{
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  "name": "FONTANA D'OR, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee",
  "name_abbreviation": "Fontana D'Or, Inc. v. Department of Revenue",
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    "judges": [],
    "parties": [
      "FONTANA D\u2019OR, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee."
    ],
    "opinions": [
      {
        "text": "Mr. PRESIDING JUSTICE LORENZ\ndelivered the opinion of the court:\nPlaintiff appeals from an order of the circuit court affirming a decision of defendant (Department) assessing plaintiff for unpaid retailers\u2019 occupation taxes plus interest and penalties. It contends that retailers\u2019 occupation taxes are not due on a 15% \u201cgratuity\u201d charge separately contracted for by its customers.\nPlaintiff operates a catering business in its dining halls in the city of Chicago. Following several audits of its books and the issuance of a notice of tax liability, the Department held hearings at which the following facts found in the referee\u2019s hearing disposition order were adduced.\nDorothea Taitel, a Department auditor, testified that she examined plaintiff\u2019s records and found that plaintiff was deducting \u201cgratuities\u201d which were contracted for and paid by its customers from the gross receipts which were reported to the Department. The total amount of gratuities deducted during the assessment period from January 1969 through January 1972 was *297,698.63.\nHenry Jasek, a Department auditor, testified that plaintiff\u2019s payroll records showed its employees, such as its. waitresses, cooks and bus boys, were paid a salary based upon an hourly rate. Plaintiff s W-2 forms did not show any tips given to its employees.\nGeorge Micelli, plaintiff\u2019s president and part owner of the corporation, testified on plaintiff\u2019s behalf. A sample contract and breakdown sheet admitted in evidence was explained by him. In pertinent part it showed the following:\n90 Plates at $7.75 $697.50\n15% Gratuity 104.62\n5% Sales Tax 34.87\n20 Bottles Rose\u2019 Wine 60.00\n$896.99\nLess Deposit 100,00\n$796.99\nEvery customer was quoted a sales price plus a 15% \u201cgratuity,\u201d even when the contract did not contain an itemized breakdown sheet. The tax was charged to the customer on the sales price excluding this 15% \u201cgratuity,\u201d and the amount collected was remitted to the Department. Micelli testified that the 15% \u201cgratuity\u201d paid by the customer was a mandatory charge not subject to negotiation between plaintiff and its customer. No correlation existed between the amount of \u201cgratuities\u201d collected from the customers and the amounts paid as salaries to plaintiff\u2019s employees.\nThe hearing referee found that plaintiff was attempting to deduct a portion of its payroll expenses from its gross receipts and held that the 15% charge was not a gratuity. He assessed plaintiffs liability as follows:\nState Retailers\u2019 Occupation Tax Deficiency $ 31,055.19\nMunicipal \" \" \" \" 7,244.69\nPlus 5% Penalty 1,914.99\nInterest computed thru September 30, 1974 18,766.94\nTotal Liability $58,981.81\nThereafter, plaintiff filed a complaint for review of the Department\u2019s decision under the Administrative Review Act. (Ill. Rev. Stat. 1975, ch. 110, par. 264 et seq.) On September 30, 1975, the trial court affirmed the Department\u2019s decision and entered judgment for the amounts of interest and penalties remaining unpaid.\nOpinion\nPlaintiff contends retailers\u2019 occupation taxes are not due on the 15% \u201cgratuity\u201d charge separately contracted for by its customers. Section 1 of the Retailers\u2019 Occupation Tax Act (Ill. Rev. Stat. 1975, ch. 120, par. 440) defines \u201cgross receipts\u201d from the sales of tangible personal property at retail as the total selling price or amount of such sales. That section further provides that \u201cselling price\u201d or \u201camount of sale\u201d means the consideration for a sale valued in money including both cash and services as \u201cdetermined without any deduction on account of the cost of the property sold, the cost of materials used, labor or services cost or any other expense whatsoever,\u201d but excluding State or local taxes. Ill. Rev. Stat. 1975, ch. 120, par. 440. (Emphasis added.)