527 N.E.2d 515, 173 Ill. App. 3d 284, 123 Ill. Dec. 52 1988.IL.1139
Appeal from the Circuit Court of Cook County; the Hon. Earl Arkiss, Judge, presiding.
JUSTICE BUCKLEY delivered the opinion of the court. O'CONNOR and QUINLAN, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE BUCKLEY
On August 19, 1985, Van's Material Company, Inc. (plaintiff), an Illinois corporation with its principal place of business in Midlothian, and which is engaged in the production, sale and delivery of ready-mix concrete, sought a declaration that its two recently purchased ready-mix concrete trucks were not subject to the Use Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 439.1 et seq.) or Retailers' Occupation Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 440 et seq.) pursuant to their respective statutory exemptions for machinery used primarily for manufacturing tangible personal property. Plaintiff also sought in its declaratory judgment action a refund of $14,661.16 for taxes paid under protest on the trucks, each of which cost $104,722.55, to the Illinois Department of Revenue. The trial court granted summary judgment in favor of the Department and its officers (defendants), but denied plaintiff's summary judgment motion, giving substantial deference to the Department's guidelines. It is from these rulings that plaintiff appeals. For the following reasons, we reverse and remand.
Mr. Sieben Vander Wagen, Jr., plaintiff's president, described in his affidavit and deposition the process whereby ready-mix concrete is produced. Four separate components, sand, limestone, water, and cement, are, in certain proportions, loaded into a hollow drum of the truck while on plaintiff's premises. When the loading process is complete, the components are churned in a mixer for 8 to 10 minutes during delivery to the jobsite. At the jobsite, the mixture, known as ready-mix concrete, is tested by the truck driver to ascertain its quality, particularly its water consistency. If the consistency is acceptable, the driver discharges the mixture down a chute at the direction of the contractor, who then arranges the concrete in the desired form. The mixture solidifies within 24 hours, but will not fully strengthen for at least 28 days.
With this process in mind, it is necessary to determine whether plaintiff's ready-mix trucks are as a matter of law subject to section 3 of the Use Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 439.3), which imposes a tax "upon the privilege of using in this State tangible personal property," and section 2 of the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 441) , which imposes a tax "upon persons engaged in the business of selling tangible personal property at retail at the rate of 5% of the gross receipts." The latter section exempts from its purview proceeds from:
"[The] sale of machinery and equipment which will be used by the purchaser, or a lessee of the purchaser, primarily in the process of manufacturing or assembling tangible personal property for wholesale or retail sale or lease . . .." (Ill. Rev. Stat. 1985, ch. 120, par. 441.)
"Manufacturing process" is defined in the same section as follows:
"[The] production of any article of tangible personal property, whether such article is a finished product or an article for use in the process of manufacturing or assembling a different article of tangible personal property, by procedures commonly regarded as manufacturing, processing, fabricating, or refining which changes some existing material or materials into a material with a different form, use or name." Ill. Rev. Stat. 1985, ch. 120, par. 441.
A similar provision in the Use Tax Act, which defines "manufacturing process" identically to that in the ROTA, provides:
"The tax imposed by this Act does not apply to the use of machinery and equipment primarily in the process of the manufacturing or assembling of tangible personal property for wholesale or retail sale or lease . . .." Ill. Rev. Stat. 1985, ch. 120, par. 439.3
Plaintiff maintains that it was entitled to the benefit of this tax exclusion because ready-mix concrete is manufactured in its ready-mix concrete trucks, and the product is ultimately sold for consumer use. As plaintiff points out, although an Illinois court of review has not yet considered the issue, courts in several other jurisdictions have done so and have concluded, based on nearly identical exclusionary provisions, that ready-mix concrete trucks are tax exempt due to the manufacturing process in which they are engaged. (Capitol Con Crete, Inc. v. Director of Revenue, State of Missouri (Administrative Hearing Commission July 17, 1987), No. RS -- 85 -- 0259; Valley Ready Mixed Concrete Co. v. Wisconsin Department of Revenue (Wis. Tax Appeals Comm'n November 13, 1984), No. S -- 7575, Wis. Tax Rep. par. 202 -- 471 , aff'd (Wis. Cir. Ct. Dane County, May 2, 1985), No. 84 -- CV -- 6724, Wis. Tax Rep. par. 202 -- 556 ; Auxier-Scott Supply Co. v. Oklahoma Tax Comm'n (Okla. 1974), 527 P.2d 159; Wakefield Ready-Mixed Concrete Co. v. State Tax Comm'n (1969), 356 Mass. 8, 247 N.E.2d 869.) While defendants attempt to draw distinctions between these decisions and Illinois law, they nevertheless are unable to cite any cases where ready-mix concrete trucks were held subject to State sales tax under a manufacturing exemption.
In addition to the persuasive authority cited by plaintiff, the language of the statute itself supports plaintiff's interpretation. As noted earlier, "manufacturing process" is defined broadly by both statutory provisions as "the production of any article of tangible personal property . . . by procedures commonly regarded as manufacturing . . . which change some existing material or materials into a different form, use, or name." Plaintiff's procedure of combining four separate materials, sand, water, limestone and ...