SECOND DIVISION

									November 20, 2001

No.  1-00-1872

								)

SCHAWK, INC., a Delaware Corporation	) Appeal from the

							  	) Circuit Court of

	Plaintiff-Appellee,				) Cook County.

								)										

		v.						)

								)

KENNETH ZEHNDER, Director, Illinois	)

Department of Revenue, and 			)

JUDY BAAR TOPINKA, Treasurer of the	)

State of Illinois,					) Honorable

								) Thomas P. Quinn,

	Defendants-Appellants.			) Judge Presiding.

								)

	JUSTICE GORDON DELIVERED THE OPINION OF THE COURT:

	Defendants Kenneth Zehnder, Director of the Illinois

Department of Revenue and Judy Topinka, Treasurer of the State of

Illinois (collectively "the Department") appeal from an order of

the circuit court of Cook County finding that plaintiff Schawk,

Inc. ("Schawk") is engaged in manufacturing and thus is entitled

to a tax credit for certain equipment it uses in its business. 

On appeal, the Department contends that the circuit court

misinterpreted the word "manufacturing" as it is defined in the

applicable statute.  We reverse and remand for further

proceedings.

BACKGROUND

	The following facts regarding the nature of Schawk's

business are not in dispute and were stipulated to by the

parties.  Schawk, a Delaware corporation doing business in Illinois, provides digital imaging prepress services for the

consumer products industry.  Schawk produces and sells color

separated film (referred to as "exposed film," "color

separations" or "product") used by its customers to print

packaging materials for consumer products such as cereal boxes,

promotional materials and in-store displays.  Schawk does not

generally print the materials itself, but merely supplies the

film for printing to its customers.  

	When Schawk receives a new work order its customer supplies

either electronic files or hard copy transparencies which depict

the package, sales display or promotional material the customer

wants printed.  If Schawk receives an electronic file, it checks

to verify that the files contain all of the necessary elements. 

If hard copy is supplied by the customer, Schawk's color scanning

department scans the transparencies to create an electronic file. 

A computer operator then corrects or retouches the electronic

file to produce a file whose colors match the transparency

supplied by the customer.

	Subsequently, using a computer, an assembly operator places

all of the images in the proper order in the electronic file. 

This step is important because printing of multiple colors

requires that the printing presses apply the colors in the proper

order (a separate film is used for each color).  Once the

electronic file is assembled, it is sent to the digital proofing

department.  Both mechanical and digital proofs are used.  The digital proof is inspected for digital file integrity.  The

mechanical proof is used to inspect the dimensions of each

graphic element and to verify that each element meets printer

specifications.  After the mechanical quality control department

approves the mechanical proof, the electronic file is sent to the

film output department where a final film is produced.  Various

output devices are used to produce exposed film, which is then

developed.  

	Once the final film is produced, it is inspected by Schawk's

film quality control department.  A color proof is used to

inspect how well the images on the film match the transparency or

artwork which was originally supplied by the customer.  The film

then goes through a final mechanical inspection before it is

shipped to the customer's printer.

	On its Illinois income tax returns for the tax years ending

December 31, 1992, through December 31, 1997, Schawk took

investment tax credits pursuant to section 201(e) of the Illinois

Income Tax Act (35 ILCS 201(e)(West 1998)) against its personal

property tax replacement income tax liability for various items

of machinery and equipment purchased during those years.  This

equipment is used by Schawk in the course of its business, as

described above.  Under the Act, the credits would only have been

available to Schawk if it was primarily engaged in manufacturing. 

The Department subsequently audited Schawk's tax returns, and

determined that Schawk was not entitled to the investment tax credit under section 201(e).  Schawk subsequently paid additional

amounts in income tax under protest.

	On January 24, 1997, Schawk filed a complaint for injunctive

relief alleging that it was engaged in manufacturing and that it

was thus entitled to claim the income tax credits at issue. The

trial court subsequently entered summary judgement in favor of

Schawk and against the Department, finding that Schawk was

engaged in manufacturing under section 201(e).  This appeal

followed.

ANALYSIS

	The Department contends that Schawk is not primarily engaged

in manufacturing and is thus not entitled to a tax credit for

qualified property pursuant to section 201(e)(1) of the Illinois

Income Tax Act (35 ILCS 201(e)(1)(West 1998)).  We agree.

