{ "id": 5434360, "name": "STARK MATERIALS COMPANY, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellees", "name_abbreviation": "Stark Materials Co. v. Department of Revenue", "decision_date": "2004-05-12", "docket_number": "No. 4-03-0114", "first_page": "316", "last_page": "325", "citations": [ { "type": "official", "cite": "349 Ill. App. 3d 316" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "298 N.E.2d 789", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1973, "pin_cites": [ { "page": "793" } ], "opinion_index": 0 }, { "cite": "12 Ill. App. 3d 725", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2857066 ], "year": 1973, "pin_cites": [ { "page": "730-31" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/12/0725-01" ] }, { "cite": "242 N.E.2d 205", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1968, "pin_cites": [ { "page": "207" } ], "opinion_index": 0 }, { "cite": "41 Ill. 2d 154", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2851304 ], "year": 1968, "pin_cites": [ { "page": "157" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/41/0154-01" ] }, { "cite": "209 Ill. 2d 520", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5462174 ], "year": 2004, "pin_cites": [ { "page": "529" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/209/0520-01" ] }, { "cite": "645 N.E.2d 1060", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1995, "pin_cites": [ { "page": "1066" } ], "opinion_index": 0 }, { "cite": "269 Ill. App. 3d 220", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 365936 ], "year": 1995, "pin_cites": [ { "page": "229" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/269/0220-01" ] }, { "cite": "552 N.E.2d 436", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "year": 1990, "pin_cites": [ { "page": "439" }, { "page": "439" } ], "opinion_index": 0 }, { "cite": "195 Ill. App. 3d 798", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2493226 ], "weight": 2, "year": 1990, "pin_cites": [ { "page": "803" }, { "page": "803" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/195/0798-01" ] }, { "cite": "752 N.E.2d 1212", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2001, "pin_cites": [ { "page": "1215" } ], "opinion_index": 0 }, { "cite": "323 Ill. App. 3d 303", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 171761 ], "year": 2001, "pin_cites": [ { "page": "306" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/323/0303-01" ] }, { "cite": "26 U.S.C. \u00a7 482", "category": "laws:leg_statute", "reporter": "U.S.C.", "year": 1996, "opinion_index": 0 } ], "analysis": { "cardinality": 764, "char_count": 21266, "ocr_confidence": 0.718, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.15951026488416892 }, "sha256": "09eadab332e10555c082baad6bd1f2775c9173cb30960d638cb9900472a8676d", "simhash": "1:32723687b342b464", "word_count": 3398 }, "last_updated": "2023-07-14T17:18:36.100393+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "STEIGMANN and APPLETON, JJ., concur." ], "parties": [ "STARK MATERIALS COMPANY, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellees." ], "opinions": [ { "text": "JUSTICE McCULLOUGH\ndelivered the opinion of the court:\nOn March 18, 1999, plaintiff, Stark Materials Company, Inc., brought an action against, inter alios, the Illinois Department of Revenue (Department) for declaratory judgment, pursuant to sections 2a and 2a.1 of the State Officers and Employees Money Disposition Act (Protest Monies Act) (30 ILCS 230/2a, 2a.1 (West 1998)), seeking recovery of tax monies paid, under protest, pursuant to the Retailers\u2019 Occupation Tax Act (ROTA) (35 ILCS 120/1 through 14 (West 1998)). The parties stipulated to the material facts and each party filed a motion for summary judgment based on those facts. On December 13, 2002, the trial court denied plaintiffs motion for summary judgment and granted the Department\u2019s cross-motion for summary judgment, concluding the Department had properly calculated plaintiffs liability under ROTA. On appeal, plaintiff argues that (1) its delivery charges are not taxable as \u201cgross receipts\u201d under ROTA, and (2) the increased gross sales reported by plaintiff for federal income-tax purposes are not taxable \u201cgross receipts\u201d under ROTA. We affirm.\nThe Department audited plaintiffs sales-tax account for the period of July 1, 1995, through December 31, 1997. On December 31, 1998, the Department issued plaintiff a notice of sales-tax liability indicating that plaintiff owed the following amounts:\n\u201cTax Due/Excess Tax Collected $86,825\nPenalty $0\nInterest $15,733\nPayments/Credits _$0\nPAY THIS AMOUNT $102,558.\u201d\nThe total amount due was the result of the Department\u2019s conclusion, based on the audit, that plaintiff underpaid its taxes for the periods at issue in the amount of $86,825 and also owed $15,733 in statutory interest thereon.