{ "id": 45754, "name": "NOKOMIS QUARRY COMPANY, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants", "name_abbreviation": "Nokomis Quarry Co. v. Department of Revenue", "decision_date": "1998-03-25", "docket_number": "No. 5\u201497\u20140216", "first_page": "264", "last_page": "272", "citations": [ { "type": "official", "cite": "295 Ill. App. 3d 264" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "383 N.E.2d 197", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1978, "pin_cites": [ { "page": "200" } ], "opinion_index": 0 }, { "cite": "73 Ill. 2d 243", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5441129 ], "year": 1978, "pin_cites": [ { "page": "247-48" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/73/0243-01" ] }, { "cite": "100 N.E. 235", "category": "reporters:state_regional", "reporter": "N.E.", "year": 1912, "pin_cites": [ { "page": "236" } ], "opinion_index": 0 }, { "cite": "257 Ill. 43", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 4717473 ], "year": 1912, "pin_cites": [ { "page": "45" } ], "opinion_index": 0, "case_paths": [ "/ill/257/0043-01" ] }, { "cite": "525 N.E.2d 73", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1988, "pin_cites": [ { "page": "77" } ], "opinion_index": 0 }, { "cite": "123 Ill. 2d 95", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5551260 ], "year": 1988, "pin_cites": [ { "page": "104" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/123/0095-01" ] }, { "cite": "545 N.E.2d 695", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 6, "year": 1989, "pin_cites": [ { "page": "698" }, { "page": "699" }, { "page": "701" }, { "page": "699" }, { "page": "699" } ], "opinion_index": 0 }, { "cite": "131 Ill. 2d 196", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5570158 ], "weight": 6, "year": 1989, "pin_cites": [ { "page": "201" }, { "page": "203" }, { "page": "207-08" }, { "page": "202-03" }, { "page": "200-01" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/131/0196-01" ] }, { "cite": "667 N.E.2d 701", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1996, "pin_cites": [ { "page": "703" } ], "opinion_index": 0 }, { "cite": "281 Ill. App. 3d 888", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 150251 ], "year": 1996, "pin_cites": [ { "page": "891" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/281/0888-01" ] }, { "cite": "678 N.E.2d 693", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1997, "pin_cites": [ { "page": "700" } ], "opinion_index": 0 }, { "cite": "287 Ill. App. 3d 566", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 520977 ], "year": 1997, "pin_cites": [ { "page": "576" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/287/0566-01" ] }, { "cite": "657 N.E.2d 1165", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1995, "pin_cites": [ { "page": "1168" } ], "opinion_index": 0 }, { "cite": "276 Ill. App. 3d 121", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 927652 ], "year": 1995, "pin_cites": [ { "page": "124-25" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/276/0121-01" ] }, { "cite": "562 N.E.2d 1198", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1990, "pin_cites": [ { "page": "1199" } ], "opinion_index": 0 }, { "cite": "204 Ill. App. 3d 1055", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2573117 ], "year": 1990, "pin_cites": [ { "page": "1059" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/204/1055-01" ] }, { "cite": "590 N.E.2d 478", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1992, "pin_cites": [ { "page": "481" } ], "opinion_index": 0 }, { "cite": "147 Ill. 2d 484", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3278143 ], "year": 1992, "pin_cites": [ { "page": "491" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/147/0484-01" ] }, { "cite": "651 N.E.2d 218", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 4, "year": 1995, "pin_cites": [ { "page": "219" }, { "page": "219" }, { "page": "220" }, { "page": "220" } ], "opinion_index": 0 }, { "cite": "272 Ill. App. 3d 212", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 251336 ], "weight": 4, "year": 1995, "pin_cites": [ { "page": "215" }, { "page": "215" }, { "page": "215" }, { "page": "215-16" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/272/0212-01" ] } ], "analysis": { "cardinality": 817, "char_count": 16374, "ocr_confidence": 0.774, "pagerank": { "raw": 1.0337614277320145e-07, "percentile": 