12 N.E.2d 638 | Ill. | 1937
Lead Opinion
The Herlihy Mid-Continent Company and the Underground Construction Company filed a complaint in the circuit court of Cook county against the Director of Finance and the Treasurer of the State of Illinois to enjoin the collection of the Illinois Retailers' Occupation tax and to recover certain taxes theretofore paid by complainants. The S.A. Healy Company and four other contractors were permitted to intervene as parties plaintiff and, by agreement, the complaint was dismissed as to the Treasurer of the State of Illinois. The circuit court held that rule No. 6 of the Department of Finance which required plaintiffs to pay a tax measured by the total receipts from their contracts was void, and enjoined the Director of Finance from collecting the tax so far as it was measured by certain items claimed by him to be properly included. As to the remaining items, the complaint was dismissed for want of equity. This is a joint appeal from that decree, prosecuted in the names of the original parties plaintiff and the intervening petitioners.
The plaintiffs and intervening petitioners (hereafter referred to as plaintiffs) are contractors employed by the Sanitary District of Chicago under written contracts for the construction of concrete sewers and tunnels and for the building of sewage treatment works. The contracts recite that they are for work and labor. The compensation for the construction of sewers is based upon linear feet. Two types of materials were used or consumed in the performance of these contracts: (1) temporary materials used for shoring and bracing, for the building of bulkheads and coffer-dams, and for the construction of railroads and voltage lines to be used by workmen and (2) the materials that *602 were consumed in the permanent structures — sand, cement, gravel, reinforcing steel and the like. The court below found that the materials of the first type remained the property of plaintiffs and were not subject to the tax. Thus, we are concerned only with that part of the decree which held taxable the materials which were incorporated in the projects themselves.
It was stipulated by the parties, as to the sewer contracts, that the cost of materials incorporated in them represented only twenty-five per cent of the total contract price and, as to the sewage treatment works, that the cost of such materials represented thirty-three and one-third per cent of that price. The court in its decree found that the completed structures could be used only by a governmental agency performing services similar to the sanitary district, and were not property of a type which is commonly bought or sold for commercial purposes. It also found that if the structures were razed, no salvage would be realized except as to certain moveable equipment, apparently referring in this latter connection to several manhole covers, the cost of which was negligible when compared with the total contract price, and to sludge removal machinery which was not furnished by plaintiffs. Notwithstanding these findings, the circuit court, as stated above, held that plaintiffs were liable for a tax measured by the cost of the sand, cement, gravel, steel and other materials entering into the permanent structures.
At the outset, it must be remembered that the tax here questioned is not a privilege tax imposed upon purchasers, like the Motor Fuel Tax, (People v. Deep Rock Oil Corp.
The original Retailers' Occupation Tax act was entitled "An act in relation to a tax upon persons engaged in the business of selling tangible personal property at retail," etc. (Laws of 1933, p. 938.) That act was held unconstitutional, (Winter v.Barrett, supra,) and the statute enacted to replace it was 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." (Ill. Rev. Stat. 1937, chap. 120, pars. 440,et seq.) The title of the second act is broader than that of the first and we have held that "by the omission of the words `at retail' from the title and the substitution therefor of the words `to purchasers for use or consumption' the legislature made certain that the definition of `sale at retail' in the present act is not limited by what was formerly contained as part of the title." (Franklin County Coal Co. v. Ames,
The merchandising process often involves several sales before an article reaches the hands of the ultimate consumer. Under the definition in section 1 only that person transferring the goods "for use and consumption and not for resale" is subject to the tax. The quantity sold is no test under this definition;(Franklin County Coal Co. v. Ames, supra;) it is the purpose for which the property is sold that is determinative. Under the contracts before us in this case, plaintiffs agreed to build sewers and buildings requiring the use of sand, gravel, cement and steel. They were the persons "using" these materials even though after their metamorphosis they became part of a structure whose title vested in the Sanitary District of Chicago. While in one sense, title to these materials passed from plaintiffs to the sanitary district, yet the niceties of property law have no place in the construction of a statute of this type. Plaintiffs *605 did not hold themselves out as vendors of the materials furnished, nor did the sanitary district select or purchase the materials used although it set up certain requirements and specifications in its contract. The identity of the materials used in the construction was destroyed and, as properly found by the lower court, the completed structures had no commercial value as salvage or otherwise. What the Sanitary District of Chicago bought under its contract, if there was a sale at all, were sewers and sewage treatment works, completed and ready for use. Under these circumstances it would be unreasonable to characterize the transfer of the materials incorporated in the completed structures as a sale.
The Director of Finance relies upon our decisions in BradleySupply Co. v. Ames,
We hold that there was no transfer of tangible personal property within the meaning of the act by plaintiffs to the Sanitary District of Chicago and that the plaintiffs are not subject to a tax. That part of the decree of the circuit court of Cook county which held plaintiffs subject to a tax is therefore reversed; in all other respects the decree is affirmed.
Affirmed in part, reversed in part.
Dissenting Opinion
I cannot agree with the majority of this court. The opinion states that even if a substantial portion of an occupation is the selling of tangible personal property for use or consumption, such an occupation is not necessarily taxable, and that "further refinements must be made." This idea is sought to be supported byPeoples Gas Light and Coke Co. v. Ames,
Although our decision in Blome Co. v. Ames,
In my opinion, neither the Blome Co. decision nor the BradleySupply Co. decision should be overruled, but if either is to be expressly overruled, both should fall. Plumbing contractors are not distinguishable in their occupation from any other sort of contractors doing construction work. Whether their sales are of fixtures, pipe, lead or what-not, that has a great or a small value or no value as salvage, and whether their sales are of fabricated or unfabricated tangible personal property has no bearing upon the reasoning that should be applied to the occupations these persons engage in. The refinements that have crept into our decisions based on the fact that printing is said to be "one of the graphic arts;" that blueprint paper, when printed upon, is of no value to any one other than the purchaser; that letter-heads cannot be sold and are also of no value to any one except the customer who buys them; that electrotypes *608 have little salvage value, and that an optometrist may branch out from the professional part of his occupation and engage in the sale of spectacle frames, lenses, cases for glasses, etc., are all, in my opinion, wide of the mark. None of these sales are any the less transfers of tangible personal property for use or consumption and not for resale.
In my opinion, better reasoning is contained in Cusick v. Com.
What salvage value would there be, for example, in a suit of clothes made for and worn by any member of this court, after the suit had been worn, or in a partly eaten meal served to one of our number, or even in a photograph of any one of us?
In People v. Graves,
In holding taxable the occupation of a construction contractor, and that there was a sale of the materials furnished to a municipal corporation in the construction of a dam, intake tower, settling basin, and filtering house, as part of the municipality's water-works system, the Supreme Court of Arkansas, in Wiseman v. Gillioz,
By placing the tax on those occupations engaged in by persons, firms and corporations making the last sale for use or consumption, the General Assembly wisely sought to protect, and intended to protect, dealers in every sort of materials used and consumed by the ultimate purchaser thereof. This protection is against competitors in like occupations who do an interstate business, which occupations are *610 expressly exempted. The majority opinion moves the incidence of the tax one step backward from the goal set up by the General Assembly, and the retail dealers must suffer loss because of the advantage given to competitors who do an interstate business, if the majority opinion remains the law.
For these reasons, I must dissent.