{
  "id": 5380023,
  "name": "Miller Brewing Company, vs. Marshall Korshak, Director of Revenue, Appellee",
  "name_abbreviation": "Miller Brewing Co. v. Korshak",
  "decision_date": "1966-05-23",
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    "judges": [],
    "parties": [
      "Miller Brewing Company, vs. Marshall Korshak, Director of Revenue, Appellee."
    ],
    "opinions": [
      {
        "text": "Mr. Justice Schaefer\ndelivered the opinion of the court:\nThe plaintiff, Miller Brewing Company, a Wisconsin corporation licensed to do business in Illinois, brought this action against the Director of Revenue to enjoin him from taking any steps to assess against and collect from the plaintiff any use tax or service use tax, or penalties, with respect to certain items of tangible personal property for the period from January 1, 1961, to May 31, 1964, on the ground that such taxes would be illegal and unconstitutional. The defendant\u2019s motion to dismiss plaintiff\u2019s amended complaint was granted and plaintiff appeals. The revenue and constitutional questions are involved.\nWe shall consider first the allegations of the amended complaint that relate to the notice of proposed use tax assessment that was served upon the plaintiff. The plaintiff manufactures \u201cmalt beverage products\u201d in Wisconsin and sells them directly to \u201cindependent wholesale distributors\u201d who, in turn, sell to retailers. It does not sell any of its products directly either to retailers or to consumers. \u201cIn the ordinary course of its business plaintiff has found it advisable to promote a demand for its malt beverage products, among ultimate consumers by providing for the manufacture and fabrication of certain \u2018point-of-sale\u2019 advertising material (hereinafter sometimes referred to as \u2018POS advertising items\u2019) such as interior neon signs, clocks and other devices intended to encourage a demand for the products of Plaintiff among those who congregate at the point of ultimate sale of Plaintiff\u2019s products.\u201d The fabricators retained the items until Miller sent them a \u201crequisition drop shipping order\u201d directing them where to ship the items. In the period relevant here, Miller paid a total of $592,879.19 for items shipped to Illinois wholesalers. Of this total, $83,407.99 was paid to Illinois fabricators; the bulk of the remainder was paid to fabricators located in Minnesota and Wisconsin.\nThe amended complaint alleged that \u201cPlaintiff did not intend to acquire title to or property in any of said POS advertising items\u201d except those shipped to its Wisconsin warehouse. It continued: -\n\u201c14.2. Except for the Wisconsin warehouse items, none of said POS advertising items shipped to the Illinois wholesale distributors had ever been inventoried by the Plaintiff or entered upon the books of account of the Plaintiff.\n\u201c14.3. Except for the aforementioned Wisconsin warehouse items, Plaintiff was not named, either as consignor or otherwise, upon any of the bills of lading or other shipping documents which accompanied the respective shipments.\n\u201c14.4. The fabricators and suppliers delivered the POS advertising items to independent carriers, shipping charges prepaid, for delivery to the Illinois Wholesale distributors.\n\u201c14.5. As soon as the fabricators and the suppliers delivered the said POS advertising items to the respective carriers, Plaintiff became legally obligated to pay said fabricators and suppliers for the cost of fabrication of said POS advertising items and to reimburse them for freight charges which had been prepaid by them.\n\u201c14.6. The respective suppliers were named as consignors of all shipments and the several Illinois wholesale distributors were named as consignees. Risk of loss during shipment was in the consignees and all claims for damage were to be made by the consignees.\n\u201c14.7. Title to the POS advertising items passed from the suppliers to the Illinois wholesale distributors when said items were delivered to the respective carriers at the points of origin of the shipments.\n\u201c14.8. If, contrary to its intent, the Plaintiff at any time acquired any ownership, title or interest in and to any of said POS advertising items other than the Wisconsin warehouse items, any such ownership, title or interest was relinquished by Plaintiff no later than the time when said POS advertising items were placed with carriers at the respective points of origin of the respective shipments.\u201d\nThe complaint further alleged that prices to the wholesalers \u201cwere not increased to cover the cost to Plaintiff of the POS advertising items;\u201d that .\u201cPlaintiff did not direct or control any such distributors in the use or distribution of said items nor did Plaintiff pay any bonuses or any charges for the use or non-use of such items,\u201d but the wholesalers \u201cusually distributed the POS advertising items to various Illinois retailers who would then use said items at the point-of-sale to encourage a demand for Plaintiff\u2019s malt beverage products among ultimate consumers thereof.