTIFFS-APPELLANTS,

v.

THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of St. Clair County; the Hon. Patrick J. Fleming, Judge, presiding.

JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Gene and Pansy Smith and Delvis G. Smith, Jr., appeal from a judgment of the circuit court of St. Clair County affirming, on administrative review, final assessments imposed on them by defendant, the Department of Revenue (hereinafter referred to as the Department), for tax deficiencies due under the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1983, ch. 120, par. 440 et seq.), the Municipal Retailers' Occupation Tax Act (Ill. Rev. Stat. 1983, ch. 24, par. 8-11-1) and section 5.01 of the Local Mass. Transit District Act (Ill. Rev. Stat. 1983, ch. 111 2/3, par. 355.01). We affirm.

Plaintiffs are family members who owned and operated seven furniture stores in Illinois for varying periods of time between 1974 and 1982. Pansy Smith is Gene Smith's wife. Delvis G. Smith, Jr., is his son. Their furniture stores were located in O'Fallon, Waterloo, Fairview Heights, Collinsville, Granite City, Wood River and Mascoutah. The Department conducted an investigation and audit of these stores and determined that taxes were due for which no returns had been filed. The Department therefore compiled corrected returns and issued notices of tax liability to plaintiffs. These notices assessed retailers' occupation tax (ROT), municipal retailers' occupation tax (MROT) and local mass transit district tax (MTD) delinquencies in the amount of $20,933.12, penalties in the amount of $4,386.61 and interest in the amount of $9,818.09.

Plaintiffs each contested the notices. They requested and were granted an administrative hearing by the Department, which was convened on January 5, 1984, and continued on March 28, 1984. The Department entered into evidence numerous documents, including its corrected returns, notices of tax liability, plaintiffs' letter of protest and request for hearing, notices of hearings, post office return receipts related to the various notices, and the hearing officer's letter of authorization. In addition, testimony was adduced from Bernie Saner, an agent for the Department's investigation division, and Richard Foy, one of the Department's auditors. Plaintiffs were represented by counsel. Gene Smith gave testimony on plaintiffs' behalf, but Pansy and Delvis did not appear. Plaintiffs offered no documentary evidence.

Following the March 28 hearing, the hearing officer rendered his disposition in which he recommended that the notices of tax liability be upheld. The Department then issued its final assessments, including penalties and additional accrued interest, in the following amounts:

Tax Store Period Type of Tax Amount Penalty

O'Fallon 1/82-3/82 ROT & MROT $ 1,219.14 $ 243.83 O'Fallon 1/82-3/82 MTD 60.96 12.19 Waterloo 9/82-10/82 ROT & MROT 586.03 117.20 Fairview Hgts. 4/81-8/82 ROT & MROT 12,816.75 2,763.35 Fairview Hgts. 4/81-12/81 MTD 325.12 65.02 Fairview Hgts. 1/82-8/82 MTD 325.12 65.02 Collinsville 1/79-6/79 ROT & MROT 2,400.00 480.00 Granite City 1/82-2/82 ROT & MROT 800.00 160.00 Wood River 1/74-3/74 ROT & MROT 1,200.00 240.00 Mascoutah 1/80-3/80 ROT & MROT 1,200.00 240.00

Total: $20,933.12 $4,386.61

Store Interest Total

O'Fallon $ 633.94 $ 2,096.91 O'Fallon 31.70 104.85 Waterloo 158.22 861.45 Fairview Hgts. 7,416.08 22,996.18 Fairview Hgts. 205.33 595.47 Fairview Hgts. 152.80 542.94 Collinsville 2,222.00 5,100.00 Granite City 424.00 1,384.00 Wood River 1,848.00 3,288.00 Mascoutah 984.00 2,424.00

Total: $14,074.07 $39,393.80

On July 6, 1984, plaintiffs filed a joint complaint for administrative review of the Department's final assessments pursuant to the Administrative Review Law (Ill. Rev. Stat. 1983, ch. 110, par. 3-101 et seq.) in the circuit court of St. Clair County. In January of 1985, the Department filed a motion for summary judgment, with supporting authorities, contending that there was no genuine issue as to any material fact and that it was entitled to judgment as a matter of law. The Department's motion was granted, and its final assessments were thus affirmed. The circuit court denied plaintiffs' subsequent motion to reconsider. Plaintiffs now appeal on the grounds that there was insufficient evidence to support the tax deficiencies assessed by the Department. This claim is without merit.

The record shows that the Department's assessments were determined as follows. A referral was made to the Department's investigation division from the State of Missouri indicating that Gene Smith was operating furniture stores in Illinois. Bernie Saner established through a confidential source that Smith had operated seven such stores on the Illinois side of the St. Louis metropolitan area. Only two of these stores, in O'Fallon and Waterloo, were registered with the Department as of October, 1982. The Department had no evidence of any tax payment or sales-tax registration with regard to the remaining five.

Saner testified that he and Richard Foy, a Department auditor, visited the Waterloo store in the latter part of October, 1982. They obtained sales invoices from that store covering a one-month period between September and October, 1982. The invoices were provided by John Williams, a salesman who was managing the store. Saner was given a list of the other stores and information concerning their ownership and operation, including the involvement of Smith's wife and son, by a confidential source. After obtaining this information, Saner interviewed Gene Smith, himself, who admitted operating the stores and advised Saner of the periods of operation. Saner confirmed the operation period of the O'Fallon stores by obtaining copies of the lease from the landlord, a VFW post, and learned that Smith had leased the building and paid rent on it for three months: January, February and March of 1982. Saner similarly confirmed the operation period of the Fairview Heights store through a lease which showed that Smith and his wife, Pansy, rented it for a 17-month period beginning in April, 1981 and ending in ...


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