delivered the opinion of the court:
In this Illinois Supreme Court Rule 308 petition (155 Ill. 2d R. 308), we are asked to answer six certified questions dealing with a claim brought under the Illinois Whistleblower Reward and Protection Act (Act) (740 ILCS 175/1 et seq. (West 2002)), filed by Beeler Schad & Diamond as a relator on behalf of the State of Illinois. The underlying claim relates to defendants’ sale of goods over the Internet and/or through catalogs into Illinois and defendants’ alleged failure to collect and remit use tax relating to these sales. 1 The trial court certified the following questions for interlocutory review.
Question 1
“As a matter of law, if a remote retailer does not collect and remit use tax on sales to Illinois customers, can it make a ‘knowingly’ false record or statement, as required to create liability under the Illinois Whistleblower Reward and Protection Act, 740 ILCS 175/1?”
Question 2
“(a) As a matter of law, does the Whistleblower Act require the existence of an actual record or statement to support a claim or can the failure to keep a record be actionable?
(b) As a matter of law, can documents memorializing a purchase (i.e. invoices or packing receipts) that show in the line item for tax ‘$0.0’ or in some other way that tax is not being collected be considered ‘false’ under the Whistleblower Act where the retailer that created those documents does not collect tax?
(c) Under the Whistleblower Act, as a matter of law, is it necessary that a false statement be submitted to or actually relied upon by the State?”
Question 3
“Does the application of the general provisions of the Whistle-blower Reward and Protection Act, 740 ILCS 175/1, to enforce the sales and use tax laws improperly deprive taxpayers of the specific rights and privileges afforded them under the Protest Monies Act (30 ILCS 230/1), the Taxpayer’s Bill of Rights, 20 ILCS 2502/1, and/or the statutory administrative procedures offered by the Illinois Department of Revenue, 35 ILCS 105/1; 35 ILCS 120/1, such that the Whistle-blower Reward and Protection Act cannot be used to enforce the collection of taxes due the State?”
Question 4
“Is the Illinois Department of Revenue the sole entity authorized by the Illinois General Assembly to assess and collect use tax?”
Question 5
“Does the Illinois Whistleblower Reward and Protection Act, 740 ILCS 175/1, apply to alleged tax liabilities under the Use Tax Act?”
Question 6
“(a) Does the Illinois Whistleblower Reward and Protection Act, 740 ILCS 175/1, violate the Attorney General clause of the Illinois Constitution, Article V, Section 15, by improperly usurping the exclusive authority of the Attorney General to initiate and conduct litigation on behalf of the State?
(b) Does the Illinois Whistleblower Reward and Protection Act, 740 ILCS 175/1, as applied to tax matters, violate either the Attorney General clause or the Executive Compensation clause of the Illinois Constitution, Article V, Sections 15 and 21?”
This court denied defendants’ Rule 308 petition; however, the Illinois Supreme Court pursuant to its supervisory authority directed this court to answer the above certified questions, which we now do in this appeal.
BACKGROUND
The following facts are relevant to answering the certified questions raised on appeal. The law firm of Beeler, Schad & Diamond filed a complaint alleging that the defendant retailers’ records, returns and statements that claimed no use tax was due on their sales to Illinois consumers were knowingly false within the meaning of the Act. Beeler, Schad & Diamond filed this complaint on behalf of the State of Illinois as a relator. The complaint alleged that “defendants are retailers whose out-of-state operations made sales to Illinois residents over the Internet and/or through catalogs and defendants failed to collect and remit use tax on these sales.” The complaint also alleged that each of defendants’ Web sites, retailers’ records, returns and statements that claimed no use tax due on its sales to Illinois customers was knowingly false within the meaning of the Act.