\u201d\nAs we read the complaint, what the plaintiff says is that it caused the items of tangible personal property here involved to be manufactured in order to promote the sale of its product. It paid for them, directed their shipment to particular wholesalers in Illinois, and paid the freight charges. But it also says that it never became the owner of these items because it did not ever intend to take title to them, and did not inventory them or enter them upon its books of account. We think those considerations are irrelevant. The plaintiff caused the items to be brought into being, paid for their manufacture and exercised complete power of disposition over them. Even if, in some other context or for some other purpose, someone other than the plaintiff might somehow be regarded as the owner of the items in the state in which they were manufactured, the dominion exercised over them by the plaintiff is sufficient to establish the plaintiff as their owner for the realistic purposes of a taxing statute.\n\u2022 The only conclusion that we can reach from the allegations of the complaint is that the plaintiff was the owner of the items in question when it directed that they be shipped into Illinois in order to stimulate the sale of its product. They were used in this state for that purpose. The complaint does not allege that these items of personal property fall within any of the statutory exceptions dealing with property brought into this state by an owner. (See Ill. Rev. Stat. 1963, chap. 120, par. 439.3.) Unless, therefore, the ownership of these items was transferred to someone else, the property was used in Illinois by the plaintiff, and the plaintiff is subject to the use tax. We turn, therefore, to the allegations of the complaint that are apparently intended to divorce the plaintiff from ownership of this property.\nParagraph 14.7 of the complaint alleges: \u201cTitle to the POS advertising items passed from the suppliers to the Illinois wholesale distributors when said items were delivered to the respective carriers at the points of origin of the shipments.\u201d This paragraph is based upon the assumption that the plaintiff never acquired any interest in or title to the items, a theory that we are unable to accept. Moreover, the allegation as to the passage of title is unmistakably a conclusion of law rather than an allegation of fact. (Leitch v. Hine, 393 Ill. 211; Wolcott v. Village of Lombard, 387 Ill. 621, 626; Grove v. Templin, 320 Ill. 597, 602.) Yet the facts as to the transactions are peculiarly within the knowledge of the plaintiff.\nParagraph 14.8 of the complaint alleges that if the plaintiff at any time acquired any ownership, title or interest in and to any of the items, and we have held that it did, \u201cany such ownership, title or interest was relinquished by the plaintiff * * Here, again, the complaint studiously fails to allege facts.\nIn the context of this statute, we are unaware of the meaning of an allegation that title, interest or possession has been \u201crelinquished.\u201d The complaint nowhere alleges that the items were sold to the Illinois wholesale distributors or to anyone else. The allegation that the plaintiff did not increase prices to its wholesalers to cover these items seems designed to negative a sale, and in the trial court the plaintiff did not argue that a sale- had taken place. Similarly, there is no allegation that the'items were given by the plaintiff to the Illinois wholesalers or to anyone else. The original complaint alleged that these items \u201care furnished gratuitously to the several independent distributors of Plaintiff.\u201d During the argument before the trial court the plaintiff refused to concede that there had been a gift, and in its amended complaint, filed after that argument, the allegation that the items were \u201cfurnished gratuitously\u201d was omitted.\nThe complaint has been carefully drafted to avoid a plain and a simple statement of the actual transactions between the plaintiff and the wholesale distributors. Whether this was done in order to avoid taking a position that might result in the imposition of a tax upon its wholesale or retail distributors, we do not know. Like the circuit court, we must determine the legal sufficiency of the amended complaint that the plaintiff has chosen to file, and in our opinion the circuit court properly held that it failed to establish the illegality of the use tax proposed to be assessed against the plaintiff.\nIn its briefs in this court the plaintiff has argued extensively numerous questions under the due process and commerce clauses of the Federal constitution. But the amended complaint that it filed does not assert facts that would call into operation the constitutional doctrines that it advances.\nWith respect to the proposed assessment under the service use tax, the amended complaint alleged that \u201cPlaintiff has determined that the demand for its products will be increased if the various retailers of said products display, outside of their several places of business, signs which disclose that the individual retailer is engaged in the sale of Plaintiff\u2019s products.\u201d The signs were shipped to plaintiff\u2019s wholesale distributors and were installed at \u201cthe several places of business of those Illinois retailers who sell the malt beverages produced by Plaintiff to ultimate consumers thereof.