{
  "id": 3310774,
  "name": "HUMPHREY CADILLAC AND OLDS, INC., Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE, Defendant-Appellant",
  "name_abbreviation": "Humphrey Cadillac & Olds, Inc. v. Department of Revenue",
  "decision_date": "1979-01-26",
  "docket_number": "No. 78-222",
  "first_page": "27",
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    "id": 8837,
    "name": "Illinois Appellate Court"
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  "last_updated": "2023-07-14T14:49:10.381789+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
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  "casebody": {
    "judges": [],
    "parties": [
      "HUMPHREY CADILLAC AND OLDS, INC., Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE, Defendant-Appellant."
    ],
    "opinions": [
      {
        "text": "Mr. JUSTICE RECHENMACHER\ndelivered the opinion of the court:\nThe Department of Revenue (hereafter \u201cthe Department\u201d) served Humphrey Cadillac and Olds, Inc. (hereafter \u201cthe Taxpayer\u201d) with a notice of tax liability for use tax alleged to be owing upon automobiles held by the Taxpayer in what is termed a \u201crental\u201d account. The assessment, including the penalty and interest, was in the amount of *11,869.30, and covered the period from July of 1972 through May of 1975. After an evidentiary hearing before one of the Department\u2019s hearing officers, the assessment was confirmed and the Taxpayer filed a complaint under the Administrative Review Act (Ill. Rev. Stat. 1977, ch. 110, par. 264 et seq.), before the circuit court of Winnebago County. After further proceedings, the court entered a judgment reversing the finding of the Department\u2019s hearing officer. The Department appeals.\nAt the outset we note that the finding of the Department\u2019s hearing officer may not be reversed unless it is against the manifest weight of the evidence. (See, e.g., Thermos v. Department of Revenue (1976), 37 Ill. App. 3d 410, 412.) However, the underlying facts in this case were not in any substantial way in dispute, although the opposing witnesses drew different conclusions from those facts.\nThe primary business of the Taxpayer is the retail sale of new and used automobiles and parts, and the firm has enjoyed retail sales of $8 to $10 million dollars per year. Apart from inventory accounts for new cars, used cars, and leased cars, the Taxpayer held certain automobiles under what it termed a \u201crental account.\u201d During the audit period, 60 to 61 cars were held in this account, with 10 to 12 cars listed in the account at any given time, for periods ranging to some months to slightly longer than a year. The assessment of use tax by the Department in this case was based upon the cost of all of the vehicles which were at any time held in the rental account.\nThere were a number of factors which led the Department to make an assessment for use tax, apart from the fact that the account was labeled a \u201crental\u201d account. The Taxpayer maintains a number of \u201cdemo\u201d cars (i.e., used for demonstration purposes) and these are not held under the \u201crental\u201d account. The \u201cdemos\u201d all carry dealer\u2019s license plates while the cars held in the \u201crental\u201d account are licensed individually. The Taxpayer maintains a separate \u201crental\u201d office within the dealership which has a sign bearing the title \u201cRockford Auto Rental,\u201d a name \u201cmade up\u201d in order to give the general public the appearance that the rental office was a separate firm. Every car in the rental inventory was rented at least once, and the rental operation generated gross income of *68,229 during the audit period, although after expenses this worked out to a net loss of *8,479. Finally, an auditor for the Department testified that the Taxpayer books indicated \u201cwhat appeared to be depreciation\u201d in the form of an item entered into the account, against the value of the cars, termed a \u201cdepreciation reserve.