Beeler, Schad & Diamond also filed a similar complaint in Nevada. In the Nevada case, the Nevada Supreme Court addressed the false claims actions brought by Beeler, Schad & Diamond relating to allegations of falsified tax liabilities associated with the retailers’ Internet and/or catalog sales. International Game Technology, Inc. v. Second Judicial District Court,
Here, the Attorney General intervened in the matter filed in the circuit court and prosecuted the matter on the State’s behalf. In response to the complaint filed in Illinois, defendants filed a joint motion to dismiss. The trial court denied defendants’ joint motion to dismiss and also granted defendants’ motion for an interlocutory appeal under Rule 308. This court denied defendants’ Rule 308 petition for
Before addressing the certified questions, we deem it necessary to provide background information underlying the questions in the instant appeal. The act implicated in the instant matter is the Illinois Whistleblower Reward and Frotection Act (740 ILCS 175/1 et seq. (West 2002)). The Act provides a provision relating to false claims. 740 ILCS 175/3 (West 2002). According to the false claims provision, a person presents a false claim when he “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to the State.” 740 ILCS 175/3(a)(7) (West 2002). The Illinois false claims provision defines “knowing” and “knowingly” as:
“a person, with respect to information:
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.” 740 ILCS 175/3(b) (West 2002).
Alleged violations of the Act may be brought in a civil action commenced by the Attorney General or a private person, referred to as a “relator,” in the State’s name in actions known as qui tarn actions. 740 ILCS 175/4(a), (b), (c) (West 2002). The State may intervene, proceed with the action and take over conduct of the action, or decline to intervene. 740 ILCS 175/4(b)(4)(A), (b)(4)(B) (West 2002). If the State proceeds with an action commenced by the relator, the relator receives a percentage of the proceeds from the successful disposition or settlement of the claim. 740 ILCS 175/4(d) (West 2002).
The Act is modeled after the Federal False Claims Act (FCA) (31 U.S.C. §3729 et seq. (2000)) and is an antifraud statute. State ex rel. Beeler, Schad & Diamond, EC. v. Burlington Coat Factory Warehouse Corp.,
The obligation allegedly avoided here is the payment of use tax. The use tax is a tax on the privilege of using tangible property in the state. 35 ILCS 105/3 (West 2002). The use tax must be collected and remitted by any retailer maintaining a place of business in Illinois. 35 ILCS 105/3 — 45 (West 2002).
Our review of an interlocutory appeal brought pursuant to Rule 308 “is strictly limited to the certified question.” In re Estate of Williams,
ANALYSIS
Question 1
The first question that we will address is what constitutes a “knowingly” false record or statement sufficient to create liability under the Act. Defendants contend that the allegedly false statements at issue here reflect nothing more than a “difference in interpretation growing out of a disputed legal question.” United States ex rel. Humphrey v. Franklin-Williamson Human Services, Inc.,
The State responds that whether defendants acted with the requisite state of mind is a question of fact that cannot be resolved on a motion to dismiss. The State maintains that whether defendants had a sufficient nexus with Illinois subjecting them to use tax depends on the quantity, nature and scope of their contacts with Illinois. The State similarly contends that the complaints alleged that defendants had sufficient contacts with Illinois to create a tax liability and that defendants knowingly made false statements that they did not owe use tax. As such, the trial court properly denied the motion to dismiss.
Under the circumstances of the instant case, the answer to this certified question is that a remote retailer cannot make a “knowingly” false record or statement sufficient to create liability under the Act when the pertinent area of the law is unclear and specific factual analysis must be completed to determine if the retailers’ use tax liability was correctly disclosed as $0. To prevail in a reverse false claims cause of action, proof is required: “(1) that the defendant made, used, or caused to be used a record or statement to conceal, avoid, or decrease an obligation to the United States; (2) that the statement or record was false; (3) that the defendant knew that the statement or record was false; and (4) that the United States suffered damages as a result.” Wilkins ex rel. United States v. State of Ohio,
We find Wilkins ex rel. United States v. State of Ohio,
We also note that the Illinois Department of Revenue’s (Department) position regarding nexus determinations consistently rests upon an analysis of the facts specific to a taxpayer. Even though the Department has created a general guideline to assist in making nexus determinations, whether an entity has sufficient nexus in the State to impose a tax liability rests upon the specific facts of the transaction. Illinois Department of Revenue General Information Letter, ST 07— 0063 — GIL (June 12, 2007). Given the Department’s consistent position that nexus determinations are a fact-specific inquiry and the myriad of considerations that must be undertaken to determine nexus based on the nature and extent of activities within the state, we cannot conclude that a retailer that does not collect and remit use tax, but does disclose that no use tax was collected, can “knowingly” make a false record or statement necessary to create a liability under the Act.
