author: JUSTICE COCCIA

text:
    MEL-PARK DRUGS, INC., Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellees.
    First District (2nd Division)
    No. 1-89-1938
    Opinion filed July 30, 1991.

      Gerald W. Shea and Ira A. Rogal, both of Shea, Rogal & Associates, of Westchester, for appellant.
    Roland W. Burris, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and Gerald S. Post, Assistant Attorney General, of Chicago, of counsel), for appellees.
   JUSTICE COCCIA

delivered the opinion of the court:

Plaintiff, Mel-Park Drugs, Inc. (Mel-Park), appeals from a judgment entered by the circuit court of Cook County on administrative review affirming the decision of an administrative law judge (ALJ) upholding an assessment by the Department of Revenue (Department), against plaintiff in the amount of $179,069.36. The Department assessed plaintiff for tax deficiencies, penalties, and interest under the service occupation tax (SOT), retailer’s occupation tax (ROT), municipal retailer’s occupation tax (MROT), and parallel retailer’s and service occupation taxes under the Regional Transportation Authority tax act (RTA).

Mel-Park Drugs is a pharmacy located in Melrose Park, Illinois. It sells prescription and nonprescription medicines and drugs, food, liquor, cigarettes, newspapers, and miscellaneous nonfood and nondrug items, and also provides film processing services. Lee Alport is a pharmacist who works at Mel-Park and is one of its owners. Alport prepared and filed Mel-Park’s monthly State tax returns. In September 1983, the Department began a Held audit of Mel-Park’s sales and service tax returns.

The auditor, Eileen McGinnis, found that for the 35-month period from July 1, 1981, through May 31, 1984, Mel-Park had underpaid its retailer’s occupation tax (ROT) obligation by $63,227.23 (Ill. Rev. Stat. 1989, ch. 120, par. 440 et seq.) and underpaid its service occupation tax (SOT) obligation by $5,998.30 (Ill. Rev. Stat. 1989, ch. 120, par. 439.101 et seq.). McGinnis also found that Mel-Park had underpaid its municipal retailer’s occupation tax (MROT) (Ill. Rev. Stat. 1989, ch. 24, par. 8 — 11—1) and municipal service occupation tax (MSOT) (Ill. Rev. Stat. 1989, ch. 24, par. 8 — 11—5) obligations by $19,523.31, and underpaid its Regional Transportation Authority retailer’s occupation tax (RTA ROT) (Ill. Rev. Stat. 1989, ch. lll2/s, par. 704.03(e)) and service occupation tax (RTA SOT) (Ill. Rev. Stat. 1989, ch. lll2/3, par. 704.03) obligations by $19,522.60. At the conclusion of the audit McGinnis prepared corrected tax returns.

On April 1, 1985, the Department issued notice of the above-described tax liabilities to Mel-Park. The total balance due was $108,271.44 plus penalties and interest, for a grand total of $171,372.07 through April 30, 1985, with interest accumulating. On April 15, 1985, Mel-Park requested a hearing, which was held July 31, 1986. Thereafter, plaintiff filed its brief on September 2, 1986, and the Department entered a “Hearing Disposition” on or about August 14,1987, and a “Final Assessment” on or before October 15, 1987.

Section 4 of the Retailer’s Occupation Tax Act (Ill. Rev. Stat. 1989, ch. 120, par. 443) provides, with regard to the examination and correction of tax returns, that:

“As soon as practicable after any return is filed, the Department shall examine such return and shall, if necessary, correct such return according to its best judgment and information, which return so corrected by the Department shall be prima facie correct and shall be prima facie evidence of the correctness of the amount of tax due, as shown therein. ***
Proof of such correction by the Department may be made at any hearing before the Department or in any legal proceeding by a reproduced copy or computer print-out of the Department’s record relating thereto in the name of the Department under the certificate of the Director of Revenue. If reproduced copies of the Department’s records are offered as proof of such correction, the Director must certify that those copies are true and exact copies of records on file with the Department. If computer print-outs of the Department’s records are offered as proof of such correction, the Director must certify that those computer print-outs are true and exact representations of records properly entered into standard electronic computing equipment, in the regular course of the Department’s business, at or reasonably near the time of the occurrence of the facts recorded, from trustworthy and reliable information. Such certified reproduced copy or certified computer print-out shall without further proof, be admitted into evidence before the Department or in any legal proceeding shall be prima facie proof of the correctness of the amount of tax due, as shown therein.”

The above-quoted section is incorporated by section 12 of the Service Occupation Tax Act (Ill. Rev. Stat. 1989, ch. 120, par. 439.112). Similarly, the pertinent provisions of the ROT Act are incorporated by reference in the MROT and the RTA Acts. Elkay Manufacturing Co. v. Sweet (1990), 202 Ill. App. 3d 466, 470, 559 N.E.2d 1058, 1060.

The Department’s submission of corrected returns establishes its prima facie case. (Young v. Hulman (1968), 39 Ill. 2d 219, 234 N.E.2d 797; Central Furniture Mart, Inc. v. Johnson (1987), 157 Ill. App. 3d 907, 910, 510 N.E.2d 937, 939.) As summarized in Masini v. Department of Revenue (1978), 60 Ill. App. 3d 11, 14, 376 N.E.2d 324, 327, the statute has been strictly construed insofar as establishing a prima facie case is concerned; Illinois courts have uniformly sustained a prima facie case based on corrected tax returns.

In Masini v. Department of Revenue, this court stated that while there is no statutory requirement that the Department substantiate the basis for the corrected return or produce the auditor who computed it in order to support its prima facie case, when the corrected return is called into question, the method employed by the Department in correcting the taxpayer’s return must meet some minimum standard of reasonableness, citing Fillichio v. Department of Revenue (1958), 15 Ill. 2d 327, 155 N.E.2d 3, and Elkay Manufacturing Co. v. Sweet, 202 Ill. App. 3d at 470, 559 N.E.2d at 1060. The reasonableness standard is based upon the statutory provision which requires the Department to correct returns “according to its best judgment and information.” Masini v. Department of Revenue, 60 Ill. App. 3d at 14, 376 N.E.2d at 327.

In the case at bar, Mel-Park seeks to overturn the final assessment on the basis that the audit was conducted by unreasonable methods and its returns were not corrected according to the Department’s “best judgment and information.” Therefore, Mel-Park argues, the Department has failed to establish a prima facie case that the amount of tax due is correct. Alternatively, Mel-Park argues that it has overcome any prima facie case the Department has established and the Department has not proved its final assessment to be correct.

In order to address these claims, we must review the evidence presented at the administrative hearing in the case at bar.

At the hearing the auditor, Eileen McGinnis, testified. Also, her audit summary and the audit papers were introduced into evidence. McGinnis found that Mel-Park’s records were incomplete such that, of the 35-month audit period, she was able to test check only three months, November 1981, March 1983, and February 1984. Most notably lacking from the records submitted were daily cash register tapes showing gross sales receipts, and daily register tapes showing prescription costs. In addition, McGinnis noted a discrepancy between Mel-Park’s Federal income tax return and its monthly State tax return, which was the result of an unorthodox practice of “netting out” prescription service fees, cigarettes, and newspapers from the total amount reported on line one of the State return for gross retail sales receipts. Further, McGinnis testified that Mel-Park essentially took a double deduction for purposes of calculating its SOT liability, by reporting only 50% of its prescription costs as the taxable base for the SOT and then taking 50% of that figure as its liability. Mel-Park had, in effect, merged the Illinois Administrative Code’s actual cost method (Method No. 2) and the estimated 50% of gross receipts method (Method No. 3) when calculating its SOT liability. Thus, McGinnis had to reconstruct the gross sales receipts and prescription and nonprescription sales receipts from the incomplete documents provided to her.

McGinnis attempted to reconstruct the correct gross sales receipt figure by using check registers and matching purchase invoices for the three test months. She attempted to check purchases to verify the percentage of food, prescription drugs and nonprescription drugs purchased. She categorized the purchases for the test months and con-eluded that food and drug purchases were 36.5% of the total purchases for those months and, therefore, 63.5% of the total purchases were for nonfood and nondrug items. She then derived the average drug purchases from the food and drug purchases, concluding that 59% of the food and drug purchases were for drugs. Thus, she estimated that about 22% (21.5%) of Mel-Park’s total sales receipts were from the sale of drugs. Using this basis, she estimated Mel-Park’s gross retail sales, calculated its liability and corrected its returns. As previously stated, McGinnis concluded that the underpaid liability was in the amount of $108,271.44.

McGinnis’ cross-examination hearing testimony acknowledged that she had lumped together food and nonprescription drugs in the same category with prescription drugs. In a second category she placed all other nonfood items, such as liquor, newspapers, magazines, cigarettes, and other miscellaneous items. McGinnis acknowledged that food and nonprescription drugs, while taxed at a lower rate than nonfood items, are taxed differently than prescription drugs. However, McGinnis testified that she could not determine from the purchase invoices for medicines and drugs which were prescription and which were nonprescription. Thus, McGinnis admitted that, in calculating Mel-Park’s tax deficiency regarding drugs, she used a figure for the sale of drugs which included sales of both nonprescription and prescription drugs.

McGinnis testified that she did not use a “markup” method to calculate Mel-Park’s tax liability. However, McGinnis testified that she was not informed of the sale price markup percentages that Mel-Park used.