\u201d\nAt the hearing before the Department\u2019s hearing officer, the Taxpayer\u2019s sales manager presented testimony which related the \u201crental\u201d account to the Taxpayer\u2019s overall business. He testified that the term \u201cdepreciation reserve\u201d was not correct since the charge against the value of the cars in the rental account was an \u201cinventory adjustment,\u201d intended to adjust the original value of the cars to their current market value. He stated that similar records were kept for the new and used car inventories. The \u201crental department\u201d was operated as a convenience to the Taxpayer\u2019s customers and with the idea that the persons using the cars, and others, would become interested in purchasing them. Other than the sign within the Taxpayer\u2019s premises, the Taxpayer did nothing to promote or advertise its rental operation, and the \u201crental\u201d cars were frequently loaned to customers without charge. Every car in the rental account had been purchased directly from the manufacturer and each car was ultimately sold to a retail customer and Retailers\u2019 Occupation Tax paid. The \u201crental\u201d cars were often used for demonstration purposes by the Taxpayer\u2019s salesmen, and on occasion one of these cars would be purchased by a person to whom it had been loaned or rented. The Taxpayer regarded the \u201crental\u201d account as an \u201caccount for resale,\u201d and every car held in the account was available for sale at all times.\nIn our view the trial court was correct in reversing the finding of the hearing officer and assessment of the Department. The use tax is a tax imposed on the privilege of using tangible personal property in this State, purchased at retail from a retailer (Ill. Rev. Stat. 1977, ch. 120, par. 439.3). In this case, the evidence was uncontroverted that the automobile in question was obtained from the General Motors Corporation and that General Motors does not engage in the retail sale .of automobiles but is \u201cstrictly a wholesaler.\u201d It is also obvious from the record as a whole that the cars held in the \u201crental\u201d account were purchased for the purpose of resale, and that the transitional use of the cars for rental, courtesy and demonstration was merely incidental. The most important fact compelling this conclusion is that the cars held under the \u201crental account\u201d were treated as inventory available for sale at all times. From the large number of cars which passed through the \u201crental\u201d account during the audit period, it is clear that this treatment was no idle boast and that the Taxpayer achieved the frequent sale and a rapid turnover of the \u201crental\u201d cars. Similarly, the sale of certain of the \u201crental\u201d cars to the person renting or using them supported the Taxpayer\u2019s assertion that the interim or transitional use of the cars in the \u201crental\u201d account was primarily intended to demonstrate the cars and promote sales. In the context of the Taxpayer\u2019s massive sales operation, the gross receipts generated by the rental cars were inconsequential, and the fact that the rental car department was operated at a loss, while all the other divisions of the Taxpayer\u2019s business were expected to make a profit, provided ample support for the Taxpayer\u2019s contention that it had not purchased the cars for rental purposes. Certainly, the rental of the cars to customers would not, standing by itself, render them subject to the use tax. (See Illinois Road Equipment Co. v. Department of Revenue (1965), 32 Ill. 2d 576.) Nor does the Taxpayer\u2019s deduction of a charge labeled \u201cdepreciation reserve\u201d from the cars and the account compel a different result, since the term was described as a misdescription, and the adjustment was similar to those made in the firm\u2019s new and used car inventories. (See Thermos v. Department of Revenue (1976), 37 Ill. App. 3d 410,415.) In sum, since the automobiles coming, from time to time, under the \u201crental\u201d account were purchased from a wholesaler (the manufacturer) for purposes of resale, they did not constitute \u201ctangible personal property\u201d \u201cpurchased at retail from a retailer,\u201d and were not subject to the use tax. See Du Page Aviation Corp. v. Department of Revenue (1976), 37 Ill. App. 3d 587.\nFor the foregoing reasons, the judgment of the circuit court of Winnebago County is affirmed.\nJudgment affirmed.\nSEIDENFELD and WOODWARD, JJ., concur.",
        "type": "majority",
        "author": "Mr. JUSTICE RECHENMACHER"
      }
    ],
    "attorneys": [
      "William J. Scott, Attorney General, of Chicago (Gail A. Moreland, Assistant Attorney General, of counsel), for appellant.",
      "Robert K. Clark, of Rockford, for appellee."
    ],
    "corrections": "",
    "head_matter": "HUMPHREY CADILLAC AND OLDS, INC., Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE, Defendant-Appellant.\nSecond District\nNo. 78-222\nOpinion filed January 26, 1979.\nWilliam J. Scott, Attorney General, of Chicago (Gail A. Moreland, Assistant Attorney General, of counsel), for appellant.\nRobert K. Clark, of Rockford, for appellee."
  },
  "file_name": "0027-01",
  "first_page_order": 49,
  "last_page_order": 52
}