We further note that dismissing a complaint that raises a question of fact has long been rejected in this state. See A.F.P. Enterprises, Inc. v. Crescent Pork, Inc.,
Question 2(a)
We answer this question by stating that the Act requires the existence of an actual
The State responds that the Act is an antifraud statute and, as such, the intentional concealment of a material fact is the equivalent of a false statement of material fact. The State maintains that under the Illinois tax statutes and regulations, a retailer who is required to collect use tax must maintain records showing that he collected the tax “in accordance with [86 Ill. Adm. Code §150.405] and that he states such tax separately to the purchaser from the selling price of the tangible personal property which he is selling.” 86 111. Adm. Code §150.1305(a) (amended and eff. August 21, 1974). The State claims that the complaint adequately stated that defendants did not prepare and maintain records showing that they collected the required taxes, omitted from their verified returns the use tax liability incurred on retail sales over the Internet, and failed to remit to the State the full amount of their use tax liability. The State asserts that defendants’ failure to maintain records and to make disclosures to the State when required to do so, as well as withholding information when making those disclosures, is the equivalent of creating a false record for purposes of the Act.
The State relies on United States ex rel. Oliver v. Parsons Co.,
We answer certified question 2(a) in the affirmative. To state a claim under the Act, the alleged violation must be based on a false statement or document. We restrict our answer to stay within the limited scope of concluding that an actual document must exist; however, we do not express an opinion as to whether concealment of or omission of material information from documents or records is sufficient to state a claim because such an inquiry is outside the scope of the certified question. Without the existence of a document or statement, we believe it would be difficult to determine whether the document was false. See American Textile Manufacturers Institute, Inc.,
We believe the cases relied upon by the State are distinguishable because those cases do not address reverse false claims violations that are at issue here or they relate to an omission of material information from existing documents. Oliver, 195 E3d at 465 (addressed the exclusion of companies on a disclosure statement); Pickens,
We must now consider the trial court’s reliance on Pickens v. Kanawha River Towing,
Question 2(b)
Our answer to this certified question is that documents memorializing that no use tax is due or collected should not be considered false under the Act provided the retailer lacked scienter when generating the documents. Our analysis of this issue focuses on the meaning of the term “false” or “falsity.” Although the FCA does not define the term “falsity,” generally, falsity means an untruth. FruCon Construction Corp. v. Sacramento Municipal Utility District, No. S — 05—583 LKK/GGH (E.D. Cal. June 15, 2007). Since falsity is synonymous with an untruth, “ [expressions of opinion, scientific judgments, or statements as to conclusions about which reasonable minds may differ cannot be false.” United States ex rel. Maxwell v. Kerr-McGee Chemical Worldwide, LLC, No 04 — CV—01224—PSF— CBS, slip op. at 2 (D. Colo. October 6, 2006).
