dissenting:
I concur with my colleagues on the questions of estoppel, constitutional sufficiency of section 2c, and export. However, insofar as they read Dearborn and section 2c to mandate that any retail sale, no matter how insignificant, converts a taxpayer whose principal business is wholesaling into a retailer, I dissent.
In Dearborn the supreme court reiterated its longstanding position that the ROTA is an excise tax on the privilege of making retail sales and has no application otherwise. There the taxpayer maintained that it was not a retailer, although a field audit by the Department indicated that about 1.5& of its gross sales might have been at retail for the period concerned. The hearing examiner held that the taxpayer was a wholesaler but nonetheless held it subject to 2c. The appellate court took essentially the same position but was reversed by the supreme court, which said:
“While the amendments with which we are here concerned [section 2c added by amendment in 1965 and itself amended in 1967] do not in terms purport to impose the retailers’ occupation tax upon a wholesaler, that is their effect under the construction given them by the appellate court: A wholesaler, like the plaintiff here, is assessed for a supposed tax deficiency; section 4 makes the Department’s corrected returns presumptively correct; if the wholesaler cannot prove that his sales were for resale by the documentation prescribed by section 2c, then section 1 renders the presumption of liability conclusive. The wholesaler is made liable for the tax despite uncontroverted evidence that he is not engaged in the business of selling property at retail, and indeed makes no retail sales at all.
Such an anomalous result could not occur in the absence of these amendments, for without them the plaintiff’s evidence would have been sufficient to rebut the Department’s prima facie case. [Citation.] Under our decisions this attempt by indirection to extend the retailers’ occupation tax to one not engaged in that business would invalidate the amendments.” Dearborn Wholesale Grocers, Inc. v. Whitler (1980), 82 Ill. 2d 471, 477-78, 413 N.E.2d 370, 373.
The instant case is unlike Dearborn in that the plaintiff here admitted to certain retail sales, although in a lesser amount (about .66% of its gross) than that found by the audit in Dearborn. In my judgment it makes no difference whether the retail sales are admitted by the taxpayer or maintained by the audit. ROTA can apply only to such sales as can be established to be at retail and not for resale.
The essential teaching of Dearborn is that there are two types of evidence involved, contrary to the position of the Department, which maintains that the resale registration is exclusive. In the first instance the taxpayer may introduce whatever kind of evidence is available to it to establish the nature of its business and the nature of the specific sales in question. In Dearborn it consisted of affidavits from its salesmen and the general registration number of its purchasers; no resale certificates were introduced. On this basis the supreme court held that the taxpayer was exclusively a wholesaler.
Once it has been established that there are retail sales, whether by the introduction of evidence or by admission as in the instant case, then, and then only, does section 2c come into play and exemption can be established solely by the resale certificates. This is the second type of evidence, but it will never be reached until it is first established that the taxpayer acted as a retailer as to some sales. In my opinion the supreme court made this plain in Dearborn when it said:
“The apparent purpose of section 2c is rather to provide a means of verifying a claim made by a person subject to the Act as a retailer that a particular sale by him is exempt from tax because the purchaser is not himself the ultimate user or consumer of the property.” (Emphasis added.) (82 Ill. 2d 471,479,413 N.E.2d 370, 374.)
If it were otherwise, as the supreme court indicated in the prior quotation, it would be compelled under its prior decisions to hold section 2c unconstitutional.
This is precisely what the trial court did in the instant case. It examined evidence which led it to conclude that the major portion, or $597,949.50, of the questioned sales of $710,830 were of a wholesale nature to which the ROTA could not apply. As to the balance, it held them to be taxable and reduced the assessment accordingly.
Admittedly, the Department has a more difficult time when the taxpayer is acting in the capacities of both wholesaler and retailer, but it cannot be permitted to use section 2c, which was enacted presumably to make its job easier with retailers, as a dragnet to include all sales made by anyone conducting business of any nature within the State of Illinois. The ROTA remains a tax on the privilege of doing a retail business and no other.
Dearborn found the taxpayer to be exclusively a wholesaler and not subject to the ROTA in any respect. I find nothing in that opinion which prevents a taxpayer from acting in both capacities, i.e., wholesaler and retailer, and segregating its sales accordingly. When questioned by the Department, it may use whatever evidence it may obtain, including after-acquired section 2c certificates, to establish the nature of the sales. Once the wholesale sales have been separated out, then the burden is upon it to produce section 2c certificates acquired simultaneously with the sale to establish retail exemptions. Failing this, it is liable to the extent that it cannot so produce.
I would affirm the trial court.