0.5489101874279156 }, "sha256": "927c8dfb00eb0bcafdbbcc10c2062e3effd954556400505ef62b149c97434785", "simhash": "1:33009c19ffd4a2e5", "word_count": 2546 }, "last_updated": "2023-07-14T18:51:11.490834+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "NOKOMIS QUARRY COMPANY, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants." ], "opinions": [ { "text": "JUSTICE KUEHN\ndelivered the opinion of the court:\nWe are faced with one dispositive issue in this case: Whether two machines that plaintiff, Nokomis Quarry Company, uses in its quarry operation qualify for a manufacturing exemption from the use tax imposed by the Illinois Use Tax Act (the Act) (35 ILCS 105/1 et seq. (West 1994)). Specifically, defendant, the Department of Revenue of the State of Illinois (Department), appeals from the Montgomery County circuit court\u2019s order, upon administrative review, reversing the Department\u2019s decision that plaintiff\u2019s crawler dozer and wheel loader are not exempt from the use tax. We affirm.\nThe Department\u2019s decision is based upon undisputed facts. Plaintiff owns and operates a limestone quarry in Montgomery County. The quarry\u2019s limestone deposit sits in two layers separated by a layer of shale. The upper layer of limestone is buried underneath approximately 12 to 15 feet of soil. Once the soil is extracted, plaintiff removes the limestone by blasting with explosives. Its blasting method involves the systematic drilling of holes, the filling of these holes with an explosive charge, and the detonation of that charge. This explosion creates limestone fragments called \u201cshot rock.\u201d After the explosion, plaintiff uses a D135A crawler dozer to push the shot rock off whatever ledge remains after the blast. Plaintiff then utilizes a WA-500 wheel loader to pick up the shot rock and transport it to a \u201ccrusher-sorter\u201d machine, which crushes and/or sorts the rock into various sizes, as necessary. The crawler dozer and wheel loader are exclusively used for these purposes.\nAfter an audit, the Department issued two tax-liability notices to plaintiff, assessing use tax on the crawler dozer and wheel loader for the period of January 1, 1991, to April 30, 1994. Plaintiff filed a timely protest to these notices, claiming that the two machines were used in manufacturing and, thus, were exempt from use tax.\nOn February 7, 1996, an administrative hearing was held on the issue of whether the two machines qualified for the manufacturing exemption from the use tax. Plaintiff presented the uncontroverted testimony of both its general manager, Ron Koehler, and a civil engineering expert, Richard Barksdale. Both Koehler and Barksdale testified that the blasting technique plaintiff utilizes is a form of crushing and that the resulting shot rock\u2019s size is determined by the placement of the explosive charges. Koehler further stated that the charges are placed 10 feet apart in order to produce shot rock of less than 150 pounds, in compliance with state \u201cstone fill\u201d specifications. The stone fill is used for erosion prevention along ditches and/or lakes. He noted that nearly all of this shot rock created by the initial blast could be sold without further processing, if warranted by consumer demand. In plaintiffs business, approximately 40% to 50% of this shot rock is sorted and sold without additional processing. The remainder of the shot rock is crushed further to create smaller-sized products for sale.\nOn June 13, 1996, the Department issued its final administrative decision, finding that the crawler dozer and wheel loader did not qualify for the manufacturing exemption. The Department determined that, because the manufacturing process originated at the crusher-sorter machine, plaintiff primarily used the crawler dozer and wheel loader to extract limestone prior to the manufacturing process. On July 5, 1996, the Department issued two final assessments of use tax due, totalling $40,822.93, including interest and penalties.\nOn August 9, 1996, plaintiff filed its complaint for administrative review in the Montgomery County circuit court. On March 19, 1997, the circuit court reversed the Department\u2019s final decision. Its order concluded that the machines qualified for a manufacturing exemption from the use tax because the manufacturing process actually began with the blasting. The Department now appeals this order, contending that the circuit court\u2019s reversal constitutes error.