Joseph Bigane III, a CPA, testified as an expert witness for Mel-Park, having been retained to review the audit procedures and tax deficiency assessment. He also reviewed the general ledger, monthly receipts and cash disbursements during the audit period, and purchase invoices for the test months used by the auditor. Bigane said that to the extent nonprescription drug sales were categorized with prescription drugs sales, the Department’s assessment of tax liability was inaccurate because the “bottom line” for the SOT was too high.

Bigane had Alport mark on a January 1984 invoice from the General Drug Co., a Mel-Park supplier (taxpayer’s group exhibit No. 5), which drugs were nonprescription and which were prescription. He testified that the bottom of the invoices indicated partial verification of Alport’s notations, because there were (a) prescription symbols, (b) narcotics symbols and (c) price indicators made or omitted, any of which would indicate whether the purchase was a prescription or nonprescription drug. Bigane then categorized the purchases into three categories: prescription drugs, nonprescription drugs, and nondrugs. However, Bigane could not apply this method to the first test month, November 1981, and thus based his analysis on the other two test months, March 1983 and February 1984. Bigane testified that his method produced a figure (apparently gross sales figure) for the three test months that was $100,000 different than the auditor’s figure. In Bigane’s opinion, the figure Mel-Park used for prescription drug costs on its State sales tax return was reasonable because his own calculation was within $50,000 of the reported figure.

Relative to the ROT liability, Bigane testified that the auditor had unreasonably ignored profit margins (markups) when calculating gross sales receipts based on purchases. He said that Mel-Park’s gross profit margin, the difference between the selling prices and the cost of the goods, should be expressed as a percentage. Based on information provided to him by Lee Alport, Bigane testified that Mel-Park had a profit margin of 80% on prescription drugs and 33% on over-the-counter drugs, 30 to 33x/s% on food items, and 20% on newspapers. Bigane obtained outside verification of the reasonableness of Al-port’s percentage figures, primarily relying upon the National Association of Retail Druggists.

Bigane used the Department’s figures for food purchases for the test months. Using Alport’s gross profit margins, Bigane calculated a larger amount of food sales for the audit period than did the auditor. Bigane testified that the auditor’s estimates had been based on an assumption that all gross profit margins for all items were identical but that this assumption was unreasonable, because the markup on some items was greater than on others.

Bigane testified that the auditor had made mathematical errors in ignoring a volume discount for one month and a $5,000 prepayment.

Bigane also testified that according to the Lilly Digest, an authoritative source for the pharmaceutical industry, a pharmacy with sales in the range of Mel-Park’s sales should have prescription drug sales at about 68.5% of total sales. The auditor had estimated Mel-Park’s drug sales at a much smaller percentage. The auditor had estimated that food and drugs were about 36.5% of total sales and that drug sales were 59% of the food and drug sales, or about 21% or 22% of the total sales, not 68.5%.

Thus, according to Bigane’s testimony, the method used by the auditor to calculate tax liability was unreasonable and the resulting assessment of tax liability was not accurate.

Lee Alport testified that he kept the books for Mel-Park, that an auditor assisted him monthly and a CPA did an annual audit. Alport prepared the monthly returns and thought they were accurate when he prepared them. He acknowledged that he excluded pharmacy fees and periodical sales from the first line of the State return for gross receipts. Alport said that Mel-Park filled about 165 to 175 prescriptions per day. There are two cash registers in the pharmacy area, front and back. The pharmacy area is itself located at the back of the store. The prescription sales are entered on the front cash register and the cost of prescriptions is recorded by the pharmacist on a “tally sheet.” When pharmacists at Mel-Park prepared a prescription, they would remove the item from a general container on which was marked the unit cost. That cost would be recorded on a tally sheet. Each day Alport totalled the cost of prescriptions from the tally sheets. He also totalled the prescription sales on the front register. Each month he totalled the costs of prescriptions on the rear register and also obtained a grand total of prescription sales and records on the register. Although he said he had shown his monthly total tapes from the cash register and the tally sheets to the auditor, he threw away the tapes from the front register once he had recorded the figures elsewhere, and he threw away the tally sheets of the costs. Thus, there were no daily tapes of prescription sales available, nor daily records of costs. Alport produced a tape showing monthly total prescription sales, costs, and fees for the audit period. For example, one tape, for June 1981, exhibit 3, reflected the figure $65,119.72 as gross total pharmacy sales for that month, and a figure of $10,325.53 for total prescription costs and the difference, $54,794.19, was the total for prescription fees.

On October 15, 1987, ALJ Ralph Jacobson issued a two-page determination and recommended decision. That recommended decision reduced Mel-Park’s tax deficiency from $108,271.44 to $69,484, plus interest and penalties. ALJ Jacobson’s recommended decision was based, in part, on additional documentation provided by the Department in April and May 1987, and a redetermination of the deficiency, characterized as a “reaudit.” However, no one made these papers a part of the record or moved to reopen the proceedings.

On November 16, 1987, Mel-Park filed its complaint for administrative review. On May 27, 1988, the circuit court, by Judge Earl Arkiss, remanded the matter to the ALJ for completion of the record and written findings of fact, noting that the record did not contain a request for a reaudit and the reduction in the tax deficiency was not explained by the record as it stood.

On remand, because ALJ Jacobson had left the Department, ALJ Valerie Bawolek assumed the file, reviewed the record, and entered a 15-page recommended decision on October 4, 1988. In that recommended decision ALJ Bawolek declined to consider the April and May 1987 work papers in the file relating to the redetermination and reau-dit identified in ALJ Jacobson’s decision. Bawolek indicated that her fact findings were based exclusively on the matters in evidence and officially noticed. She further deemed the revision of the amount of tax deficiency by ALJ Jacobson as unsupported by the evidence and she set aside that recommendation.

ALJ Bawolek found that the audit procedures were reasonable despite the auditor’s failure to use a markup method of estimating gross retail sales receipts. She found that Mel-Park did not rebut the Department’s prima facie case. To avoid an unduly harsh result, she allowed an ROT deduction for prescription service fees by using a method for calculating the deduction which had not been employed by Mel-Park but which was supported by the record. The Department adopted the ALJ’s recommendation, leading to its final tax assessment of $179,069.36 on October 18, 1988.

Mel-Park then appealed to the circuit court. Mel-Park contended below, as it does on appeal, that the audit was so defective that no assessment could be based on it and that no prima facie case has been established by the Department. Alternatively, Mel-Park contended that its evidence at the administrative hearing overcame the Department’s prima facie case and that the Department has not carried its burden by sufficient evidence to support its assessment. In addition, Mel-Park contended that the remand order was violated by the ALJ’s substitution of a new decision and withdrawal of the prior ALJ’s decision.

On July 12, 1989, Judge Randye Kogan held that ALJ Bawolek had essentially complied with the prior remand order because that order had directed that written findings should be made. Judge Kogan rejected Mel-Park’s claim that the Department lacked the authority to submit a new decision and tax assessment on remand. Also, Judge Kogan affirmed the findings of fact and conclusions of law by ALJ Bawolek that the Department’s audit was not defective and that it had proved a prima facie case of tax deficiencies based on properly corrected tax returns. Judge Kogan held that the findings and conclusions were not against the manifest weight of the evidence or contrary to law.

I

The first issue on review has two components. They are: (a) whether the Department’s audit was so defective that no assessment could be based upon it such that the Department failed to establish a prima facie case against Mel-Park as to the amount of liability; and, in the alternative, (b) whether Mel-Park presented sufficient evidence to shift the burden to the Department to sustain its tax assessment.

We begin by noting that the findings and conclusions of an administrative agency are prima facie correct and will not be disturbed unless they are against the manifest weight of the evidence. (Central Furniture Mart, Inc. v. Johnson, 157 Ill. App. 3d at 910, 510 N.E.2d at 939.) Our task is to review the circuit court’s affirmance of the administrative judge’s decision. We are not to substitute our judgment for that of the administrative law judge but to determine only whether it is against the manifest weight of the evidence or contravenes the law. Gas Research Institute v. Department of Revenue (1987), 154 Ill. App. 3d 430, 433-34, 507 N.E.2d 141, 143.

Section 3 — 110 of the Illinois Code of Civil Procedure concerning administrative review (Ill. Rev. Stat. 1989, ch. 110, par. 3 — 110) provides that administrative findings of fact are to be considered prima facie true and correct by the circuit court:

“Every action to review any final administrative decision shall be heard and determined by the court with all convenient speed. The hearing and determination shall extend to all questions of law and of fact presented by the entire record before the court. No new or additional evidence in support of or in opposition to any finding, order, determination or decision of the administrative agency shall be heard by the court. The findings and conclusions of the administrative agency on questions of fact shall be held to be prima facie true and correct.” (Emphasis added.) Pub. Act 82 — 280 §3 — 110, eff. July 1,1982.