\u201d\nThe amended complaint continued: \"Plaintiff did not lease said signs either to the wholesalers or retailers who used them, and Plaintiff did not receive rent or other payments either from the distributors or from the retailers for the use of said signs. While it is possible that, with respect to an insignificantly small number of such signs, Plaintiff might have exercised a right or power over such signs during the period involved, as a general proposition Plaintiff merely retained ownership of said signs while they were located within the State of Illinois and did not exercise any rights or powers over such signs incident to that ownership during the period involved.\u201d\nPlaintiff contends that the signs which it concededly owns in Illinois are not subject to the Service Use Tax Act. That act imposes a tax on \u201cthe privilege of using in this State real or tangible personal property acquired as an incident to the purchase of a service from a serviceman.\u201d Apparently the individualized character of these signs accounted for their assessment under the service use tax. In any event, the plaintiff does not contend that it did not purchase service from a serviceman. Its contention is rather that it does not, in the language of the act, exercise \u201cany right or power over tangible personal property incident to the ownership of that property.\u201d To tax its signs under the Service Use Tax Act would, plaintiff contends, equate \u201cthe Service Use Tax with a property tax, assessable merely because of ownership.\u201d\nThe fact remains, however, that the plaintiff used these signs in Illinois, for its benefit, in the natural way in which signs are used, by causing them to be put up where people could look at them. The power to allow property one owns to be used for one\u2019s benefit in this manner is the \u201cexercise\u201d of \u201can incident of ownership\u201d under the act. The contention that the tax is a \u201cdouble tax\u201d is clearly without merit.\nFinally, it is the plaintiff\u2019s position that regardless of its liability for the principal amounts of the taxes assessed against it, the 25% penalties imposed for failure to file returns should not be sustained. It argues first that the penalties are not authorized by the taxing statutes, and second, that if the statutes authorize the penalties, they are invalid under the due-process clauses of the State and Federal constitutions. Section 12 of the Use Tax Act, and section 12 of the Service Use Tax Act, each provide that certain designated sections of the Retailers\u2019 Occupation Tax Act \u201cwhich are not inconsistent with this Act, shall apply, as far as practicable, to the subject matter of this Act to the same extent as if such provisions were included herein.\u201d (Ill. Rev. Stat. 1963, chap. 120, pars. 439.12; 439.42.) Section 5 is one of the sections of the Retailers\u2019 Occupation Tax Act thus incorporated by reference. One of the main purposes of that section is to provide for penalties in certain cases, including a 25% penalty for failure to file a return, (Ill. Rev. Stat. 1963, chap. 120, par. 444.) and we think it is clear that this penalty provision is applicable to the use tax and the service use tax. Cf. Turner v. Wright, 11 Ill.2d 161.\nIn our opinion the penalty provisions do not deprive the plaintiff of its constitutional rights. As is true of many other taxes, the information from which the amount of these taxes must be computed is peculiarly within the knowledge of the taxpayer. In Helvering v. Mitchell, 303 U.S. 391, 82 L. Ed. 917, the validity of sanctions designed to ensure full and honest disclosure was sustained, and their civil rather than criminal character was recognized. The imposition of a 25 % penalty for failure to file a return has been approved in many cases. (Offutt v. Commissioner, (4th cir. 1960) 276 F.2d 471; Henningsen v. Commissioner, (4th cir. 1957) 243 F.2d 954; McAlpine Land & Development Co. v. Commissioner, (4th cir. 1942) 126 F.2d 163; Noteman v. Welch, (1st cir. 1939) 108 F.2d 206.) Other than its asserted belief that it was not liable to pay the taxes, the plaintiff has shown no reason to justify its failure to file a return; similar assertions have been held ineffective to avoid a penalty for failure to file a return. See, e.g. Heman v. Commissioner, (8th cir. 1960) 283 F.2d 227, 233.\nFor the reasons stated, the judgment of the circuit court is affirmed.\nJudgment affirmed.",
        "type": "majority",
        "author": "Mr. Justice Schaefer"
      }
    ],
    "attorneys": [
      "Pope, Ballard, Uriell, Kennedy, Shepard & Fowls, of Chicago, (Frank H. Uriell and Paul A. Teschner, of counsel,) for appellant.",
      "William G. Clark, Attorney General, of Springfield, (Richard A. Michael and John J. O\u2019Toole, Assistant Attorneys General, of counsel,) for appellee."
    ],
    "corrections": "",
    "head_matter": "(No. 39529.\nMiller Brewing Company, vs. Marshall Korshak, Director of Revenue, Appellee.\nOpinion filed May 23, 1966.\nRehearing denied September 21, 1966.\nPope, Ballard, Uriell, Kennedy, Shepard & Fowls, of Chicago, (Frank H. Uriell and Paul A. Teschner, of counsel,) for appellant.\nWilliam G. Clark, Attorney General, of Springfield, (Richard A. Michael and John J. O\u2019Toole, Assistant Attorneys General, of counsel,) for appellee."
  },
  "file_name": "0086-01",
  "first_page_order": 88,
  "last_page_order": 97
}