\nOn February 24, 1999, plaintiff responded to the notice by remitting the sum of $102,558 but paid the amount under protest pursuant to sections 2a and 2a.l of the Protest Monies Act. On March 18, 1999, it filed a complaint for declaratory and injunctive relief. On March 22, 1999, the trial court entered a preliminary injunction preventing the State from disposing of the funds. On the same date, plaintiff submitted a second payment of $933.62 under protest for additional accrued interest on the deficiency. On March 4, 2002, the court dissolved the injunction to the extent of allowing a refund of $13,153, representing tax plus interest to plaintiff, and a release from the protest fund of $19,809 into appropriate funds of the state treasury.\nAs stated, each party filed a motion for summary judgment. In so doing, the parties stipulated that the two issues presented for resolution were questions of law, namely (1) whether plaintiffs delivery charges were subject to the retailers\u2019 occupation tax (ROT) and (2) whether the increased gross sales reported by plaintiff for federal income-tax purposes for the tax year ending December 31, 1996, were subject to the ROT. The parties entered into a stipulation of fact as to all material facts necessary to a resolution of the case, from the period between July 1, 1995, through December 31, 1997, and attached numerous exhibits.\nPlaintiff is an Illinois corporation that mines, excavates, processes, and sells certain minerals extracted from quarries. After excavation, it processes the minerals into either ready-mix concrete (ready-mix) or an aggregate compound of processed gravel and sand. Plaintiff sells the ready-mix or aggregate compound to purchasers for use primarily in construction activities.\nDuring the periods at issues, one of plaintiffs multiple customers was Stark Excavating. Plaintiff delivered ready-mix to Stark Excavating in trucks owned by Stark Excavating. Stark Excavating leased the trucks to plaintiff and imposed an hourly rental charge for the trucks. The trucks had rotating drums that were used to agitate the ready-mix. To the extent that a certain truck was not being used by plaintiff for a particular job, the truck was available to Stark Excavating for its own purposes, including picking up ready-mix from plaintiff or another supplier. In those instances where Stark Excavating picked up ready-mix from plaintiff, plaintiff was not charged for use of the truck. If plaintiff delivered the ready-mix to Stark Excavating, then plaintiff was charged for use of the truck based on an hourly rate pursuant to the parties\u2019 lease agreement.\nOn invoices from plaintiff to Stark Excavating, one charge is labeled a \u201cdelivery charge.\u201d The \u201cdelivery charge\u201d was based on a formula that took into account certain weighted variables, including operator costs, payroll costs, truck rental, fuel charges, plant maintenance costs, and union dues. The cost of concrete was not included in the delivery-charge calculation. The delivery charge in issue varied from delivery to delivery based on the aforementioned variables. The formula employed by plaintiff to determine the delivery charge was the same regardless of whether the purchaser was Stark Excavating or another purchaser.\nStark Excavating periodically purchased ready-mix from suppliers other than plaintiff when (1) the prices plaintiff charged were not favorable or (2) when Stark Excavating\u2019s project was not close to plaintiffs place of business. In those instances where Stark Excavating purchased concrete from other suppliers, it used its own trucks to pick up the concrete.\nDuring the periods at issue, plaintiff did not include the delivery charges it collected from Stark Excavating in its gross receipts reported to the Department on its Illinois sales- and use-tax returns. Plaintiff included the delivery charge on all invoices to Stark Excavating regardless of whether plaintiff delivered the ready-mix or whether Stark Excavating picked it up.\nWilliam Vinyard, the Department\u2019s auditor, did not consider whether Stark Excavating had the necessary equipment (such as a truck with a rotating drum) to give it the option of picking up ready-mix directly from plaintiff. He concluded that the delivery charges in question were taxable because plaintiff is a ready-mix retailer. Based on prior audits, he was not aware of any other ready-mix retailer that sold ready-mix to customers with their own trucks with agitating drums that would allow customers to pick up the ready-mix from the retailer.\nFor federal income-tax purposes, plaintiff made an adjustment to its books and records to report increased gross sales for the income-tax year ending December 31, 1996. Plaintiff adjusted its books and records to report increased gross sales to avoid such an adjustment, and possible imposition of penalties, by the Internal Revenue Service (IRS) pursuant to the IRS\u2019s authority under section 482 of the Internal Revenue Code (26 U.S.C. \u00a7 482 (1996)). Plaintiff made these \u201csection 482\u201d adjustments on its own initiative because it had previously and inadvertently used an improper method to transfer costs from one entity to another. Plaintiff made these adjustments prior to the date that it filed its original federal income-tax return for the year ending December 31,1996, and took these adjustments into account in preparing that return.