How did Illinois treat call-tracking services that electronically delivered reports and used toll-free numbers?

Plain-English summary

Illinois gave no binding determination for the call-tracking service, but explained two different tax layers. A service without any transfer of tangible personal property produced no Retailers' Occupation or Use Tax under the general rule, and electronically transferred information or data was not tangible property. Tangible reports, media, or manuals could instead trigger Service Occupation Tax or Use Tax treatment.

For telecommunications, a provider that obtained toll-free numbers, paid the carrier, and used the numbers in its own service—without reselling them—was generally the end user. It owed Telecommunications Excise Tax to the carrier rather than making a retail telecom sale to its customer.

What this means for you

Inventory every customer deliverable and document whether toll-free capacity is resold or merely consumed as an input. Do not treat the GIL as approval of a specific bundled call-tracking charge.

Common questions

Q: Is an electronic report tangible personal property?
A: The GIL said electronically transferred information or data was not tangible property.

Q: Who owed telecom tax on toll-free numbers used to provide tracking?
A: A provider that used rather than resold the numbers was generally the end user and paid the tax to its carrier.

Citations and references

• 86 Ill. Adm. Code 130.101, 150.101, and 130.2105(a)(3)
• 86 Ill. Adm. Code 140.101 through 140.109
• 35 ILCS 630/3 and 630/4; 86 Ill. Adm. Code 495.110 and 495.140
• 2 Ill. Adm. Code 1200.110(a)(4) and 1200.120

Subject

Service Occupation Tax

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-10-0069.pdf

Original ruling text

ST 10-0069-GIL 08/10/2010 SERVICE OCCUPATION TAX
If no tangible personal property is transferred to the customer, then no Illinois Retailers’
Occupation Tax or Service Occupation Tax would apply. See 86 Ill. Adm. Code Parts 130 and

140. (This is a GIL.)

August 10, 2010

Dear Xxxxx:
This letter is in response to your letter dated January 13, 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:
On behalf of our client, we are requesting a written private letter ruling from the State of
Illinois with respect to the treatment of certain services for the purposes of applying
Illinois’ retailer’s [sic] occupation tax (‘ROT’)/service occupation tax (‘SOT’) and/or
telecommunications excise tax statutes and regulations. Included is a power of attorney
form authorizing us to discuss this matter on behalf of the CLIENT.
Facts
1.

CLIENT provides an advertising service to car dealerships (hereafter ‘Retailers’),
whereby the company collects and analyzes certain information regarding
prospective customers, measured ad performance and evaluates employee call
handling skills (herein referred to as ‘Call Tracking’).

2.

CLIENT has Retailers located within the state of Illinois that purchase the various
Call Tracking services.

3.

Even though CLIENT is the party legally providing the Call Tracking service, it
has engaged a third-party call measurement, monitoring and tracking service
provider (herein referred to as ‘Company B’) as a sub-contractor to provide the
Call Tracking services on its behalf.

4.

Company B is headquartered in STATE2 but has a call center located in STATE.

5.

To facilitate the call tracking and measurement services, Company B arranges
for one or more customer vanity numbers (1-8YY numbers which can be
customized (e.g., ‘800-RET-AILR’) to be used by the customers of CLIENT (i.e.,
used by the Retailers). The number of toll-free numbers that are used by a
Retailer is determined by the Retailer when the Retailer contracts with CLIENT
for a particular Call Tracking package (i.e., various packages include the use of 1
to 10 toll-free numbers). If the Retailer wants any of the numbers to have custom
digits (i.e., custom vanity numbers), the Retailer has the right to request the
desired number contingent on that number being available. The toll-free
numbers are used in advertisements on CLIENT’s website, or on the Retailer’s
website and under certain premium plans. The toll-free numbers can also be
used in advertising medium of the Retailer’s choice (e.g., placed in the
newspaper, radio, TV ads, etc.).

6.

All vanity numbers ring directly to Company B’s call center located in STATE.
They do NOT ring directly to the Retailer’s location, nor does the Retailer have
any other use of the toll-free number (e.g., for outgoing calls, etc.).

7.

Company B is the ‘Customer of Record’ for any numbers used, and maintains
exclusive rights to any such number(s) beyond the term of the agreement with
CLIENT and/or the Retailer.

8.

The telecommunications providers bill Company B for the toll-free numbers
consumed in the delivery of its call monitoring, measurement and tracking
services.

9.

Per the agreement with Company B, all applicable federal, state and local sales
and use taxes are included in the telecommunication service provider’s invoice to
Company B and paid by Company B on the services it consumes. No federal,
state or local sales and use taxes are charged to CLIENT by Company B.

10.

When a potential customer or Retailer dials the toll-free number, the call is
connected to Company B’s servers located in STATE. Company B’s servers pick
up the call and play a ‘Welcome’ message and the server makes a second call
dialed to the ‘point to number’ at the Retailer. The second call is transparent to
Retailer’s customer.

11.

