S. Bloom, Inc. v. Korshak

• Citation: 52 Ill.2d 56,284 N.E.2d 257
• Decision Date: 22 May 1972
• Docket Number: 44937,Nos. 44895,s. 44895
• Parties: S. BLOOM, INC., et al., Appellants, v. Marshall KORSHAK, City Collector, Appellee. Helen RYAN, Appellant, v. Marshall KORSHAK et al., Appellees.
• Court: Supreme Court of Illinois

Page 257

284 N.E.2d 257

52 Ill.2d 56

S. BLOOM, INC., et al., Appellants, v. Marshall KORSHAK, City Collector, Appellee.

Helen RYAN, Appellant, v. Marshall KORSHAK et al., Appellees.

Nos. 44895, 44937.

Supreme Court of Illinois.

May 22, 1972.

Rehearing Denied June 23, 1972.

David Silbert and Eugene T. Sherman, Chicago, for appellant helen ryan.

Cohon, Raizes & Regal, Chicago (Maurice P. Raizes, Chicago, of counsel), for appellants S. Bloom, Inc., Cigarette Service Co., and Beatrice Wolpe.

Richard L. Curry, Corporation Counsel (William R. Quinlan and Gayle F. Haglund, Asst. Corporation Counsels, of counsel), for appellees.

WARD, Justice:

These consolidated appeals to this court concern challenges to the constitutionality of the Chicago cigarette tax ordinance which was enacted by the city council of the city of Chicago on December 10, 1971, under the 'home rule' authority conferred by the constitution of Illinois of 1970 (Ill.Const., art. VII, sec. 6 S.H.A.). The challenges were asserted in class actions brought in the circuit court of Cook County, which sought declaratory judgments and injunctive relief.

The appeal in No. 44895 stems from the action brought against Marshall Korshak, city collector of the city of Chicago, by S. Bloom, Inc. (in behalf of persons in the business of selling cigarettes to persons for resale in the city of Chicago), Cigarette Service Co. (in behalf of persons selling cigarettes in the city of Chicago to a purchaser for use and not for resale), and Beatrice Wolpe (in behalf of all persons who purchase cigarettes in the city of Chicago). Excepting one section the court held the ordinance to be constitutional. Section 178.1--4(b) was judged invalid on the ground that it violated the equal-protection assurances of the United States and Illinois constitutions, and because it represented an attempt to delegate legislative authority unlawfully. Defendant Korshak has cross-appealed from this judgment of unconstitutionality.

The appeal in No. 44937 derives from an action brought against Marshall Korshak, city collector of the city of Chicago, and Joseph Bertrand, city treasurer of the city of Chicago, by Helen Ryan, in behalf of all persons who purchased cigarettes in the city of Chicago. The judge who had ruled in the S. Bloom, Inc. case, was assigned the Ryan complaint for declaratory judgment and, noting that a notice of appeal had been filed by the plaintiffs in the Bloom matter after his ruling there, he dismissed the Ryan complaint. In January, 1972, this court ordered that the revenues received by the city of Chicago under the ordinance were to be segregated and directed to a special fund pending the disposition of these appeals. The appeals in Bloom and Ryan have been consolidated, as they both concern constitutional objections to the validity of the ordinance.

Ryan, whose contentions we shall consider first, claims that as the General Assembly did not authorize the ordinance, the city council of Chicago was without power to enact it. Section 6 of article VII of the constitution of Illinois of 1970 (Powers of Home Rule Units) declares in part:

'(a) A County which has a chief executive officer elected by the electors of the county and any municipality which has a population of more than 25,000 are home rule units. Other municipalities may elect by referendum to become home rule units. Except as limited by this Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt.

(e) A home rule unit shall have only the power that the General Assembly may provide by law (1) to punish by imprisonment for more than six months or (2) to license for revenue or impose taxes upon or measured by income or earnings or upon occupations.

(g) The General Assembly by a law approved by the vote of three-fifths of the members elected to each house may deny or limit the power to tax and any other power or function of a home rule unit not exercised or performed by the State other than a power or function specified in subsection (1) of this section.

(m) Powers and functions of home rule units shall be construed liberally.'

