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In Witte Brothers Exchange, Inc. v. Dept. of Revenue, 2013 WL 5476071 (Ill.App 1 Dist. 2013), the First District Appellate Court of Illinois held that the trucking company was subject to Illinois income taxes for its “pass-through miles” in the state, reversing the holding of the trial court. Pass-through miles, as the taxpayer contended, were miles traveling directly through the state without conducting any business while traveling through – no pickups or deliveries were made as trucks drove through Illinois.


In this case, the underlying taxpayer was Witte Brothers Exchange, Inc., an interstate trucking company (“Witte”). The Illinois Department of Revenue (the “Department”) assessed $136,303 against Witte for its pass-through miles in the state for its tax years ended in 2005 though 2007. The Department contended that Witt was deficient because it failed to include pass-through miles in the numerator of the apportionment factor as required under Section 304(d)(1) of the Illinois Income Tax Act.


Specifically, Section 304(d)(1) of the Tax Act provides:

Such business income (other than that derived from transportation by pipeline) shall be apportioned to this state by a fraction, the numerator of which is the revenue miles of the person in this state, and the denominator of which is the revenue miles of the person everywhere. For purposes of this paragraph, a revenue mile is the transportation of 1 passenger or 1 net ton of freight the distance of 1 mile for consideration. (emphasis added)

The trial court found in favor of Witt, relying primarily on a prior ruling involving an airline where its planes did not depart or land in Illinois. The court in that case ultimately held that where a company’s airplanes neither depart or land in Illinois, but merely flew over the state, the company was not subject to tax under Section 304(d)(1) of the Tax Act. Northwest Airlines, Inc, v. Department of Revenue, 295 Ill.App.3d 889 (1998). Witt argued at the trial court level that logically because Witt’s trucks did not pick up or deliver goods in Illinois, but merely passed through the state, its trucks should not be taxed. Trucking without pick up or delivery, Witt contended, was no different than flying over the state and therefore, by analogy, Witt’s activities in Illinois do not subject it to taxation.

The appellate court did not agree with Witt’s analogy. The appellate court, citing Northwest Airlines, explained that:

[T]he nexus requirement [of the commerce clause of the United States Constitution] cannot be satisfied. Flight plans for overflights are not filed with any Illinois state or municipal authorities. There are no voice communication with overflights, and such flights make no use of Illinois facilities, services, or employees. There exists no physical contact between overflights and this state, nor any economic connection. We do not find the mere possibility that an overflight will avail itself of services and facilities in this state in the event of an unscheduled landing sufficient to establish a nexus.

The court reasoned that while Witt did not perform any pick ups or deliveries in its travels through Illinois, it did utilize the state’s infrastructure and roadways, its property and employees were physically present in Illinois (not merely flying in its airspace), it performed the economic activity of providing shipping services involving travel through Illinois, and Witt’s trucks refueled while traveling through Illinois (thus using Illinois suppliers). Considering these facts, the court determined that Witt had sufficient presence in the state and was therefore, subject to the tax set forth under Section 304(d)(1) of the Tax Act.


It should be noted that Witt’s commerce clause challenge (U.S. Constitution, Art. I, § 8, cl.3) was not heard, as Witt failed to raise an issue of commerce clause violation at the trial court level. Further note that Section 304 of the Tax Act was amended to add Section 304(d)(3), which specifically covers the type of activity in which Witt engaged for tax years ending after 2008.
Click here to read the text of Witte Brothers Exchange, Inc. v. Dept. of Revenue.