A

The Retailer’s Occupation Tax Act (Ill. Rev. Stat. 1989, ch. 120, par. 440 et seq.) is a tax on the occupation of selling tangible physical property at retail. The tax exacted is not a sales tax on the consumer but a tax on the retail seller as measured by his sales to consumers. (People’s Drug Shop, Inc. v. Moysey (1943), 384 Ill. 283, 285-86, 51 N.E.2d 144, 146.) It is a tax on the occupation and not on the sale, although sales are used as a measure of the tax assessed. (384 Ill. at 286, 51 N.E.2d at 146.) When calculating ROT liability the auditor must determine the taxpayer’s gross retail sales receipts. This is ordinarily done through the records of the taxpayer, who is required to maintain records in sufficient detail to accurately define his tax liability. (Ill. Rev. Stat. 1989, ch. 120, par. 446.) In Copilevitz v. Department of Revenue (1968), 41 Ill. 2d 154, 157, 242 N.E.2d 205, 207, our supreme court reiterated the basic rule that the statutory recordkeeping provisions of the ROT are mandatory.

The Service Occupation Tax (SOT) Act (Ill. Rev. Stat. 1989, ch. 120, par. 439.101 et seq.) is a tax on persons making sales of service. The SOT is intended to place service providers on a tax parity with retailers to the extent they transfer tangible personal property to the ultimate consumer as an incident to the sale of service. (A.R. Barnes & Co. v. Department of Revenue (1988), 173 Ill. App. 3d 826, 829, 527 N.E.2d 1048, 1050.) The SOT is a tax on the cost to service providers (servicemen) of tangible personal property transferred as an incident to such sale. (Hagerty v. General Motors Corp. (1974), 59 Ill. 2d 52, 55, 319 N.E.2d 5, 6.) Thus, in calculating the SOT liability, the auditor must ascertain the wholesale cost of items of property. For prescription medicines and drugs, for example, there is a service occupation tax on the containers, labels, and the wholesale cost-price of the product. Under the Illinois Administrative Code, the portion of the retail sales price attributable to the pharmacist’s services is not taxed. (86 Ill. Adm. Code §140.135 (1985).) The pharmacist pays the SOT on the property transferred incidentally to selling the medicine or drug and declares the “prescription service fee” as a deduction from the ROT. For prescription medicines and drugs there is no ROT. (86 Ill. Adm. Code §§130.2035(a), (b)(1) (1985).) Conversely, for nonprescription medicines and “over-the-counter” drugs only the ROT is applicable.

A pharmacist is required to keep records detailing his prescription costs and sales. (86 Ill. Adm. Code §§130.310(d), 130.801, 130.805(a), 130.810 (1985).) There are four methods provided by the Illinois Administrative Code for calculating the prescription service fee deduction, including an “actual cost” method (Method No. 2) and an estimated method based on attributing costs as 50% of the gross prescription receipts (Method No. 3). 86 Ill. Adm. Code §140.135 (1985).

Items sold by a pharmacy which are neither food nor prescription or nonprescription medicines or drugs are taxed under the ROT Act at a higher rate than food (other than food prepared for immediate consumption) and prescription and nonprescription medicines and drugs. 86 Ill. Adm. Code § 130.310(a) (1985).

The first component of Mel-Park’s argument is that the audit was fatally defective because the auditor failed to distinguish between prescription and nonprescription medicines and drugs when estimating gross receipts, thus lumping both together with food items. Mel-Park claims that this procedure resulted in an inflation of the basis for SOT liability because there is no SOT liability except for prescription medicines and drugs. Also, Mel-Park claims that the auditor failed to consider the different markup percentages used to set retail prices for different items, and instead used a one-to-one ratio of purchases to sales for all items. For example, the auditor estimated that if an item represented 10% of the wholesale cost Mel-Park expended to purchase it, then the auditor assumed that that item accounted for 10% of the gross retail sales receipts. Mel-Park complains that this is an unreasonable assumption. As a result, the auditor underestimated the percentage of gross receipts attributable to high markup items with low tax rates, such as prescription medicines and drugs. For example, sales of items with an 80% markup for retail might account for a large portion of the pharmacy’s total gross retail sales receipts even though the same item would account for a low percentage of total costs. Thus, by using the one-to-one purchase percentage to sales percentage, the auditor inflated Mel-Park’s tax liability.

In Young v. Hulman (1968), 39 Ill. 2d 219, 221, 234 N.E.2d 797, 799, a similar claim of a defective audit was raised. There the Department’s auditor testified that he could not reconcile the amount of sales reported by the taxpayer in its monthly return with its books and records. He then attempted to reconstruct the sales records by going outside the taxpayer’s books and records and reviewing actual transaction documents and purchase invoices and inventory records. The taxpayer complained that the method used was intrinsically defective because it ignored the account books and reviewed the documents from which the books were made. Our supreme court held that there was ample justification for the audit method where the auditor stated that he went outside the taxpayer’s books and records because they failed to support the taxpayer’s monthly returns and in some instances the taxpayer’s methods of accounting did not comply with the Department rules and regulations. The supreme court refused to disregard the audit entirely.

We conclude that, under Young v. Hulman, it was proper for McGinnis to lump all medicines and drugs together into one category because she had only purchase invoices, checks and bank records, and a general ledger with yearly totals available to her. She testified that she was unable to distinguish prescription from nonprescription drugs from the purchase invoices provided. The ALJ accepted this testimony, and noted that even Bigane needed Lee Alport’s assistance in marking the invoices in order to testify which purchases were for prescription and which were for nonprescription drugs. In addition, Mel-Park’s method of netting out deductions was sufficiently unorthodox to justify the method of lumping together all medicine and drug sales as the best available method for reconstructing gross prescription and nonprescription sales receipts. While we recognize that McGinnis denied Mel-Park any prescription service fee deduction based on the failure to provide records of its actual costs of prescriptions, the ALJ ultimately allowed Mel-Park to employ the estimated 50% method and to take the deduction. Therefore, any harm resulting from the lumping together of the prescription and nonprescription medicines and drugs did not affect the prescription service fee deduction. Thus, Mel-Park’s SOT liability was not inflated. To that extent, we hold that the audit was not defective in this regard.

However, Mel-Park also maintains that the audit procedures were unreasonable and defective because McGinnis did not use the markup method in estimating total gross sales receipts. Mel-Park insists that the failure to use that method of estimating gross receipts is not consistent with the Department’s duty to use its best information and judgment. Ill. Rev. Stat. 1989, ch. 120, par. 443.

Mel-Park’s markup theory rests on four Illinois cases where the Department estimated gross retail sale receipts by using purchases and a markup method common in the relevant trade or industry. Mel-Park cites the following cases: Vitale v. Department of Revenue (1983), 118 Ill. App. 3d 210, 454 N.E.2d 799; Fillichio v. Department of Revenue, 15 Ill. 2d 327, 155 N.E.2d 3; Puleo v. Department of Revenue (1983), 117 Ill. App. 3d 260, 453 N.E.2d 48; and Goldfarb v. Department of Revenue (1952), 411 Ill. 573, 104 N.E.2d 606. These cases do not require the Department of Revenue to use the markup method when estimating gross retail sale receipts. It is true that when the taxpayer has failed to produce adequate records to substantiate its claimed gross receipts, these cases permit the Department to use the markup practice in the trade and industry in calculating the corrected tax returns. We decline to apply the same rule in reverse and require the Department to use the markup method on the taxpayer’s demand. Such a rule would reward the taxpayer’s failure to maintain adequate records.

The Department is required only to meet a minimum standard of reasonableness when correcting taxpayer’s returns. (Fillichio v. Department of Revenue, 15 Ill. 2d 327, 155 N.E.2d 3.) While the Department may not ignore the taxpayer’s records when they are complete and accurate, and substitute its judgment based upon general estimates (Goldfarb v. Department of Revenue, 411 Ill. 573, 104 N.E.2d 606), the records submitted to the auditor in the case at bar were not sufficiently specific to permit the auditor to use a markup method. Indeed, no documentation of markup practices was provided to the auditor. As a matter of policy, the taxpayer should not be able, in effect, to elect a less precise method of supporting its statement of gross receipts when the law clearly mandates that accurate records of actual sales receipts be kept. Ill. Rev. Stat. 1989, ch. 120, par. 446; Copilevitz v. Department of Revenue, 41 Ill. 2d at 157, 242 N.E.2d at 207.

We hold that the audit was not fatally flawed despite the auditor’s failure to use a markup methodology. To hold otherwise would impose upon the Department one particular method of calculating gross receipts, as a matter of law, even though the taxpayer failed to provide adequate records reflecting actual sales. Therefore, the audit method not being unreasonable, the Department’s corrected returns constituted a prima facie case supporting its tax assessment. Young v. Hulman, 39 Ill. 2d at 222, 234 N.E.2d at 799; Elkay Manufacturing Co. v. Sweet, 202 Ill. App. 3d at 471, 559 N.E.2d at 1061.

B

Mel-Park’s next argument, that its evidence at the administrative hearing overcame the Department’s prima facie case, covers much of the same ground. To overcome the Department’s prima facie case, a taxpayer must present more than its testimony denying the accuracy of the assessments, but must present sufficient documentary support for its assertions. (Elkay Manufacturing Co. v. Sweet, 202 Ill. App. 3d at 472, 559 N.E.2d at 1061-62.) As a general matter, and leaving aside casual individual sales, all sales of tangible personal property are taxable unless the taxpayer produces evidence identified with its books and records to establish its claim of nonliability. (Central Furniture Mart, Inc. v. Johnson, 157 Ill. App. 3d at 910, 510 N.E.2d at 940; Pedigo v. Department of Revenue (1982), 105 Ill. App. 3d 759, 434 N.E.2d 860.) The taxpayer has the burden of proving by competent evidence that a proposed assessment is not correct, and when such evidence is not so inconsistent or improbable in itself as to be unworthy of belief, the burden then shifts to the Department, which is required to prove its case by competent evidence. Young v. Hulman, 39 Ill. 2d at 223, 234 N.E.2d at 799; Fillichio v. Department of Revenue, 15 Ill. 2d at 333, 155 N.E.2d at 7.