\nAn administrative agency\u2019s decision may be reversed only if it is factually against the manifest weight of the evidence or legally erroneous. Thomas M. Madden & Co. v. Department of Revenue, 272 Ill. App. 3d 212, 215, 651 N.E.2d 218, 219 (1995). Where, as here, facts are undisputed, a tax-exemption determination is a question of law and, as such, hinges solely on an application of the proper legal standard to those facts. City of Chicago v. Illinois Department of Revenue, 147 Ill. 2d 484, 491, 590 N.E.2d 478, 481 (1992); Our Savior Lutheran Church v. Department of Revenue, 204 Ill. App. 3d 1055, 1059, 562 N.E.2d 1198, 1199 (1990). Our review of an agency\u2019s statutory construction interpretation, a purely legal question, is de nova. Thomas M. Madden & Co., 272 Ill. App. 3d at 215, 651 N.E.2d at 219.\nPlaintiff initially contends that prior Department decisions, as well as one of our unpublished orders, collaterally estop the Department from arguing that this case\u2019s facts do not warrant the manufacturing exemption from the use tax. We recognize that, just as prior decisions of this court, \u201cadministrative decisions have res judicata and collateral estoppel effect where a department\u2019s determination is made in proceedings which are adjudicatory, judicial, or quasi-judicial in nature.\u201d Marco v. Doherty, 276 Ill. App. 3d 121, 124-25, 657 N.E.2d 1165, 1168 (1995). However, the collateral estoppel doctrine applies to the relitigation of facts, not to questions of law. City of Chicago v. Chicago Fiber Optic Corp., 287 Ill. App. 3d 566, 576, 678 N.E.2d 693, 700 (1997); Deford-Goff v. Department of Public Aid, 281 Ill. App. 3d 888, 891, 667 N.E.2d 701, 703 (1996). This case does not require the relitigation of facts. Rather, it demands our statutory construction analysis of the Act (35 ILCS 105/1 et seq. (West 1994)), a question of law. Accordingly, because collateral estoppel is inapplicable, we must confront the merits of the Department\u2019s appeal.\nSection 3 of the Act imposes a tax \u201cupon the privilege of using in this State tangible personal property.\u201d 35 ILCS 105/3 (West 1994). However, section 3 \u2014 5(18) of the Act affords certain exemptions from this use tax:\n\u201cUse of the following tangible personal property is exempt from the tax imposed by this Act:\n* * *\n(18) Manufacturing and assembling machinery and equipment used primarily in the process of manufacturing or assembling tangible personal property for wholesale or retail sale ***.\u201d 35 ILCS 105/3 \u2014 5(18) (West 1994).\nFor purposes of this exemption, section 3 \u2014 50(1) of the Act further defines manufacturing process as follows:\n(1) \u201c \u2018Manufacturing process\u2019 means the production of an article of tangible personal property, whether the article is a finished product or an article for use in the process of manufacturing or assembling a different article of tangible personal property, by a procedure commonly regarded as manufacturing, processing, fabricating, or refining that changes some existing material into a material with a different form, use, or name. In relation to a recognized integrated business composed of a series of operations that collectively constitute manufacturing, or individually constitute manufacturing, or individually constitute manufacturing operations, the manufacturing process commences with the first operation or stage of production in the series and does not end until the completion of the final product in the last operation or stage of production in the series.\u201d 35 ILCS 105/3 \u2014 50(1) (West 1994).\nA resolution of the issue before us requires our statutory construction analysis of these provisions.\nThis statutory construction analysis is two-tiered: the first tier requires construction of the statute; the second demands a determination of the applicability of the statutory exemption. Van\u2019s Material Co. v. Department of Revenue, 131 Ill. 2d 196, 201, 545 N.E.2d 695, 698 (1989). We must first address the issue of the statute\u2019s construction.