June 7, 2001

PRESIDING JUSTICE STEIGMANN delivered the opinion ofthe court:

In June 1997, plaintiff, Subway Restaurants ofBloomington-Normal, Inc. (Subway), filed a complaint againstdefendants, Judith Baar Topinka, the State Treasurer, Kenneth H.Zehnder, the Director of the Illinois Department of Revenue, andthe Illinois Department of Revenue (collectively Department),seeking the return of $64,851 under the Retailers' Occupation Tax(ROT) Act (35 ILCS 120/1 through 14 (West 1996)) and interestthereon, which Subway had previously paid under protest. Theparties later filed cross-motions for summary judgment, and inJuly 2000, the trial court granted Subway's motion for summaryjudgment. The Department appeals, and we reverse and remand withdirections.

The following facts appear in the parties' jointlyfiled stipulation of facts. In July 1995, Subway agreed to leasespace from Illinois State University (University), an exclusivelyeducational institution, in four of its on-campus student residence halls and operate a Subway restaurant in each of thoselocations. (Shortly after entering into the leases with theUniversity, Subway entered into contracts with Douglas andCynthia Barch to operate and manage the four restaurants. TheBarches are not parties to this appeal.)

Through the lease agreements, the University sought toprovide its students, faculty, and staff members with a diningoption in addition to the University-run cafeterias. The fourleases, which were identical, provided that the relationshipbetween the University and Subway was that of lessor and lessee. The University did not assist Subway in operating or managing thefour on-campus restaurants, and Subway did not produce any foodproducts for distribution by the University. The prices chargedat the on-campus restaurants were consistent with the pricescharged at seven other Subway restaurants located near theUniversity. However, pursuant to the leases, the Universityreserved the right to review Subway's prices and menu format.

Subway purchased its products and supplies for all ofits local restaurants from the same supplier, and Subway did notpurchase any supplies in conjunction with, or in the name of, theUniversity. Subway used its own equipment and personal propertyto make its food products, and Subway was responsible for maintaining its equipment and furniture.

Subway hired its own employees to work at the on-campusrestaurants and provided them with uniforms and training in thesame way it did at its other restaurants. However, under theleases, Subway was required to give hiring preference to theUniversity's students.

As lessor of the property, the University was obligatedto provide Subway with utilities and garbage removal. Pursuantto the leases, Subway operated the on-campus restaurants onlywhen the University's students were present in the residencehalls--that is, during the academic term and during move-in daysimmediately preceding the start of classes. During such times,the on-campus restaurants were open to members of the generalpublic as well as the University's students, faculty, and staffmembers.

Subway was responsible for paying all taxes on itssales and operations. As lessee, Subway also was responsible formaintaining insurance on all its furniture, fixtures, equipment,and inventory. It also had to pay for and carry general publicliability insurance.

The leases also contained the following provisions: (1) Subway was prohibited from acting as an agent of the University; (2) Subway functioned as a lessee and independent contractor for the University; (3) "no employee of [Subway could] bedeemed an employee of [the University] for any purpose"; (4)Subway was required to conform to all rules and regulations ofthe University; (5) Subway would allow the University to inspectthe premises at any time; and (6) Subway was required to submitall disputes and questions to the University's residence hallfood service director for resolution.

In August 1995, Subway opened a restaurant in each ofthe four residence halls. Any patron of the on-campus Subwayrestaurants could pay cash for his or her food and beverages. (Between August 1, 1995, and March 31, 1996, Subway collected andremitted $258,223 in ROT based on cash sales at the on-campusrestaurants. That ROT is not at issue in this case.)

Each student who entered into a room and board contractwith the University was issued a computerized declining balancedebit card (debit card) with an initial balance ranging from $759to $1,030 per semester (depending upon which residence hall thestudent lived in). Those students could use their debit cards topurchase food and beverages, which the University was obligatedto provide them under the room and board contracts. They coulduse their debit cards at the on-campus Subway restaurants, theUniversity-run cafeterias, or a combination of both. Each time astudent purchased food and beverages with his debit card, thetotal purchase amount was automatically deducted from the debitcard's account balance.

In addition, students, faculty, and staff members whodid not reside in the residence halls could establish debit cardaccounts by depositing funds with the University. The depositedamount would then appear as a balance on the individual's debitcard. These debit-card holders, like students with room andboard contracts, could purchase food and beverages from eitherthe on-campus Subway restaurants or the University-run cafeteriasby using their debit cards.

Pursuant to the leases, Subway reported the monthlygross transactions from the on-campus restaurants to the University. After totaling all debit-card sales, the University kept a2 1/2% transaction fee and remitted the balance to Subway.

Sometime during 1997, the Department conducted an auditof Subway's sales tax records for the period January 1994 throughOctober 1996. The Department later issued a notice of taxliability based upon Subway's failure to pay ROT for the periodAugust 1995 through March 1996 for food purchased withUniversity-issued debit cards. According to the Department,Subway owed $58,088 in ROT, plus $6,763 in interest, totaling$64,851. In May 1997, Subway paid that amount to the StateTreasurer under protest. 30 ILCS 230/2a (West 1996).

In June 1997, Subway filed a complaint against theDepartment, seeking the return of $64,851 in ROT and interest. In the complaint, Subway alleged that it did not owe ROT forstudent purchases with a debit card because Subway served as theUniversity's agent. The trial court later enjoined the StateTreasurer from transferring the money into the treasury's generalfund. In October 1998, the parties jointly filed a stipulationof facts.

In November 1998, Subway filed a motion for summaryjudgment, and in March 1999, the Department filed a motion forsummary judgment. In November 1999, the trial court conducted ahearing on the cross-motions for summary judgment and took thematter under advisement. In July 2000, the court granted Subway's motion and denied the Department's motion, finding that"[t]he obligation to pay for the food is [the University's] and[Subway] is exempt from [ROT]." This appeal followed.

A motion for summary judgment is properly granted whenthe pleadings, depositions, admissions, and affidavits establishthat no genuine issue of material fact exists and that the movingparty is entitled to judgment as a matter of law. See 735 ILCS5/2-1005(c) (West 1998); Rotzoll v. Overhead Door Corp., 289 Ill.App. 3d 410, 413, 681 N.E.2d 156, 158 (1997). When parties filecross-motions for summary judgment, they agree that (1) nomaterial issue of fact exists; and (2) only a question of law isinvolved. In such a case, we review de novo the trial court'sdecision. Andrews v. Cramer, 256 Ill. App. 3d 766, 769, 629N.E.2d 133, 135 (1993).

In Illinois, any person or company, including anexclusively educational institution, that regularly sells products for consumption is required to pay ROT. See 35 ILCS 120/2(West 1996) (ROT is "imposed upon persons engaged in the businessof selling at retail tangible personal property"); 35 ILCS 120/1(West 1996) ("'Sale at retail' means any transfer of the ownership of or title to tangible personal property to a purchaser,for the purpose of use or consumption ***"); see also 86 Ill.Adm. Code