There is no contention that under the constitution the city of Chicago is not a home rule unit not that the General Assembly has limited the power of the city to tax under 6(g). But Ryan argues that section 6(e) must be interpreted as excepting the power to impose any privilege or nonproperty taxes from the general grant of authority given home rule units under 6(a). The contention cannot be sustained. The powers of home rule units are to be liberally construed (section 6(m)), and it would be unreasonable to attempt to read limitations into section 6(e) beyond taxes which are 'upon or measured by income or earnings or upon occupations' and thus contradict the broad authority given home rule units to tax under 6(a). That no such unreasonable interpretation should be given 6(e) is evidenced by Local Government Committee Report, Illinois Constitutional Convention 1969--70, pp. 81--82. The report, in discussing the revenue provisions, cites sales and use taxes on cigarettes and hotel rooms as examples of local taxes empowered under the article.

Alternatively, Ryan contends that if the restrictions of section 6(e) are limited to taxes on income, earnings or occupation, the section is invalid under the dueprocess and equal-protection provisions of the United States and Illinois constitutions. It is said that the section is 'unreasonable and arbitrary' because it singles out one class of nonproperty or privilege taxes and requires prior legislative approval for their use by home rule units, while other nonproperty or privilege taxes can be imposed by home rule units without prior approval by the General Assembly. The argument is based on Ryan's assumption that under the constitution of 1970 there is a mandatory and restricted classification of taxes into property and nonproperty categories. This is incorrect. The Revenue and Finance Committee of the Illinois Constitutional Convention, 1969--70, in its report to the convention, noted that the revenue article had been drawn to avoid the restrictions of the prior article. The report declared in part: 'It (new article) permits the levy of property, sales, use, franchise, privilege, income, excise, inheritance, gift, severance and all other kinds of taxes.'

Article IX of the constitution of 1970 states: 'The General Assembly has the exclusive power to raise revenue by law except as limited or otherwise provided in this Constitution. The power of taxation shall not be surrendered, suspended, or contracted away.' Not inconsistently with this, section 6 of article VII confers the power to tax upon home rule units, save as it is withheld by section 6(e) and may be denied under section 6(g).

The limitations appearing in 6(e) cannot be said to be arbitrary and unreasonable nor is there anything to suggest a nonuniform application.

Ryan claims, too, that section 6(e) is contrary to section 2 of article IX, which provides: 'In any law classifying the subjects or objects of nonproperty taxes or fees, the classes shall be reasonable and the subjects and objects within each class shall be taxed uniformly. Exemptions, deductions, credits, refunds and other allowances shall be reasonable.' It is said that this section requires that there be no unreasonable classification of nonproperty taxes and that the classification in section 6(e) of article VII is an unreasonable one. The contention does not persuade. Section 2 of article IX requires that the objects and subjects of nonproperty taxes be reasonably classified. It does not speak of the classification of taxes.

In this and in the preceding point, Ryan seems to claim that types of taxes are being treated unequally. Of course, due process and equal protection are concepts of rights of persons.

The first and principal contention of the plaintiffs, S. Bloom, Inc., Cigarette Service Co., and Beatrice Wolpe, whom we shall hereafter refer to as Bloom, is that the tax imposed by the ordinance is an occupation tax and therefore beyond the powers of the city of Chicago under section 6(e) of article VII of the constitution of Illinois, because there has been no grant of authority by the General Assembly to impose an occupation tax. To support the assertion that the ordinance provides for an occupation tax, Bloom argues that the legal incidence of the tax falls upon either the wholesaler or the retailer. This, it says, is evidenced by the circumstances that section 178.1--2(b) of the ordinance requires wholesale tobacco dealers to purchase tax stamps from the city collector and to cancel the stamps prior to any delivery to retail tobacco dealers in the city of Chicago; that section 178.1--2(d) makes it unlawful for any retailer of tobacco to purchase cigarettes which do not bear a cancelled tax stamp and provides that possession of cigarettes not bearing the stamp creates a presumption of violation of the ordinance; that section 178.1--5(b) requires retailers to file quarterly reports and that sections 178.1--7(a) and (b) require wholesalers to fill out special invoices and file quarterly reports. Bloom points out, too, that the ordinance establishes an alternative method for the collection of the tax, which requires wholesalers to prepare monthly tax returns covering sales to retailers in Chicago and for the wholesalers to remit the moneys due to the city. In further support of the thesis that the incidence of the tax is on the wholesaler or retailer it is argued that the ordinance provides penalties only for wholesalers and retailers of cigarettes. Anticipating an argument by the defendant that wholesalers under the ordinance are to serve as collection agents for the tax, Bloom...