Following an audit of plaintiff's, Ogden Chrysler Plymouth, Inc.'s (Ogden's), records for theperiod January 1996 through September 1998, the Department of Revenue (Department) concludedthat Odgen's receipt of payments from DaimlerChrysler Motors Corporation (Chrysler) pursuant toChrysler's Employee/Retiree New Vehicle Purchase/Lease Program (Program) should be includedin Ogden's gross receipts and subject to the retailers' occupation tax (ROT) (35 ILCS 120/1, 2--10(West 2002)). The Department issued a notice of tax liability, proposing to assess $3,490 in tax plusinterest. Ogden timely protested. Subsequently, both parties filed cross-motions for summaryjudgment, and no hearing was held. An administrative law judge (ALJ) recommended grantingOgden's motion and denying the Department's motion. The Director of the Department (Director)rejected the ALJ's recommendation and granted the Department's motion and denied Ogden's motion. The Director found that Chrysler's payments constituted gross receipts, and he rejected Ogden'srequest for attorney fees based upon its argument that the Department enacted an invalid rule throughprivate letter ruling (PLR) pronouncements.

Ogden sought judicial review of the Director's decision. 35 ILCS 120/12 (West 2002). Thecircuit court reversed on the gross receipts issue and affirmed the Director's decision with respect toOgden's request for attorney fees.

The Director and the Department appeal the circuit court's order addressing the gross receiptsissue. Ogden cross-appeals that part of the circuit court's order affirming the Director's denial ofattorney fees. Thus, we must first decide whether payments received by Ogden from Chrysler as partof a Chrysler employee incentive program constitute "gross receipts" within the meaning of sections1 and 2--10 of the Retailers' Occupation Tax Act (Act) (35 ILCS 120/1, 2--10 (West 2002)) and aretherefore subject to the ROT. The second issue we must decide is whether the Department failed tofollow proper rulemaking procedures in enacting its rule on employee purchase programs, therebyentitling Ogden to attorney fees. We reverse the circuit court's ruling on the first issue and affirmwith respect to the second issue.
 

I. BACKGROUND

Chrysler dealers who are parties to a valid sales and service agreement with Chrysler areeligible to participate in the Program. Under the Program, active or retired Chrysler employees andtheir family members may purchase or lease Chrysler vehicles at a reduced price. A participatingdealer must sell or lease a vehicle at the employee purchase price listed on the factory invoice. Duringthe relevant period, Ogden was a participating dealer in the Program.

The Program further provides that an eligible purchaser cannot negotiate the price with adealer, and the dealer cannot charge the purchaser or lessee any preparation, documentation, delivery,or handling fees. A dealer is required to show a copy of the factory invoice to the eligible customerso that he or she can verify the employee purchase price. A regular customer may not review thefactory invoice.

In exchange for participating in the Program, with respect to each eligible sale, the dealerreceives from Chrysler 6% of the employee purchase price, plus $75. At the time a dealer purchasesa vehicle from Chrysler, neither the dealer nor Chrysler is able to determine if the vehicle will be soldunder the Program. Payments are processed by electronic funds transfer or as a reduction in theamount the dealer owes Chrysler as listed on the monthly dealer parts account. Chrysler does notinform its employees or their family members about the dealer payment. Eligible customers receiveall consumer rebates in addition to the reduced purchase price provided under the Program.

The payment made by Chrysler to the dealer does not affect the employee purchase price. Forits accounting purposes, Ogden treats the payments from Chrysler under the Program as a reductionin its cost of goods sold. However, Ogden treats general consumer rebates as a receipt from the saleof an automobile.

Following a Department audit, the Department issued Ogden a notice of tax liability for failureto pay ROT on payments it received between January 1996 and September 1998 from Chrysler forthe sale or lease of several Chrysler vehicles. The Department alleged that Ogden owedapproximately $3,490 in past-due tax and interest.

During the administrative proceedings, both Ogden and the Department agreed that therewere no disputed issues of material fact that required a fact-finding hearing. Accordingly, bothparties filed cross-motions for summary judgment, and no hearing was held. The ALJ recommendedthat summary judgment be entered in favor of Ogden. However, the Director disagreed and, onSeptember 11, 2001, entered summary judgment for the Department and against Ogden.

