How did Illinois tax a truck-stop service package combining climate control, television, internet access, electricity, and a separately sold window adapter?

Plain-English summary

Illinois treated the components according to what the customer received and how electricity was billed. Sales of service that did not transfer tangible personal property were outside Illinois Retailers' Occupation and Use Taxes under the rules stated in the GIL. The Department specifically said television programming or other no-property services were not subject to Retailers' Occupation, Use, Service Occupation, or Service Use Tax. A separately sold plastic window adapter, however, was taxable tangible personal property.

The GIL discussed separate tax systems for telecommunications, internet access, and electricity. It stated a 7% Illinois Telecommunications Excise Tax rate for retail telecommunications in 2010 and said satellite television providers were generally outside that tax. It also described the then-effective federal Internet Tax Freedom Act moratorium as running through November 1, 2014.

For electricity included in one basic-package charge, the company was generally the user and owed tax to its electricity supplier. When electricity was separately charged to customers, the customers became the users and the company had to charge and remit Electricity Excise Tax as a delivering supplier. The Department did not give the requested taxable percentage for the bundled offering.

What this means for you

Identify each package component, whether tangible property changes hands, and whether electricity is bundled or separately sold. Do not carry the GIL's 2010 rates or expired date-specific internet discussion forward without checking current law.

Common questions

Q: Was the plastic window adapter taxable?
A: Yes. The company owed Retailers' Occupation Tax on its retail sale, and the customer owed the corresponding Use Tax.

Q: Who was treated as the electricity user when power was bundled?
A: The company was generally the user and paid the tax to its supplier.

Q: What changed when electricity was separately charged?
A: The customers were treated as the users, and the company collected and remitted Electricity Excise Tax as a delivering supplier.

Citations and references

• 86 Ill. Adm. Code 130.101, 150.101, and 140.101 through 140.109
• 35 ILCS 630/3 and 630/4; 35 ILCS 636/5-10 and 636/5-15
• 47 U.S.C. § 151 note, § 1101
• 35 ILCS 640/2-4, 2-7, and 2-8; 86 Ill. Adm. Code 511.200
• 2 Ill. Adm. Code 1200.110 and 1200.120

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-10-0065.pdf

Original ruling text

ST 10-0065-GIL 08/05/2010 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.)

August 5, 2010

Dear Xxxxx:
This letter is in response to your letter dated June 25, 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:
ABC will soon be starting operations in your state and would like to receive a
determination of to what degree our services are subject to sales tax. Below is a
general description of our business followed by a list of services and offerings that we
may choose to provide. Please comment on the sales tax status for each offering noted
and the partial extent (percentage of) it may be taxable in the case of a bundled offering
that includes both taxable and exempt offerings. Please also provide any specific
suggestions or instructions with respect to who to notify in your state or what forms to
submit such that when our monthly tax payments are made our handling of them is on
record.
Thank you for your assistance and please contact me with any questions or
clarifications required.
Business Description:
XYZ by ABC operates equipment located in travel center (truck stop) parking lots.
Truck drivers pull into parking spaces outfitted with our equipment. A heating, cooling
and ventilation unit sits above each parking space. The unit is connected to a Service
Delivery Module by means of a flexible hose. The Service Delivery Module attaches to

the truck’s passenger window and is the delivery mechanism for the conditioned air as
well as the power, communications and entertainment offerings.
Specific offerings:
Basic Service Package: For a single bundled hourly rate, the customer receives
heat/air conditioning, the ability to watch a limited set of TV channels if they desire, the
ability to plug into a powered electrical outlet, and the ability to access the Internet
through a wired connection.
Wireless Internet Access: For a separate charge, customers may gain access to the
Internet via our wireless network connection.
Broadband Internet Access: For a separate charge, customers may use an Ethernet
connection to access the Internet through our Service Delivery Module.
Expanded TV Access: For a separate charge, customers may gain access through
our Service Delivery Module to additional TV channels not provided in the Basic Service
Package.
Movies on Demand: For a separate charge, customers can purchase the ability to
access and view movies through our Service Delivery Module.
Electricity: For a separate charge, customers can purchase just the ability to access a
powered electrical outlet through our Service Delivery Module
Window Adapter: For a separate charge, customers may purchase a plastic window
adapter that enables the Service Delivery Module to attach to the customer’s truck. The
customer typically retains the adapter for future use of our services. The customer
adapter has no other use or value.

DEPARTMENT’S RESPONSE:
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. 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 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 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 the
Retailers’ Occupation Tax liability incurred on those sales.
Illinois Retailers' Occupation and Use Taxes do not apply to sales of service that do not involve
the transfer of tangible personal property to customers. However, if tangible personal property is
transferred incident to sales of service, this will result in either Service Occupation Tax liability or Use
Tax liability for the servicemen depending upon his activities. For your general information see of 86
Ill. Adm. Code 140.101 through 140.109 regarding sales of service and Service Occupation Tax.
Television programming or other services in which no tangible personal property is transferred
are not subject to Illinois Retailers' Occupation Tax, Use Tax, Service Occupation Tax, and Service
Use Tax liability.

The Illinois Telecommunications Excise Tax Act imposes a tax on the act or privilege of
originating or receiving intrastate or interstate telecommunications by persons in Illinois at the rate of
7% of the gross charges for such telecommunications purchased at retail from retailers by such
persons. 35 ILCS 630/3 and 4. The Simplified Municipal Telecommunications Tax Act allows
municipalities to impose a tax on the act or privilege of originating in such municipality or receiving in
such municipality intrastate or interstate telecommunications by persons in Illinois. 35 ILCS 636/5-10
and 5-15. Persons who provide satellite television services, including basic network channels,
premium channels, pay per view movies, sporting events, etc., are generally not subject to the
Telecommunications Excise Tax liability.
The Internet Tax Freedom Act imposes a federal moratorium on state or municipal taxes on
Internet access until November 1, 2014. 47 USCA § 151 note; § 1101. “Internet access” includes “a
service that enables users to connect to the Internet to access content, information, or other services
offered over the Internet”. Telecommunications that are purchased, used or sold by a provider to
enable users to connect to the Internet or to otherwise enable users to access content, information or
other services offered over the Internet are subject to the federal moratorium.
The Electricity Excise Tax Law imposes a tax upon the privilege of using in this State electricity
purchased for use or consumption and not for resale. 35 ILCS 640/2-4. Under Section 2-7 of the
Law, the tax is required to be collected from users by delivering suppliers maintaining a place of
business in Illinois. The provisions of Section 2-8 of the Law state that the tax "required to be
collected by any delivering supplier maintaining a place of business in this State … shall constitute a
debt owed by that person to this State …" In other words, delivering suppliers that are required to
collect the tax and fail to do so become liable for that tax.
If the single charge for the Basic Service Package includes the ability to obtain electricity, the
Company would generally be considered the user of the electricity and liable to its supplier for the tax
on the electricity delivered to the Company and provided as part of the package. However, if the
Company were to charge its customers for electricity separately, those customers would be
considered the users of the electricity, and the Company would be responsible for charging and
remitting the Electricity Excise Tax as a delivering supplier. See 86 Ill. Adm. Code 511.200.
The Company would be liable for Retailers’ Occupation Tax on the retail sale of any tangible
personal property, including the window adapters, and its customers would be liable for Use Tax on
such purchases.
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,

Richard S. Wolters
Associate Counsel
RSW:msk