Appeal from the Circuit Court of Winnebago County. No. 93-MR-43. Honorable Alford R. Penniman, Judge, Presiding.
Released for Publication May 30, 1996.
Presiding Justice McLAREN delivered the opinion of the court: Inglis and Hutchinson, JJ., concur.
The opinion of the court was delivered by: Mclaren
PRESIDING JUSTICE McLAREN delivered the opinion of the court:
On administrative review, the trial court affirmed in part and reversed in part a decision of the administrative hearings division of the defendant, the Department of Revenue of the State of Illinois (the Department), regarding certain taxations on the plaintiff, Alan Arenson, doing business as Almar Communications (Almar). The Department appeals that part of the trial court's ruling which reversed the decision of its hearings division. The plaintiff has not filed a cross-appeal. We affirm the trial court.
Arenson and his wife, Mary Arenson, have operated Almar, a communications business, since 1972 as sole proprietors. From 1985 through 1991, Almar provided paging services to customers. Generally, Almar purchased wholesale air time and resold it to its customers. If a customer did not own a pager, then Almar would also rent out a pager to the customer, charging the customer for both the air time and the pager.
Almar was also involved in the two-way radio business, including providing community "repeaters" to its customers. A repeater is:
" two-way radio device that receives a radio signal from a customer and retransmits the signals out to that same customer again to another user, so that *** two users of a customer can talk to each other using the repeater to enhance the range."
From approximately 1975 to 1980, Almar had a telecommunications tax license, which the State used to assess a telecommunications tax on repeater services. Almar returned the license to the State after some court cases indicated that the tax on the repeater services was not valid.
In 1988, Francis Wong, an employee of the Department, met with the Arensons to conduct an audit. Despite finding an accumulation of air time and rental charges upon which Almar had not paid tax, Wong told the Arensons that he did not think that Almar had any tax liability. Wong also told Mary Arenson not to worry about the interest and penalties because the Arensons could simply protest those amounts and the interest and penalties would be thrown out by the Department.
The audit initially covered the period from August 1985 to June 1988. In December 1990, the Department assessed a telecommunications excise tax against Almar for that period. In May 1991, the Department sent Arenson a letter, informing him that the documents attached to that letter superseded documents sent previously. The documents in the May 1991 letter restricted Almar's telecommunications excise tax liability to the period from August 1988 through February 1991.
From August 1988 through February 1991, Almar billed its customers who rented pagers by listing the charges for both air time and pager rental together on the customer invoices. However, the charges for air time and pager rental were separated in Almar's records.
The telecommunications excise tax liability for the period of August 1988 through February 1991 included liability for: (1) paging services, or air time, for customers who owned their own pagers; (2) paging services, or air time, for customers who rented a pager from Almar; (3) paging services consisting of the rental charges on the pagers which Almar rented out; and (4) repeater services. Almar contested only the latter two charges. The Department also assessed a 30% penalty and interest on the amount due, which Almar also contested.
Subsequently, the Department's administrative hearings division held a hearing and prepared a recommendation for disposition, which was accepted by the Department as a final administrative decision. The administrative law judge concluded that all of the charges assessed as the telecommunications excise tax were valid, but limited the liability owed for the tax on the rental charges on the pagers which Almar rented out for the period of time after July 1, 1990. The administrative law judge found that the Department's regulation which went into effect on that date (86 Ill. Adm. Code § ...