Smith v. Department of Revenue, 5-85-0429
| Citation | 493 N.E.2d 653,97 Ill.Dec. 846,143 Ill.App.3d 607 |
| Decision Date | 14 May 1986 |
| Docket Number | No. 5-85-0429,5-85-0429 |
| Parties | , 97 Ill.Dec. 846 Gene SMITH, Pansy Smith and Delvis G. Smith, Jr., Plaintiffs-Appellants, v. DEPARTMENT OF REVENUE, Defendant-Appellee. |
| Court | United States Appellate Court of Illinois |
Ralph J. Derango, Belleville, for plaintiffs-appellants.
Neil F. Hartigan, Atty. Gen., Roma Jones Stewart, Sol. Gen., Chicago (William D. Frazier, Asst. Atty. Gen., Chicago, of counsel), for defendant-appellee.
Plaintiffs, Gene and Pansy Smith and Delvis G. Smith, Jr., appeal from a judgment of the circuit court of St. Clair County affirming, on administrative review, final assessments imposed on them by defendant, the Department of Revenue (hereinafter referred to as the Department), for tax deficiencies due under the Retailers' Occupation Tax Act (Ill.Rev.Stat.1983, ch. 120, par. 440, et seq.), the Municipal Retailers' Occupation Tax Act (Ill.Rev.Stat.1983, ch. 24, par. 8-11-1) and section 5.01 of the Local Mass Transit District Act (Ill.Rev.Stat.1983, ch. 111 2/3, par. 355.01). We affirm.
Plaintiffs are family members who owned and operated seven furniture stores in Illinois for varying periods of time between 1974 and 1982. Pansy Smith is Gene Smith's wife. Delvis G. Smith, Jr. is his son. Their furniture stores were located in O'Fallon, Waterloo, Fairview Heights, Collinsville, Granite City, Wood River and Mascoutah. The Department conducted an investigation and audit of these stores and determined that taxes were due for which no returns had been filed. The Department therefore compiled corrected returns and issued notices of tax liability to plaintiffs. These notices assessed retailers' occupation tax (ROT), municipal retailers' occupation tax (MROT) and local mass transit district tax (MTD) delinquencies in the amount of $20,933.12, penalties in the amount of $4,386.61 and interest in the amount of $9,818.09.
Plaintiffs each contested the notices. They requested and were granted an administrative hearing by the Department, which was convened on January 5, 1984, and continued on March 28, 1984. The Department entered into evidence numerous documents, including its corrected returns, notices of tax liability, plaintiffs' letter of protest and request for hearing, notices of hearings, post office return receipts related to the various notices, and the hearing officer's letter of authorization. In addition, testimony was adduced from Bernie Saner, an agent for the Department's Investigation Division, and Richard Foy, one of the Department's auditors. Plaintiffs were represented by counsel. Gene Smith gave testimony on plaintiffs' behalf, but Pansy and Delvis did not appear. Plaintiffs offered no documentary evidence.
Following the March 28 hearing, the hearing officer rendered his disposition in which he recommended that the notices of tax liability be upheld. The Department then issued its final assessments, including penalties and additional accrued interest, in the following amounts:
Type of Tax
Store Period Tax Amount Penalty Interest Total
-------- ---------- ---------- ---------- --------- --------- ----------
O'Fallon 1/82-3/82 ROT & MROT $ 1,219.14 $ 243.83 $ 633.94 $ 2,096.91
O'Fallon 1/82-3/82 MTD 60.96 12.19 81.70 104.85
Waterloo 9/82-10/82 ROT & MROT 586.03 117.20 158.22 861.45
Fairview 4/81-8/82 ROT & MROT 12,816.75 2,763.35 7,416.08 22,996.18
Hgts
Fairview 4/81-12/81 MTD 325.12 65.02 205.33 595.47
Hgts
Fairview 1/82-8/82 MTD 325.12 65.02 152.80 542.94
Hgts
Type of Tax
Store Period Tax Amount Penalty Interest Total
------------ --------- ------- ---------- --------- ---------- ----------
Collinsville 1/79-6/79 ROT & $2,400.00 $ 480.00 $ 2,222.00 $ 5,100.00
MROT
Granite City 1/82-2/82 ROT & 800 160.00 424.00 1,384.00
MROT
Wood River 1/74-3/74 ROT & 1,200.00 240.00 1,848.00 3,288.00
MROT
Mascoutah 1/80-3/80 ROT & 1,200.00 240.00 984.00 2,424.00
MROT ---------- --------- ---------- ----------
Total: $20,933.12 $4,386.61 $14,074.07 $39,393.80
---------- --------- ---------- ----------
On July 6, 1984, plaintiffs filed a joint complaint for administrative review of the Department's final assessments pursuant to section 3-101, et seq. of the Code of Civil Procedure () in the circuit court of St. Clair County. In January of 1985, the Department filed a motion for summary judgment, with supporting authorities, contending that there was no genuine issue as to any material fact and that it was entitled to judgment as a matter of law. The Department's motion was granted, and its final assessments were thus affirmed. The circuit court denied plaintiffs' subsequent motion to reconsider. Plaintiffs now appeal on the grounds that there was insufficient evidence to support the tax deficiencies assessed by the Department. This claim is without merit.
