NO. 4-03-0114  

JUSTICE McCULLOUGH delivered the opinion of the court:

On March 18, 1999, plaintiff, Stark Materials Company, Inc.,brought an action against, inter alios, the Illinois Department ofRevenue (Department) for declaratory judgment, pursuant to sections 2aand 2a.1 of the State Officers and Employees Money Disposition Act(Protest Monies Act) (30 ILCS 230/2a, 2a.1 (West 1998)), seekingrecovery of tax monies paid, under protest, pursuant to the Retailers'Occupation Tax Act (ROTA) (35 ILCS 120/1 through 14 (West 1998)). Theparties stipulated to the material facts and each party filed a motionfor summary judgment based on those facts. On December 13, 2002, thetrial court denied plaintiff's motion for summary judgment and grantedthe Department's cross-motion for summary judgment, concluding theDepartment had properly calculated plaintiff's liability under ROTA. On appeal, plaintiff argues that (1) its delivery charges are nottaxable as "gross receipts" under ROTA, and (2) the increased grosssales reported by plaintiff for federal income-tax purposes are nottaxable "gross receipts" under ROTA. We affirm.

The Department audited plaintiff's sales-tax account for theperiod of July 1, 1995, through December 31, 1997. On December 31,1998, the Department issued plaintiff a notice of sales-tax liabilityindicating that plaintiff owed the following amounts:

The total amount due was the result of the Department's conclusion,based on the audit, that plaintiff underpaid its taxes for the periodsat issue in the amount of $86,825 and also owed $15,733 in statutoryinterest thereon.

On February 24, 1999, plaintiff responded to the notice byremitting the sum of $102,558 but paid the amount under protestpursuant to sections 2a and 2a.1 of the Protest Monies Act. On March18, 1999, it filed a complaint for declaratory and injunctive relief. On March 22, 1999, the trial court entered a preliminary injunctionpreventing the State from disposing of the funds. On the same date,plaintiff submitted a second payment of $933.62 under protest foradditional accrued interest on the deficiency. On March 4, 2002, thecourt dissolved the injunction to the extent of allowing a refund of$13,153, representing tax plus interest to plaintiff and a release fromthe protest fund of $19,809 into appropriate funds of the statetreasury.

As stated, each party filed a motion for summary judgment. In so doing, the parties stipulated that the two issues presented forresolution were questions of law, namely (1) whether plaintiff'sdelivery charges were subject to the retailers' occupation tax (ROT)and (2) whether the increased gross sales reported by plaintiff forfederal income-tax purposes for the tax year ending December 31, 1996,were subject to the ROT. The parties entered into a stipulation offact as to all material facts necessary to a resolution of the case,from the period between July 1, 1995, through December 31, 1997, andattached numerous exhibits.

Plaintiff is an Illinois corporation that mines, excavates,processes, and sells certain minerals extracted from quarries. Afterexcavation, it processes the minerals into either ready-mix concrete(ready-mix) or an aggregate compound of processed gravel and sand. Plaintiff sells the ready-mix or aggregate compound to purchasers foruse primarily in construction activities.

During the periods at issues, one of plaintiff's multiplecustomers was Stark Excavating. Plaintiff delivered ready-mix to StarkExcavating in trucks owned by Stark Excavating. Stark Excavatingleased the trucks to plaintiff and imposed an hourly rental charge forthe trucks. The trucks had rotating drums that were used to agitatethe ready-mix. To the extent that a certain truck was not being usedby plaintiff for a particular job, the truck was available to StarkExcavating for its own purposes, including picking up ready-mix fromplaintiff or another supplier. In those instances where StarkExcavating picked up ready-mix from plaintiff, plaintiff was notcharged for use of the truck. If plaintiff delivered the ready-mix toStark Excavating, then plaintiff was charged for use of the truck basedon an hourly rate pursuant to the parties' lease agreement.

On invoices from plaintiff to Stark Excavating, one chargeis labeled a "delivery charge." The "delivery charge" was based on aformula that took into account certain weighted variables, includingoperator costs, payroll costs, truck rental, fuel charges, plantmaintenance costs, and union dues. The cost of concrete was notincluded in the delivery-charge calculation. The delivery charge inissue varied from delivery to delivery based on the aforementionedvariables. The formula employed by plaintiff to determine the deliverycharge was the same regardless of whether the purchaser was StarkExcavating or another purchaser.

Stark Excavating periodically purchased ready-mix fromsuppliers other than plaintiff when (1) the prices plaintiff chargedwere not favorable or (2) when Stark Excavating's project was not closeto plaintiff's place of business. In those instances where StarkExcavating purchased concrete from other suppliers, it used its owntrucks to pick up the concrete.

During the periods at issue, plaintiff did not include thedelivery charges it collected from Stark Excavating in its grossreceipts reported to the Department on its Illinois sales- and use-taxreturns. Plaintiff included the delivery charge on all invoices toStark Excavating regardless of whether plaintiff delivered the ready-mix or whether Stark Excavating picked it up.

William Vinyard, the Department's auditor, did not considerwhether Stark Excavating had the necessary equipment (such as a truckwith a rotating drum) to give it the option of picking up ready-mixdirectly from plaintiff. He concluded that the delivery charges inquestion were taxable because plaintiff is a ready-mix retailer. Basedon prior audits, he was not aware of any other ready-mix retailer thatsold ready-mix to customers with their own trucks with agitating drumsthat would allow customers to pick up the ready-mix from the retailer.

For federal income-tax purposes, plaintiff made an adjustmentto its books and records to report increased gross sales for theincome-tax year ending December 31, 1996. Plaintiff adjusted its booksand records to report increased gross sales to avoid such an adjustment, and possible imposition of penalties, by the Internal RevenueService (IRS) pursuant to the IRS's authority under section 482 of theInternal Revenue Code (26 U.S.C.