In her decision recommending in favor of the Department’s assessment of liability, the ALJ placed great reliance on Du Page Liquor Store v. McKibben (1943), 383 Ill. 276, 48 N.E.2d 926, to support her conclusion that Mel-Park had failed to overcome the presumption that the returns as corrected by the Department were presumptively correct. In that case the Department introduced the corrected returns of the taxpayer at an administrative hearing. The taxpayer’s manager testified that the corrected returns were not correct, and offered written evidence from one month of the relevant six-month period. That evidence consisted of loose written papers from a notebook or diary with figures on them indicating total sales for each day of the month. For two other months there were only monthly totals of the daily sales for those months. The supreme court noted that there was no evidence that the figures obtained were the total daily record of retail sales as the figures introduced were not shown to be identified or connected in any way with books or records kept by the taxpayer.

Mel-Park, by contrast, relies on Goldfarb v. Department of Revenue (411 Ill. 573, 104 N.E.2d 606). There, the taxpayer overcame the Department’s prima facie case because the corrected tax returns had been compiled using the markup method to estimate gross retail sales, even though the taxpayer had a record of his daily receipts taken from the cash register and testified that the record was kept by him or under his supervision. The Goldfarb court distinguished Du Page Liquor Store v. McKibben because the records there were incomplete and Goldfarb’s records were complete as to daily receipts. In Goldfarb v. Department of Revenue the court stated that, when the prima facie presumption is overcome, the Department has the burden of proving its case by a preponderance of the evidence. The court held that the Department did not question the sufficiency of the taxpayer’s records; rather, it ignored them. Thus the supreme court reversed the circuit court, ordering it to quash the assessment.

We conclude that the ALJ correctly relied on DuPage Liquor Store v. McKibben because there is no evidence of daily sales receipts from the cash register nor daily cost of prescription records. In Goldfarb v. Department of Revenue, the taxpayer produced records of daily sales receipts as well as monthly totals. In Du Page Liquor Store v. McKibben, the court noted that there was “no evidence that the figures obtained are the total of a daily record of retail sales.” (383 Ill. at 278, 48 N.E.2d at 927.) Although Mel-Park does not rely upon this language to suggest that its monthly summaries were sufficient records, we conclude that such summaries are not adequate, as a matter of law, to overcome the Department’s prima facie case. Our reasons follow.

In the case at bar, Mel-Park offered into evidence tapes that were monthly totals of daily receipts and costs, but did not produce the source documents from which these totals were made, and in fact had destroyed the source documents. Under the Illinois Administrative Code, the reference in Du Page Liquor Store notwithstanding, the taxpayer is required to maintain the records of the actual sales of the prescription drugs and merchandise. (86 Ill. Adm. Code §140.701 (1985).) Section 140.701(a) provides:

“Every *** serviceman making sales or transactions which are subject to the [SOT] Act, shall keep all sales invoices, purchase orders, merchandise records and requisitions, inventory records, credit memos, debit memos, bills of lading, shipping records, and all other records pertaining to any and all purchases and sales of goods whether or not the *** serviceman believes them to be taxable under the Act; and the *** serviceman shall also keep summaries, recapitulations, totals, journal entries, ledger accounts, accounts receivable records, accounts payable records, statements, tax returns, and other documents listing, summarizing or pertaining to sales, purchases, inventory changes, shipments or other transactions.”

Although the above-quoted paragraph clearly contemplates that summaries of sales be maintained, subsection (b) of section 140.701 further requires that “[s]uch books and records must clearly indicate and explain the complete information (deductions as well as cost price) which provide the basis for the information required for tax returns.” (86 Ill. Adm. Code § 140.701(b) (1985).) In addition, subsection (c) of section 140.701 provides that records of sufficient detail to show the cost price of an item must be kept:

“Where the nature of a business is such that a portion of sales are nontaxable for any reason, then such records as will clearly indicate the information required in filing tax returns must be kept. Entries in any books, records or other pertinent papers or documents of the taxpayer in relation thereto shall be in detail sufficient to show the name and address of each purchaser to whom a sale is made, the character of every such transaction (i.e., whether it is a sale for resale other than as an incident to a sale of service, a sale made within the protection of the Commerce Clause of the Constitution of the United States, etc.), the date of every such transaction and the amount of cost price involved in every such transaction.” (Emphasis added.) (86 Ill. Adm. Code §140.701(c) (1985).)

Thus, it is not sufficient for the taxpayer to maintain only summaries of the total costs of prescription drugs but also the character of every transaction must be established as to cost price. In addition, under the ROT, the Illinois Administrative Code (86 Ill. Adm. Code §130.310(d)(l) (1985)) requires that a retailer of medicine and medical supplies must keep an actual record of all sales:

“The retailer must keep an actual record of all sales and must report tax at the applicable rates, based on sales as reflected in his records. Books and records must be maintained in sufficient detail so that all receipts reported with respect to food, drugs, medicines and medical appliances can be supported.”

Similarly, section 130.801(b) of the Administrative Code (86 Ill. Adm. Code §130.801(b) (1985)), requires retailers to “maintain complete books and records covering receipts from all sales and distinguishing taxable from nontaxable receipts.” As previously noted, “[c]ash register tapes and other data which will provide a daily record of the gross amount of sales” are minimum requirements under the Administrative Code (86 Ill. Adm. Code § 130.805(a) (1985)). Finally, under section 130.810(b) (86 Ill. Adm. Code §130.810(b) (1985)), entries in books and records used to support a claim of deduction must be in sufficient detail to show the character of the transaction, the amount of receipts realized and such other information as may be necessary to establish its nontaxable nature.

Under the foregoing requirements of the Administrative Code, it is clear that the ALJ correctly determined that Mel-Park had not carried its burden to overcome the prima facie case established by the corrected returns because it had failed to produce documentary evidence that met the minimum standards of recordkeeping required of retailers.

We must return our attention to the matter of the prescription service fee deduction in order to address Mel-Park’s argument that it was entitled to the deduction it claimed on its returns. Although the ALJ allowed Mel-Park to take the service prescription fee deduction, she did so to avoid the harsh result which would follow upon the auditor’s disallowance of that deduction due to Mel-Park’s failure to produce the actual records of its prescription costs. Finding that disallowing any prescription service fee deduction would be tantamount to imposing SOT tax liability on 100% of the receipts from prescription sales, and that the evidence showed there clearly was rendering of the service, the ALJ concluded that in the interest of fairness Mel-Park could use the estimated 50% of gross sales method and thus take the prescription service fee deduction. But in doing so, the ALJ specifically affirmed the auditor’s conclusion that Mel-Park was not eligible for the actual cost method of obtaining the deduction and that Mel-Park’s returns amounted to an improper double deduction. The ALJ found that Lee Alport “had destroyed his daily prescription cost records after recording the totals” and that the auditor was not provided with the daily records or prescription costs or prescriptions. The auditor and her written summary did not show that Alport had offered her the tally sheets from which the prescription costs were totalled.

Under these circumstances, the ALJ ruled that Mel-Park was not entitled to the deduction as claimed on its returns, which was the double deduction figure. We hold that this was a correct ruling. The fact that the ALJ ameliorated the harshness of the result by awarding a single deduction that was supported by the evidence does not alter the correctness of the ruling that Mel-Park had not carried its burden of proof as to the deduction it had claimed.

Mel-Park argues that its exhibit, group exhibit No. 5, and its expert’s testimony, together overcame the Department’s prima facie case because the exhibit, invoices for the month of January 1984 from the General Drug Company, showed that prescription and nonprescription drugs could be distinguished; thus, it argues, the auditor could have based the SOT on the actual cost of prescription purchases rather than lumping all medicines and drugs together.

Mel-Park contends that group exhibit 5 contains three ways to identify prescription from nonprescription drugs: a narcotics blank, a symbol code, and a retail price column which is empty for any drug having a prescription code. Mel-Park complains that these invoices were available for the entire audit period and that the auditor could have based the SOT on the invoices rather than estimating that all drugs and medicines were about 22% of total sales.

In addition, Mel-Park argues that the expert’s estimation of about 68.5% of total sales should have been for prescription drugs, based on the Lilly Digest, plus Lee Alport’s testimony concerning the markup percentages he used, and should have proven a much lower tax liability than that assessed.

The ALJ disregarded the group exhibit 5 because she could not determine the criteria upon which the month of January 1984 was selected, and it was not a test month in the audit period. Therefore, she gave group exhibit 5 no weight. Further, the ALJ concluded that the auditor could not reasonably differentiate from the invoices which drugs were prescription and which were not, and that even Bigane, Mel-Park’s expert, needed Lee Alport to mark the invoices to make the distinction. The findings of the administrative law judge are prima facie correct and not to be set aside unless contrary to the manifest weight of the evidence. We conclude that the ALJ reviewed the exhibits and did not err in giving them no weight.