The record shows that the Department's assessments were determined as follows. A referral was made to the Department's Investigation Division from the State of Missouri indicating that Gene Smith was operating furnitures stores in Illinois. Bernie Saner established through a confidential source that Smith had operated seven such stores on the Illinois side of the St. Louis metropolitan area. Only two of these stores, in O'Fallon and Waterloo, were registered with the Department as of October, 1982. The Department had no evidence of any tax payment or sales tax registration with regard to the remaining five.
Saner testified that he and Richard Foy, a Department auditor, visited the Waterloo store in the latter part of October, 1982. They obtained sales invoices from that store covering a one-month period between September and October, 1982. The invoices were provided by John Williams, a salesman who was managing the store. Saner was given a list of the other stores and information concerning their ownership and operation, including the involvement of Smith's wife and son, by a confidential source. After obtaining this information, Saner interviewed Gene Smith, himself, who admitted operating the stores and advised Saner of the periods of operation. Saner confirmed the operation period of the O'Fallon store by obtaining copies of the lease from the landlord, a VFW post, and learned that Smith had leased the building and paid rent on it for three months: January, February and March of 1982. Saner similarly confirmed the operation period of the Fairview Heights store through a lease which showed that Smith and his wife, Pansy, rented it for a 17-month period beginning in April, 1981 and ending in August, 1982. Saner visited the premises where the Fairview Heights store was located, but it was no longer in business and he made a visual estimate of its size from outside. The remaining stores were also closed by this time, and neither Saner nor Foy personally viewed any of them.
Section 7 of the Retailers' Occupation Tax Act (Ill.Rev.Stat.1983, ch. 120, par. 446) states:
"Every person engaged in the business of selling tangible personal property at retail in this State shall keep records and books of all sales of tangible personal property * * *."
The duty to keep such records and books is a mandatory one. (Lakeland Construction Co. v. Department of Revenue (1978), 62 Ill.App.3d 1036, 1039, 20 Ill.Dec. 26, 28, 379 N.E.2d 859, 861.) Except for the one- month period at the Waterloo store, however, plaintiffs could not produce and the Department was unable to obtain sales records for any of the stores for the periods in question. Accordingly, Saner recommended that the gross sales and tax calculations for the stores be based on the one month of invoices from the Waterloo store which could be documented. Those invoices showed gross sales for the month of $8,000.
Richard Foy, who conducted the audit for the Department, testified that taxable sales for each of the stores but the one in Fairview Heights were computed by projecting this $8,000 per month figure based on the length of time the store operated. The difference in the Fairview Heights calculation was that Foy assumed gross sales there to be double those of the Waterloo store. This assumption, made at Saner's direction, was premised on the considerably larger size of the Fairview Heights store, as observed by Saner, and its location in a more populous section of the St. Louis metropolitan area.
Section 5 of the Retailers' Occupation Tax Act (Ill.Rev.Stat.1983, ch. 120, par. 444) expressly provides that where, as here, a person subject to the Act fails to file a return, the Department is required to determine the amount of tax due according to its best judgment and information. The Department's determination is prima facie correct and constitutes prima facie proof of the correctness of the amount of tax due. (Ill.Rev.Stat.1983, ch. 120, par. 444.) The Department is not required to substantiate the basis for its determination by placing into evidence plaintiffs' books and records. (Masini v. Department of Revenue (1978), 60 Ill.App.3d 11, 15, 17 Ill.Dec. 325, 329, 376 N.E.2d 324, 328.) If the method employed by the Department to calculate the amount of tax due is called into question, the record must show only that the techniques and assumptions...
To continue reading
Request your trial
-
Chak Fai Hau v. Dep't of Revenue & Constance Beard
...by denying the accuracy of the Department's assessments or by suggesting hypothetical weaknesses." Smith v. Department of Revenue , 143 Ill. App. 3d 607, 613, 97 Ill.Dec. 846, 493 N.E.2d 653 (1986). ¶ 55 Hau argued that the container method used by the auditor was flawed and denied the esti......
-
Sprague v. Johnson, 4-89-0423
......Plaintiff-Appellee,. v. J. Thomas JOHNSON, Director of the Department of Revenue of. the State of Illinois; and James H. Donnewald,. State ...Department of Revenue (1973), 12 Ill.App.3d 725, 298 N.E.2d 789; Smith v. Department of Revenue (1986), 143 Ill.App.3d 607, 97 Ill.Dec. 846, 493 ......
-
Elkay Mfg. Co. v. Sweet, 1-89-2251
......v. Roger D. SWEET, Director, and the Department of Revenue of. the State of Illinois, Defendants-Appellees. No. 1-89-2251. ...at 871, 510 N.E.2d at 939; Smith v. Department of Revenue (1986), 143 Ill.App.3d 607, 611, 97 Ill.Dec. 846, ......
-
Mitchell v. Department of Revenue, 1-90-2176
...... are entitled to a "prima facie presumption of correctness" so as to encourage taxpayers to keep comprehensive and accurate records, relying on Smith v. Department of Revenue (1986), 143 Ill.App.3d 607, 97 Ill.Dec. 846, 493 N.E.2d 653. That case involved owners' failure to pay taxes due under the ......