Defendants contend that documents demonstrating that tax was not being collected cannot as a matter of law be deemed “false” because a “true” statement cannot be “false” within the Act’s meaning. United States ex rel. Garst v. Lockheed Integrated Solutions Co.,
We conclude that a document reflecting that no use tax is being collected and the document reflects that use tax due is “$0.00” cannot be considered false for purposes of the Act. We agree with defendants’ position that a document that reflects the tax due relating to a transaction is $0 and that no tax was in fact being collected cannot be false for purposes of the Act but, instead, represents a truthful assertion. We must emphasize that our inquiry here is not to determine whether a knowingly false statement is required, which is the subject of the first certified question but, instead, whether a statement that is factually true can be deemed false for purposes of bringing a claim under the Act. Neither party here disputes that no use tax was collected or that the invoices rendered to the purchasers reflected that no use tax was collected or due. Since the documents at issue are factually true, in our view, factually true statements cannot be considered sufficiently false for purposes of bringing a claim under the Act. See Fru-Con Construction Corp., slip op. at 17, citing Hindo v. University of Health Sciences/The Chicago Medical School,
Question 2(c)
Next, we turn our attention to whether it is necessary that a false statement be submitted to or actually relied upon by the State for purposes of the Act. We conclude the answer to this question is no.
The State responds that documents are considered submitted to the State for purposes of the Act if the State potentially may rely upon the documents. The State claims that the invoices, order confirmations, and sales receipts that defendants distribute to retail purchasers are the same records that the State relies on to determine defendants’ tax burden and regulatory compliance and direct submission to the State is not necessary. 35 ILCS 105/11 (West 2004); 35 ILCS 120/7 (West 2004); 86 Ill. Adm. Code §1305(b) (amended and eff. August 21, 1974). The State maintains that it is sufficient that the State could have seen and relied upon the documents as part of its regular operations to satisfy this element.
The answer to this certified question is that a document is not required to be submitted to or directly relied upon by the government to violate the Act. We note that the State relies upon United States ex rel. Bahrani v. Conagra, Inc.,
Question 3
Next, we address whether the Act is a proper vehicle for the collection of sales and use tax. Our analysis first begins with whether claims brought under the Act afford taxpayers the same protections afforded to claims brought under the tax laws. Defendants contend that the sales and use tax laws and the Act are not equivalent and allowing the claims to proceed as whistleblower claims denies defendants due process safeguards and creates a conflict with the State’s tax laws. Defendants maintain that the tax statutes provide rights and protections against “unlawful exactions” that are not provided for under the Act, thereby creating a conflict between the two statutes. Defendants claim that the trial court erroneously concluded that the tax statutes and the Act are functionally equivalent in that they both seek collection of taxes. Defendants, citing Humphrey,
We agree that the Illinois tax statutes are not identical to the Act, but we cannot reach the definitive conclusion that tax claims can never be brought under the Act on the basis that the Act does not provide the same safeguards and protections provided for under the tax laws. The State correctly notes the distinguishing feature of claims brought under the Act is that these actions are civil in nature and afford defendants the protections innate in all civil causes of action, in contrast to claims brought under the tax statutes, which afford defendants an opportunity to dispute and settle assessed tax deficiencies.
We have considered defendants’ claims that despite the protections afforded to defendants under civil causes of action, these protections are not the same, specific protections afforded to defendants under the tax laws. We must keep in mind, however, the nature of the allegations at issue in the instant case. The nature of the claims here relates to defendants’ alleged fraudulent failure to collect and remit use tax. Defendants contend that it is improper to bring claims under the Act when the Department has not yet assessed or determined any tax liability relating to the claim of failing to pay use tax. Defendants correctly detail the administrative process afforded to taxpayers when a dispute regarding an alleged failure to pay taxes arises. See 35 ILCS 105/12 (West 2004); 35 ILCS 120/12 (West 2004). However, the specific inquiry and determination that must be made under the Act is
rightfully owed to it regardless of the nature of the underlying transaction giving rise to the claim.