The Director found that the Act and the Department's regulations define "gross receipts" toinclude all consideration received by the seller and that the definitions focus on how much a sellerreceives from a particular sale, but do not require that consideration be limited to that tendered bythe purchaser. Relying on case law, the Director also found that all of the consideration that a sellerreceives should be included in the seller's taxable gross receipts if all of the consideration received isdirectly related to a particular sale. He stated that Ogden's accounting treatment of the payments isnot relevant for purposes of the ROT. Finally, the Director noted that Department rulings haveconsistently held that payments from a manufacturer to a dealer are taxable under the Act. Heexplained, however, that his decision was not based on the rulings or on a recently proposedregulation that addressed reimbursements or rebates received by a seller. Rather, the Directorexplained that he relied only on the Act and case law.

Ogden sought administrative review, and, on January 17, 2003, the circuit court reversed theDirector's decision, finding that Chrysler's payments were not taxable under the Act because theconsideration is limited to that given by the purchaser. The court also found that Ogden was notentitled to attorney fees.

The Department appeals, requesting that this court affirm the Director's decision thatChrysler's payments were gross receipts subject to the ROT. Ogden cross-appeals, arguing that thecircuit court erred in denying its request for attorney fees.
 

II. STANDARD OF REVIEW

Under the Administrative Review Law (735 ILCS 5/301 et seq. (West 2002)), we review theDepartment's final decision and not the circuit court's ruling. Blessing/White, Inc. v. Zehnder, 329Ill. App. 3d 714, 726 (2002). The standard of review applied by this court turns on the propercharacterization of the questions presented. The parties disagree as to whether the gross receiptsissue presents a question of law subject to de novo review or a mixed question of law and fact thatis subject to review under the clearly erroneous standard. See City of Belvidere v. Illinois State LaborRelations Board, 181 Ill. 2d 191, 205 (1998).

Relying on recent case law, defendants argue that the clearly erroneous standard applies. Ogden contends that de novo review is appropriate because the facts in this case are undisputed. Itdistinguishes the cases relied on by defendants, arguing that, in those cases, the administrative agencywas required to draw additional factual findings from the undisputed facts, a step it contends theDepartment did not take here. Furthermore, Ogden argues that, because both the ALJ and theDirector could not agree on the meaning of the terms "gross receipts" and "consideration," theagency's legal conclusions are not entitled to any deference. We conclude that the clearly erroneousstandard applies.

In City of Belvidere, the supreme court held that whether a city's unilateral decision tocontract with a private company to provide paramedic services to the city's residents affected "wages,hours, and other conditions of employment" (5 ILCS 315/7 (West 1994)) so as to constitute amandatory subject of collective bargaining presented a mixed question of law and fact. City ofBelvidere, 181 Ill. 2d at 205. The court explained that the agency's finding was in part factualbecause it involved considering whether the facts supported a finding that the city's decision affectedwages, hours, and other conditions of employment. The case also concerned a question of lawbecause the phrase "wages, hours, and other conditions of employment" was a legal term requiringinterpretation.

Similarly, in AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill.2d 380, 392 (2001), the supreme court held that whether delivery drivers were "independentcontractors" (820 ILCS 405/212 (West 2000)) within the meaning of the unemployment insurancestatute presented a mixed question of law and fact. The court explained that the agency's decisionwas in part factual because it involved considering whether the facts supported the agency's findingthat the drivers were employees and not independent contractors under a provision of the statute. Also, the agency's decision concerned a question of law because the statutory requirements forindependent contractor status were comprised of legal terms and concepts requiring interpretation. Accordingly, the court applied the clearly erroneous standard of review. AFM Messenger Service,Inc., 198 Ill. 2d at 395.

