Hartney Fuel Oil Co. v. Village of Forest View
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Hartney, a fuel oil retailer with a home office in Forest View, in Cook County, accepted purchase orders in the Village of Mark, in Putnam County, through a business with which it contracted. No Hartney employees were involved there. By so structuring sales, Hartney avoided liability for retail occupation taxes of Cook County, Forest View, and the Regional Transportation Authority. Hartney’s interpretation of the law was consistent with regulations published at the time. However, The Illinois Department of Revenue determined, through audit, that Hartney’s sales were attributable to the company’s Forest View office, rather than the Mark location reported by the company, and issued a notice of tax liability. Hartney paid penalties of $23,111,939 under protest and filed suit. The court agreed that the bright-line test for the situs of sale is where purchase orders are accepted. The appellate court affirmed. The Illinois Supreme Court, court disagreed. The court found the “Jurisdictional Questions” regulations of the Administrative Code inconsistent with the statutes and case law. The legislature has not adopted a single-factor test for the situs of retail activity. The court’s own precedent calls for fact-intensive inquiry where there is a composite of many activities, and the legislature, by consistently employing the “business of selling” language, has effectively invoked that precedent. The Department of Revenue must abate Hartney’s penalties and tax liability for the relevant period because Hartney’s actions were consistent with its regulations in effect at the time.
Court Description:
Plaintiff, Hartney Fuel Oil Company, is a retailer of fuel oil with a home office in Forest View, in Cook County. During the tax period in question, January 1, 2005, to June 30, 2007, Hartney accepted purchase orders in the Village of Mark, in Putnam County, through a local business with which it contracted. No Hartney employees were involved there. By structuring its sales in this way, Hartney avoided liability for the retail occupation taxes of Cook County, the Village of Forest View, and the Regional Transportation Authority. Hartney’s interpretation of the law was that there is a bright-line test that the situs of a sale is where the seller accepts a purchase order, in this case, the Village of Mark. This position was consistent with the regulations which were published at the time. However, in this case, the Department of Revenue found the situs of the selling activity to be Forest View, a finding which would create liability for the retail occupation taxes of that village, Cook County, and the Regional Transportation Authority. Hartney paid taxes, interest and penalties of $23,111,939 under protest and sought relief in the circuit court of Putnam County. That court agreed that the bright-line test for the situs of sale is where purchase orders are accepted and found for Hartney. The appellate court affirmed.
In this decision, the Illinois Supreme Court, court disagreed with the “Jurisdictional Questions” regulations of the Administrative Code. The court found them inconsistent with the statutes and with case law. The court said that the legislature has not adopted a single-factor test for the situs of retail activity. The supreme court’s own precedent calls for a fact-intensive inquiry to find the proper situs where there is a composite of many activities, and the legislature, by consistently employing the “business of selling” language, has effectively invoked the supreme court’s precedent in this regard. The supreme court said that the Department of Revenue has a duty to abate Hartney’s penalties and retail occupation tax liability for the relevant period because Hartney’s actions were consistent with the Department of Revenue’s regulations in effect at the time.
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