	"Where facts are undisputed *** a determination of whether

property is exempt from taxation is a question of law."  Chicago Patrolmen's Association v. Department of Revenue, 171 Ill. 2d 263, 271, 664 N.E.2d 52, 56 (1996).  "Statutes exempting property

from taxation are to be strictly construed in favor of taxation." 

Chicago Patrolmen's Association, 171 Ill. 2d at 271, 664 N.E.2d at 56 (1996)."  Statutory construction is a question of law, and

is thus reviewed de novo.  Advincula v. United Blood Services, 176 Ill. 2d 1, 12, 678 N.E.2d 1009, 1015 (1996).    

	"The cardinal rule of statutory construction is to ascertain

and give effect to the true intent of the legislature."  Paris v. Feder, 179 Ill. 2d 173, 177, 688 N.E.2d 137, 139 (1997).  "The best evidence of legislative intent is the language used in the

statute itself, which must be given its plain and ordinary

meaning."  Paris, 179 Ill. 2d at 177, 688 N.E.2d at 139.  "The statute should be evaluated as a whole, with each provision

construed in connection with every other section."  Paris, 179 Ill. 2d at 177, 688 N.E.2d at 139.  "If legislative intent can be

ascertained from the statute's plain language, that intent must

prevail without resort to other interpretive aids."  Paris, 179 Ill. 2d at 177, 688 N.E.2d at 139.

	Pursuant to section 201(c) of the Act, a tax known as the

Personal Property Tax Replacement Income Tax (the tax) is imposed

on every corporation, partnership and trust in Illinois.  35 ILCS

5/201(c)(West 1998).  A taxpayer is allowed a credit against the

tax for investment in qualified property.  35 ILCS 5/201(e)(1)

(West 1998).  The definition of qualified property provides,

inter alia, that the property "is used in Illinois by a taxpayer who is primarily engaged in manufacturing or in mining coal or

fluorite, or in retailing."  35 ILCS 5/201(e)(2)(D)(West 1998). 

The Act further defines "manufacturing" as "the material staging

and production of tangible personal property by procedures

commonly regarded as manufacturing, processing, fabrication, or

assembling which changes some existing material into new shapes,

new qualities, or new combinations."  35 ILCS 5/201(e)(3)(West

1998).  

	We find that the plain language of the statute at issue is

clear and that the activities engaged in by Schawk are not

embraced under the statute's definition of manufacturing.  The

Oxford English Dictionary defines "manufacture" as follows: "1. *** To work up (material) into form suitable for use. *** 2. To

make or fabricate from material; to produce by labour (now esp.

on a large scale)."  IX Oxford English Dictionary 341 (2nd ed. 1989).  The American Heritage Dictionary, defines "manufacture" as "1. a. To make or process (a raw material) into a finished

product, esp. by means of a large-scale industrial operation.  b.

To make or process (a product) *** 2. To create, produce or turn

our in a mechanical manner *** 3. *** To make or process goods,

esp. in large quantities and by means of industrial machines." 

The American Heritage Dictionary 764 (1982).

	Schawk's activities on their face do not appear to fit

within the parameters of these definitions.  First, Schawk does

not appear to be turning out its product in a mechanical manner. 

Rather, Schawk's business requires the involvement of skilled

computer operators who tailor each individual color separation

product to the unique needs of each customer.  For example,

Schawk's computer operators retouch the electronic files for the

color separations in order to insure that the colors in the file

match the customer's order.  Computer operators also assemble an

electronic file for each product to place all of the images in

the proper order for printing.  Further, Schawk does not mass produce its products in large quantities.  Rather, it produces a

substantially unique product in response to each order from a

customer.  Finally, since each completed product contains images

or artwork unique to the particular customer, Schawk's services

destroy all commercial value the unexposed film with which it was

produced would have to anyone other than the customer for whom

the product was made.

	Moreover, as we look beyond the dictionary definitions of

manufacturing, the inclusion of Schawk's business in the

classification "manufacturing" is inconsistent with Illinois

precedent classifying the graphic arts as a service occupation in

the context of other tax statutes.1  In Spagat v. Mahin, 50 Ill. 2d 183, 189, 277 N.E.2d 834, 837-38 (1971), our supreme court

articulated a test to determine if a business is engaged in a

service occupation or a retail occupation:

	"If the article sold has no value to the purchaser

except as a result of services rendered by the vendor and the transfer of the article to the purchaser is an

actual and necessary part of the service rendered, then

the vendor is engaged in the business of rendering

service and not in the business of selling at retail. 