In Swank v. Department of Revenue, 336 Ill. App. 3d 851, 855 (2003), this court utilized thede novo standard of review to determine whether taxpayers' properties were "used with a view toprofit" (35 ILCS 200/15--35 (West 2000)) in a property tax exemption case. However, we appliedthe clearly erroneous standard in determining whether the plaintiffs were entitled to receiveexemptions under the statutory provision. Swank, 336 Ill. App. 3d at 861-62. We explained that thefirst issue involved a question of law because we were asked to construe a statutory provision. Specifically, we assessed whether the "used with a view to profit" language in one provision of theproperty tax statute modified another section. However, in assessing whether the plaintiffs wereentitled to receive property tax exemptions, we relied on City of Belvidere and AFM MessengerService, Inc. in concluding that the issue involved a mixed question of law and fact. Swank, 336 Ill.App. 3d at 861-62. We explained that the issue was in part factual because it required theadministrative agency to determine whether the facts indicated that the property was used foreducational purposes and whether it was "used with a view to profit." The issue also involved a legalquestion because it required the agency to construe the scope of the exemption, which was statutorilydefined and required interpretation.

Similarly, in Du Page County Board of Review v. Department of Revenue, 339 Ill. App. 3d230 (2003), this court addressed whether a house for a church's schoolteachers was exempt fromtaxation under the property tax statute. We noted that the holdings in AFM Messenger Service, Inc.and City of Belvidere set forth a new rule: whether given historical facts satisfy an established legalstandard is a mixed question of law and fact, and an agency's resolution of that question must standunless it is clearly erroneous. We determined that the exemption issue involved a mixed question oflaw and fact, and, therefore, we applied the clearly erroneous standard. Du Page County Board ofReview, 339 Ill. App. 3d at 234-35.

Given this precedent, we conclude that whether Chrysler's payments constitute gross receiptsthat are subject to the ROT involves a mixed question of law and fact. The issue, in part, involveslegal questions of statutory interpretation, such as whether Chrysler's payments constitute grossreceipts. The issue is also in part factual because it involves determining whether the facts, such asthe structure of the Program, support the Director's finding that Chrysler's payments constitute partof the consideration for the relevant transactions.

Under the clearly erroneous standard, a court gives somewhat less deference to agencyfindings than it would if the decision related solely to a question of fact because the decision is "basedon fact-finding that is inseparable from the application of law to fact." Carpetland U.S.A., Inc. v.Department of Employment Security, 201 Ill. 2d 351, 369 (2002). We will reverse the agency'sdecision only if we are " 'left with the definite and firm conviction that a mistake has beencommitted.' " AFM Messenger Service, Inc., 198 Ill. 2d at 395, quoting United States v. UnitedStates Gypsum Co., 333 U.S. 364, 395, 92 L. Ed. 746, 766, 68 S. Ct. 525, 542 (1948); see also DuPage County Board of Review, 339 Ill. App. 3d at 234-35 (new test may not make any practicaldifference; clearly erroneous standard is an ill-defined test that is essentially reducible toreasonableness).

Turning to Ogden's cross-appeal, whether several Department pronouncements constitute arule presents a question of law. We review de novo legal questions. Carpetland U.S.A., Inc., 201Ill. 2d at 369.

III. ANALYSIS

A. Defendants' Appeal

Defendants argue that the Director correctly found that Ogden must pay the ROT on all the consideration it received from the sale of vehicles under the Program, regardless of whether the consideration came from the purchasers or Chrysler. They contend that Chrysler's payments were tied to specific vehicle sales and therefore constitute gross receipts for which the ROT is due.

The Act imposes a tax--the ROT--on the gross receipts of sellers of tangible personal propertyat retail. 35 ILCS 120/2 (West 2002); Soho Club, Inc. v. Department of Revenue, 269 Ill. App. 3d220, 228 (1995). Although the tax is calculated on the taxpayer's gross receipts, the tax is on thebusiness of selling and not the sale itself. Soho Club, Inc., 269 Ill. App. 3d at 229.

The ROT is assessed at a rate of 6.25% of the gross receipts from sales of tangible personalproperty made in the course of business. 35 ILCS 120/2--10 (West 2002). The term "gross receipts"is defined, in relevant part, as "the total selling price or the amount of such sales." 35 ILCS 120/1(West 2002). The Department's regulations define "gross receipts" as "all the consideration actuallyreceived by the seller, except traded-in tangible personal property." 86 Ill. Adm. Code