\nIn Cohen v. Playboy Clubs International, Inc. (1974), 19 Ill. App. 3d 215, 311 N.E.2d 336, this court held a mandatory 15% service charge which was separately stated on Playboy\u2019s customers\u2019 bills to be includable within, and not deductible from, the selling price of food and drinks sold by Playboy. There, as here, plaintiff argued the service charge was a tip or gratuity. Nonetheless, we rejected characterizing the service charge as a gratuity where a fixed percentage was mandatorily required of all customers.\nIn the instant case, plaintiiFs president admitted the 15% \u201cgratuity\u201d was a mandatory charge to all customers and was not subject to negotiation. We cannot accept plaintiffs argument that it acted as a mere conduit for its customers\u2019 gratuities in light of the evidence that no correlation existed between the amount of gratuities paid by the customers and the salaries of plaintiffs employees. The gratuity charge for services which were incidental to and an inseparable part of the transfer of the catered meals is includable in plaintiff\u2019s gross receipts. See Snite v. Department of Revenue (1947), 398 Ill. 41, 74 N.E.2d 877.\nPlaintiff\u2019s reliance upon Big Foot Country Club v. Wisconsin Department of Revenue (1975), 70 Wis. 2d 871, 235 N.W.2d 696, is misplaced. In holding that the country club\u2019s mandatory 15% service charge was not a part of its gross receipts subject to Wisconsin\u2019s sales tax, the court specifically found the charge had been adopted by a vote of the club\u2019s members, and, thus, was a mere codification by the club\u2019s by-laws of the social custom of tipping. Here, the \u201cgratuity\u201d did not represent a voluntary payment by plaintiff s customers, but rather a nonnegotiable, mandatory portion of the customer\u2019s bill. Moreover, a close reading of the Technical Information Memorandum of the Wisconsin Department of Revenue delineated in Big Foot shows that the instant gratuity would be taxable under the State\u2019s taxing scheme.\nWe are also persuaded in our holding, although not controlled by, the similar position taken by the taxing bodies in 12 other States (Cohen v. Playboy Clubs International, Inc. (1974), 19 Ill. App. 3d 215, 222, 311 N.E.2d 336, 341) and the similar holdings of the courts of other jurisdictions. Baltimore Country Club, Inc. v. Comptroller of the Treasury (1974), 272 Md. 65, 321 A. 2d 308; Youngstown Club v. Porterfield (1970), 21 Ohio St. 2d 83, 255 N.E.2d 262; contra, St. Paul Hilton Hotel v. Commissioner of Taxation (1974), 298 Minn. 202, 214 N.W.2d 351.\nFor the reasons given, we affirm the order of the circuit court.\nAffirmed.\nMEJDA and SULLIVAN, JJ., concur.\n\u201c(g) A customer tip which is given directly to an employee in cash or which is added by the customer to his bill, which amount is then turned over in full to the employee is exempt from the sales tax, if the amount of such tip is wholly in the discretion or judgment of the customer. (However, an amount of flat percentage, whether designated as a tip or as a service charge, that is added to the price of meals pursuant to a requirement of the seller furnishing such meal is a part of the selling price of such meals and is subject to the tax regardless of whether the amount or flat percentage may subsequently be paid over in part or in whole by the seller to his employees).\u201d Big Foot Country Club v. Wisconsin Department of Revenue (1975), 70 Wis. 2d 871, 875, 235 N.W.2d 696, 698.",
        "type": "majority",
        "author": "Mr. PRESIDING JUSTICE LORENZ"
      }
    ],
    "attorneys": [
      "Edward A. Berman Ltd., of Chicago (Edward A. Berman and Lewis W. Schlifkin, of counsel), for appellant.",
      "William J. Scott, Attorney General, of Chicago (Paul J. Bargiel, Assistant Attorney General, of counsel), for appellee."
    ],
    "corrections": "",
    "head_matter": "FONTANA D\u2019OR, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee.\nFirst District (5th Division)\nNo. 63205\nOpinion filed December 30, 1976.\nEdward A. Berman Ltd., of Chicago (Edward A. Berman and Lewis W. Schlifkin, of counsel), for appellant.\nWilliam J. Scott, Attorney General, of Chicago (Paul J. Bargiel, Assistant Attorney General, of counsel), for appellee."
  },
  "file_name": "1064-01",
  "first_page_order": 1094,
  "last_page_order": 1097
}