Were a city library's ongoing sales of used books and other tangible items exempt merely because the seller was a governmental unit?

Plain-English summary

A governmental seller did not receive an automatic sales-tax exemption for retail sales to the public. Illinois said state and local governmental bodies incurred Retailers' Occupation Tax when selling tangible personal property unless the sale directly performed a governmental function.

The requester described a city library selling withdrawn and donated books and audiovisual materials throughout the year, plus earbuds and computer discs for patrons' convenience. The Department did not classify each item or sale individually. It did, however, expressly list sales of books by libraries and sales of books and supplies by school districts to students as taxable examples.

The GIL contrasted those sales with a state sale of motor-vehicle license plates, which could directly perform a governmental function. A sale furthering a business enterprise was taxable.

What this means for you

Government ownership of the seller is not enough. Identify whether the particular retail sale directly carries out a governmental function or instead resembles a business sale also made by private retailers.

Common questions

Q: Did the GIL specifically decide every used-book and donated-item sale described?
A: No. It gave general rules and examples rather than a transaction-specific ruling.

Q: What library example did the Department give?
A: It listed sales of books by libraries among taxable governmental sales.

Citations and references

• 86 Ill. Adm. Code 130.2055(a)
• 2 Ill. Adm. Code 1200.110 and 1200.120

Subject

Exempt Organizations

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-10-0036.pdf

Original ruling text

ST 10-0036-GIL 04/23/2010 EXEMPT ORGANIZATIONS
Governmental units incur Retailers Occupation Tax liability when selling tangible personal
property to the public for use or consumption. The only exception is the sale of an item by a
governmental unit in the performance of its governmental function. See 86 Ill. Adm. Code
130.2055. (This is a GIL.)

April 23, 2010

Dear Xxxxx:
This letter is in response to your letter dated February 23, 2010, 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:
We are writing to request a ruling in regard to the application of Illinois state and local
retailers’ occupation tax.
The CITY’s Library purchases books and audio-visual materials for public use. Books
and audio-visual materials become damaged or obsolete over time and are removed
from the library’s collection; the library also receives donations of used books and
audio-visual materials. Some of these books and audio-visual materials are donated to
other non-profit organizations, some are recycled, and some are discarded; the
remainder are sold for 50 cents (paperback books) or one dollar (hardcover books,
DVDs, CDs and VHS tapes). The city’s library used to have an annual sale of these
items, but the logistics of an annual sale was challenging and was not the best use of
resources – considerable storage space had to be put aside all year and a significant
number of staff or volunteers had to be utilized during a short period of time. So, it was
decided to place a small table at each of our three branches and sell the items all year,
as the items become available, instead of just once a year.
Additionally, the CITY’s Library sells ear buds and computer discs as a convenience to
its patrons that forgot to bring these items to the library. The library charges a nominal

fee of $1.00 to help recover the costs involved (the purchase price, storage, and staff
time involved).
Based on the information as provided above, the CITY respectfully requests a ruling
from the Illinois Department of Revenue on whether the Library is required to collect the
state and local retailers’ occupation tax on used/donated excess book sales made at the
city’s library branches.
The issue is not under audit, appeal, or protest in any form or fashion with the State of
Illinois.
If you have any questions or need additional information, please contact me.

DEPARTMENT’S RESPONSE:
Although we cannot give you a specific answer in the form of a General Information Letter, we
hope you find the following helpful. Section 130.2055(a) of the Code provides that “the State of
Illinois or any local governments in Illinois, or any agency or instrumentality of any such government
body, incurs Retailers' Occupation Tax liability when it engages in the selling of tangible personal
property at retail to the public other than in the performance of a governmental function.” 86 Ill. Adm.
Code 130.2055(a). The reason for this rule is to ensure that governmental units do not have a
competitive advantage when selling items that are also sold by Illinois retailers.
An example of sales that may be made by a governmental body to the public that involves the
performance of a governmental function is the sale of motor vehicle license plates by the State of
Illinois. Where a governmental unit makes sales that are not in the direct performance of its
governmental function, the sales are taxable. Examples of taxable sales by governmental units
include the operation of concession stands by park districts, sales of smoke detectors by fire
protection districts, sales of leaf bags by municipalities, sales of T-shirts, caps and mugs by State
agencies, sales of books by libraries, and sales of books and supplies by school districts to students.
Accordingly, if the tangible personal property you are selling is in the performance of your
governmental function, then you would not incur Retailers' Occupation Tax liability. In contrast,
however, if the sale of that tangible personal property is in furtherance of a business enterprise, then
you would incur Retailers’ Occupation Tax liability.
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