\nThe adjusted \u201cgross receipts or sales\u201d figure on plaintiffs federal income-tax return for the tax year ending December 31, 1996, was higher than the \u201cgross selling price\u201d for the same retail sales that plaintiff had previously reported on ROT returns filed with the Department. Plaintiff did not amend the previously filed ROT returns to reflect an increase in gross receipts to match the higher gross sales figure set out on its federal income-tax return. The adjustment to plaintiffs federal return did not reflect additional sales of tangible personal property at retail.\nOn June 14, 2002, plaintiff filed a motion for summary judgment, alleging that (1) the delivery charges in question were not \u201cgross receipts\u201d for purposes of the ROT and were therefore not subject to tax, and (2) the increased gross sales it reported for federal income-tax purposes for the tax year ending December 31, 1996, were not \u201cgross receipts\u201d for ROT purposes and were therefore not subject to tax. On July 23, 2002, the Department filed its own motion for summary judgment, alleging that (1) the charge labeled a \u201cdelivery charge\u201d by plaintiff was not a transportation or delivery charge that could be deducted from plaintiffs gross receipts from the sale of concrete under section 130.415 of the ROT regulations (86 Ill. Adm. Code \u00a7 130.415 (1996)), and (2) plaintiff was required to use the same figure for gross receipts in computing its Illinois ROT liability that it reported as gross sales on its federal income-tax return.\nIn ruling on the parties\u2019 motions for summary judgm\u00e9nt, the trial court noted that the Department\u2019s correction of plaintiffs ROT return \u201cis prima facie evidence of the correctness of the amount of tax due,\u201d and that plaintiff, as the taxpayer, had the burden to prove by competent evidence that the corrected returns of the Department were not correct. It stated that while plaintiff had a right to impose a delivery charge, more is required than the option to pick up or deliver the product to avoid inclusion as a \u201cgross receipt\u201d for purposes of the ROT. The court concluded that where plaintiff failed to show a transportation or delivery charge separate and apart from the selling price, i.e., a delivery charge was imposed regardless of whether the customer had the product delivered or picked up the product, plaintiff was not entitled to exclude the delivery charge from the selling price for purposes of the ROT.\nAs to whether plaintiff was required to use the increased gross sales reported for federal income-tax purposes for the tax year ending December 31, 1996, as the \u201cgross receipts\u201d on which the ROT was based, the trial court noted that plaintiffs books and records reflected a certain gross sales figure at the time of filing the ROT return. Later, plaintiff amended its books and records to show an increase in gross sales to avoid penalties under section 482 of the Internal Revenue Code. These figures were used in calculating plaintiffs federal income-tax return. The court agreed with plaintiff that it is entitled to charge its customers whatever price it chooses for its product and no requirement exists for a fair or arm\u2019s-length retail price for purpose of the ROT. However, it concluded that the underlying issue was the actual sales price or consideration received by plaintiff from Stark Excavating for the product in question. It noted the following:\n\u201cThe only thing in this record on which to base this decision are the books and records of the plaintiff. The parties have stipulated that plaintiff adjusted its own books and records to reflect an increase in gross sales. If the seller\u2019s own books and records are adjusted to show plaintiff received more than was originally stated for ROT tax purposes, then the Department is entitled to use these books and records in an audit to adjust the ROT tax. Otherwise, if an error occurred in the seller\u2019s books and records at the time the ROT tax return was filed and was subsequently corrected by the seller, the ROT tax could not be corrected. *** Plaintiff has produced no books or records which would show that it actually had sales receipts other than reflected in the stipulated adjusted books and records on which the Department relied to adjust the ROT tax.\u201d\nThe court concluded that the Department\u2019s calculation of the ROT based on plaintiffs own books and records was not improper. On December 13, 2002, the court granted the Department\u2019s motion for summary judgment and denied plaintiffs motion for summary judgment. This appeal followed.\nIn this case, the parties agreed that the issues were best resolved by motions for summary judgment. No material facts are in dispute and the trial court granted judgment as a matter of law. As a question of law, review of the trial court\u2019s granting of summary judgment is de novo. See Fuller v. Snyder, 323 Ill. App. 3d 303, 306, 752 N.E.2d 1212, 1215 (2001).