IFRA Member Notice - IL Supreme Court Decision in Marathon v Cook County Department of Revenue
Good afternoon IFRA members,
This morning the Illinois Supreme Court issued their opinion in the Marathon v. Cook County Department of Revenue case that involved the collection of sales tax on the retail sale of gasoline and diesel fuel in Cook County. The case stemmed from the way in which the Cook County Department of Revenue applied the sales tax to “book out” transactions between distributors.
Previous results in the lower courts:
Administrative Law Judge – found that it was Marathon’s burden to establish the exact nature of what Marathon termed a book out or book transfer transaction and that Marathon failed to introduce sufficient documentary evidence to corroborate its claim that ownership did not transfer during those transactions.
Circuit Court – reversed the ALJ’s decision, finding that the ALJ’s ruling was clearly erroneous and against the manifest weight of the evidence
Appellate Court – reversed the circuit court’s decision and affirmed in part the ALJ’s decision. The Appellate Court determined that the record showed that the Department’s auditing method met a minimum standard of reasonableness and that the Department established a prima facie case. The Appellate Court agreed with the ALJ that Marathon did not meet its burden of rebutting the Department’s prima facie case that the book out transactions were taxable sales under the Fuel Tax Ordinance
IFRA submitted an Amicus Brief on behalf of members in support of Marathon’s position prior to the case reaching the IL Supreme Court.
Today, the IL Supreme Court found:
“Because the ALJ’s ultimate conclusion that Marathon failed to present sufficient documentary evidence to corroborate its claim that cash settlements were financial exercises and did not transfer any ownership was based upon those factual findings, we find that conclusion to be clearly erroneous in view of the entire record.”
“We find that the competent evidence presented by Marathon regarding the book out transactions between Marathon and other distributors was sufficient to rebut the Fuel Tax Ordinance’s presumption that the transactions would ultimately lead to the retail sale of taxable fuel in Cook County. Because Marathon sufficiently rebutted the Department’s prima facie presumption of taxability, the burden shifted back to the Department to prove its case by a preponderance of competent evidence.”
“The ALJ, though, stopped her analysis after determining that Marathon did not rebut the Department’s prima facie case, so she did not reach this point in the analysis… Thus, we reverse the judgement of the appellate court. We also affirm in part and reverse in part the judgement of the circuit court. We affirm the part of the circuit court’s judgement reversing the ALJ’s decision in favor of the Department and reverse the remainder of the circuit court’s judgement. The matter is remanded to the Cook County Department of Administrative Hearings with directions to make appropriate findings of fact and reach the determination of whether the Department has proven its case of taxability under the Fuel Tax Ordinance.”
To summarize, the Court found that the ALJ had established a prima facie case of taxability, and that Marathon overcame that burden through the evidence presented, but the ALJ never determined if the Department was able to overcome that burden shifting back to the Department. The case heads back to the Administrative Hearings to make that determination.
While the Court did not address the Amicus Briefs filed, it did seem like they were siding with Marathon’s position that book out transactions do not count as sales but need to procedurally allow the Department the opportunity to prove taxability by the preponderance of the evidence at the ALJ level.
We will update you all with any further developments.
Thank you,
Nate