The opinion of the court was delivered by: Justice McBRIDE
(NUNC PRO TUNC December 28, 1999)
Appeal from the Circuit Court of Cook County
Honorable John A. Ward, Judge Presiding.
Defendants, the Illinois Department of Revenue and Douglas Whitley, the Director of Revenue (hereafter collectively referred to as the Department), issued a notice of deficiency to plaintiff Tyson Foods, Inc. (Tyson), assessing Illinois corporate income taxes for tax years ending March 29, 1986, and April 2, 1988. Two actions relating to the deficiencies, one pursuant to the State Officers and Employees Money Disposition Act and another pursuant to the Administrative Review Act, were consolidated before the circuit court. The court, in separate orders, entered judgment in favor of defendants in both cases. Tyson appeals, contending that the circuit court erred in finding that Tyson's activities in Illinois permitted the State to impose an income tax on Tyson, erred by failing to apply proper standards in granting summary judgment in one of the actions, and erred in failing to abate penalties against Tyson.
Tyson is an Arkansas-based corporation whose primary business is producing and selling poultry-based food products. Tyson did not file corporate income tax returns in Illinois for the tax years ending March 29, 1986, and April 2, 1988. In 1990, the Department issued a notice of deficiency to Tyson assessing corporate income tax of $9,827 for the tax year that ended March 29, 1986, and $46,992 for the tax year that ended April 2, 1988, along with penalties of $7,722 and $31,280 for the respective years.
Tyson challenged the notice of deficiency relating to 1986 by filing a complaint in the circuit court pursuant to the State Officers and Employees Money Disposition Act. 30 ILCS 230/1 et seq. (West 1996). Prior to filing, Tyson paid the deficiency for 1986 to the Department under protest. The payment of $22,052.84 represented $17,549.00 of tax and penalties and $4,503.84 of interest.
Tyson also challenged the notice of deficiency for 1988 by filing with the Department a protest and request for an administrative hearing. At the administrative hearing, the parties agreed to a stipulation of facts. Following the hearing, an administrative law judge recommended that the notice of deficiency for the 1988 tax year be upheld in its entirety. The Department adopted the recommendation of the administrative law judge.
Tyson then filed a complaint for administrative review in the circuit court. Tyson's actions before the circuit court under the State Officers and Employees Money Disposition Act and Administrative Review Act were consolidated. The circuit court noted that despite the consolidation, separate judgments would be entered on the two cases.
Public Law 86-272 (the Law), under which Tyson sought protection from taxation, confers immunity from state income taxes on companies whose "only business activities" in a state consist of "solicitation of orders" for interstate sales. See Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214, 223, 112 S. Ct. 2447, 120 L. Ed. 2d 174 (1992); 15 U.S.C. § 381(a) (1988). Subsection (c) of the Law states that for purposes of imposing an income tax, a person shall not be considered to have engaged in business activities within a State during any taxable year by reason of the maintenance of an office in the state by one or more independent contractors whose activities on behalf of such person consist solely of making sales or soliciting orders for sales. 15 U.S.C. § 381(c) (1988).
The facts, as stipulated to by the parties before the circuit court, are as follows. Tyson was an Arkansas-based corporation whose primary business was producing and selling poultry-based food products. Tyson processed its poultry products at 24 locations in 6 states and maintained 6 frozen foods distribution centers. None of these processing facilities or distribution centers were located in Illinois.
Sales of Tyson products were solicited by wholesale food brokers who were independent contractors with respect to Tyson. The wholesale customers placed their orders with the independent contractor food brokers, who then forwarded the orders to Tyson's corporate headquarters for acceptance.
Tyson employed two regional sales managers who resided in Illinois. These regional sales managers oversaw Tyson's relationship with the wholesale food brokers. Their territories covered parts of Illinois, Wisconsin, Michigan, and Ohio. The parties agree that the activities of the wholesale food brokers and Tyson's regional sales managers constituted "solicitation" within the meaning of Public Law 86-272 and thus did not constitute a basis for Tyson to be subject to Illinois' income tax. Aside from the regional sales managers, Tyson did not employ any persons within Illinois. Nor did Tyson maintain any bank accounts or own any real estate within Illinois.
Tyson, through its corporate headquarters, arranged delivery of its products to Illinois customers by truck from points outside the state. Tyson did not maintain a garage, transportation center, or other repair or storage facility for its trucks within Illinois. Tyson registered its fleet of trucks with the Illinois Secretary of State in 1984. The registration of the trucks in Illinois was under the terms of the International Registration Plan (IRP), as adopted by the Illinois Secretary of State.
On February 13, 1984, Tyson entered into an office lease with landlord Dick Lukin, Inc., for an office located at 540 Frontage Road, Northfield, Illinois. The term of the lease was one year and the annual rent was $500. The lease was renewed annually and was in effect during the relevant times for purposes of the issues at hand. In February 1984, a telephone line listed under Tyson's name was connected to the leased office premises and remained in operation during the times relevant to this appeal. The number was listed in Tyson's name in the telephone directory but was not referred to in advertisements or used for the solicitation of business by Tyson. If the Tyson phone number was called, the phone was answered by an employee of Dick Lukin, Inc., if such an employee was in the immediate vicinity. When the phone was answered, callers were referred to the Tyson ...