Opinion ID: 2220171
Heading Depth: 1
Heading Rank: 2

Heading: Chicago Sales Tax

Text: The second issue concerns whether tampons and sanitary napkins should be exempt from a sales tax imposed by the City of Chicago (the city). The appellate court did not reach this question, and we normally would not review an issue not addressed by the appellate court. ( Christopher, 409 Ill. at 134.) The circuit court, however, resolved the issue in plaintiffs' favor and certified the question for review, the parties fully addressed the issue in their briefs and requested that we decide the issue, and a decision on this issue would serve the interest of judicial economy ( Krasnow v. Bender (1979), 78 Ill.2d 42, 47). Consequently, we accept the issue for review. Chicago's city council enacted the Chicago Sales Tax Ordinance (the ordinance) (Chicago Municipal Code § 200.6-1 et seq. (1984)). The ordinance imposes a tax on the sale of tangible personal property in the city, but the ordinance also exempts certain property from this tax: Purchases or uses of tangible personal property under the following circumstances shall not be subject to the [sales] tax   :    (i) purchase or use of food for human consumption which is to be consumed off the premises where it is sold (other than alcoholic beverages and food which has been prepared for immediate consumption) and prescription and nonprescription medicines, drugs, medical appliances and insulin, urine testing materials, syringes, and needles used by diabetics, for human use. (Emphasis added.) (Chicago Municipal Code § 200.6-4 (1984).) The city council subsequently inserted soft drinks after alcoholic beverages in the ordinance, thereby removing the exemption for soft drinks. City Council of Chicago, Official Journal of the Proceedings, September 6, 1984, at 9022. Although the ordinance does not contain a definition of medical appliances, the Chicago department of revenue issued a regulation in which it defined medical appliances as follows: A medical appliance is an item intended by the maker to correct any functioning part of the body or is used as a substitute for any functioning part of the body, such as artificial limbs, crutches, wheelchairs, stretchers, hearing aids, corrective eyeglasses, sterile cotton or bandaids, and the like. Medical appliances also include testing equipment such as blood pressure kits, thermometers, urine testing kits, and the like. However, supplies such as non-sterile cotton swabs, disposable diapers, toilet paper, tissues, towelettes, and the like do not qualify for the exemption. Likewise, cosmetics such as lipsticks, perfume, hair tonics and the like, do not qualify for the exemption. City of Chicago Department of Revenue, Regulation 1.200.6-4(i)(2) (December 12, 1982). The State of Illinois also exempts medical appliances from its sales taxes; namely, the Retailers' Occupation Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 441) and the Use Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 439.3). Both the Retailers' Occupation Tax Act and the Use Tax Act provide an exemption for: food for human consumption which is to be consumed off the premises where it is sold (other than alcoholic beverages, soft drinks and food which has been prepared for immediate consumption) and prescription and nonprescription medicines, drugs, medical appliances and insulin, urine testing materials, syringes, and needles used by diabetics   . (Emphasis added.) (Ill. Rev. Stat. 1985, ch. 120, pars. 439.3, 441.) Thus, the State's exemption and the city's exemption are identical. The Illinois Department of Revenue (Illinois Department), like the Chicago department of revenue (Chicago department), issued a regulation defining medical appliances: (2) A medical appliance is an item which is intended by the maker to correct any functioning part of the body or which is used as a substitute for any functioning part of the body, such as artificial limbs, crutches, wheelchairs, stretchers, hearing aids, corrective eyeglasses, dental prostheses, and sterile cotton, bandages and bandaids. The term `medical appliance' also includes testing equipment used by an individual to test his or her own medical condition.    (4) Supplies, such as non-sterile cotton swabs, disposable diapers, toilet paper, tissues and towelettes do not qualify for the reduced rate. Cosmetics, such as lipsticks, perfume and hair tonics do not qualify for the reduced rate. (86 Ill. Adm. Code § 130.310 (1985).) The Illinois Department later amended its regulation to exempt diapers and absorbent pads for incontinent patients from the tax. (11 Ill. Reg. 18767 (adopted Jan. 23, 1987).) Nevertheless, the Illinois Department's definition and the Chicago department's definition are virtually identical. Both parties point out that in 1985 the Illinois Department began construing medical appliances in the Retailers' Occupation Tax Act and the Use Tax Act as including tampons and sanitary napkins, thus effectively exempting those products from its sales taxes. The parties stipulated that the Chicago department has never construed the term medical appliances in the ordinance to include tampons and sanitary napkins; thus, the city has continued to tax those products. Defendants contend that because the ordinance does not specifically exempt tampons and sanitary napkins, and because tampons and sanitary napkins do not fall within the definition of medical appliances set forth by the Chicago department, tampons and sanitary napkins should not be exempt from the city's sales tax. Plaintiffs, however, contend that tampons and sanitary napkins fall within the Chicago department's definition of medical appliances. Plaintiffs do not challenge either the Illinois statute or the Chicago ordinance. Rather, they challenge the Chicago department's interpretation of its definition of medical appliances; that is, the Chicago department's failure to interpret tampons and sanitary napkins as medical appliances. We hold that tampons and sanitary napkins fall within the Chicago department's definition of medical appliances. Defendants argue that medical appliances are items used pursuant to an injury or an illness, whereas nonmedical appliances are items used for hygienic purposes. Defendants point out that menstruation is a normal bodily function, not an illness, and thus tampons and sanitary napkins are used for hygienic purposes and are not, therefore, medical appliances. Tampons and sanitary napkins, however, serve an absorbent function similar to that of cotton and bandaids, and these latter two items are explicitly defined as medical appliances by the Chicago department's regulation. Moreover, tampons and sanitary napkins are not only used for menstruation, but are also used by many post-surgical patients of both sexes and all ages. Significantly, the Illinois Department, which has a definition of medical appliances almost identical to the Chicago department's definition, has determined that tampons and sanitary napkins are medical appliances. Defendants assert that the city council has not overridden the Chicago department's regulation by amending the ordinance to explicitly exempt tampons and sanitary napkins. Defendants therefore conclude that the city council chose not to follow the State's definition. Defendants also assert that because the Illinois Department altered its interpretation of medical appliances to include tampons and sanitary napkins after the city council enacted its ordinance and after the Chicago department defined medical appliances, the city council could not have intended to set up its ordinance consistent with the State's sales tax statutes. Defendants argue that the city may choose its own definition of medical appliances and is not obligated to follow the State's definition. We believe our holding is consistent with the intent of the city council. When the State chose to exclude soft drinks from its sales tax exemption (Ill. Rev. Stat. 1985, ch. 120, pars. 439.3, 441), the city council amended its ordinance to likewise exclude soft drinks as an exemption (City Council of Chicago, Official Journal of the Proceedings, September 6, 1984, at 9022). The amendment the city council passed to change the ordinance to exclude soft drinks as an exemption provided: WHEREAS, The State of Illinois has removed soft drinks from the types of foods exempt from the Illinois Retailers' Occupation Tax and Illinois Use Tax; and WHEREAS, It is the City's desire to maintain consistency in the administration and enforcement of the Chicago Sales Tax as compared to such State taxes to the extent practicable   . (Emphasis added.) (City Council of Chicago, Official Journal of the Proceedings, September 6, 1984, at 9022.) Thus, the city council has expressed an intent to administer and enforce its sales tax ordinance consistent with the State's administration and enforcement of its sales tax statutes. Although the city council has not amended the ordinance so as to exempt tampons and sanitary napkins, the State also did not amend its statutes to include tampons and sanitary napkins as exemptions. Rather, the State, through the Illinois Department of Revenue, simply altered its interpretation of its definition of medical appliances. Consequently, it is not surprising that the city council did not amend the ordinance to exempt tampons and sanitary napkins. The Chicago department of revenue has also expressed an intent to administer and enforce the ordinance uniformly with the State sales tax. The Chicago department's Sales Tax Ruling No. 3 provides: The Illinois Use Tax [citation] contains many provisions which are identical to that of the Chicago Sales Tax. Therefore, for administrative convenience and uniformity in the enforcement of such taxes, the Department of Revenue will allow persons who are subject to the State of Illinois Use Tax to follow the State rules and regulations with respect to that tax in complying with the City of Chicago Sales Tax. However, this will only be allowed where the State rules and regulations apply to a statutory provision in the Use Tax Act which is identical to one in the Chicago Sales Tax Ordinance, and which has not been specifically addressed in any Chicago Sales Tax Rule [or] Regulation   . (Emphasis added.) (City of Chicago Department of Revenue, Ruling No. 3 (December 18, 1982).) Although the Chicago department has specifically addressed the definition of medical appliances in a regulation, that definition is virtually identical to the definition set forth by the Illinois Department. Consequently, the Chicago department has not expressly departed from the State's position regarding medical appliances, except to state that tampons and sanitary napkins are not medical appliances when the State has stated that such products are medical appliances. The Chicago department's position with regard to tampons and sanitary napkins is therefore contrary to its own regulation and rule. Our holding, on the other hand, is consistent with the department's intent as expressed by Regulation 1.200.6-4(i)(2) and Rule No. 3. The language of the statutes, ordinance and regulations also supports our decision. Both the State and the city imposed identical taxes  sales taxes. Both the State and the city chose to exempt medical appliances from the taxes. Significantly, the language used in both exemptions is identical. Moreover, the language used by both the Illinois Department of Revenue and the Chicago department of revenue to define medical appliances is virtually identical. We conclude, therefore, that both the State and the city had a similar intent and provided the medical appliances exemption for similar reasons. [S]tatutes are to be construed strictly in favor of the taxing body and against exemptions. ( Board of Education v. City of Peoria (1979), 76 Ill.2d 469, 473.) The courts give substantial weight and deference to a reasonable construction of an ambiguous statute by the governmental department charged with enforcement of the statute. ( People ex rel. Watson v. House of Vision (1974), 59 Ill.2d 508, 514-15; Illinois Consolidated Telephone Co. v. Illinois Commerce Comm'n (1983), 95 Ill.2d 142, 152.) Interpretations of statutes by administrative agencies are sources for ascertaining legislative intent. ( Illinois Consolidated, 95 Ill.2d at 153.) Such interpretations, however, are not binding on the courts. Illinois Consolidated, 95 Ill.2d at 153. Under the circumstances, and for the foregoing reasons, we will not defer to the Chicago department of revenue's interpretation of its definition of medical appliances; that is, its determination that tampons and sanitary napkins are not medical appliances. Defendants advance no reason to justify a departure from the State's interpretation of medical appliances other than to assert, without citation to authority, that the city has no obligation to follow the State's interpretation. While this may be true and while the Chicago department's interpretation of an ordinance presumably reflects the intent of the city council, we have determined that the Chicago department's interpretation (although not its definition) of medical appliances is contrary not only to its own intent but also to the intent of the city council. We do not believe our decision in any way contravenes the taxing power of the city council or the legal status of the ordinance because we simply hold that the Chicago department's action (not to exempt tampons and sanitary napkins) was contrary to the intent of the city council. Because we have resolved the case at bar in plaintiffs' favor, we need not address plaintiffs' last argument that the appellate court erred when it denied their request for oral argument. Accordingly, we reverse the judgment of the appellate court and affirm the judgment of the circuit court. We remand the cause to the circuit court of Cook County for proceedings consistent with this opinion. Appellate court reversed; circuit court affirmed; cause remanded. JUSTICE STAMOS took no part in the consideration or decision of this case.