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XL Disposal Corp. v. Zehnder

April 07, 1999


No. 97MR125

The opinion of the court was delivered by: Presiding Justice Knecht


Appeal from Circuit Court of Sangamon County

Honorable Donald M. Cadagin, Judge Presiding.

Defendants, Illinois Department of Revenue (Department) and its Director, appeal from a determination by the circuit court of Sangamon County that plaintiff, XL Disposal Corporation, Inc. (XL Disposal), was entitled to exemption from taxation under the Use Tax Act (Act) (35 ILCS 105/1 et seq. (West 1996)) because (1) the vehicles used in its garbage hauling business qualified as rolling stock used in interstate commerce and as component parts of a pollution-control facility; and (2) a specific piece of equipment was part of a pollution-control facility. We reverse the circuit court and affirm the Department's determination XL Disposal did not qualify for exemption from taxation.


Following administrative hearings, on March 17, 1997, the Department rendered a determination of tax liability under the Act against XL Disposal. XL Disposal paid under protest the sum of $187,513.14, the tax, penalty, and interest determined by the Director of the Department to be due.

On May 13, 1997, XL Disposal sought administrative review in the circuit court from the Department's determination pursuant to the Administrative Review Law. 735 ILCS 5/3-101 et seq. (West 1996). XL Disposal asserted it was exempt from taxation under section 2a of the Act, pertaining to pollution-control facilities (35 ILCS 105/2a (West 1996)), and under section 3-55 of the Act, pertaining to rolling stock of an interstate carrier for hire (35 ILCS 105/3-55 (West 1996)). The circuit court reversed the Department's decision to tax XL Disposal, finding the company qualified for the exemptions provided under both sections of the statute. This appeal followed.

The case was submitted to the Department at the administrative hearing on stipulated facts. The submissions on behalf of XL Disposal included two affidavits of Ed Pruim, president of XL Disposal, and related exhibits. The Department submitted only its notice of tax liability, which established its prima facie case. See 35 ILCS 120/4 (West 1996); Elkay Manufacturing Co. v. Sweet, 202 Ill. App. 3d 466, 470, 559 N.E.2d 1058, 1060 (1990). No live testimony was presented.

Evidence as to the nature of Xl Disposal's business is found solely in the affidavits of Pruim and is not disputed by the Department. XL Disposal engaged in the business of picking up, sorting, and disposing of garbage discarded by its residential, commercial, and municipal customers. The garbage was of a "non-hazardous" type "routinely produced" consisting of "waste food products from homes, restaurants and stores, paper products, yard waste, plastics, metal, glass," as well as "packaging *** toiletries, soaps" and "cleaning materials" such as paint thinners and disinfectants. Pruim stated the household waste contained some items, e.g., solvents, petroleum-based cleaning products, paint materials, thinners, preservatives, disinfectants, caustic cleaners, shoe polish, dyes, and cleaning supplies, that were not classified as hazardous waste only because they were in such small quantities.

XL Disposal used its vehicles and equipment to pick up garbage from its customers, separate out recyclables at one of its "transfer" stations, and take the garbage to final disposal sites, either recycling facilities or landfills it did not own. Some of the landfill sites were outside the State of Illinois.

The hauling aspect of XL Disposal's business is the focus of this case. XL Disposal provided Dumpsters for its customers to deposit and collect their garbage. Then the company used garbage trucks, which it refers to as "packer" trucks, to collect the garbage and transport it to the transfer centers. The packer trucks compacted the garbage under pressure to reduce volume for ease in transport and more efficient disposal. The packer trucks were designed to prevent leakage of liquids and control odors during transport.

At both of XL Disposal's transfer stations, the garbage from the packer trucks was combined and consolidated for hauling to landfills or, in the case of one of the transfer sites, separated for hauling to a recycling facility. In hauling the garbage from the transfer sites, XL Disposal used two types of trailers, both pulled by truck cabs the company referred to as "power units." "Transfer" trailers looked like semi-truck trailers but had moving floors that allowed the units to be emptied without tipping on the uneven ground of a landfill. The other trailers were "dump trailers," which looked and operated like the back half of a dump truck. XL Disposal also purchased "tank trucks" for hauling hazardous waste. The company did not have a license for hazardous waste disposal. Pruim's affidavit stated these trucks were leased to other companies that were authorized to dispose of hazardous waste. Those companies are not identified in the record.

Separate from its hauling operation, XL Disposal also purchased a wood shredder, known as a Grassan shredder. Its purpose was to reduce the bulk of wood and yard waste, making it more amenable to transportation and acceptance for disposal at the company's landscape waste compost site.

XL Disposal operated pursuant to numerous state and federal environmental, commercial, and transportation regulations. The garbage collection services were performed pursuant to contract with the City of Chicago and suburban municipalities in Cook County. Pruim stated the company's duties extended through ultimate disposal in approved landfills both in and outside Illinois. He identified an exhibit attached to his affidavit as an example of conditions imposed upon the company by its contracts. The exhibit is actually a set of specifications the City of Chicago provides for prospective contract bidders. The record does not contain any actual contracts. The exhibit in question requires the bidder to provide the name of ...

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