Question 4
The answer to this question is that the Department is not the sole entity authorized to assess and collect use tax when evidence of a defendant knowingly generating a false record or statement to avoid payment of tax exists. Defendants contend that the Department has exclusive authority to assess and collect use tax based on a statutory grant of authority; and as such, claims filed to collect taxes cannot be brought under the Act. See Village of Niles v. K mart Corp.,
The State responds that nothing in the Administrative Procedures Act (5 ILCS 100/1 — 1 et seq. (West 2004)) or the Use Tax Act (35 ILCS 105/12 (West 2004)) provides exclusive jurisdiction in the Department to decide all use tax enforcement questions. Employers Mutual Cos. v. Skilling,
First, we note that the Illinois General Assembly has the power to generate revenue in the state and to vest exclusive jurisdiction in an administrative agency. See Village of Lisle, 352 111. App. 3d at 852,
Turning to the Nevada Supreme Court’s decision in International Game Technology, Inc. v. Second Judicial District Court,
Similarly, this court in Village of Lisle acknowledged that where an administrative “agency’s technical expertise would help resolve the controversy, or when there is a need for uniform administrative standards,” authority to resolve the dispute should be relinquished to the administrative agency. Village of Lisle,
We believe it is important to draw a distinction that is not fully drawn by defendants. This appeal is not seeking to assess and collect tax on defendants, which defendants contend is within the exclusive jurisdiction of the Department. If this were the situation, then the Department would conduct an audit of defendants’ records and impose any deficient taxes on defendants. Rather, the underlying claim in the instant case is that defendants knowingly failed to remit use tax to the State as defined by the Act and falsified documents. The nature of these allegations exceeds a claim for a tax deficiency, which would fall within the purview of the Department’s powers to assess and collect use taxes. Instead, the allegations here relate to the intent underlying defendants’ alleged creation of false records and statements, which is an area that does not require the Department’s specialized knowledge and is an area that the Attorney General is more than competent to address. Accordingly, based on the nature of the claims raised in the instant case, the Department is not the sole entity authorized to assess and collect use tax when allegations of false records and statements exists.
Question 5
Our answer to this certified question is that alleged use tax claims relating to Internet and/or catalog sales may be brought under the Act. Defendants point to the FCA’s language, which the Illinois Act was patterned after, that expressly excludes all tax matters under the Internal Revenue Code from falling within the purview of the FCA. Defendants maintain that the Act’s express language that states it does not apply to the Illinois Income Tax Act (35 ILCS 5/101 et seq. (West 2004)) should be extended to also exclude the Use Tax Act. Defendants contend that the Illinois legislature contemplated that not all Illinois taxes are incorporated in the Illinois Income Tax Act when it replaced the phrase “Internal Revenue Code” with “Illinois Income Tax Act” in adopting the FCA. Thus, defendants assert that the Act does not apply to the Use Tax Act.
The State responds that the Act does not exclude claims to enforce use tax obligations. The State notes that the Act expressly states that it “does not apply to claims, records, or statements made under the Illinois Income Tax Act.” 740 ILCS 175/3(d) (West 2002). The State notes that in drafting the Act, the General Assembly included income tax claims, but did not include use tax claims, which indicates the General Assembly’s intent to exclude use tax claims as falling under the Act’s scope. See Mattis v. State Universities Retirement System,
We reject defendants’ contention that the legislature did not contemplate extending the Act’s exclusionary language to include the Use Tax Act. The legislature is entrusted with the power to enact the laws of the State of Illinois, including tax laws, and to raise revenue for this state. We must reject defendants’ contention that the legislature was unaware that a separate taxing scheme apart from the income taxes of the State exists when it adopted the FCA and overlooked expressly excluding those taxes from the Act. The fundamental rule of statutory construction is to determine and give effect to the intent of the legislature, and the statutory language is the best indicator of the legislature’s intent. Quality Saw & Seal, Inc. v. Illinois Commerce Comm’n,
Question 6(a)
Our answer to this certified question is that the Act is constitutional and does not improperly usurp the exclusive authority of the Attorney General to initiate and conduct litigation on behalf of the State. Defendants claim that the Act’s provisions directly conflict with the Attorney General’s “exclusive constitutional power and prerogative to conduct the state’s legal affairs.” (Emphasis in original.) Lyons v. Ryan,
