Klein Town Builders, Inc. v. Department of Revenue

• Decision Date: 01 December 1966
• Docket Number: No. 39937,39937
• Citation: 222 N.E.2d 482,36 Ill.2d 301
• Parties: KLEIN TOWN BUILDERS, INC., Appellee, v. The DEPARTMENT OF REVENUE, Appellant.
• Court: Illinois Supreme Court

Page 482

222 N.E.2d 482

36 Ill.2d 301

KLEIN TOWN BUILDERS, INC., Appellee, v. The DEPARTMENT OF REVENUE, Appellant.

No. 39937.

Supreme Court of Illinois.

Dec. 1, 1966.

Rehearing Denied Jan. 17, 1967.

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

Philip J. Simon, Chicago (Schultz, Krinsley, Voorheis & Hedberg, Robert B. Moore, and David C. Kenyon, Chicago, of counsel), for appellee.

KLINGBIEL, Chief Justice.

On administrative review brought by the taxpayer, the circuit court of Cook County set aside an assessment for use taxes against Klein Town Builders, Inc., a general construction contractor. The Department of Revenue appeals.

The assessment was made in the amount of $7,629.69 on purchases of building materials during the period from July 16, 1961, to May 31, 1962. The purchases were all made from suppliers located within Illinois. Although the contractor had given the suppliers exemption affidavits it is undisputed that the purchases were not exempt and that a tax was due the State. The plaintiff's objection is that the Department's claim should be directed against the Illinois suppliers under the Retailers' Occupation Tax Act, rather than against the plaintiff under the Use Tax Act, that purchasers are under a duty to pay only where the purchases are made outside Illinois from retailers who are not licensed by the Department to collect and remit the tax.

The Use Tax Act imposes a tax upon 'the privilege of using in this State tangible personal property purchased at retail on and after August 1, 1955, from a retailer.' (Ill.Rev.Stat.1965, chap. 120, par. 439.3.) It is not disputed that under the decision of this court in Lyon & Sons Lumber and Mfg. Co. v. Department of Revenue, 23 Ill.2d 180, 177 N.E.2d 316, the plaintiff is the 'user' of the materials purchased, since they were employed in building houses or other structures constituting part of the real estate upon which they were erected. It is strongly urged however, that insofar as purchases from Illinois retailers are concerned, the retailer is responsible for remitting the tax due (of which he is relieved to the extent that he remits the retailers' occupation tax), and that there is no provision for discharging this debt by requiring the purchaser to pay the tax directly to the State.

We cannot agree that a purchaser incurs no direct liability for the tax under the circumstances of this case. It is true, as the plaintiff points out, that the use tax was designed to supplement the retailers' occupation tax. Its purpose is primarily to prevent avoidance of the latter tax by people making out-of-State purchases, and to protect Illinois merchants against such diversion of business to retailers outside Illinois. The scheme of the act was explained in Turner v. Wright, 11 Ill.2d 161, 142 N.E.2d 84, wherein its validity was upheld, and need not be repeated here. It is sufficient to observe that unlike use taxes in some other States which are imposed only upon use of property purchased outside the State, the Illinois tax 'falls alike on those who purchase at retail within the State and those who purchase outside of it.' (Turner v. Wright, 11 Ill.2d 161, 167, 142 N.E.2d 84, 88.) It makes the retailer a collector of the tax, insofar as Illinois purchases are concerned, but...