Huston Bros. Co. v. McKibbin, 27544.

Citation386 Ill. 479,54 N.E.2d 564
Decision Date11 May 1944
Docket NumberNo. 27544.,27544.
PartiesHUSTON BROS. CO. v. McKIBBIN, Director of Finance, et al.
CourtSupreme Court of Illinois

OPINION TEXT STARTS HERE

Action by Huston Brothers Company against George B. McKibbin, Director of Finance, and others, for a decree declaring certain rules of the Department of Finance void, adjudging unconstitutional an amendment to section 1 of the Retailers' Occupation Tax Act, restraining defendants from transferring to the general revenue fund of state moneys paid by plaintiff under protest, refunding taxes so paid and enjoining the exaction of taxes on future sales of plaintiff's products to doctors and hospitals. From a decree dismissing the complaint, plaintiff appeals.

Reversed and remanded, with directions.Appeal from Circuit Court, Sangamon County; Lawrence E. stone, judge.

Madigan & Thorsen and Hovey & Ely, all of Chicago, and Coyle & Ensel, of Springfield (Robert Thorsen, of Chicago, of counsel), for appellant.

George F. Barrett, Atty. Gen. (Harry L. Arnold, of Rockford, and William C. Wines, of Chicago, of counsel), for appellees.

WILSON, Justice.

Huston Brothers Co. is engaged in the business of selling drugs, medicines, pharmaceutical, medical and surgical supplies, so far as is relevant, to doctors and hospitals who use these products in the care and treatment of their patients. In an action instituted in the circuit court of Cook county, captioned Huston Brothers Co. v. Nudelman, No. 39C 10458, a decree was rendered in favor of the taxpayer, finding that it was not engaged in selling at retail and restraining the Department of Finance of the State from collecting retailers' occupation taxes on its sales of medical and surgical supplies to doctors and hospitals. No appeal was prosecuted from this decree, and it has long since become final. When the complaint was filed in the circuit court of Cook county and, also, the day the decree was rendered, section 1 of the Retailers' Occupation Tax Act defined a ‘sale at retail’ as ‘any transfer of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, * * *.’ Ill.Rev.Stat.1939, chap. 120, par. 440. Section 2 imposed then, as now, a tax ‘upon persons engaged in the business of selling tangible personal property at retail * * *.’ Ill.Rev.Stat.1943, chap. 120, par. 441. Prior to 1941, section 1 did not define the words ‘use or consumption.’ By an amendatory act, approved May 29, 1941 (Laws of 1941, page 1079) the following definition was added to section 1: “Use or consumption', in addition to its usual and popular meaning, shall be construed to include the employment of tangible personal property by persons engaged in service occupations (including construction contracting and other service occupations of like character), trades or professions, in the rendering of services, where as a necessary incident to the rendering of such services, transfer of all or of a part of the tangible personal property employed in connection with the rendering of said services is made from the person engaged in the service occupation (including construction contracting and other service occupations of like character), trade or profession, to his customer or client.' Thereafter, the Department of Finance (now known as the Department of Revenue) promulgated rules Nos. 1 and 31 again imposing a tax upon sales of medical and surgical supplies to doctors and hospitals.

August 20, 1941, the plaintiff, Huston Brothers Co., filed its complaint in the circuit court of Sangamon county against the defendants, the Director of Finance, the State Treasurer, and the Attorney General. Subsequently, the complaint was amended. The relief sought was a decree (1) declaringrules Nos. 1 and 31 void to the extent applicable to plaintiff when engaged in selling the products enumerated in its complaint to doctors and hospitals; (2) adjudging unconstitutional the amendment to section 1 of the Retailers' Occupation Tax Act, in so far as it imposes a tax upon plaintiff when engaged in selling its medical and surgical supplies to doctors and hospitals; (3) restraining defendants from transferring to the general revenue fund of the State monies paid by plaintiff, under protest, representing taxes levied under the Retailers' Occupation Tax Act; (4) refunding the taxes so paid; and (5) enjoining the exaction of taxes on future sales of its products to doctors and hospitals. Defendants answered the complaint, maintaining, so far as pertinent, that the amendment to section 1 of the Retailers' Occupation Tax Act is not vulnerable to the assault on its constitutional validity in the respects challenged. The cause was heard upon the pleadings and a stipulation...

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