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Springfield Rare Coin Gal. v. Johnson

OPINION FILED DECEMBER 19, 1986.

SPRINGFIELD RARE COIN GALLERIES, INC., APPELLEE,

v.

J. THOMAS JOHNSON, DIRECTOR OF REVENUE, APPELLANT.



Appeal from the Circuit Court of Sangamon County, the Hon. Simon L. Friedman, Judge, presiding.

JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:

Plaintiff, Springfield Rare Coin Galleries, Inc., brought this action for injunctive and declaratory relief in the circuit court of Sangamon County, challenging the constitutionality of portions of a recent amendment to Illinois' occupation and use tax statutes. The amendment created an exemption from such taxes for "legal tender, currency, medallions, gold or silver coinage issued by the State of Illinois, the government of the United States of America or the government of any foreign country, except the Republic of South Africa." (Emphasis added.) (Pub. Act 83-1495.) (Ill. Rev. Stat. 1985, ch. 120, par. 439.3 (Use Tax Act); Ill. Rev. Stat. 1985, ch. 120, par. 441 (Retailers' Occupation Tax Act).) It is the South African "exemption exclusion" which is the target of plaintiff's attack.

The circuit court of Sangamon County granted summary judgment for the plaintiff and struck down the exemption exclusion as violative of the United States and Illinois constitutions and the General Agreement on Tariffs and Trade. A direct appeal to this court was taken pursuant to Rule 302(a)(1) (94 Ill.2d R. 302(a)(1)).

On April 11, 1984, the Illinois Senate began consideration of Senate Bill 1727, which would exempt gold and silver coins sold for investment or collection from State occupation and use taxes. The bill was motivated by the fact that many States exempt such products from taxes, and the belief that Illinois precious metals dealers were at a competitive disadvantage. The bill passed the Senate and moved to the House on May 23, 1984.

On June 22, the House adopted amendment number one to the bill, which excluded gold coins or any of the other enumerated items issued by the Republic of South Africa from the exemption. South Africa issues a gold coin commonly known as the Krugerrand, which, by virtue of the amendment, would remain subject to taxation.

The amended bill passed in the House and returned to the Senate for its concurrence. During debate, Senator Marovitz made the following remarks:

"[I]f you want to see this bill passed and see the unfairness and inequity to our business people in the State, if you want to see that alleviated, then [the exclusion] is the only way to do it because there is substantial problem to having South African Krugerrands in the bill in the House. As a matter of fact, to get it on the record, many individuals voted for this bill in committee in the House, and the next day they were severely chastised in the newspapers and felt that they would have to have this amendment. We put this amendment in there for that very reason." (83d Ill. Gen. Assem., Senate Proceedings, June 28, 1984, at 66.)

Thus, the plain purpose behind the exclusion was to avoid the appearance of encouraging South African investment.

The bill, as amended with the added exclusion, also included a severability provision. The amended bill passed in the House and was concurred in by the Senate on June 30, 1984.

On September 11, the Governor vetoed the bill. In his veto message, the Governor expressed his reservations about the constitutionality of the exemption exclusion, but did not base the veto on that ground. Subsequently, both houses of the General Assembly voted to override the veto.

Plaintiff, a Springfield retailer of gold coins and similar products, brought this suit seeking equitable relief and a declaration that the exemption exclusion was unconstitutional. He alleged that, prior to the enactment of the exclusion, Krugerrands had been by far the most widely traded gold coin product sold, and that since enactment of the exclusion the sale of Krugerrands had fallen off precipitously in favor of other, nontaxed gold coins. The circuit judge declared that the exclusion provision was severable from the balance of the tax exemption amendment and struck down the exclusion as unconstitutional.

One final development which occurred during the pendency of these proceedings merits mention. On October 1, 1985, the President issued Executive Order 12535, which prohibited the importation of South African Krugerrands into the United States. The presidential ban, however, does not affect Krugerrands already in this country and does not apply to other items named in the Illinois exemption exclusion, that is, "legal tender, currency, medallions, gold or silver coinage" of the Republic of South Africa, except Krugerrands.

We are not here dealing with South Africa's apartheid policy. We must divorce the issue in this case from its emotionally charged surroundings. We consider only whether Illinois may impose a discriminatory tax on the sale of products of a single foreign nation as an expression of disapproval of that nation's policies, and as a disincentive to investment in that nation's products. We conclude that it may not, and affirm the decision of the circuit court.

The defendant first asserts that the plaintiff lacks standing to bring this suit. To have standing, a party seeking declaratory relief must be "`interested in the controversy'" and must "possess a personal claim, status, or right which is capable of being affected." (Underground Contractors Association v. City of Chicago (1977), 66 Ill.2d 371, 375-76.) Put another way, the plaintiff must have sustained a real injury, fairly traceable to the defendant's conduct, which is likely to be redressed by the requested relief. Valley Forge Christian College v. Americans United for Separation of Church & State, Inc. (1982), 454 U.S. 464, 472, 70 L.Ed.2d 700, 709, 102 S.Ct. 752, 758.

Plaintiff, by virtue of his status as an Illinois retailer, is subject to the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 440 et seq.). That act imposes a tax upon gross receipts from retail sales of tangible personal property. The Act is one of the tax statutes affected by the exemption exclusion. Ill. Rev. Stat. 1985, ch. 120, par. 441(h).

Defendant argues, however, that plaintiff suffers no injury by operation of the Retailers' Occupation Tax Act, and hence lacks standing to challenge amendments to it, because of the effect of the Use Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 439.1 et seq.). Section 3 of the Use Tax Act imposes a tax at the same rate as the tax imposed by the Retailers' Occupation Tax Act, for the privilege of using tangible personal property. (Ill. Rev. Stat. 1985, ch. 120, par. 439.3.) Retailers collect the use ...


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