Regarding the expert testimony that the correct percentage of prescription drug sales should be closer to the Lilly Digest figure, we deem this evidence to be hearsay and not reliable. (Puelo v. Department of Revenue, 117 Ill. App. 3d 260, 453 N.E.2d 48; Elkay Manufacturing Co. v. Sweet, 202 Ill. App. 3d at 472, 559 N.E.2d at 1062.) There was nothing in the evidence to substantiate the basis for the estimate of the number of prescriptions filled daily, upon which the Lilly estimate was based.

While Mel-Park may have sketched out an alternative theory for estimating its gross receipts, it has not met its burden to overcome the prima facie case. (Central Furniture Mart, Inc. v. Johnson, 157 Ill. App. 3d at 911, 510 N.E.2d at 940.) We affirm the circuit court’s decision as we are not prepared to say that Mel-Park has introduced evidence of sufficient strength to overcome the Department’s prima facie case.

II

We must, finally, address Mel-Park’s second claim, regarding the ALJ Bawolek’s setting aside of the initial ALJ’s recommended decision. We conclude that the circuit judge correctly ruled that ALJ Ba-wolek acted consistently with the circuit court’s previous order of remand by making findings of fact and conclusions of law based on the evidence in the record. The remand order of May 27, 1988, stated:

“This Court is cognizant that the absence of findings does not make the Administrative Decision void. However, the circumstances warrant written findings notwithstanding that the statute does not specifically require it.”

The circuit court, on subsequent review, determined that the remand order had been complied with in that ALJ Bawolek had rendered explanations and reasoning for her final determination of tax liability.

Under the provisions for administrative review in the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 3 — 111(2)), the circuit court may “make any order it deems proper for the amendment, completion or filing of the record of the administrative agency.” In addition, the circuit court has the power “[t]o reverse and remand the decision in whole or in part, and, in such case, to state the questions requiring further hearing or proceedings and to give such instructions as may be proper.” (Ill. Rev. Stat. 1987, ch. 110, par. 3— 111(6).) In the case at bar the circuit court noted that factual, not credibility, issues were to be resolved on remand and that the review by ALJ Bawolek reflected a complete and careful examination of the record.

Under section 11(c) of the Illinois Administrative Procedures Act (Act) (Ill. Rev. Stat. 1987, ch. 127, par. 1001 et seq.), findings of fact shall be based exclusively on the evidence and on matters officially noticed. (Ill. Rev. Stat. 1987, ch. 127, par. 1011(c).) In Cook County Federal Savings & Loan Association v. Griffin (1979), 73 Ill. App. 210, 391 N.E.2d 473, we stated that an administrative agency cannot base its decision on facts, data and testimony which do not appear in the record and that findings must be based on evidence introduced in the case and nothing can be treated as evidence which is not introduced as such. Under this standard, the ALJ was correct in rejecting the recommended decision of the prior ALJ since it was based on data not introduced into evidence. Similarly, in Pedigo v. Department of Revenue (105 Ill. App. 3d 759, 434 N.E.2d 860), we rejected evidence contained in a supplemental brief filed after the departmental hearing because such was never introduced at the hearing or in the circuit court on review. Thus, we affirm the decision of the circuit court to the extent that it ruled ALJ Bawolek’s decision was issued consistently with the intent of the original remand order and the requirements of section 11(c) of the Illinois Administrative Procedures Act. Ill. Rev. Stat. 1987, ch. 127, par. 1011(c).

Plaintiff cites Jones v. Board of Fire & Police Commissioners (1984), 127 Ill. App. 3d 793, 797, 469 N.E.2d 393, 402, for the proposition that when a case is remanded with directions, the lower court can do nothing except carry out those directions. However, Jones v. Board of Fire & Police Commissioners states only that the lower court must proceed on remand as directed by the mandate and not the opinion, unless the mandate instructs the court to proceed in conformity with the opinion. We hold that the ALJ properly followed the directives on remand by the circuit court because setting aside the prior ALJ decision was proper and providing written findings of fact based on the hearing evidence complied with the essential requirement of the circuit court’s remand order. Plaintiff’s contention that it was improper for the ALJ to vacate the prior administrative decision also runs afoul of the general rule that when an administrative decision is reversed, vacated, or remanded, the case stands as if no decision had ever been made. (Jones v. Board of Fire & Police Commis sioners, 127 Ill. App. 3d at 801, 469 N.E.2d at 402; Creamer v. Police Pension Fund Board (1978), 69 Ill. App. 3d 792, 387 N.E.2d 711.) Finally, we conclude that there was no error in the second ALJ rendering a decision on the basis of the record made at the hearing before the previous ALJ. (American Welding Supply Co. v. Department of Revenue (1982), 106 Ill. App. 3d 93, 435 N.E.2d 761.) As we are persuaded that the ALJ fully considered the evidence, we find no error.

Accordingly, the judgment of the circuit court for the county of Cook is affirmed.

Judgment affirmed.

SCARIANO, P.J., and DiVITO, J., concur.


source: Caselaw Access Project

license: Public Domain

text:
      In re ILLINOIS BELL SWITCHING STATION LITIGATION
    First District (2nd Division)
    No. 1-89-0974
    Opinion filed July 30, 1991.
   On October 23, 1992, the Appellate Court, First District, withdrew the July 30, 1991, opinion in case No. 1-89-0974, published at 218 Ill. App. 2d 224. A new opinion was subsequently filed June 30, 1992, and is now published at 234 Ill. App. 3d 457.


author: JUSTICE RIZZI

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. MICHAEL J. DEPKE, Defendant-Appellant.
    First District (3rd Division)
    No. 1-87-1451
    Opinion filed July 31, 1991.

      Marc W. Martin, of Chicago, for appellant.
    John M. O’Malley, State’s Attorney, of Chicago (Inge Fryklund, Paula Carstensen, and Lori J. Williams, Assistant State’s Attorneys, of counsel), for the People.
   JUSTICE RIZZI

delivered the opinion of the court:

Following a jury trial, defendant Michael J. Depke was convicted of delivery of a controlled substance and sentenced to serve six years in prison. On appeal, defendant argues that (1) the State improperly attempted to influence the jury with the false impression that probation was an available sentence in a Class X delivery of controlled substance case; (2) the trial court erred in sua sponte informing the jury that probation was not available in connection with this case; and (3) the State failed to prove him guilty beyond a reasonable doubt. We affirm.

Thomas Braglia and Gary Brotan testified on behalf of the State. In September 1983, Braglia and Brotan were employed as law enforcement officers for the Northeastern Metropolitan Drug Enforcement Group (MEG). In the course of their undercover duties, the officers assumed the aliases of Tom and Mike, respectively. The agents established a buyer/seller relationship with Robert Franklin, defendant’s codefendant, who was tried separately. On September 16, 1983, Brotan and Braglia went to 7839 South Linder in Midlothian to purchase cocaine from Franklin. When the officers arrived, no one was at home. However, they found a note which read, “Mike you guys are late, give me a call. Bob.”

At approximately 4 p.m. on September 20, 1983, Robert Franklin called an undercover telephone at MEG headquarters and asked to speak to Mike. Agent Braglia answered the telephone, introduced himself as Mike’s friend Tom and advised Franklin that Mike was not available. Franklin asked Braglia where he and Mike were on September 16, and suggested another meeting at 7 p.m. that evening at 7839 Linder. At approximately 6:55 p.m. that evening, Brotan and Braglia went to 7839 Linder and rang the doorbell. Defendant answered the door and the agents asked for Franklin. Defendant invited the agents into the house and directed them to the kitchen, where they saw Franklin seated at the table. Franklin introduced defendant as his brother-in-law and owner of the house.

After a brief conversation, Brotan asked Franklin if he had the cocaine. Franklin responded affirmatively and motioned to defendant to get the cocaine. Defendant walked over to the kitchen cabinet, removed a clear plastic bag filled with cocaine and handed it to Braglia before returning to his seat. Franklin then informed the agents that they would receive a minimum six-year sentence if they were caught with the cocaine. Franklin asked the officers if they had ever been arrested, and when they answered no, he responded, “good, because if they were caught, most likely nothing would happen to them.”

When Brotan asked Franklin how much the cocaine weighed, he sent defendant to another part of the house to retrieve a scale. Defendant returned with a triple beam scale which he gave to Bro-tan before resuming his seat. Brotan weighed the cocaine and determined that it weighed 48.5 grams. Brotan asked if he could purchase an additional pound of cocaine. Franklin told the agents that he did not know them well enough to sell them that much cocaine. Thereafter, in response to Brotan’s request for a demonstration of the cocaine manufacturing process, Franklin declined, but described in detail the growing and chemical processing required to produce cocaine powder. When the conversation ended, Brotan paid Franklin $3,300 for the cocaine and the two officers left defendant’s residence. Two months later, defendant was arrested and charged with delivery of a controlled substance.

At trial, Richard Paulas, a forensic scientist employed by the Illinois Department of State Police, testified that he examined the substance retrieved as a result of this MEG investigation. Paulas’ examination revealed the substance to be 41.6 grams of cocaine.

Defendant did not testify on his own behalf. However, defendant’s sister, Christine Depke, testified that Franklin had a key to defendant’s home. Following closing arguments, the jury convicted defendant of delivery of a controlled substance. Thereafter, the court sentenced him to a term of six years’ imprisonment. This appeal followed.

Defendant first argues that the State impermissibly attempted to influence the jury with the false impression that probation was an available sentence in a Class X delivery of controlled substance case. We disagree.

