Reif v. Barrett

• Decision Date: 22 December 1933
• Docket Number: No. 22131.,22131.
• Citation: 355 Ill. 104,188 N.E. 889
• Parties: REIF et al. v. BARRETT, Auditor of Public Accounts, et al.
• Court: Illinois Supreme Court

355 Ill. 104

188 N.E. 889

REIF et al.

v.BARRETT, Auditor of Public Accounts, et al.

No. 22131.

Supreme Court of Illinois.

Dec. 22, 1933.

Suit by Gus Reif, on behalf of himself and all other taxpayers similarly situated, against Edward J. Barrett, Auditor of Public Accounts, and others, wherein intervening petitions and bills of complaint were filed by Robert Irving Winter and John A. Neu. From a decree dismissing the intervening petitions and the amended bills of complaint, the plaintiff and the intervening plaintiffs appeal.

Decree affirmed.Appeal from Circuit Court, Sangamon County; Lawrence E. stone, judge.

Roscoe Forth, of Granite City, I. H. Streeper, III., of Alton, Jesse R. Brown, of Edwardsville, and L. G. Pefferle, of Springfield, for appellants.

Otto Kerner, Atty. Gen. (Montgomery S. Winning and Joseph Londrigan, both of Springfield, of counsel), for appellees.

HERRICK, Justice.

The appellant Gus Reif, after having first obtained leave of the court, filed his bill on behalf of himself and all other taxpayers in the state of Illinois similarly situated, in the circuit court of Sangamon county, against the appellees, Edward J. Barrett, auditor of public accounts, John C. Martin, state treasurer, and Joseph J. Rice, director of finance of the state of Illinois, to restrain by injunction the expenditure of public money appropriated for the enforcement of ‘An Act in relation to a tax upon persons engaged in the business of selling tangible personal property to purchasers for use or consumption.’ Smith-Hurd Rev. St. 1933, c. 120, §§ 440-153, pp. 2453-2455, Cahill's Rev. St. 1933, c. 120, pars. 426-439, pp. 2389-2391. Subsequently, by leave of the court, intervening petitions and bills of complaint were filed by Robert Irving Winter and John A. Neu. The original bill, together with the intervening petitions and the other bills of complaint, were amended by leave of the court. The appellees entered their appearance in the circuit court and filed their general demurrer to the pleadings as amended filed by the appellants. On hearing, the demurrer was sustained, and the amended bills and amended intervening petitions were severally dismissed for want of equity. Though the language of the different amended bills and amended intervening petitions is somewhat different, yet the general relief prayed is substantially the same. The pleadings of the appellants attack the constitutionality of the Retailers' Occupation Tax Act, supra, together with other alleged companion bills making certain appropriations in connection therewith. From the decree dismissing the intervening petitions and amended bills, the appellants have prosecuted this appeal.

The amended bills charged that the Retailers' Occupation Tax Act is violative of section 13 of article 4, section 2 of article 2, article 3, sections 1, 4, 12, and 17 of article 4, section 16 of article 5, sections 1, 2, and 6 of article 9 of the Constitution of this state, and section 1 of the Fourteenth Amendment to the Constitution of the United States.

It is earnestly urged by the appellants that the tax in question is a property tax and not an excise or occupation tax, and that therefore the tax sought to be levied by the Retailers' Occupation Tax Act is in violation of sections 1 and 2 of article 9 of the Constitution of 1870. As to whether or not a given tax is an excise or a privilege and occupational or a property tax is ordinarily not difficult of solution. They are essentially different types of tax, with no infringement or overlapping of one upon the other. Their character and their object are vastly different. A property tax is levied merely for the purpose of raising revenue and is levied against property. It does not seek or in any wise attempt to control the use, operation, or regulation of the property. When the tax is raised, the mission of the property tax has been fulfilled. A property tax has nothing whatever to do with the question of privilege, license, or permission. On the other hand, an occupation tax has one of two missions: Either to regulate and control a given business or occupation, or to impose a tax for the privilege of exercising, undertaking, or operating a given occupation, trade, or profession. Its effect is to license a person engaged in a given calling or occupation. A license in form may not be issued to a taxpayer, but the payment of the tax is the license under the authority of the state to engage in such occupation. Regulation is not a necessary adjunct of an occupation tax. It may or it may not be. The payment of the tax itself is a condition precedent to the privilege of carrying on a business or occupation. The payment of the tax is made mandatory by the act creating it upon the right of the individual to follow the given occupation. An occupation tax may be levied under the general police powers of the state, where its purpose is to regulate or control a given occupation, or it may be levied under the general sovereign powers of the state, where its sole purpose is to raise revenue. Under which power it is levied makes no difference as to the character of the tax. The type of tax is not changed by any name that may be given it under the law through which it is enacted; neither is the test as to whether or not the occupation tax is the sole revenueor only a part of the revenue of the state.

