Svithiod Singing Club v. McKibbin

• Decision Date: 18 November 1942
• Docket Number: No. 26926.,26926.
• Parties: SVITHIOD SINGING CLUB et al. v. McKIBBIN, Director of Finance, et al.
• Court: Illinois Supreme Court

381 Ill. 194

44 N.E.2d 904

SVITHIOD SINGING CLUB et al.

v.McKIBBIN, Director of Finance, et al.

No. 26926.

Supreme Court of Illinois.

Nov. 18, 1942.

Suit by Svithiod Singing Club against George B. McKibbin, Director of Finance, and others, for an injunction against the collection of a retailers' occupation tax, wherein other similar clubs were permitted to intervene as plaintiffs. From a decree dismissing their complaints for want of equity, original plaintiff and intervening plaintiffs appeal.

Decree reversed and cause remanded with directions to grant the relief as prayed.Appeal from Circuit Court, Cook County; William V. Brothers, judge.

Adelbert Brown, Kirkland, Fleming, Green, Martin & Ellis, Folsom, Grossberg, Brill & May, Siebel & Siebel, Osborne, Kline & McGurren, and Porges & Frank, all of Chicago, for appellants.

George F. Barrett, Atty. Gen. (William C. Wines, of Chicago, of counsel), for appellees.

STONE, Chief Justice.

By this direct appeal, the revenue being involved, appellants seek the reversal of a decree of the circuit court of Cook county dismissing for want of equity, on motion of appellees, the complaints of the original plaintiff and the intervening plaintiffs.

The issue involved is whether a social club, organized as a nonprofit corporation, which serves food and drink to its members but not to the public, is subject to the Illinois retailers' occupation tax. Ill.Rev.Stat.1941, chap. 120, par. 440 et seq. The original plaintiff, Svithiod Singing Club, is an Illinois nonprofit corporation. Its primary object is the promotion of social intercourse among the members of the club and the advancement of the social arts and sciences. As an incident thereto and for the purpose of furthering such primary object, it furnishes food and drinks to its members, though not to the general public. Other like clubs were permitted to interyene, and also are appellants here. Appellee, Director of Finance, promulgated and is enforcing a rule subjecting appellants to the tax. Such taxes were paid under protest and a temporary injunction was entered under section 2a of an act in relation to the payment of public money into the State Treasury. Ill.Rev.Stat.1941, chap. 127, par. 172, p. 3069.

The points urged for reversal are that the court erred in holding that appellants, as private social clubs, are engaged in the business of selling tangible personal property at retail, within the act; and in holding that the act applies to nonprofit corporations such as appellants.

The act applicable to the present inquiry is entitled: ‘An Act in relation to a tax upon persons engaged in the business of selling tangible personal property to purchasers for use or consumption.’ Section 2 of the act, in so far as applicable to the present inquiry, lays a tax upon ‘persons engaged in the business of selling tangible personal property at retail’ for use or consumption, and not for resale. The rate imposed by the original act was three per cent of the gross receipts from such sales made in the course of such business. By amendment of the act, effective July 1, 1941, the tax was reduced to two per cent of ninety-eight per cent of the gross receipts from such sales after June 30, 1941. Ill.Rev.Stat.1941, chap. 120, par. 441, § 2, p. 2661.

Appellants insist they are not ‘persons engaged in the business of selling tangible personal property,’ as that term is used in the act. They urge that the tax is upon the business and not on any transaction of sale, and as their primary business or purpose is to furnish service to their members and not to transact sales, they do not come within the intent or spirit of the act.

