Appeal from the Circuit Court of Kane County. No. 95--TX--023. Honorable Melvin E. Dunn, Judge, Presiding.
The Honorable Justice Thomas delivered the opinion of the court. McLAREN, P.j., and Bowman, J., concur.
The opinion of the court was delivered by: Thomas
JUSTICE THOMAS delivered the opinion of the court:
Plaintiffs, Bruce Nagel, d/b/a Nagel Trucking, and Nagel Trucking and Materials, Inc., appeal the trial court's judgment affirming the decision of defendant the Department of Revenue (the Department), which determined that both the materials plaintiffs transported and certain transportation charges plaintiffs levied were subject to the Retailers' Occupation Tax (the ROT). The issue on appeal is whether the trial court erred in finding that the transportation charges were subject to the ROT. We affirm.
Plaintiff Bruce Nagel, d/b/a Nagel Trucking is a sole proprietorship whose primary business is the transportation of materials. Plaintiff Nagel Trucking and Materials, Inc., is the successor in interest to that sole proprietorship. Because the distinction between plaintiffs is not relevant to this appeal, we will refer to plaintiffs collectively as "plaintiff."
Some of plaintiff's customers requested that plaintiff locate and sell them materials in addition to providing transportation services. On those occasions, plaintiff advanced the charges to pay the supply source for the materials and then delivered the materials to plaintiff's customers. Plaintiff then billed the customers an aggregate charge for the sale and transportation of the materials.
The Department audited plaintiff's operations and assessed the ROT on both the sale and transportation of the materials. Plaintiff requested an administrative hearing. At the hearing, plaintiff did not contest the portion of the assessment which applied to the materials. Plaintiff paid the ROT on the materials portion of the assessment, including penalties and interest. Plaintiff only contested the portion of the assessment which applied to the transportation of the materials.
Using plaintiff's records, the Department and plaintiff agreed on the amount of each transaction represented by transportation charges. However, the Department held that, because plaintiff failed to overcome the Department's prima facie case with documentary evidence showing that the sale of the materials and the transportation of the materials were separate transactions, defendant owed the ROT on both the sale of the materials and the transportation of the materials.
Plaintiff filed a complaint for administrative review. The trial court affirmed the Department's decision and its rationale. Plaintiff filed a timely notice of appeal.
On appeal, plaintiff argues that the Department's decision to impose the ROT on the transportation portion of the transactions is both contrary to law and against the manifest weight of the evidence. The Department concedes that, in the present case, the facts are undisputed and the determination whether the transactions are subject to the ROT is a question of law. Harrisburg-Raleigh Airport Authority v. Department of Revenue, 126 Ill. 2d 326, 331, 533 N.E.2d 1072, 127 Ill. Dec. 944 (1989). Although courts of review should give some deference to an administrative agency's construction of a statute, we are not bound to give that construction the same deference as an agency's findings of fact. However, statutes exempting property from taxation should be strictly construed in favor of taxation, and the taxpayer bears the burden of proving his entitlement to the exemption. Harrisburg-Raleigh Airport Authority, 126 Ill. 2d at 331.
Section 130.415 of Title 86 of the Illinois Administrative Code (Administrative Code) provides in relevant part:
"b) The answer to the question of whether or not a seller, in computing his Retailers' Occupation Tax liability, may deduct, from his gross receipts from sales of tangible personal property at retail, amounts charged by him to his customers on account of his payment of transportation or delivery charges in order to secure delivery of the property to such customers, or on account of his incurrence of expense in making such delivery himself, depends not upon the separate billing of such transportation or delivery charges or expense, but upon whether the transportation or delivery charges are included in the selling price of the property which is sold or whether the seller and the buyer contract separately for such transportation or delivery charges by not including such charges in such selling price.
c) If such transportation or delivery charges are included in the selling price of the tangible personal property which is sold, the transportation or delivery expense is an element of cost to the seller within the meaning of Section 1 of the Retailers' Occupation Tax Act, and may not be deducted by the seller in computing his Retailers' Occupation Tax liability.
d) On the other hand, where the seller and the buyer agree upon the transportation or delivery charges separately from the selling price of the tangible personal property which is sold, then the cost of the transportation or delivery service is not a part of the "selling price" of the tangible personal property which is sold, but instead is a service charge, separately contracted for, and need not be included in the figure upon which the seller computes his Retailers' Occupation Tax liability. *** The best evidence that transportation or delivery charges were agreed to separately and apart from the selling price, is a separate and distinct contract for transportation or delivery. However, documentation which demonstrates that the purchaser had the option of taking delivery of the property, at the seller's ...