ILMO Prods. Co. v. Dep't of Revenue
| Decision Date | 05 September 2013 |
| Docket Number | NO. 4-12-0973,4-12-0973 |
| Parties | ILMO PRODUCTS COMPANY, an Illinois Corporation, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE; BRIAN HAMER, Director of Revenue; and ALEXI GIANNOULIAS, Treasurer of the State of Illinois, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
NOTICE
This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from Circuit Court of Sangamon County
Honorable John Schmidt Judge Presiding
¶ 1 Held: The appellate court affirmed the trial court's summary-judgment determination, concluding that the "HAZMAT" fees the plaintiff imposed on its high-pressure gas cylinders were not subject to the retailers' occupation tax because they concerned a nontaxable rental and the plaintiff's cryogenic systems were exempt from the use tax as manufacturing machinery.
¶ 2 In February 2008, plaintiff, ILMO Products Company (ILMO), sued defendants, the Illinois Department of Revenue (Revenue), Brian Hamer, and Alexi Giannoulias, seeking a declaratory judgment that the "retailers' occupation tax" and "use tax"—which Revenue had levied on ILMO's high-pressure gas cylinders and cryogenic gas systems—were improper. In July 2012, ILMO filed a motion for summary judgment based on the parties' stipulated facts, positing that (1) the "HAZMAT" fees ILMO imposed on its high-pressure gas cylinders were not subject to the retailers' occupation tax because they concerned a nontaxable rental, rather than ataxable sale, and (2) the cryogenic systems were exempt from the use tax as manufacturing machinery. In September 2012, the trial court granted summary judgment in favor of ILMO.
¶ 3 Defendants appeal, arguing that the trial court erred by granting ILMO's motion for summary judgment. We disagree and affirm.
¶ 6 In January 2008, Revenue, after conducting a tax audit of ILMO—an Illinois corporation whose business included, among other things, (1) renting high-pressure gas cylinders and (2) purchasing and renting to customers cryogenic systems that store liquid gases and convert them to gaseous gases—found that ILMO owed retailers' occupation and use taxes, penalties, and interest. Shortly thereafter, ILMO paid $140,761.51 in taxes, penalties, and interest under protest. That same day, ILMO sued defendants, seeking a declaratory judgment that the retailers' occupation tax and use tax—which Revenue had levied on ILMO's high-pressure gas cylinders and cryogenic gas systems, respectively—were improper.
¶ 8 The parties thereafter agreed to the following stipulated facts:
¶ 9 ILMO sells gases to its customers and in so doing charges a "HAZMAT" fee "related to ILMO's compliance with hazardous materials laws and regulations for the sale of industrial, medical[,] and specialty gases." ILMO collects a retailers' occupation tax on both the sale and the fee.
¶ 10 ILMO also rents high-pressure gas cylinders to its customers. ILMO does not collect retailers' occupation tax on the rental fees because the rental does not involve the sale ofproperty. However, ILMO does collect a separately stated "HAZMAT" fee related to ILMO's "compliance with hazardous materials laws and regulations." The retailers' occupation tax that Revenue claims is due represents taxes on the "HAZMAT" fee on the cylinder rentals.
¶ 11 ILMO additionally owns and leases to its customers cryogenic systems that (1) store liquid gases supplied by ILMO's supplier and delivered in a bulk truck and (2) convert the liquid gases to gaseous gases. ILMO's cryogenic-systems customers use the systems as intended. Once converted, those customers either use the gases (1) in their manufacturing process, e.g., welding, laser cutting, injection into plastics, or (2) for delivery of gases to medical patients.
¶ 13 In February 2008, ILMO sued defendants, seeking a declaratory judgment that the retailers' occupation tax and use tax were improper. In July 2012, ILMO filed a motion for summary judgment based on the parties' previously outlined stipulated facts, positing that (1) the "HAZMAT" fees ILMO imposed on its high-pressure gas cylinders were not subject to the retailers' occupation tax because they concerned a nontaxable rental, rather than a taxable sale (see 35 ILCS 120/2 (West 2008) (), and (2) the cryogenic systems were exempt from the use tax as manufacturing machinery because it uses those systems to convert bulk liquid gases into gaseous gases for sale to its customers (see 35 ILCS 105/3-5(18) (West 2008) (). (ILMO also argued that the imposition of the use tax on the cryogenic systems was improper because its customersused the those systems to convert—or, "manufacture"—the gases as well.)