In response, the State contends that the Illinois Supreme Court previously rejected this same contention in Scachitti v. UBS Financial Services,
We agree with the State that the Act is constitutional. We rely on our state supreme court’s decision in Scachitti. In Scachitti, the Illinois Supreme Court addressed whether the Act usurped the Attorney General’s constitutional powers to represent the State. Scachitti,
Question 6(b)
Finally, we turn to the last certified question and answer this question that the Act does not violate the Attorney General clause and the executive compensation clause of the Illinois Constitution, article Y, sections 15 and 21. Section 15 of the Illinois Constitution provides that “[t]he Attorney General shall be the legal officer of the State, and shall have the duties and powers that may be prescribed by law.” Ill. Const. 1970, art. Y, §15. The executive compensation clause of the Illinois Constitution states, in pertinent part: “Officers of the Executive Branch shall be paid salaries established by law and shall receive no other compensation for their services.” Ill. Const. 1970, art. Y, §21. Defendants contend that the Act cannot be used as a tax assessment and collection mechanism because the Attorney General clause and the executive compensation clause preclude payment to private attorneys for the collection of tax monies on behalf of the State. Saltiel v. Olsen,
Defendants rely on Saltiel, where the Illinois Attorney General protested the payment of fees to plaintiffs in a matter involving a challenge to the constitutionality of a real estate transfer tax. The Illinois Supreme Court in Saltiel concluded that the executive compensation clause was not violated because the Attorney General did not hire the attorneys that represented the plaintiffs in the litigation. Saltiel,
In response, the State claims that the Act is an antifraud statute and not a tax collection statute, and fees relators receive are from the litigation’s proceeds as a reward for detecting fraud upon the State. The State also claims that the executive compensation clause is not violated because fees paid from a common fund are not fees paid by the State. Thus, no violation of the executive compensation clause exists.
In our view, the Act does not violate the Attorney General clause and the executive compensation clause of the Illinois Constitution. Resources spent in litigating a matter brought in conjunction with qui tarn proceedings cannot be equated with the State expending money to a private attorney. The State correctly notes that the Act is an antifraud act and not a tax collection act, and, thus, the money a relator
CONCLUSION
In light of the above, the certified questions are answered as follows:
Question 1
No, a remote retailer cannot make a “knowingly” false record or statement to create liability under the Act if the retailer discloses that no use tax is due or collected based on the taxpayer’s reasonable interpretation of the law.
Question 2
(a) Yes, the Act under the facts of the instant case requires the existence of an actual record or statement.
(b) No, documents memorializing a purchase that discloses that no use tax is being collected cannot be considered false sufficient to create liability under the Act.
(c) No, under the Act, a false record or statement does not have to be submitted to or directly relied upon by the State.
Question 3
No, claims brought under the Act do not deprive defendants of rights and privileges such that the Act cannot be used to enforce the collection of taxes due the State based on false records and statements because litigants are afforded the protections provided to all litigants in civil proceedings.
Question 4
No, the Illinois Department of Revenue is not the sole entity authorized by the Illinois General Assembly to assess and collect use tax when defendants create fraudulent records and statements relating to taxes due to the State.
Question 5
Yes, the Act applies to alleged tax liabilities under the Use Tax Act when fraudulent records and statements exists.
Question 6
(a) No, the Act does not violate the Attorney General clause of the Illinois Constitution by improperly usurping the Attorney General’s exclusive authority to initiate and conduct litigation on the State’s behalf because in qui tarn proceedings, the Attorney General still maintains control over the proceedings.
(b) No, the Act does not violate the Attorney General clause or the executive compensation clause of the Illinois Constitution because the relator that files a claim on behalf of the State is not directly paid by the State for services rendered.
Certified questions answered; cause remanded.
FITZGERALD SMITH, EJ., and O’MARA FROSSARD, J., concur.
Notes
This court granted a motion to withdraw from the appeal filed by Pfaltzgraff Co., Maidenform, Inc., Toy’s R Us and PETsMART.