At trial, the following testimony was adduced during the direct examination of Thomas Braglia:

“PROSECUTOR: Did Robert Franklin say anything at this point?
WITNESS: Yes, sir.
PROSECUTOR: What did he say?
WITNESS: He told myself and Agent Brotan that if we were caught with this amount of cocaine, that we would receive a minimum of six years in jail. He thought that we should be aware of that.
PROSECUTOR: What did he say next to you?
WITNESS: He indicated that he wanted to know if myself or Agent Brotan had ever been arrested or did we have any record of any type whatsoever, police record.
PROSECUTOR: Did you respond to Mr. Franklin’s inquiry?
WITNESS: Yes, sir, I did.
PROSECUTOR: What did you say?
WITNESS: Told Mr. Franklin neither myself or Agent Brotan had ever been arrested by the police for any offenses whatsoever, that we were clean.
PROSECUTOR: What did Robert Franklin say at this point?
WITNESS: Mr. Franklin said that he himself had never been arrested nor had Mr. Depke, his brother-in-law been arrested. That was good because if we were caught, most likely nothing would happen to us.
DEFENSE COUNSEL: Objection, Judge, move it be stricken. Could we have a sidebar?
THE COURT: Sustained.”

Later, during the cross-examination of Thomas Braglia by defense counsel, the following testimony was elicited:

“DEFENSE COUNSEL: And you guys told him that you were never arrested before, right?
WITNESS: That’s correct.
DEFENSE COUNSEL: And then that is when Franklin said to you that it would be easy on you or you would get probation if you didn’t have any record, is that true?
WITNESS: That’s correct.
DEFENSE COUNSEL: But Mr. Franklin was wrong, wasn’t he?
WITNESS: I don’t know that sir.
THE COURT: The jury will take note that there is no probation in connection with this case. Proceed.”

During the direct examination of Gary Brotan, the following testimony was elicited:

“PROSECUTOR: What happened then?
WITNESS: Mr. Franklin got into a conversation with us as to if we had ever been arrested before.
PROSECUTOR: What did you reply?
WITNESS: I told him that we were clean as far as our criminal record was [sic] and also that we were clean as far as carrying any weapons while we were sitting at the table.
PROSECUTOR: What if anything else did he relate?
WITNESS: He told us about the penalty. That if we had got — if we had got caught with the ounce and a half of cocaine, that we could receive six years in jail, but seeing that our record was clean, we probably would only get probation.
THE COURT: I will interject again to mention that the jury may note that probation is not a sentence in connection with this charge. Proceed.”

Defendant contends that the above-quoted testimony demonstrates that the State intentionally elicited testimony which indicated that Robert Franklin told the agents that probation was an available sentence in this matter. Defendant argues that this testimony, combined with the trial court’s sua sponte ruling which informed the jury that probation was not an available sentence, improperly influenced the jury to either convict defendant, because the penalty of probation was only a slap on the wrist, or to believe, based on the court’s instruction, that defendant possessed a prior criminal history since probation was not an available sentence in this matter.

Defendant’s argument must fail. The record indicates that defense counsel interjected the issue of probation into the record when he asked Agent Braglia during cross-examination if it was true that Franklin told him that he would probably get probation if he was arrested. Defense counsel elicited the response which prompted the court to sua sponte instruct the jury that probation was not an available sentence in the present case. Therefore defendant’s contention that the State intentionally elicited information in an attempt to improperly influence the jury is disingenuous and without merit.

Further, defendant’s second argument that the combination of the elicited testimony and the judge’s instruction improperly influenced the jury to convict is unconvincing. The court is obligated to use restraint in giving instructions sua sponte. (People v. Garcia (1988), 169 Ill. App. 3d 618, 622, 523 N.E.2d 992, 995.) However, a trial judge has a duty to see that justice is done, and if it appears that justice will fail because a fact has not been developed or a line of inquiry has not been pursued, the judge has a duty to intervene either by suggestions to counsel or by his own inquiry or examination of witnesses, if necessary, and so long as he does not forget his role as judge in doing so, his actions are proper. People v. Hicks (1989), 183 Ill. App. 3d 636, 646, 539 N.E.2d 756, 762.

In the present case, the judge was under a duty to prohibit the introduction of evidence regarding sentencing, since it was not an issue within the province of the jury. The court’s sua sponte instruction was required due to defense counsel’s cross-examination of Agent Braglia which improperly interjected the issue of probation into the case after the court had already sustained a previous defense objection to questioning on the subject of sentencing. Under these circumstances, we find no error in the trial court’s sua sponte instruction in this matter.

Further, under the co-conspirator exception to the hearsay rule, the declarations of a co-conspirator are admissible against all conspirators upon an independent, prima facie showing of a conspiracy or joint venture between the declarant and one of the other defendants, if such declarations are made in furtherance of and during the pendency of the conspiracy. (People v. Goodman (1980), 81 Ill. 2d 278, 283, 408 N.E.2d 215, 216.) In the present case, those criteria were satisfied where defendant let the agents into his home, retrieved the cocaine from his kitchen cabinet, and obtained a scale for the agents to weigh the cocaine. In addition, defendant was present while his codefendant discussed the penalties for possession of cocaine, and the drug manufacturing process, as well as when he accepted $3,300 in cash from the agents in exchange for the cocaine. In light of this evidence, an agreement between defendant and his codefendant to sell cocaine could be inferred. We therefore conclude that, because a sufficient prima facie case of conspiracy was shown by independent evidence, the testimony regarding Franklin’s conversation with the MEG agents was properly admitted.

Defendant finally argues that the State failed to prove him guilty of delivery of a controlled substance beyond a reasonable doubt. We disagree.

A criminal conviction will not be set aside unless the evidence is so improbable or unsatisfactory that it creates a reasonable doubt of the defendant’s guilt. (People v. Collins (1985), 106 Ill. 2d 237, 261, 478 N.E.2d 267, 276.) It is the jury’s duty to assess the credibility of witnesses and to weigh the evidence in determining a defendant’s guilt or innocence. (People v. Boclair (1989), 129 Ill. 2d 458, 474, 544 N.E.2d 715, 722.) That determination is entitled to great deference and will not be set aside absent the presence of a reasonable doubt of defendant’s guilt. (People v. Boclair, 129 Ill. 2d 458, 544 N.E.2d 715.) Further, when a challenge to the sufficiency of the evidence is presented, the relevant inquiry is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. People v. Collins, 106 Ill. 2d at 261.

In the present case, the evidence of defendant’s guilt is overwhelming. Both MEG agents testified that defendant answered the door to his home, directed them to the kitchen where Franklin was seated, and was present during the discussion regarding the drug deal and possible future deals. In addition, defendant procured the cocaine from the kitchen cabinet, obtained a scale from another room in the house, and was present when the agents weighed the cocaine and when they paid $3,300 in cash for the drugs. In sum, viewing the evidence in the light most favorable to the prosecution, a rational trier of fact could have found defendant guilty of delivery of more than 30 grams of a controlled substance beyond a reasonable doubt. We therefore conclude that the jury’s verdict is not so unsatisfactory, unreasonable or improbable as to raise a reasonable doubt of defendant’s guilt.

Accordingly, we affirm the judgment of the circuit court.

Affirmed.

CERDA, P.J., and WHITE, J., concur.


author: PRESIDING JUSTICE JIGANTI

text:
    THE CITY OF CHICAGO, Plaintiff-Appellee, v. UNIT ONE CORPORATION, Defendant-Appellant.
    First District (4th Division)
    No. 1-90-1383
    Opinion filed August 1, 1991.

      Barry B. Nekritz, Stephen M. Dorfman, and Phillip J. Zisook, all of Al-theimer & Gray, of Chicago, for appellant.
    Kelly R. Welsh, Corporation Counsel, of Chicago (Lawrence Rosenthal and Mardell Nereim, Assistant Corporation Counsel, of counsel), for appel-lee.
   PRESIDING JUSTICE JIGANTI

delivered the opinion of the court:

The City of Chicago (City) filed a complaint against Unit One Corporation, owner of commercial space in a building on Lake Shore Drive, alleging that certain commercial signs on the exterior wall of the building violated the Chicago Zoning Ordinance. (Chicago Municipal Code ch. 194A, art. 7, §§7.3-7, 7.10-1, 7.10-7 (1989).) Unit One responded with a counterclaim and affirmative defense in which it argued that the City was estopped from enforcing the zoning ordinance against Unit One because Unit One had detrimentally relied on the fact that the City had issued permits for the signs in question for the preceding 15 years. Unit One also alleged that the City was attempting to enforce the ordinance in an impermissibly selective manner. The circuit court entered judgment for the City and against Unit One. Unit One appeals from the court’s order.

The parties agree to the following facts. The commercial signs at issue were displayed on the exterior wall of Harbor House Condominium, a building on North Lake Shore Drive. Commercial space in the building was owned by Unit One, which leased the space to commercial tenants. As part of the commercial lease agreements, the tenants displayed their signs on the exterior wall of the Harbor House Building. The display of the signs was in violation of the Chicago Zoning Ordinance because contrary to the limitations of the ordinance, the signs were larger than 18 by 18 inches, contained more colors than two, and were illuminated. (Chicago Municipal Code ch. 194A, art. 7, §7.10 — 7 (1989).) Similar signs had been continually present at the same location since 1973. In a 15-year period, between February 1973 and May 1988, the City issued sign permits for the signs in question. Each of the permits was stamped with the following language:

“CONFORMS TO ZONING ORDINANCE
This Approval of Application for license shall not be held to permit or be an approval of any Violation of the provisions of the Chicago Zoning Ordinance.”