¶ 14 Revenue responded that summary judgment was improper for two reasons. First, ILMO failed to prove that no question of material fact existed regarding ILMO's "HAZMAT" fees on the cylinder rentals being subject to the retailers' occupation tax because it presented no evidence (1) that a customer could rent a cylinder without purchasing gas from ILMO or (2) how it calculates its "HAZMAT" fees, indicating that the fee was merely an attempt to evade the retailers' occupation tax by charging a fee on tax-exempt cylinder rental that, in fact, related to the sale of gas. Second, ILMO failed to prove that its cryogenic systems were not subject to the use tax because the stipulated facts did not show that (1) those systems were primarily used for manufacturing rather than storage or (2) the conversion of liquid gas to gaseous gas constituted "manufacturing."
¶ 15 In September 2012, the trial court granted summary judgment in favor of ILMO, ordering the State Treasurer to refund the taxes ILMO paid under protest.
¶ 16 This appeal followed.
¶ 18 Defendants argue that the trial court erred by granting ILMO's motion for summary judgment. Specifically, defendants contend that a question of fact exists as to whether (1) ILMO's "HAZMAT" fees on its high-pressure cylinder rentals were taxable under the retailer's occupation tax, and (2) the cryogenic systems are taxable under the use tax because the facts actually show that they were primarily used for storage rather than manufacturing. We address defendants' contentions in turn.
¶ 20 " 'Summary judgment is appropriate where the pleadings, affidavits, depositions, and admissions on file, when viewed in the light most favorable to the nonmoving party, demonstrate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.' " Edens v. Godinez, 2013 IL App (4th) 120297 ¶ 13 (quoting West Bend Mutual Insurance v. Norton, 406 Ill. App. 3d 741, 744, 940 N.E.2d 1176 (2010)). We review de novo a trial court's order granting summary judgment. Howle v. Aqua Illinois, Inc., 2012 IL App (4th) 120207 ¶ 41, 978 N.E.2d 1132.
¶ 22 Defendants first contend that the trial court erred by granting summary judgment in favor of ILMO because a question of fact exists as to whether ILMO's "HAZMAT" fees on its high-pressure cylinder rentals were taxable. Specifically, defendants assert that it is unclear "whether the [']HAZMAT['] fees that ILMO charges on its cylinders are taxable *** because the facts do not show whether the underlying regulatory costs that ILMO recoups with its [']HAZMAT['] fees are incurred on gas sales (making the fees taxable) or on cylinder rentals [(rendering the fees tax-exempt)]." Because defendants stipulated that the "HAZMAT" fee was a fee on a rental collected to pay fees related to compliance with hazardous materials laws and regulations, summary judgment was appropriate on this issue.
¶ 23 When a party enters into a stipulation, that stipulation will be enforced unless the party demonstrates that the stipulation is unreasonable, a violation of public policy, or the result of fraud. Myoda Computer Center, Inc. v. American Family Mutual Insurance Co., 389 Ill. App. 3d 419, 423, 909 N.E.2d 214 (2009); Steward ex rel. Schluter v. Schluter, 352 Ill. App. 3d 1196,1200, 819 N.E.2d 1 (2004); Fitzpatrick v. Human Rights Comm'n, 267 Ill. App. 3d 386, 390, 642 N.E.2d 486 (1994); In re Marriage of Sanborn, 78 Ill. App. 3d 146, 149, 396 N.E.2d 1192 (1979). Significantly, defendants do not claim that their stipulation was not enforceable. Instead, defendants claim that although they stipulated that ILMO collects a "HAZMAT" fee related to ILMO's "compliance with hazardous materials laws and regulations," a genuine issue of material fact exists because ILMO presented no evidence showing that those fees actually relate to such compliance. In other words, defendants claim that although they made a stipulation, that stipulation cannot be used against them because ILMO failed to produce evidence to prove what they stipulated. We are not impressed.
¶ 24 Defendants agreed in the parties' March 2012 "Stipulation of Facts" that "[w]ith the rental of the high pressure gas cylinders, ILMO includes a separately-stated [']HAZMAT['] fee related to ILMO's compliance with hazardous materials laws and regulations." (Emphases added.) In short, defendants agreed that the "HAZMAT" fee was collected as part of the rental of the gas cylinders and used to comply with...
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