Some confusion has arisen in the decisions with reference to the Constitution giving the right to levy a certain tax. The state does not derive its power to levy a tax from the Constitution. States have the inherent power to levy taxes as an integral part of their sovereignty. This power is inherent and absolute, limited only by the restrictions imposed by the Constitution, State or Federal. It is not necessary that the power be conferred by the people. The power is exercised by the governing body of the sovereignty, so that in this state the power to tax is inherent in and vested in the Legislature. Porter v. Rockford, Rock Island & St. Louis Railroad Co., 76 Ill. 561. In this state the Legislature is confined to three forms of taxes by virtue of the limitations of our Constitution, as follows: (1) Property tax on valuation basis; (2) occupation tax; and (3) franchise or privilege tax. Bachrach v. Nelson, 349 Ill. 579, 182 N. E. 909.

It is argued by the appellants that, because the act exempts the taxpayer from paying a tax on gross receipts for sales made on credit until the account is paid, and that because, also, the act provides that such transactions whereby the possession of the property is transferred but the seller ratains the title as security for the payment of the selling price until the price is actually paid, and such credit sales and conditional sales shall not be deemed sales within the meaning of the act until the purchase price is paid, there is thereby an unwarranted exemption and discrimination. The act does not undertake to define or state that a charge account or sale on time is not a sale, but the act as interpreted provides the tax shall only be paid as and when the payments are received by the seller-this, because the tax is not levied on sales, but the amount of the tax is adjusted on gross receipts from sales. There is no attempt on the part of this act to say that a sale is not a sale, but it does differentiate between sales for cash and sales made under conditional sale contracts and sales made on credit. Conditional sales have been held valid. Sherer-Gillett Co. v. Long, 318 Ill. 432, 149 N. E. 225. There is, of course, no receipt, either gross or net, on a conditional sale until a payment has been made for the personal property, so that these provisions attacked are, as a matter of fact, not only logical, but wholly consistent with the object of the act. As to sales on time or where payment is deferred, the mere statement of the proposition proves itself that there is no receipt by the person pursuing the occupation of selling personal property until a payment is made on account. Then, and only then, is there a liability pro tanto on the part of the seller. The Legislature has not attempted by this act to declare that not to be a fact which is a fact. The Legislature, however, does have the power, for the purpose of the application of the act, to declare that that which is recognized as a fact may be excluded from such application. Winter v. Barrett, 352 Ill. 441, 186 N. E. 113. The purpose of exempting tangible personal property sold under conditional sales contracts and sold on time clearly demonstrates the legislative intent that the tax is not against the property, but is a privilege tax, and the amount of the tax is to be measured by the amount of gross receipts received by the person engaged in the business of selling tangible personal property at retail for use or consumption by the buyer. If the tax were levied upon the value of the property sold rather than fixed upon the basis of the receipts, there might be some merit in the contention made by the appellants that the tax is a personal property tax or an income tax. However, the appellants are in error in this contention.

The appellants, in support of their position that the tax in question is an income tax or property tax, cite Bachrach v. Nelson, supra, which held invalid the income tax of 1932. The crux of the decision there was that income is property, and that under our Constitution the Legislature is confined to the levy of the three types of taxes supra; that, income being property, the law under consideration was held unconstitutional because the tax was levied on a graduated scale and not levied upon a valuation basis. But the very definition of the term ‘income’ demonstrates that the tax was not levied upon a valuation basis, but was distinctly levied against income. Income is property. The tax here in question is not levied on the basis of income, but is levied on the privilege of engaging in the occupation, the amount of...