Did Illinois sales tax apply to retail goods sold by an individual or corporation even when the business reported no profit?

Plain-English summary

Illinois framed sales-tax liability around retail sales of tangible personal property, not the seller's label as an individual or corporation. The GIL said Retailers' Occupation Tax applied to persons engaged in Illinois in selling tangible personal property to buyers for use or consumption. The statutory list of persons included natural individuals, firms, partnerships, corporations, limited liability companies, and other listed entities.

The complementary Use Tax applied to retail purchases of tangible personal property used in Illinois. If the retailer did not collect it, the purchaser was responsible for remitting Use Tax directly to the Department.

The requester also asked whether a business with no actual profit owed tax. The GIL addressed only sales and use tax and said the Income Tax Division would answer any income-tax liabilities separately. It stated the then-current state sales-tax rate as 6.25% plus applicable local taxes; that rate statement is historical.

What this means for you

Do not treat lack of net profit or business form as a substitute for analyzing a retail sale. Determine whether taxable tangible personal property was sold for use or consumption and whether the retailer collected the complementary Use Tax. Analyze income tax separately.

Common questions

Q: Did the GIL answer whether an unprofitable business owed Illinois income tax?
A: No. It said the Income Tax Division would address that question in a separate letter.

Q: Did the sales-tax rules cover both individuals and corporations?
A: Yes. The cited statutory definition of persons included natural individuals and public or private corporations, among other entities.

Citations and references

• 35 ILCS 120/1 and 120/2
• 35 ILCS 105/3
• 86 Ill. Adm. Code 130.101
• 86 Ill. Adm. Code 150.101 and 150.130

Subject

Sale At Retail

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0006.pdf

Original ruling text

ST 10-0006-GIL 02/25/2010 SALE AT RETAIL
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See
86 Ill. Adm. Code 130.101. (This is a GIL.)

February 25, 2010

Dear Xxxxx:
This letter is in response to your letter dated December 22, 2009, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
What is the amount of state of Illinois sales tax to be paid on proceeds from the sales of
goods and wares? By a sole-proprietor corporation?
Is there any tax owed by a sole-proprietor corporation if the corporation after all
corporate expenses made no actual profit?
Please reply immediately!
DEPARTMENT’S RESPONSE:
This letter concerns the applicability of any sales tax you may incur in Illinois. The
Department’s Income Tax Division of our office will address any Illinois Income Tax liabilities you may
incur in a separate letter.
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 35 ILCS
120/2; 86 Ill. Adm. Code 130.101. In Illinois, persons subject to Retailers’ Occupation Tax include
any natural individual, firm, partnership, association, joint stock company, joint adventure, public or
private corporation, limited liability company, or a receiver, executor, trustee, guardian or other
representative appointed by order of any court. See 35 ILCS 120/1.

In Illinois, Use Tax is imposed on the privilege of using, in this State, any kind of tangible
personal property that is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as "sales" tax in Illinois. If the
purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of
purchase. The retailers are then allowed to retain the amount of Use Tax paid to reimburse
themselves for their Retailers' Occupation Tax liability incurred on those sales. If the retailer does not
collect the Use Tax from the purchaser for remittance to the Department, the purchaser is responsible
for remitting the Use Tax directly to the Department. See 86 Ill. Adm. Code 150.130. The current
state rate is 6.25%, plus any applicable locally imposed taxes.
See the Department’s website for the tax rate finder for local taxes and general information
about sales of tangible personal property.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk