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Tivoli Enterprises Inc. v. Zehnder

June 23, 1998

TIVOLI ENTERPRISES, INC., PLAINTIFF-APPELLANT,
v.
KENNETH ZEHNDER, AS DIRECTOR OF REVENUE, AND JUDY BAAR-TOPINKA, AS STATE TREASURER, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Justice Doyle

Appeal from the Circuit Court of Du Page County.

No. 96--MR--651

Honorable Bonnie M. Wheaton, Judge, Presiding.

This appeal addresses the propriety of a use tax assessment that the Illinois Department of Revenue (Department) issued against plaintiff, Tivoli Enterprises, Inc. The central issue is whether a Department regulation required plaintiff to pay a use tax on its purchase of items (paper and plastic cups, lids, tubs, straws, and napkins) that it used in conjunction with its sale of soft drinks and popcorn at its concession counters in its movie houses.

The facts are not in dispute. Plaintiff operates 15 movie houses in Illinois. Each of plaintiff's movie houses has a darkened viewing area with seats where customers view movies. Doors separate the viewing area from other areas of the movie houses so that light will not disturb customers viewing movies.

Each of plaintiff's movie houses has a separate area, commonly referred to as the lobby. In the lobby of each of the movie houses, plaintiff operates a concession counter where plaintiff sells soda pop, popcorn, and candy to customers. Plaintiff does not provide tables or chairs in the concession counter areas for customers to consume the items they have purchased. Customers typically consume the items in the viewing area.

At its concession counters, plaintiff sells the soda pop in disposable paper or plastic cups with disposable plastic lids. Plaintiff sells the popcorn in disposable tubs. Plaintiff sells the candy in wrappers provided by the candy manufacturer. Plaintiff also provides paper napkins and straws to customers who purchase items at the concession counters.

Plaintiff purchases the cups, lids, tubs, straws, and napkins (disposable concession items) that it uses at its concession counters from a supplier. During the period from January 1993 through December 1995, plaintiff did not pay a use tax to the supplier when it purchased disposable concession items from the supplier.

In 1996, following an audit, the Department assessed taxes and interest against plaintiff in the amount of $47,891. Of that amount, $29,061 was for plaintiff's nonpayment of use taxes to its supplier when it purchased the disposable concession items.

On July 19, 1996, plaintiff paid the Department the full assessment amount of $47,891. Of that amount, plaintiff paid $29,061 under protest. This represented the part of the assessment for the nonpayment of use taxes related to plaintiff's purchases of the disposable concession items. Plaintiff made the payment under protest pursuant to the State Officers and Employees Money Disposition Act (30 ILCS 230/1 et seq. (West 1996)).

On August 9, 1996, plaintiff filed a verified complaint in the circuit court. The complaint named the director of the Department and the State treasurer as defendants. Count I of the complaint sought declaratory and injunctive relief on the ground that the Department misapplied its regulations when it imposed the use tax on plaintiff's purchases of the disposable concession items. Counts II and III sought declaratory judgment and injunctive relief on the ground that the imposition of the tax violated plaintiff's rights under the state and federal constitutions.

The parties filed cross-motions for summary judgment. On May 6, 1997, after extensive briefings and a hearing on the matter, the trial court entered an order granting defendants' motion for summary judgment and denying plaintiff's motion for summary judgment. On May 23, 1997, the trial court issued an order entering judgment against plaintiff in the amount of $29,061 as to count I of plaintiff's complaint. The circuit court also entered judgment in favor of defendants as to counts II and III of plaintiff's complaint. Finally, the order dissolved a preliminary injunction that had restrained the State from transferring the funds that plaintiff had paid under protest into its general funds. Plaintiff's timely appeal followed.

On appeal, plaintiff does not contest the judgment against counts II and III of its complaint. Rather, plaintiff alleges error only as to count I. Consequently, this appeal concerns only count I of plaintiff's complaint. See Kincaid v. Ames Department Stores, Inc., 283 Ill. App. 3d 555, 570 (1996) (issues not raised or argued before appellate court are deemed waived).

At issue on appeal, as it was in the circuit court, is the construction of the relevant parts of section 130.2070 of Title 86 of the Illinois Administrative Code (86 Ill. Adm. Code §130.2070 (1998)). The parties agree that section 130.2070 embodies the Department's governing regulations regarding the taxation of purchases such as those made by plaintiff when it purchased the disposable concession items. However, the parties disagree as to whether section 130.2070 requires the taxation of plaintiff's purchases.

Section 130.2070 provides, in relevant part, as follows:

"130.2070 Sales of Containers, Wrapping and Packing Materials and

Related Products

a) Definition

When used in this Regulation, the term 'containers' includes all containers, wrapping and packing materials, bags, twines, container handles, wrapping papers, gummed tapes, cellophane, boxes, bottles, drums, cartons, sacks or other packing, packaging, containing and ...


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