Court Opinion

ID: 7023036
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:53:09.748129+00
Date Added: 2024-06-11T16:10:38.339052
License: Public Domain

PRESIDING JUSTICE McCULLOUGH, dissenting: The parties agree that this is a question concerning a use tax to be imposed by the State of Illinois. First, I question the term “use tax.” In Illinois, a use tax is a tax upon the privilege of using personal property within this State. (United Air Lines, Inc. v. Mahin (1971), 49 Ill. 2d 45, 46, 273 N.E.2d 585, 586.) As is apparent, the reason for the use tax is to complement the retailers’ occupation tax by preventing the evasion of tax on purchases made outside the State and equalize a competitive disadvantage of Illinois retailers who face retailers’ occupational tax liability. The transaction in this case involves a purchase of coal from Old Ben Coal Company and Inland Steel Company. Both coal companies were located in Illinois, and there is no dispute that the coal was in the State of Illinois at the time of its purchase. It is also undisputed that Old Ben and Inland are retailers for the purposes of the Retailers’ Occupation Tax Act. Likewise, it is undisputed that the coal purchased was not purchased for the purpose of resale and that the purchase of the coal was not taxed by the State of Missouri or any other State. Contested is whether delivery was in Illinois. Because of my inability to see the big picture, i.e., that it is other than a sales tax and not a matter of interstate commerce, I would find that the Union Electric Company (Union) is responsible for the tax to the State of Illinois. On the merits, we need only look to the contract between Union and Cora Dock. In article II, paragraph 5, of the contract, it provided: “In the event Union is unable, for any reason, to receive coal from barges at the Plant, then it may request Cora to divert deliveries to an alternate destination. Cora reserves the right to refuse to serve a particular alternative destination because of operating conditions or other circumstances.” Article III requires Cora to cause each unit of a train to be unloaded at the terminal within a specific time period. However, with respect to delivery from Cora to Union, article V provides: “It is anticipated by the parties that three or four tows per week shall constitute normal operating conditions under this Agreement. Scheduling of loaded barges and the release of empties shall be in conjunction with the needs of the Plant.” A question in this case: Is there an interruption for the owner’s benefit? If there is an interruption, then the property is taxable. Although Cora Dock was required to unload the trains coming into Cora Dock on a timely basis, i.e., within four hours, there was no similar requirement that the coal move from Cora Dock to Union at any specific time schedule. It appears from reading the contract that the coal could and would be stockpiled at Cora Dock for transfer to Union, the only provision in the contract being that “[i]t is anticipated by the parties that three or four tows per week shall constitute normal operating conditions.” If the purchaser or his representative receives physical possession of the property in Illinois, the sale is not within interstate commerce. This applies even though the buyer may ship the goods out-of-State after receiving physical possession of the property in this State. (86 Ill. Adm. Code 130.605(a)(1), (a)(2) (1985).) With respect to the application of sections 130.605(b), and (c), subsection (b) concerns sales in which the sellers are obligated by agreement with the purchaser to physically deliver the goods from Illinois to out-of-State. In this case, the sellers, Old Ben and Inland, were only obligated to furnish the coal at the loading point at each mine. As to subsection (c), it exempts sales in which the seller, by carrier or by mail, under contract with the buyer, delivers goods from in-State to out-of-State. The arrangements for delivery beyond the point of loading were made by Cora and Union and not by the sellers. Neither of these subsections apply to this case. Simply stated, Cora Dock acted as plaintiff’s representative for purpose of assessing the tax liability under section 130.605(a)(1) of the regulations. I would also find that the elements of Complete Auto are satisfied if applied to this case. The four-part test: (1) the tax must be fairly apportioned; (2) it must not discriminate against interstate commerce; (3) the tax must be fairly related to benefits provided by the State; and (4) there must be a sufficient nexus between the activity and the State. Applying this test, the tax is fairly apportioned, it does not discriminate against interstate commerce inasmuch as it may very well be a simple sales tax or if considered a use tax, it is for property which is not purchased for resale. The tax does not discriminate against interstate commerce, is fairly apportioned, and is related to the benefits provided by the State who provide law enforcement and other governmental services. The coal is taken from the State of Illinois ground, and certainly the operation of the coal mine and the contract provisions provide a sufficient nexus between the activity and the State. The Supreme Court’s application of Complete Auto in Goldberg v. Sweet (1989), 488 U.S___, 102 L. Ed. 2d 607, 109 S. Ct. 582, is further justification to uphold the tax here.