\nThe objective in construing the manufacturing exemption statute is to determine and give effect to the legislature\u2019s intent. Thomas M. Madden & Co., 272 Ill. App. 3d at 215, 651 N.E.2d at 220. The court should consider not only the statute\u2019s language but also its purposes. Canteen Corp. v. Department of Revenue, 123 Ill. 2d 95, 104, 525 N.E.2d 73, 77 (1988). \u201cStatutes granting tax exemptions are to be construed strictly in favor of the taxing body and against exemption, and the party claiming an exemption bears the burden of clearly proving he comes within the statutory exemption.\u201d Thomas M. Madden & Co., 272 Ill. App. 3d at 215-16, 651 N.E.2d at 220.\nMindful of this precedent for statutory review, our supreme court has already addressed the statutory construction of the identical provisions pertinent to the present case, in Van\u2019s Material Co. v. Department of Revenue, 131 Ill. 2d 196, 545 N.E.2d 695 (1989). Such an analysis requires an examination of three distinct words or phrases which form the gist of section 3 \u2014 5(18): (1) \u201ctangible personal property,\u201d (2) \u201cprocess of manufacturing or assembling,\u201d and (3) \u201cprimarily.\u201d Van\u2019s Material Co., 131 Ill. 2d at 203, 545 N.E.2d at 699. The supreme court further expanded the analysis of this second phrase by stating that, in order to be a \u201cprocess of manufacturing\u201d as contemplated by section 3 \u2014 50 of the Act, the procedure must: (1) change an existing material or materials into one with a new form, use, or name and (2) be commonly regarded as manufacturing.\nThere is no dispute in this case that plaintiff\u2019s limestone products are tangible personal property. Furthermore, the Department does not contest the proposition that if the manufacturing process begins with the initial blast, then the crawler dozer and wheel loader are used \u201cprimarily\u201d in the manufacturing process. Therefore, the taxability of plaintiffs use of its crawler dozer and wheel loader turns on whether blasting begins the manufacturing process within the purview of section 3 \u2014 50. We hold that it does.\nPlaintiff produced uncontroverted evidence that the blasting procedure changed existing material into material with a new form, a new use, and a new name. The record demonstrates that the blasting either completely changes or begins the transformation of a limestone deposit with no apparent use into various sizes of limestone products with different uses.\nThe Department argues, however, that plaintiff failed to meet its burden of showing that the blasting process is \u201ccommonly regarded as manufacturing.\u201d The Department points to the differences between the dictionary definitions of \u201cquarrying\u201d and \u201cmanufacturing,\u201d as well as its own regulations and prior rulings. Based on the record before us, we cannot agree with this argument.\nIn Van\u2019s Material Co., the supreme court noted:\n\u201cIn interpreting the term \u2018commonly regarded\u2019 it seems evident that application of the terms of the statute is not to be guided by some hyperbolic definition of manufacture but rather is subject to commonsense interpretations based on past and current understanding. [Citations.] ***\n*** [Tjhis court [has] determined that \u2018[w]henever labor is bestowed upon an article which results in its assuming a new form, possessing new qualities or new combinations, the process of manufacturing has taken place.\u2019\u201d Van\u2019s Material Co., 131 Ill. 2d at 207-08, 545 N.E.2d at 701, quoting Dolese & Shepard Co. v. O\u2019Connell, 257 Ill. 43, 45, 100 N.E. 235, 236 (1912).\nWe do not believe that the evidence in this case supports the glaring distinction the Department draws between \u201cquarrying\u201d and \u201cmanufacturing.\u201d Rather, under the particular circumstances before us, we view plaintiffs calculated blasting method as synonymous with manufacturing.\nThe blasting technique plaintiff utilizes is much more complicated than mere digging or haphazard rock removal. Plaintiff deliberately puts a sufficient amount of explosives in systematically placed holes in order to achieve an intended result, particularly, the production of shot rock which may be immediately marketed or further processed. This blasting method does more than simply separate the rock from the ground; it does so with specific desired results. Clearly, plaintiff bestows labor upon a limestone deposit, resulting in the limestone\u2019s assumption of new forms possessing new qualities or new combinations.