Fefferman v. Marohn

• Decision Date: 22 March 1951
• Docket Number: 31771,31772,Nos. 31770,s. 31770
• Citation: Fefferman v. Marohn, 408 Ill. 542, 97 N.E.2d 785 (Ill. 1951)
• Parties: FEFFERMAN et al. v. MAROHN, Acting Director of Revenue, et al.
• Court: Illinois Supreme Court

Page 785

97 N.E.2d 785

408 Ill. 542

FEFFERMAN et al. v. MAROHN, Acting Director of Revenue, et al.

Nos. 31770, 31771, 31772.

Supreme Court of Illinois.

March 22, 1951.

Ivan A. Elliott, Atty. Gen. (William C. Wines, Raymond S. Sarnow and James C. Murray, all of Chicago, of counsel), for appellants.

Barrett, Barrett, Costello & Barrett, of Chicago (George F. Barrett and Edward Wolfe, Chicago, of counsel), for appellee T. B. Packer, doing business as Monroe Manufacturing & Sales Co.

DAILY, Justice.

We consider here three separate appeals from decrees of the circuit court of Cook County which have been consolidated in this court on the stipulation of the parties that the issues of law and fact are identical in each appeal. Complaints were filed by each of the appellees under the provisions of the Administrative Review Act seeking to compel the Department of Revenue, appellant, to issue each of the appellees assignable credit memoranda under the provisions of section 6 of the Retailers' Occupation Tax Act, (Ill.Rev.Stat.1947, chap. 120, par. 445,) for taxes paid under the act as the result of what they claim to be 'a mistake of fact or error of law.'

The separate complaints of appellees each alleged that they were in the business of selling textiles, clothing materials, and clothing to retailers, charitable institutions and public hospital and penal institutions; that they had sold such items to the State of Illinois and to Cook County, and on such sales had paid the regular tax provided by the Retailers' Occupation Tax Act, (Ill.Rev.Stat.1947, chap. 120, pars. 44o-453;) that the said State and county sold, transferred or gave the said merchandise to patients of public hospitals, inmates of penal institutions and to other persons who were the actual owners and consumers of said merchandise. The allegations continued that the sales were in fact sales at wholesale for which no tax was payable under the act, and that each appellee was entitled to an assignable credit memorandum for the amount of tax paid as the result of a mistake of fact or error of law during the period beginning September 1, 1941, and ending April 30, 1945. It closing, each complaint alleged that the Director of the Department of Revenue had held that the sales were taxable as being sales at retail as defined in section 1 of the Retailers' Occupation Tax Act, and had denied each of the three claims.

The record shows that the merchandise sold to the State and county consisted of bedding, towels, gauze, bandage muslin, surgical instruments, rubber gloves and other items of a similar nature. At the start, the controversy also embraced taxes which had been paid on the sale of uniforms for the State militia, but that issue is not before, us, for appellees have abided by the trial court's finding that they were not entitled to credit memoranda for taxes paid prior to June 30, 1942, on the ground that recovery was barred by the Statute of Limitations. As to taxes paid on subsequent dates, however, the trial court set aside the orders of the Department which denied appellees credit, sustained the appellees' contention that the sales were not sales at retail within the contemplation of the act, and ordered the Department to issue credit memoranda for the respective amount accruing to each appellee. The Department and the Director have appealed directly from the judgments and we take jurisdiction because the revenue is involved and because the State is an interested party.

The records, stipulations and pleadings before us raise the issue of whether the vendor of personal property sold to a State or county is exempt from the retailers' occupation tax, where the property is used, without cost or charge, by inmates and patients of institutions operated by the governmental vendee. Appellees contend that they are not liable unless it can be shown that the sale is made at retail, and that it is a sale for use and consumption. It is their position that the sales here were at wholesale rather than at retail, and that the buyers, namely the State and county, were not the ultimate users and consumers. The appellants, on their part, contend that the sales in question were transfers of tangible property for use and consumption and not for resale, and are therefore subject to a tax which is measurable by the Retailers' Occupation Tax Act.

This court has determined in previous decisions that the tax authorized by the Act is an occupational tax imposed upon persons engaged in selling tangible personal property at retail in this State, and that it is not a tax upon sales although the tax is to be measured by the gross receipts from such sales. Mahon v. Nudelman, 377 Ill. 331, 36 N.E.2d 550; Herlihy Mid-Continent Co. v. Nudelman, 367 Ill. 600, 12 N.E.2d 638, 115 A.L.R. 485; Reif v. Barrett, 355 Ill. 104, 188 N.E. 889. Evidence of sale of personal property at retail is a necessary element to the establishment of the tax, and it is material in determining if a person making such a sale is engaged in an occupation which is subject to the tax. Material Service Corp. v. McKibbin, 380 Ill. 226, 43 N.E.2d 939. A 'sale at retail' is defined by section 1 of the act (Ill.Rev.Stat.1947, chap. 120, par. 440,) as follows: "Sale at retail' means 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, for a valuable consideration.' In construing the language of this statute we have held that unless the purchaser is to be the ultimate user or consumer, or there is to be no further transfer of the property, the seller's occupation is not taxable. Mallen Co. v. Dept. of Finance, 372 Ill. 598, 25 N.E.2d 43; American Optical Co. v. Nudelman, 370 Ill. 627, 19 N.E.2d 582; Huston Bros. Co. v. McKibbin, 386 Ill. 479, 54 N.E.2d 564.

Appellees, relying upon the line of the last cited cases, contend that the ultimate users and consumers of the merchandise they sold to the State and county are the patients and inmates of charitable institutions, not the purchasers themselves, thus rendering appellees' occupations nontaxable. Appellants argue, and we believe are supported by previous decisions...