\nPlaintiff first argues that its delivery charges are not taxable \u201cgross receipts\u201d for purposes of the ROT because (1) delivery charges are not taxable if the customer has the option of picking up the product, (2) its delivery charges were separately stated on invoices, and (3) the Department applies an impermissible per se rule to ready-mix retailers.\nA plaintiff taxpayer must establish by competent evidence that a return corrected by the Department is not correct, and until it provides such proof, corrected returns are presumptively correct. Sprague v. Johnson, 195 Ill. App. 3d 798, 803, 552 N.E.2d 436, 439 (1990); 35 ILCS 120/4 (West 1998). A taxpayer may overcome the presumption by presenting his books and records. See Sprague, 195 Ill. App. 3d at 803, 552 N.E.2d at 439. \u201cAs a general rule, all sales of tangible personal property are taxable unless the taxpayer produces evidence identified with its books and records to establish its claim of nonliability.\u201d (Emphasis omitted.) Soho Club, Inc. v. Department of Revenue, 269 Ill. App. 3d 220, 229, 645 N.E.2d 1060, 1066 (1995).\nUnder section 1 of ROTA, \u201cgross receipts\u201d are the \u201ctotal selling price or the amount of such sales.\u201d 35 ILCS 120/1 (West 1996); see also 86 Ill. Adm. Code \u00a7 130.401 (1996) (defining \u201cgross receipts\u201d as \u201call the consideration actually received by the seller\u201d). The issue then becomes whether delivery charges are included within the \u201cselling price.\u201d 86 Ill. Adm. Code \u00a7 130.415(b) (1996). If delivery charges are included within the \u201cselling price,\u201d the expense is an element of cost to the seller and the seller may not deduct such expense in computing its ROT liability. 86 Ill. Adm. Code \u00a7 130.415(c) (1996). The \u201cselling price\u201d is defined in pertinent part as:\n\u201cthe consideration for a sale *** which *** shall be determined without any deduction on account of the cost of the property sold, the cost of materials used, labor or service cost or any other expense whatsoever, but does not include charges that are added to prices by sellers on account of the seller\u2019s tax liability under this Act.\u201d 35 ILCS 120/1 (West 1996).\nHere, plaintiff had a separate charge for delivery on its invoices but the evidence reveals that the charges were not separate and apart from the \u201cselling price.\u201d First, the \u201cdelivery charges\u201d were not reflective of the costs of any delivery. \u201cOperator costs,\u201d which were made up of \u201cemployee payroll and equipment rental costs,\u201d were not clearly related to delivery. Similarly, \u201cplant costs,\u201d which were made up of \u201cpayroll and maintenance costs associated with operating Stark Materials\u2019 ready mix plant,\u201d should also have been included in the \u201cselling price.\u201d See 35 ILCS 120/1 (West 1996) (\u201clabor or service costs or any other expense whatsoever\u201d is not deductible from the \u201cselling price\u201d). \u201cOperator costs\u201d and \u201cplant costs\u201d constituted 22.11% of the delivery charges imposed on each invoice.\nMoreover, plaintiff imposed this charge on all invoices, regardless of whether the customer did or did not pick up the product, or had the ability to pick up the product. As the trial court noted, \u201c[t]he ability to pick up the product is a factor but must be coupled with the customer\u2019s option to pay a delivery charge if delivered or not pay a delivery charge if he picks up the product.\u201d While plaintiff had a right to impose a delivery charge, it failed to show a transportation or delivery charge separate and apart from the selling price because its customers did not have an option to pick up the product and not pay a delivery charge. Any \u201coption\u201d that existed was purely illusory.\nWhile plaintiff submits that it did not have the opportunity to sufficiently develop the record to prove the nature of the delivery charges, the parties stipulated to the material facts and agreed that summary judgment was the proper vehicle for disposition of the case. Accordingly, plaintiff cannot now complain that it was deprived of the opportunity to build a record. See generally Arvia v. Madigan, 209 Ill. 2d 520, 529 (2004). Because plaintiff failed to show its \u201cdelivery charges\u201d were separate and apart from the \u201cselling price,\u201d it cannot overcome the presumption that the Department properly determined such charges were taxable \u201cgross receipts\u201d under ROTA.\nPlaintiff also argues that the separate delivery charges on its invoices indicate those charges are not \u201cgross receipts\u201d for purposes of the ROT. However, whether a seller may deduct from its gross receipts from sales of tangible personal property at retail \u201cdepends not upon the separate billing of such transportation or delivery charges or expense,\u201d but upon whether the charges are included in the selling price of the property sold or whether the seller separately contracts for those charges by not including them in the selling price. 