The stamps were initialed by the zoning administrator or his agent.

Because the City continually issued permits for the signs, the board of managers believed the signs were legal. The board never investigated to determine otherwise. Unit One used the availability of the signs as a feature to attract commercial tenants. Neighborhood and parking congestion contributed to Unit One’s difficulty in attracting commercial tenants. Many commercial tenants insisted that the right to maintain the exterior signs be a part of their contract. In addition, the availability of commercial enterprises in the building was used as a selling point with residential tenants.

There were periods of time when the commercial spaces in the building remained vacant. One space remained vacant for one year. At least one business, a restaurant that had leased space and utilized the signs for advertising, went out of business. The same restaurant space was leased at least three other times during the period in question. Another commercial unit turned over three times in one year. Each of these businesses used the commercial signs available on the exterior wall of the building.

After the City initiated its action against Unit One, the leases the company executed provided rent concessions and allowances for the tenants to terminate if the right to maintain signs was revoked as a consequence of the City’s suit. In the opinion of two former members of the board of managers, Unit One would be unable to continue to attract commercial tenants if it were not allowed to maintain the exterior wall signs. The commercial space is not suitable for residential use, and converting it to other nonresidential use would involve monetary expense.

As the City pursued its action against Unit One, there remained other commercial signs in the area that were in apparent violation of the sign ordinance, but with respect to which the City had initiated no action. It was unknown how many of these signs may have been “grandfathered in”: legal because they were in existence before the ordinance was adopted in 1957. The Chicago zoning administrator indicated that there are thousands of nonconforming signs in the City, and the four City zoning inspectors are engaged in an ongoing process of surveying the entire city to identify the violations.

The parties do not dispute that the signs in question in this case were in violation of the City’s zoning ordinance. It is also uncontro-verted that the City issued permits for the signs over a period of 15 years. It is Unit One’s theory that the City should be estopped from enforcing the ordinance against Unit One because the City has through its action ratified the issuance of the sign permits and Unit One has relied to its detriment on the City’s action.

For support, Unit One cites to Cities Service Oil Co. v. City of Des Plaines (1961), 21 Ill. 2d 157, 171 N.E.2d 605. In Cities Service, the City of Des Plaines issued in error a permit for the construction of a gas station. The city also provided to the plaintiff a copy of an outdated ordinance under the terms of which the plaintiff’s proposed gas station was in compliance. Seven months later the city revoked the permit. In the meantime, relying on the permit and the apparent acquiescence of city officials, the plaintiff had purchased the subject property and expended a large sum of money installing permanent parts of the structure. The supreme court determined that under the special facts and circumstances of the case, the city was estopped from revoking the permit. The court noted that while as a general rule a citizen has the responsibility of informing himself of existing ordinances, where the city had allowed construction to go forward for seven months before revoking the permit, the plaintiff could reasonably infer that the issuance of the permit had been ratified. The court in Emerald Home Builders, Inc. v. Kolton (1973), 11 Ill. App. 3d 888, 298 N.E.2d 275, relying on the decision in Cities Service, came to a similar conclusion in determining that the City of Chicago was estopped from revoking a building permit one month after construetion had begun, where plaintiff had spent $15,560, including the cost of the real estate, in reliance upon the erroneously issued permit.

We do not believe that the case at bar presents the special facts and circumstances which were determinative in Cities Service and Emerald Home Builders. As stated in Cities Service, the general rule is that a municipality will not be estopped from enforcing a public right, absent special circumstances that would make it highly inequitable or oppressive to do so. Those who deal with governmental bodies take the risk of “having accurately ascertained that he who purports to act for [the body] stays within the bounds of his authority.” (Cities Service Oil Co. v. City of Des Plaines (1961), 21 Ill. 2d 157, 160-61, 171 N.E.2d 605, 607.) If the unauthorized acts of a governmental employee are allowed to bind a municipality through equitable estoppel, the municipality would remain helpless to correct errors and forced to permit violations “to remain in perpetuity.” (Lake Shore Riding Academy, Inc. v. Daley (1976), 38 Ill. App. 3d 1000, 1003, 350 N.E.2d 17, 20.) For this reason, estoppel against a public body should not be invoked except in compelling circumstances. Bank of Pawnee v. Joslin (1988), 166 Ill. App. 3d 927, 521 N.E.2d 1177.

In order to invoke estoppel against a municipality, a party must show that its action was induced by the conduct of municipal officers and that in the absence of estoppel relief, substantial loss to the party will occur. (Cities Service, 21 Ill. 2d 157, 171 N.E.2d 605.) In the present case, we do not believe that Unit One has met this necessary criteria. Unit One argues that by issuing the sign permits over a period of 15 years, stating through its stamp that the signs “conformed with the zoning ordinance,” and allowing the signs to be openly and continuously displayed, the City through its conduct ratified the issuance of the permits. However, the mere issuance of an unauthorized permit and detrimental reliance thereon do not in themselves provide grounds for relief. (Cities Service, 21 Ill. 2d 157, 171 N.E.2d 605.) We believe this rule generally applies even where the municipality has issued repeated permits as in the present case.

In Cities Service, a case upon which Unit One relies heavily, the court found that in failing to revoke a permit until seven months after its issuance, the municipality had in effect ratified the permit. However, in Cities Service, a case decided upon its particular facts and circumstances, the court found that the municipality, in giving the plaintiff a copy of an outdated ordinance, had induced the plaintiff into believing that he was proceeding in accordance with the law. (See O’Laughlin v. City of Chicago (1976), 65 Ill. 2d 183, 357 N.E.2d 472 (distinguishing Cities Service).) The lapse of time in itself does not provide the compelling circumstances that justify application of the estoppel doctrine. La Salle National Bank & Trust Co. v. City of Chicago (1984), 128 Ill. App. 3d 656, 470 N.E.2d 1239.

In the present case, there is no special circumstance indicating that the City actively misled or induced Unit One into believing no violation of the sign ordinance was involved. In fact, the permit stamp to which Unit One refers also contained the following language: “This Approval of Application for license shall not be held to permit or be an approval of any Violation of the provisions of the Chicago Zoning Ordinance.” As a rule, every entity is charged with the responsibility of knowing the limitations of any ordinance under which it is subject. (See Cities Service, 21 Ill. 2d 157, 171 N.E.2d 605.) Under the circumstances of the present case, we do not believe Unit One has shown that it should be relieved of this responsibility.

Nor do we believe Unit One has shown substantial reliance on the sign permits such that it would be inequitable and unjust at this point for the City to enforce the sign ordinance. (Bank of Pawnee v. Joslin (1988), 166 Ill. App. 3d 927, 521 N.E.2d 1177.) Unlike the plaintiff in Cities Service, who purchased property and began construction in reliance upon the erroneously issued permit, Unit One has not shown that it substantially changed its position because of the unauthorized sign permits. The condominium building was not constructed in reliance upon the belief that commercial signs would be permitted. Nor is there any indication that the commercial space in the building was designed in reliance upon the sign permits.

In alleging that without sign permits it will be unable to attract or retain commercial lessees, Unit One is directing its complaint against the ordinance itself, and not the City’s error in failing to properly administer it. That Unit One will now be disfranchised of an advantage to which it had no right in the first place is not the type of loss upon which the concept of estoppel is focused. The fact that the sign ordinance will now be enforced leaves Unit One in the same position it would have been in had it complied with the law in the first place. Therefore, we do not believe that the circuit court’s finding that Unit One failed to show substantial loss in reliance upon the sign permits was against the manifest weight of the evidence. Accordingly, the City should not be estopped from enforcing the zoning ordinance.

Unit One also argues that because at the time of the instant trial the City had failed to initiate action against other obvious violators of the sign ordinance, the City in prosecuting Unit One has engaged in impermissible selective enforcement of the ordinance. We do not believe that the fact that Unit One was prosecuted while others were not is enough to establish a claim of selective prosecution. To invoke the claim of selective prosecution, the complaining party must prove that the selection was based on some invidious classification. (See City of Collinsville v. Seiber (1980), 82 Ill. App. 3d 719, 403 N.E.2d 90.) Unit One has made no such assertion. Further, the City admitted that the present case represents a test of its power to prosecute violations despite having erroneously issued permits, and that due to limited resources, the process of seeking out and prosecuting violators is a lengthy one. In the meantime, as long as its enforcement methods are not based upon impermissible classifications, the City does not violate equal protection rights, even where it is unequal or arbitrary in the administration of its power. (Wundsam v. Gilna (1981), 97 Ill. App. 3d 569, 422 N.E.2d 1109.) For these reasons, the ruling of the circuit court is affirmed.

Affirmed.

JOHNSON and McMORROW, JJ., concur.


author: PRESIDING JUSTICE LORENZ

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. CHRISTOPHER KING, Defendant-Appellant.
    First District (5th Division)
    No. 1-88-2281
    Opinion filed August 2, 1991.

      Michael J. Pelletier and Leslie Wallin, both of State Appellate Defender’s Office, of Chicago, for appellant.