It is settled that the tax so imposed is an occupation tax upon a class of vendors described in the act, and not a tax upon sales, though it is measured by the gross receipts from sales. Mahon v. Nudelman, 377 Ill. 331, 36 N.E.2d 550;Herlihy Mid-Continent Co. v. Nudelman, 367 Ill. 600, 12 N.E.2d 638;Reif v. Barrett, 355 Ill. 104, 188 N.E. 889. Not all vendors of personal property for use or consumption are subject to the tax. Revzan v. Nudelman, 370 Ill. 180, 18 N.E.2d 219. The class of vendors subject thereto must be determined from a construction of the act itself. Section 2 imposes a tax upon persons engaged in the business of selling tangible personal property at retail. By the last paragraph of section 1 it is declared that ‘isolated or occasional sale of tangible personal property at retail by a person who does not hold himself out as engaging in the business of selling such tangible personal property at retail does not constitute engaging in such business.’ This is a negative declaration which, though describing certain vendors who do not come within the act, does not define or describe those who do. That class is described in section 2 of the act as ‘persons engaged in the business of selling tangible personal property at retail.’ Section 1 of the act defines ‘sale at retail’ as transfer ‘for use or consumption and not for resale.’ In the glossary of the act the language persons ‘engaged in the business' of such selling is not defined, though the word ‘persons' is defined. Therefore we must seek the construction of that language in the usual, popular meaning attaching to the words used, unless the spirit and purpose of the act, as shown by its provisions, enlarges or alters that meaning. In Landry v. Shinner & Co., 344 Ill. 579, 176 N.E. 895, 897, it is pointed out that ‘the plain and obvious meaning of the language used by the Legislature is the safest guide to follow in construing any act.’ Bradley Supply Co. v. Ames, 359 Ill. 162, 194 N.E. 272, Revzan v. Nudelman, supra, and 2 Lewis' Sutherland on Statutory Construction, 2nd Ed., § 518, are to the same effect.

It follows that the word ‘business,’ as used in the act, is to be construed in the usual or popular meaning of the word, unless, as stated, the text or purpose of the act varies that meaning. The text and purpose of an act is to levy a tax against those in the business of selling at retail. Selling at retail is distinguished from wholesale in that the sale is in smaller quantities and the property sold is not sold for resale. The term ‘retailers' occupation tax’ connotes commercial enterprise devoted to the business of making retail sales. This is indicated by the standards used, such as ‘gross receipts,’ ‘sales at retail,’ and the like. That the business which the act intends shall be included is a commercial business, is further indicated by the last paragraph of section 1 of the act, which provides, as stated, that isolated sales by one ‘who does not hold himself out as engaging in the business of selling such tangible personal property at retail does not constitute engaging in such business.’

Courts, in seeking legislative intent, consider not only the language used, but also the object to be attained, or the evil to be remedied by the act. Inter-State Water Co. v. City of Danville, 379 Ill. 41, 39 N.E.2d 356;United States Industrial Alcohol Co. v. Nudelman, 375 Ill. 342, 31 N.E.2d 594;People ex rel. Auburn Coal & Material Co. v. Hughes, 357 Ill. 524, 192 N.E. 551. Prior to the passage of this act the expenses of State government were borne in part by direct taxation on both real and personal property, which, during the vears of economic depression and its resultant reduction of property values, rendered that burden onerous. The problem was to provide a just tax to relieve property of that direct burden. It is patent that the merchandising business with its large stocks of wares and resulting larger need for police and fire protection, required more of the expenses of government than real estate, which called for less governmental protection, and it is also apparent from these facts that the General Assembly in enacting the Retailers' Occupation Tax Act sought to tax the business of selling at retail, to arrive at some method of relieving property from direct taxation and to place the burden upon that class of business which not only enjoyed the greater part of governmental protection but which benefited by being conducted under that protection. That those engaged in the business of selling tangible personal property at retail have contrived to pass this tax on to the consumer, was neither within the intent of the General Assembly nor within the purpose of the act, as shown by its terms; but those facts do not indicate that the word ‘business' as used in the act should be construed in any other than the usual and popular meaning.

Webster defines ‘business' as ‘any particular occupation or employment, habitually engaged in, especially for livelihood or gain.’ This court in Mahon v. Nudelman, supra, and Herlihy Mid-Continent Co. v. Nudelman, supra, in distinguishing between the business of selling tangible personal property and that of providing service, held that where service rendered ‘is deemed an inseparable part of a commercial transaction and incident to it,’ [377 Ill. 331, 36 N.E.2d 552] the vendor is taxable. To be exempt because sales are isolated or casual the seller must be also one who ‘does not hold himself out as engaging in the business of selling such tangible personal property at retail.’ The quantity sold is not a test of the applicability of the tax. Herlihy Mid-Continent Co. v. Nudelman, supra; Franklin County Coal Co. v. Ames, 359 Ill. 178, 194 N.E. 268. We must not lose sight of the fact that certain ‘persons' are the only ones upon whom the tax is imposed. The tax is not a privilege tax imposed upon purchasers. It is not a property tax upon the items sold, but is an occupation tax upon a class of vendors engaged in the business of selling tangible personal property at retail. It seems clear from these considerations that the term ‘business,’ as used in the act, is to be construed in its usual and popular sense, Revzan v. Nudelman, supra; Bradley Supply Co. v. Ames, supra, and, as used in the act, indicates...