Belleville Dr. Pepper v. Korshak

• Decision Date: 01 December 1966
• Docket Number: No. 39934,39934
• Citation: 221 N.E.2d 635,36 Ill.2d 352
• Parties: BELLEVILLE DR. PEPPER et al., Appellees, v. Marshall KORSHAK, Director of Revenue, et al., Appellants.
• Court: Illinois Supreme Court

Page 635

221 N.E.2d 635

36 Ill.2d 352

BELLEVILLE DR. PEPPER et al., Appellees, v.Marshall KORSHAK, Director of Revenue, et al., Appellants.

No. 39934.

Supreme Court of Illinois.

Dec. 1, 1966.

William G. Clark, Atty. Gen., Springfield (Richard A. Michael and A. Zola Groves, Asst. Attys.Gen., of counsel), for appellants.

Martin, Craig, Chester & Sonnenschein, Chicago (Charles G. Chester and Sydney G. Craig, Chicago, or counsel), for appellees.

HOUSE, Justice.

Plaintiffs, bottlers and distributors of soft drinks, brought this action to enjoin the Department of Revenue from imposing and collecting the retailers' occupation tax and use tax on their purchase of bottles, cartons and shells (cases).The department appeals directly to this court from a decree of the circuit court of Cook County enjoining the imposition of the taxes.We have jurisdiction because the revenue is involved.

The department adopted an amendment to Rule 51 of its Rules and Regulations reading: 'Effective February 1, 1965, sellers of containers which are reusable, and which in the ordinary course of business are returned to the purchaser to be used again as containers for tangible personal property, are making sales for use or consumption, and their receipts from such sales are subject to the retailers' occupation tax.This is true regardless of the fact that the purchaser may charge a deposit at the time of transferring the container to his customer.'This amendment was held to be invalid by the trial court.

The facts are stipulated.Pllaintiffs purchase bottles, fill them with their beverages and place them in cartons or shells for sale to grocers, drug stores and others.The purchasers pay a deposit on the bottles and containers (less than the actual value) when they buy the beverage, and possession of them is surrendered without any right of reclamation.When a new supply is purchased, credit is given for an amount equal to the required deposit for a like amount of containers.In this State the average number of times used or 'trips' of the containers is 18 to 24 for bottles, 2 to 6 for cartons and 30 to 75 for shells.

Two elements must be present before there is a taxable sale.First, there must be a sale for use and consumption and second, the item sold is not for resale.(Modern Dairy Co. v. Department of Revenue, 413 Ill. 55, 108 N.E.2d 8;Burrows Co. v. Hollingsworth, 415 Ill. 202, 112 N.E.2d 706;Material Service Corp. v. Isaacs, 25 Ill.2d 137, 183 N.E.2d 164.)The Department's contention is that the containers are purchased for use and consumption and that this is indicated by acceptance of a 'deposit' of an amount considerably less than the cost price.It argues that since cost of the containers is about 2 1/2 times the deposit, the intention of the parties is manifested that the transaction is not a sale, but is a loan with a deposit to ensure the containers return.This is said to constitute a bailment rather than a sale.

In Owens-Illinois Glass Co. v. McKibbin, 385 Ill. 245, 52 N.E.2d 177, a similar attempt was made to impose a retailers' occupation tax upon beer bottles sold to breweries in Illinois.There, as here, the bottles...