86 Ill. Adm. Code \u00a7 130.415(b) (1996). As stated above, the charges are within the \u201cselling price\u201d of the product. Further, plaintiff acknowledges that it did not separately contract for those charges. Plaintiffs argument is without merit.\nPlaintiff next contends that the Department applies an impermissible per se rule regarding the taxability of delivery charges imposed by ready-mix retailers. However, plaintiff could only suffer prejudice under such a rule if plaintiff imposed valid delivery charges. Because we determined above that plaintiffs delivery charges were not valid for ROT purposes, plaintiff can show no prejudice even if the Department applied such a rule.\nPlaintiff also argues that the increased gross sales that it reported for federal income-tax purposes for the tax year ending December 31, 1996, are not taxable \u201cgross receipts\u201d for purposes of ROTA. We disagree.\nPlaintiff owes ROTA taxes based on its \u201cgross receipts.\u201d 35 ILCS 120/2 \u2014 10 (West 1996). It acknowledges that for the tax year ending December 31, 1996, prior to the Department\u2019s audit, it adjusted its books and records to show an increased amount of gross sales receipts. It had earlier filed a state ROTA tax return reporting a lesser amount of gross receipts, and the Department\u2019s auditor assessed an increase in tax liability based upon the new, higher figure.\nWe again note that plaintiff has the burden to overcome the presumption of reasonableness that the Department\u2019s calculations were correct. Before such presumption is overcome, plaintiff must present some evidence identified with its books or records. Copilevitz v. Department of Revenue, 41 Ill. 2d 154, 157, 242 N.E.2d 205, 207 (1968).\nHere, the Department based its conclusions on the books and records themselves. Plaintiffs books and records reflect the higher amount of gross sales and receipts as stated on plaintiff\u2019s federal income-tax return. While plaintiff challenges the corrected returns, it offered no testimony or evidence in support of the correctness of its original return. As we stated in Quincy Trading Post, Inc. v. Department of Revenue, 12 Ill. App. 3d 725, 730-31, 298 N.E.2d 789, 793 (1973):\n\u201cIn short, the plaintiff may not prevail by merely saying its own return was correct, and that the revenue department must prove its return correct. Simply questioning the Department of Revenue\u2019s return or denying its accuracy does not shift the burden to the Department of Revenue.\u201d\nPlaintiff implicitly asserts that if it changed its books and records in good faith, such actions should not be imputed against it for ROT purposes. We decline to adopt plaintiffs position and depart from the rule requiring a taxpayer to provide evidence of his original return. To accept plaintiffs contention would effectively enable a taxpayer to avoid any Department investigation of intentional or unintentional errors contained within an original ROT return. To avoid such discovery, a taxpayer would need only file a later federal income-tax return with different figures and change its books and records accordingly. Because plaintiff has failed to present competent evidence in support of its original return, we find that its challenge is insufficient to overcome the presumption in favor of the Department.\nIn summary, we conclude that plaintiff has failed to overcome the Department\u2019s prima facie case that (1) plaintiffs delivery charges were taxable \u201cgross receipts\u201d under ROTA and (2) the increased amount of gross sales reported on plaintiffs federal income-tax return and correspondingly adjusted in its books and records were also taxable \u201cgross receipts\u201d under ROTA. Accordingly, because plaintiff failed to meet its burden to show the Department\u2019s calculations were incorrect, the trial court properly granted the Department\u2019s motion for summary judgment and denied plaintiff s motion for summary judgment.\nFor the reasons stated, we affirm the trial court\u2019s judgment.\nAffirmed.\nSTEIGMANN and APPLETON, JJ., concur.", "type": "majority", "author": "JUSTICE McCULLOUGH" } ], "attorneys": [ "David A. Hughes (argued), of Horwood, Marcus & Berk, Chtrd., of Chicago, for appellant.", "Lisa Madigan, Attorney General, of Chicago (Gary S. Feinerman, Solicitor General, and Jerald S. Post (argued), Assistant Attorney General, of counsel), for appellees." ], "corrections": "", "head_matter": "STARK MATERIALS COMPANY, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellees.\nFourth District\nNo. 4\u201403\u20140114\nArgued April 20, 2004.\nOpinion filed May 12, 2004.\nDavid A. Hughes (argued), of Horwood, Marcus & Berk, Chtrd., of Chicago, for appellant.\nLisa Madigan, Attorney General, of Chicago (Gary S. Feinerman, Solicitor General, and Jerald S. Post (argued), Assistant Attorney General, of counsel), for appellees." }, "file_name": "0316-01", "first_page_order": 334, "last_page_order": 343 }