If the article sold is the substance of the transaction

and the service rendered is merely incidental to and an

inseparable part of the transfer to the purchaser of

the article sold, then the vendor is engaged in the

business of selling at retail."  Spagat, 50 Ill. 2d at 189, 277 N.E.2d at 837-38.

Relying on this distinction, courts have concluded that various

activities which can be loosely grouped under the classification

"graphic arts" constitute services rather than sales of personal

property at retail.  See, e.g., H.G. Adair Printing Co. v. Ames, 364 Ill. 342, 4 N.E.2d 481 (1936) (commercial printing is a

service occupation and thus commercial printers are not liable

for retailer's occupation tax);  A.B.C. Electrotype Co. v. Ames, 364 Ill. 360, 4 N.E.2d 476 (1936) (persons producing

"electrotypes, stereotypes, and matrices" are engaged in a

service occupation);  J.A. Burgess Co. v. Ames, 359 Ill. 427, 194 N.E. 565 (1935) (blue printers and photostaters are engaged in a

service occupation).

	Likewise, in the case at bar, Schawk is engaged in the

business of producing color separations on exposed film, which

can also be included as one of the graphic arts.  It appears that the primary value of the film which Schawk sells to its customers

comes from the services performed by Schawk to customize the film

to contain the artwork or designs supplied by the customer.  If a

customer simply wanted to acquire unexposed film, it is unlikely

that they would seek a provider who also performed significant

services to place artwork and designs on that film.  Furthermore,

the services which Schawk provides destroy any value which the

unexposed film has to anyone but Schawk's customers.  The primary

value which Schawk provides its customers is thus the value of

these services.

	Although the forgoing cases involve the differentiation of

service occupations from retail occupations, our supreme court in

Colorcraft Corp. v. Department of Revenue, 112 Ill. 2d 473, 493 N.E.2d 1066 (1986), has adopted itstheir test for service occupations

in order to differentiate them from manufacturing, and is

squarely on point.  The Colorcraft court held that photo finishing services constitute services rather than manufacturing

for the purpose of an exemption available to manufacturers under

the Use Tax Act (Ill.Rev.Stat.1983, ch. 120, par 439.3).  In

Colorcraft the taxpayer was a business which processed color film into finished photographs for consumers.  The taxpayer argued

that it was engaged in the business of manufacturing and thus its

photo finishing equipment was exempt from the use tax.  The

statute at issue defined manufacturing similarly to the statute at issue in the instant case.2

	The Colorcraft court reasoned that the graphic arts had been classified as service occupations rather than retail sales in

several earlier cases construing the Retailer's Occupation Tax 

Act.  H.G. Adair Printing Co., 364 Ill. 342, 4 N.E.2d 481;  A.B.C. Electrotype Co., 364 Ill. 360, 4 N.E.2d 476;  J.A. Burgess Co., 359 Ill. 427, 194 N.E. 565.  The Colorcraft court noted that our supreme court in Spagat had articulated a test to determine if a business is engaged in a service or retail occupation.

	The court then held that, like the other graphic arts, photo

finishing is a service occupation.  The photo finishing process

"destroys the materials used as far as their commercial value is

concerned."  Colorcraft, 112 Ill. 2d at 483, 493 N.E.2d at 1070.  "Once the paper is used to make the customers' prints, except

perhaps in rare instances, it is of no value to anyone other than

the person for whom the pictures are developed.  It is unlikely

that the average person would be even remotely interested in

purchasing prints developed for another."  Colorcraft, 112 Ill. 2d at 483, 493 N.E.2d at 1070.  The primary value provided by the taxpayer to its customers is thus the service which it renders,

and the taxpayer is not in the business of selling tangible

personal property.  Colorcraft, 112 Ill. 2d at 483, 493 N.E.2d at 1070.

