First Nat. Bank of Maywood v. Jones

• Decision Date: 01 April 1971
• Docket Number: No. 43141,43141
• Citation: 48 Ill.2d 282,269 N.E.2d 494
• Parties: The FIRST NATIONAL BANK OF MAYWOOD et al., Appellants, v. Theodore A. JONES, Director of Revenue, et al., Appellees.
• Court: Illinois Supreme Court

Page 494

269 N.E.2d 494

48 Ill.2d 282

The FIRST NATIONAL BANK OF MAYWOOD et al., Appellants, v. Theodore A. JONES, Director of Revenue, et al., Appellees.

No. 43141.

Supreme Court of Illinois.

April 1, 1971.

Rehearing Denied May 26, 1971.

Kenart M. Rahn, Chicago, for appellants.

William J. Scott, Atty. Gen., Springfield (Francis T. Crowe, Calvin C. Campbell and A. Zola Groves, Asst. Attys. Gen., of counsel), for appellees.

WARD, Justice.

The plaintiffs, First National Bank of Maywood and National Bank of Austin, both of which are national banking associations created pursuant to the United States Code on Banks and Baning (Title 12, U.S.C. § 21) brought suit in the circuit court of Cook County individually and in a representative capacity on behalf of all other national banks in Illinois similarly situated, against the Director of Revenue of the State of Illinois, the State Treasurer, the Attorney General and various vendors and lessors of tangible personal property to the plaintiffs. The suits, which were consolidated in the circuit court, charged that the plaintiffs were required to pay Illinois use and occupation taxes by reason of unauthorized, illegal and unconstitutional rules and collection procedures initiated and enforced by the defendant Director of Revenue. They alleged that the effect of the enforcement of these rules and procedures has been to tax beyond and in excess of the limited consent given by Congress to the States under Title 12 U.S.C. § 548. Thereby the plaintiffs were and are being deprived, the complaints said, of constitutional rights assured under the Federal and State constitutions. In an amendment to the complaints the plaintiffs also charged that the taxes imposed upon them violated the Illinois Retailer's Occupation Tax Act (Ill.Rev.Stat.1967, ch. 120, par. 441) and the 'Robinson-Patman Act' (Title 15 U.S.C. § 13). The complaints asked that the Director of Revenue be restrained from collecting occupation and use taxes from the plaintiffs, that the suppliers, I.e., the vendors and lessors, be directed to pay under protest any sums which may be collected from national bank customers in the future, that the suppliers be directed to file claims for refunds of taxes heretofore paid, and the complaints asked that the following tax statutes, I.e., 'The Illinois Retailers Occupation Tax Act, Chapter 120, Ill.Rev.Stat., § 440, Et seq., Illinois Use Tax Act, Chapter 120, Ill.Rev.Stat., § 439.1 Et seq., Illinois Service Occupation Tax Act, 120 Ill.Rev.Stat., § 439.101, Et seq., Illinois Service Use Tax Act, Chapter 120, Ill.Rev.Stat., § 439.31, Et seq., Illinois Leasing Occupation Tax Act * * *, Chapter 120, Ill.Rev.Stat., § 453.101, Et seq., Illinois Leasing Use Tax Act * * *, Chapter 120, Ill.Rev.Stat., § 453.121, Et seq., Municipal Retailers Occupation Tax Act. Chapter 24, Ill.Rev.Stat., § 8--11--1, Municipal Service Occupation Tax Act, Chapter 24, Ill.Rev.Stat., § 8--11--5, County Retailer's Occupation Tax Act, Chapter 34, Ill.Rev.Stat. § 409.1, and County Service Occupation Tax Act, Chapter 34, Ill.Rev.Stat., § 409.2,' insofar as they apply to the purchases or leases of tangible property by the plaintiffs, be declared unconstitutional. The Director of Revenue filed a motion to strike and dismiss the consolidated complaints, which was sustained by the circuit court and the complaints dismissed. The plaintiffs have appealed to this court since a controversy involving revenue of the State of Illinois is involved and questions under the constitution of the United States and that of the State of Illinois are presented. See Ill.Rev.Stat.1969, ch. 110A, par. 302(a)(1) and (2).

The plaintiffs argue that they purchased or leased tangible personal property as customers of the defendant suppliers in the State of Illinois and have been required to pay occupation and use taxes in violation of the limited authority to tax given to the States under section 548 of Title 12 on Banks and Banking, (Title 12, U.S.C. § 548). They have been required to pay these taxes because the Use and Occupation Tax Acts, and the interpretation of them by the State, authorizes the supplier to collect any tax due from the purchaser. This has the effect, they contend, of imposing the legal incidence or liability (see Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65; and First Agricultural National Bank of Berkshire County v. State Tax Com., 353 Mass. 172, 229 N.E.2d 245) for these taxes upon national banks contrary to the holding in First Agricultural National Bank of Berkshire County v. State Tax Com., 392 U.S. 339, 88 S.Ct. 2173, 20 L.Ed.2d 1138. They also again charge that the imposition of these local taxes results in price discrimination in violation of the 'Robinson-Patman Act.' Title 15 U.S.C. § 13.

In First Agricultural National Bank of Berkshire County, the Supreme Court held that where the legal incidence of sales or use taxes would fall upon a national bank as a purchaser, the bank is immune from these taxes because they are not among those which a State was authorized by Congress under section 548 of Title 12 to impose on a national bank. The court said: 'The court below held, contrary to appellant's contention, that the Massachusetts sales tax is not imposed upon the bank as a purchaser, but is a tax upon vendors who sell tangible personal property to the bank. Of course if this is true, the bank cannot object if a particular vendor decides to pass the burden of the tax on to it through an increased price. But if this is not true, and if the tax is on the bank as a purchaser, then, because it is a national bank, appellant is exempt under 12 U.S.C. § 548. * * * And essentially the question for us is: On whom does the incidence of the tax fall?' (392 U.S. 339, 346, 88 S.Ct. 2173, 2177, 20 L.Ed.2d 1138, 1143, 1144.) The court determined that the legal incidence of the tax clearly fell on the purchaser, saying: 'It would appear to be indisputable that a sales tax which by its terms must be passed on to the purchaser imposes the legal incidence of the tax upon the purchaser. See Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 99, 62 S.Ct. 1, 3, 86 L.Ed. 65, (69). Subsection 3 of the Massachusetts sales tax provides: 'Reimbursement for the tax hereby imposed Shall be paid by the purchaser to the vendor and each vendor in this commonwealth Shall add to the sales price and shall collect from the purchaser the full amount of the tax imposed by this section, or an amount equal as nearly as possible or practicable to the average equivalent thereof; And such tax shall be a debt from the purchaser to the vendor, when so added to the sales price, and shall be recoverable at law in the same manner as other debts.' Acts and Resolves, 1966, c. 14, § 1, subsec. 3. (Emphasis added.) This subsection reads to us as a clear requirement that the sales tax be passed on to the purchaser. And this interpretation is reinforced by subsection 23 which prohibits as unlawful advertising the holding out by any vendor that he will assume or absorb the tax on any sale that he may make. We cannot accept the reasoning of the court below that simply because there is no sanction against a vendor who refuses to pass on the tax (assuming this is true), this means the tax is on the vendor. There can be no doubt from the clear...