Follett's Illinois Book & Supply Store, Inc. v. Isaacs

• Citation: 27 Ill.2d 600,190 N.E.2d 324
• Decision Date: 25 March 1963
• Docket Number: No. 37487,37487
• Parties: FOLLETT'S ILLINOIS BOOK AND SUPPLY STORE, INC., et al., Appellants, v. Theodore J. ISAACS, Director of Revenue, Appellee.
• Court: Supreme Court of Illinois

Page 324

190 N.E.2d 324

27 Ill.2d 600

FOLLETT'S ILLINOIS BOOK AND SUPPLY STORE, INC., et al., Appellants, v. Theodore J. ISAACS, Director of Revenue, Appellee.

No. 37487.

Supreme Court of Illinois.

March 25, 1963.

Rehearing Denied May 29, 1963.

Brown, Fox & Blumberg, Chicago (Nathan an S. Blumberg and Jacob L. Fox, Chicago, of counsel), for appellants.

Charles G. Chester and Martin L. Bogot, Chicago (Martin, Craig, Chester & Sonnenschein, Chicago, of counsel), for amicus curiae, Illinois Retail Merchants Assn.

William G. Clark, Atty. Gen., Springfield (William C. Wines, Raymond S. Sarnow, A. Zola Groves, and Edward A. Berman, Asst. Attys. Gen., of counsel), for appellee.

Kirkland, Ellis, Hodson, Chaffetz & Masters, Chicago (Andrew C. Hamilton and Thomas F. Scully, of counsel), for amicicuriae Knox College and others.

UNDERWOOD, Justice.

Plaintiffs, each of which is an Illinois corporation operating a retail bookstore near a university campus, brought this action on behalf of themselves and all others similarly situated against defendant as Director of Revenue of Illinois. They seek a declaratory judgment that the exemptive provisions of the Retailers' Occupation Tax Act (Ill.Rev.Stat.1961, chap, 120, pars. 440 et seq.) and the Use Tax Act (Ill.Rev.Stat.1961, chap. 120, pars. 439.2 et seq.), as amended by Senate Bills 504 and 565 (Laws 1961, pp. 1738 and 1772) are unconstitutional and void, and severable from the acts which they amend, and that Rule 38 of defendant, interpreting said Acts, is void and of no effect. Alternatively, they ask judgment declaring that sales at retail by a nonprofit educational institution, to its students and members, of tangible personal property to be used primarily for school purposes are exempt only to the extent of sales of items that are not sold or offered for sale by persons organized for profit. They also ask that defendant be restrained from giving effect to the amendments and his interpretive bulletin (Rule 38) during the pendency of the action. Defendant's motion to dismiss the complaint for failure to state a cause of action and for want of equity was sustained. Plaintiffs elected to stand on the complaint, and appeal directly here since the revenue and constitutionality of statutes are involved. Ill.Rev.Stat.1961, chap. 110, par. 75(1)(b).

In 1961 the amendments complained of were adopted which relate to the definitive sections of the Use Tax Act and the Retailers' Occupation Tax Act, as follows: 'excepting only a person organized and operated exclusively for charitable, religious or educational purposes to the extent of sales by such person to its members, students, patients or inmates of tangible personal property to be used primarily for the purposes of such person, and to the extent of sales by such person of tangible personal property which is not sold or offered for sale by persons organized for profit.' Laws of 1961, pp. 1739, 1773.

Subsequent to the approval of these amendments, defendant issued a bulletin (now Rule 38) which, among other provisions, exempts from the retailers' occupation and use taxes the sales by schools to their students and faculty of school books and school supplies for use in their class work.

Since the defendant's motion to dismiss the complaint, as amended, admits all facts properly pleaded (People v. Sterling, 357 Ill. 354, 192 N.E. 229), and raises the question of the sufficiency of the complaint, as amended, (Miller v. City of Chicago, 348 Ill. 34, 180 N.E. 627), we must look to the material allegations of the complaint. Briefly, plaintiffs allege that they own and operate retail bookstores near the universities of Chicago and Illinois and Northwestern University, each of which universities operates a bookstore on its campus; that the universities are not-for-profit corporations operated for educational purposes and that their bookstores are not essential to such purposes or operated in furtherance of such purposes, but are in fact retail stores operated in direct competition with plaintiffs' stores, soliciting the same class of customers, offering the same merchandise from the same suppliers at substantially similar prices. Plaintiffs further allege that while they pay the retailers' occupation tax on sales of textbooks and school supplies, the defendant assesses no such tax against the university-owned stores on similar sales; that the impact of such tax falls on the purchasers at retail; that the total annual volume of sales of textbooks and school supplies to college and university students in Illinois schools is $10,705,300, of which $4,791,350 is from college and university-owned stores, treated by defendant as exempt from sales or use tax, and $5,913,950 from stores operated by plaintiffs and others similarly situated; that of the approximately 214,106 college and university students in Illinois, 34 per cent or 73,956 attend schools which do not operate bookstores, and are required to pay a sales or use tax on items identical to those sold without tax to students who attend a school operating a bookstore.

Plaintiffs further allege long-standing competition with the university bookstores based upon prompt service, availability of trade-in privileges 'and like factors', and that the exemption granted by defendant burdens them with a competitive disadvantage which will be fatal to them in the conduct of their lawful businesses. They further allege an actual controversy exists, and that they will suffer irreparable injury unless defendant is restrained, pending final decision, from giving effect to his interpretation of the amendments.

Since all parties seek a declaratory judgment on the merits, we need not consider the sufficiency of the complaint for the issuance of a temporary injunction, but we hold plaintiffs state a cause of action for declaratory judgment, and are proper parties to bring the suit. An actual controversy exists and the plaintiffs allege sufficient facts to establish their interest in the controversy, thus coming within the requirements of the Declaratory Judgments Act, Ill.Rev.Stat.1961, chap. 110, par. 57.1. Retail Liquor Dealers' Ass'n v. Schreiber, 382 Ill. 454, 459, 47 N.E.2d 462; American Civil Liberties Union v. Chicago, 3 Ill.2d 334, 353, 121 N.E.2d 585; People ex rel. Holland Coal Co. v. Isaacs, 22 Ill.2d 477, 478, 176 N.E.2d 889.

We presume the legislature intended to enact a valid law, and we will not determine the constitutionality of these amendatory bills if this case can be finally disposed of without such determination. (Stewart v. Department of Public Works and Buildings, 336 Ill. 513, 521, 168 N.E. 372.) In ascertaining the legislative intent, it is proper to consider the circumstances leading up to the adoption as well as the language used in the acts themselves. In 1942 this court held the Retailers' Occupation Tax Act did not apply to sales of tangible personal property by nonprofit corporations. (Svithiod Singing Club v. McKibbin, 381 Ill. 194, 44 N.E.2d 904.) Following the 1935 decision in Burgess Co. v. Ames, 359 Ill. 427, 194 N.E. 565, no attempt was made to impose the tax on the sale of books and other publications. Then in 1961, Senate Bill 568 (Laws 1961, p. 1743) was adopted subjecting the sale of books to retailers' occupation tax, and a similar bill (S.B. 569) imposed the use tax (Laws of 1961, p. 1777). Both of these bills, together with the amendatory laws in question here, were approved on July 10, 1961, along with five other amendments to the Retailers' Occupation Tax Act and six other amendments to the Use Tax Act. With the exception of two amendments making reference changes, all amendments proadened the base or enlarged the scope of the two tax acts.

Defendant contends the legislature clearly created two exemptions for sales of tangible personal property by a person...