	We note that not only is the case at bar consistent with the

holding in Colorcraft, but also on its facts presents a stronger case for determining that the taxpayer's activities are not

manufacturing than did the facts in Colorcraft.  While the activities of processing large numbers of photographs in a

largely automated system could be termed mass production (which

is generally associated with manufacturing) no such designation

can be made in the case at bar.  The color separated film

produced by Schawk does not just require development by automated

means.  Rather, each must be prepared to the customer's unique

specifications, with the assistance of human computer operators. 

A fortiori, Schawk is not engaged in manufacturing.

	We do not agree with Schawk's contention that the inclusion

of the word "process" in the Act's definition of "manufacturing"

expands the definition of "manufacturing" to include Schawk's

prepress business.  Such a construction would broaden the

definition of "manufacturing" well beyond the construction of our

supreme court in Colorcraft.  If "process" and thus "manufacturing" were to be expanded to include Schawk's

activities, then certainly the definition would have to be

expanded to include the activities which the court in Colorcraft specifically held were not manufacturing, even though the statute

construed therein was virtually identical in its essential terms

and also included "process" as part of its definition of

manufacturing.  Ill.Rev.Stat.1983, ch. 120, par. 439.3, quoted

in, Colorcraft, 112 Ill. 2d at 476-77, 493 N.E.2d at 1067.

	Our holding does not, however, remove the word "process"

from the definition of manufacturing.  As made clear in

Colorcraft, the inclusion of "process" in the definition of manufacturing does not pre-empt the other pre-requisites

associated with the definition of manufacturing, namely and among

other things, a lack of emphasis on specialized skills, the

merchantability of the finish products in the marketplace as a

whole rather than only to the specific customer for whom they

were prepared, mass production and a lack of uniqueness of each

product produced. 

	Schawk's cases, Dolese & Shepard Co. v. O'Connell, 257 Ill. 43, 45, 100 N.E. 235, 236 (1912); H.H.Kohlsaat & Co. v. O'Connell, 255 Ill. 271, 272, 99 N.E. 689, 690 (1912); and Van's Material Co. v. Department of Revenue, 131 Ill. 2d 196, 545 N.E.2d 695 (1989), are inapposite.  None of the activities in the

cases cited by Schawk have the distinctive features of service

occupations which we discussed above, and which were discussed in

Colorcraft.  See, e.g., Dolese & Shepard, 257 Ill. at 45, 100 N.E. at 236 (holding that constructing roads of sand, gravel or

dirt was manufacturing); H.H. Kohlsatt, 255 Ill. at 272, 99 N.E. at 690 (making baker's goods and restaurant supplies is

manufacturing); Van's Material, 131 Ill. 2d at 208, 545 N.E.2d at 701 (utilizing above definitions to determine that a ready-mix

concrete dump truck was primarily used in the manufacture of

tangible personal property).  In none of these cases do we have

the distinctive features which characterize a service occupation,

discussed above, that are present in Schawk's business and that

were present in the taxpayer's business in Colorcraft.  

	Finally, we need not address the arguments based on the

legislative history.  As we stated above, the statute at issue is

not ambiguous.  Rather, the commonly understood definitions of

the words used are readily apparent, as Schawk readily admits. 

Any resort to legislative history is thus inappropriate.  Paris, 179 Ill. 2d at 177, 688 N.E.2d at 139; Nevitt v. Langfelder, 157 Ill.2d 116, 134, 623 N.E.2d 281, 289 (1993).  Moreover, even if

we were to look to the legislative history, it would not aid

Schawk.  While Schawk correctly asserts that the bill's sponsor

stated that he intended the graphic arts industry to be covered

by this exemption, this sole comment by one legislator is of no

moment.  Atkins v. Deere & Company, 177 Ill. 2d 222, 244-45, 685 N.E.2d 342, 347-48 (1997) ("a preamble constitutes a stronger

expression of intent than does a passing comment made by a single

legislator during legislative debates); People v. Hickman, 163 Ill. 2d 250, 262, 644 N.E.2d 1147, 1153 (1994) ("while a court

gives some consideration to statements by the sponsor of a bill, such statements are not controlling").

	For the reasons discussed above, the judgement of the

circuit court of Cook County is reversed and this cause is hereby

remanded for further proceedings not inconsistent with this

opinion.	

	Reversed; cause remanded.

	CAHILL and McBRIDE<, JJ., concur.