      Jack O’Malley, State’s Attorney, of Chicago (Renee Goldfarb, Walter P. Hehner, and John Guinn, Assistant State’s Attorneys, of counsel), for the People.
   PRESIDING JUSTICE LORENZ

delivered the opinion of the court:

Defendant, Christopher King, was charged with possession of a controlled substance, possession with intent to deliver, and with unlawful use of weapons. The defendant’s pretrial motions were denied, and then, after a lengthy trial, the jury returned a guilty verdict on all three counts. The trial judge sentenced defendant to a total of 12 years. On appeal, defendant raises the following issues: (1) whether, in light of new evidence adduced at trial, the trial judge erred by denying the defendant’s motion to reconsider his pretrial motion to quash the arrest and suppress the evidence; (2) whether the trial judge properly allowed the State’s narcotics expert witness to testify on the ultimate issue of the defendant’s intent to deliver the cocaine; and (3) whether defendant was denied a fair trial because Illinois Pattern Jury Instructions, Criminal, No. 18.02 (2d ed. 1981) (IPI Criminal 2d No. 18.02) was not submitted to the jury.

We affirm.

Relevant to our disposition are the following facts as disclosed by the record. Just prior to defendant’s arrest, two Evanston police officers were directed by car radio to meet two Federal agents at the intersection of Judson and South Boulevard. Although the full content of the ensuing conversation between the men is not known, the Federal agents did inform the officers that they were staking out defendant, Christopher King, and they described the car he was driving. Within moments, defendant’s car (fitting, in fact, the description given by the Federal agents) drove by the intersection. The police officers claimed that one of the headlights of defendant’s car was out, so they followed the car and eventually pulled defendant over. Defendant got out of his car and walked to his car’s rear bumper. The officers got out of the squad car and drew their weapons.

Officer Muholland met the defendant, and Officer Conklin advanced along the passenger side of the ear. Conklin looked in the window and testified that he saw a handgun sitting in plain view on the front seat. Later at trial, defendant admitted that the handgun was his but denied that the handgun was on the front seat. At any rate, defendant was placed under arrest and taken to the squad car.

Officer Conklin searched the car and discovered two more guns and a knapsack with ammunition on the front floorboard of the car’s passenger side. Conklin testified that the guns were in two boxes, each identified as “Raven Arms.” Defendant testified that the two guns had been purchased that day and were still in a plastic bag.

Conklin also discovered a locked box which was later opened and found to contain cocaine and other drug paraphernalia. The drug paraphernalia included a measuring device, packaging materials, and plastic baggies. The officers arranged to have pictures taken of the car which included a picture showing that one of the front headlights was out.

During the hearing on defendant’s pretrial motion to quash the arrest and suppress the evidence, the officers denied that they received a description of the defendant’s car from the Federal agents. The trial judge, Marcia Orr, denied the motion, finding that the officers stopped the car because the headlight was out and that they searched the car because the handgun was in plain view. At trial, defense counsel cross-examined the officers and discovered that the officers actually did receive a description of defendant’s car. After considering the “new evidence” on a renewed motion to quash the arrest and suppress the evidence, the trial judge reaffirmed her earlier findings and denied the motion. The judge found that there were no major inconsistencies in the testimony of the officers and expressly stated that, even if the “new evidence” had been available at the pretrial hearing, she would have denied the motion.

During trial, Officer Tomczyk, who was qualified by stipulation as a narcotics expert, testified that the drug paraphernalia “would indicate a dealer in cocaine rather than a user.” The defendant objected on the ground that the testimony was unduly prejudicial. The trial judge allowed the testimony.

In regard to the unlawful use of weapons count, defense counsel asserted different arguments at trial. One argument asserted that defendant’s car was his “place of business” because he was an electrician and was forced to keep his equipment in his car; moreover, some of defendant’s work locations were in poor, crime intensive neighborhoods. As a result of this argument, the trial judge submitted Illinois Pattern Jury Instructions, Criminal, No. 18.03 (2d ed. 1981) (IPI Criminal 2d No. 18.03), which exempts liability for a person possessing weapons at their “place of business.”

Another argument asserted that the guns discovered in defendant’s car were either inaccessible or nonfunctional. The IPI Criminal 2d No. 18.02 instruction exempts liability where the discovered weapons are either inaccessible or nonfunctional. However, at the end of trial defense counsel did not tender this instruction and it was not submitted to the jury.

Defendant was convicted of all three counts. The trial judge merged the controlled substances counts and sentenced defendant to 12 years in jail. The judge also sentenced defendant to one year in jail for the unlawful use of weapons count to be served concurrently with the 12-year sentence.

Opinion

Upon review, a trial judge’s decision on a motion to quash an arrest and suppress evidence will not be disturbed unless it is found to be manifestly erroneous. (People v. Penny (1989), 188 Ill. App. 3d 499, 544 N.E.2d 1015.) Here, the defendant argues that the new evidence adduced at trial concerning the role of the Federal agents established that the stop and search by the officers was in violation of the pretext doctrine. (See Penny, 188 Ill. App. 3d 499, 544 N.E.2d 1015 (an officer’s authority to investigate a traffic violation may not become a subterfuge to obtain evidence of another offense for which the officer suspects the defendant’s involvement).) The record shows that the Federal agents were staking out the defendant; they gave a description of the car; the defendant just happened to drive by; and the officers, for no apparent reason, got out of their squad car with their guns drawn. Therefore, defendant argues that the trial judge erred by denying the motion to reconsider the motion to quash the arrest and suppress evidence.

However, the trial judge made specific factual findings which are dispositive of this issue. The judge consistently found (even after the role of the Federal agents was disclosed) that the officers stopped defendant’s car because a headlight was out and not because they suspected defendant had been involved in another offense. The judge also found that the officers searched the car because a handgun was sitting in plain view on the front seat of defendant’s car. These findings of fact are also supported by the evidence, including the picture of the front of the car showing the front headlight out and the testimony of the officers. We hold, therefore, that the trial judge’s denial of defendant’s motion to reconsider the motion to quash the arrest and suppress the evidence was not manifestly erroneous.

On this same issue, defendant also argues that he was denied due process because the prosecutor did not correct the known false testimony of the police officers at the pretrial hearing. Although the knowing use of perjured testimony does violate due process (People v. Foster (1989), 190 Ill. App. 3d 1018, 547 N.E.2d 478), the trial judge here found that there were no major inconsistencies between the police officers’ testimony in the pretrial hearing and the trial. In light of this finding, defendant’s argument falls short of establishing the knowing use of perjured testimony and applies instead to the weight and credibility of the evidence. (People v. Tyner (1968), 40 Ill. 2d 1, 238 N.E.2d 377.) Therefore, we hold that defendant was not denied due process of law.

Next, defendant argues that the trial judge erred by allowing the narcotics expert’s testimony concerning the drug paraphernalia because it addressed the ultimate issue whether defendant had the intent to deliver the cocaine. Defendant reasons that the testimony was unduly prejudicial. However, it is now well established that an expert may directly express his opinion on an ultimate issue; the test for the admissibility of the testimony is whether it will aid the jurors’ understanding. (Watson v. State Farm Fire & Casualty Co. (1984), 122 Ill. App. 3d 559, 461 N.E.2d 57.) We decline to adopt the position that the average juror is capable of making a distinction between a drug dealer and a drug user without the assistance of an expert. Also, the narcotics expert’s testimony was not unduly prejudicial because the jury was not required to accept it. Therefore, we hold that the trial judge did not err by allowing the testimony.

Finally, in regard to the unlawful use of weapons count, defendant argues that he was denied a fair trial because the jury was not given IPI Criminal 2d No. 18.02, which exempts liability if the discovered weapons were either nonfunctional or inaccessible. Although defense counsel argued that the weapons were either nonfunctional or inaccessible, he did not tender IPI Criminal 2d No. 18.02. Therefore, this issue was waived. People v. Bernard (1984), 104 Ill. 2d 218, 470 N.E.2d 1005 (a party may not raise on appeal the failure to give an instruction unless he shall have tendered it).

In response, appellate counsel for defendant argues that the failure to tender the instruction by the defense (trial) counsel amounted to ineffective assistance of counsel. In order to establish ineffective assistance of counsel, a defendant must prove that defense counsel’s representation at trial fell below an objective standard of reasonableness and there was a reasonable probability, but for the error, the outcome would have been different. (People v. Albanese (1984), 104 Ill. 2d 504, 473 N.E.2d 1246.) Also, where counsel could have reasonably believed that the jury would not believe an argument, he may strategically refrain from seeking an instruction. (People v. West (1986), 142 Ill. App. 3d 876, 492 N.E.2d 566.) Here, in order to satisfy the exemption pursuant to IPI Criminal 2d No. 18.02, defendant had to prove by a preponderance of the evidence that the weapons were either inaccessible or nonfunctional. Even though there may have been a question about the accessibility of the two guns found in the boxes, there was substantial police testimony that the first handgun was found on the front seat of defendant’s car. Given the burden of proof, trial counsel could have reasonably believed that the jury would not believe that this handgun was either inaccessible or nonfunctional, and therefore strategically refrained from seeking the instruction. Furthermore, trial counsel asserted a reasonable alternative argument to which the appropriate instruction was tendered. Therefore, we hold that defense counsel’s representation at trial did not amount to ineffective assistance of counsel.

Affirmed.

GORDON and McNULTY, JJ., concur.