\nWe are equally unpersuaded by the prior Department letter rulings on similar issues, which are noted in its brief. Although courts should generally give some deference to statutory interpretations promulgated by the administrative agency charged with the statute\u2019s administration and enforcement, such interpretations are clearly not binding on the court. Van\u2019s Material Co., 131 Ill. 2d at 202-03, 545 N.E.2d at 699. Moreover, these letter rulings are inconsistent with other Department decisions cited by plaintiff, one of which even found that \u201cthe manufacturing process begins when explosives are used to blast the solid rock from the quarry.\u201d Department of Revenue v. Mo-line Consumer Co., Dept. of Rev. Adm. Hearing Div., No. 0099 \u2014 5088 (November 23, 1992).\nWe reject that part of the Department\u2019s regulation that states, \u201cThe extractive process of quarrying does not constitute manufacturing.\u201d 86 Ill. Adm. Code \u00a7 130.330(b)(4) (1994). It is clear that \u201c [a] dministrative rules can neither limit nor extend the scope of a statute.\u201d Du-Mont Ventilating Co. v. Department of Revenue, 73 Ill. 2d 243, 247-48, 383 N.E.2d 197, 200 (1978). This portion of the regulation unduly restricts the scope of the statute. The statute\u2019s language draws no such distinction between quarrying and manufacturing. We cannot accept that which is not contemplated by the legislature.\nIndeed, both the evidence presented at the hearing and the latter portion of the very regulation upon which the Department relies indicate that plaintiffs blasting method is commonly regarded as manufacturing. That regulation specifically states that \u201cthe activities subsequent to quarrying such as crushing, washing, sizing and blending will constitute manufacturing.\u201d (Emphasis added.) 86 Ill. Adm. Code \u00a7 130.330(b)(4) (1994). Plaintiff produced evidence, via expert testimony and exhibit, that, by industry standards, its blasting method constitutes crushing to achieve a particular size. Given this uncontroverted evidence, plaintiffs calculated blasting method constitutes a \u201cprocess of manufacturing\u201d within the import of section 3 \u2014 50.\nWe now turn to the second tier of our analysis: Whether plaintiff has met its burden of proving that the manufacturing exemption applies to its crawler dozer and wheel loader. The record demonstrates that plaintiff has met its burden. After the blasting, plaintiff exclusively uses the crawler dozer to push the shot rock off whatever ledge remains after the blast. Plaintiff then exclusively utilizes the wheel loader to pick up the shot rock and transport it to a crusher-sorter machine. Clearly, these machines are used primarily in the process of manufacturing within the meaning of section 3 \u2014 5(18) of the Act. Therefore, we hold that plaintiffs D135A crawler dozer and WA-500 wheel loader are exempt from use tax.\nAccordingly, for the foregoing reasons, the judgment of the Montgomery County circuit court is affirmed.\nAffirmed.\nMAAG and GOLDENHERSH, JJ., concur.\nThis retailer\u2019s occupation tax regulation is incorporated by reference and made part of the use tax regulations pursuant to 86 111. Adm. Code \u00a7 150.1201 (1994).\nAlthough this case involves only a use-tax assessment, the supreme court has explained how the existence of substantially identical provisions in the Illinois Retailers\u2019 Occupation Tax Act (35 ILCS 120/1 et seq. (West 1994)) renders our decision today applicable to both acts. Van\u2019s Material Co. v. Department of Revenue, 131 Ill. 2d 196, 200-01, 545 N.E.2d 695, 699 (1989).", "type": "majority", "author": "JUSTICE KUEHN" } ], "attorneys": [ "James E. Ryan, Attorney General, of Chicago (Barbara A. Preiner, Solicitor General, and Brian F. Barov, Assistant Attorney General, of counsel), for appellants.", "Keith W. Casteel and William J. Priest, both of Samuels, Miller, Schroeder, Jackson & Sly, of Decatur, for appellee." ], "corrections": "", "head_matter": "NOKOMIS QUARRY COMPANY, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants.\nFifth District\nNo. 5\u201497\u20140216\nOpinion filed March 25, 1998.\nJames E. Ryan, Attorney General, of Chicago (Barbara A. Preiner, Solicitor General, and Brian F. Barov, Assistant Attorney General, of counsel), for appellants.\nKeith W. Casteel and William J. Priest, both of Samuels, Miller, Schroeder, Jackson & Sly, of Decatur, for appellee." }, "file_name": "0264-01", "first_page_order": 284, "last_page_order": 292 }