The ‘point to number’ is the Retailers [sic] own separate pre-existing or dedicated
local telephone number, where the toll-free number, necessary for the call
tracking services, is forwarded to and rings at the Retailer’s location.

12.

The Retailer is the ‘Customer of Record’ for the local telephone number(s) used
as part of the call tracking service.

13.

The local telecommunications provider bills the Retailer for this local service in
Illinois if the Retailer is located within the state of Illinois, which should include all
applicable federal, state and local sales and use taxes.

14.

A salesperson at Retailer answers the phone and a recording is played indicating
who is on the line, where the customer obtained the toll-free number and asking
if the salesperson wishes to be connected to the customer. If prompted, the
salesperson is then connected to the customer. Company B’s servers are still
participating in and recording the call. Company B’s servers also provide the
information obtained from/about the customer to Retailer via the internet. The
salesperson at the Retailer has access to all of this information during the call.

15.

Once the Retailer is done talking to the customer, the customer has the option to
take a survey. If the customer chooses, Company B’s servers take over asking
the customer to take a survey. Once the customer hangs up, the call comes to
an end.

16.

The Retailer has access to a report via the internet that contains the detailed
information for each of these calls – including a link to a recording of the call.
Under certain plans, the Retailer can also create reports to determine which
advertisements were most effective based on the number of calls using the tollfree number assigned to that advertisement. CLIENT also receives a report
summarizing the Retailer’s phone referral reports and usage data for each tollfree number.

17.

CLIENT charges a flat subscriber fee for the call tracking service to the Retailer.
The flat fee ranges from $99 per month for the basic service which includes the
use of and tracking on one toll-free number to $499 per month for the premium
service which includes the use of and tracking of ten toll-free numbers.

18.

The agreements for the various Call Tracking services provided by CLIENT to its
customers are attached as Attachments 1, 2 and 3.

19.

A copy of the Dealer Brochure referenced in the agreements for the Call Tracking
services is also attached.

20.

To the best of the taxpayer’s knowledge, the Department has not previously ruled
on this issue for this taxpayer or a similar issue for any other taxpayer in the form
of a named letter ruling. The Department did issue a GIL dated March 24, 2009
to FIRM; however, the GIL was incomplete because of missing information
needed to make a determination.

21.

Taxpayer is not involved with an audit or litigation with the Department.

Issue
Are the ‘call tracking’ services sold by CLIENT to Retailers located within the state of
Illinois subject to Illinois ROT, SOT and/or the telecommunications excise tax?
Conclusion
The sale of call tracking services from CLIENT to Retailer is a sale of nontaxable
services with no transfer of tangible personal property. It is unclear if CLIENT is selling
telecommunications services to Retailers which would be subject to the
telecommunications excise tax. CLIENT includes in its Call Tracking service fee the
use of 1-800 numbers to be used by the Retailers; however, the Call Tracking service

seems to be closer to a data processing or informational service which is excluded from
the definition of gross charges subject to telecommunications tax.
Law
The relevant authorities are quoted below.
Sales and Use Tax
Illinois ROT is imposed on persons engaged in the business of selling tangible personal
property (‘TPP’) at retail. Ill. Rev. Stat. ch. 35 para 120/2. The SOT is imposed on
persons engaged in the business of making sales of services. The SOT is imposed on
all TPP transferred as an incident of the sale of service; the service itself is not taxable.
Ill. Rev. Stat. ch. 35 paras 115/1, 115/3.
Information Services
Information or data that is downloaded electronically, such as downloaded books,
musical recordings, newspapers or magazines, does not constitute the transfer of TPP;
these types of transactions represent the transfer of intangibles and are thus not subject
to ROT. Ill. Reg. § 130.2105. If such information was transferred in a tangible format,
the transfer would be taxable under the ROT or SOT, depending on whether the item is
customized. General Information Letter ST 02-0105-GIL, Illinois Department of
Revenue, May 3, 2002.
In Private Letter Ruling ST 04-0013, Oct. 27, 2004, the Department ruled that a
company that sold web-based information services to clients was nontaxable. The
taxpayer was in the business of providing electronic financial information through a
database accessed through the Internet. No software or other TPP was transferred to
its customers. The Department found that because TPP was not transferred the
taxpayer would not be subject to the ROT or SOT on the downloads or database
information service.
Telecommunication Services
The Telecommunications Excise Tax is imposed on the act or privilege of originating or
receiving intrastate or interstate telecommunications in Illinois at a rate of 7% of the
gross charges for such telecommunications services. Ill. Reg. § 495.140(a). ‘Gross
charges’ means the amount paid for the act or privilege of originating or receiving
telecommunications in Illinois and for all services and equipment provided in connection
with providing telecommunications by a retailer. Ill. Reg. § 495.100(a). The term does
not include charges for the storage of data or information for subsequent retrieval or
charges for the processing of data or information intended to change its form or content.
In addition, charges for automated data storage, retrieval and processing services or for
the use of computer time or other equipment are not included in gross charges.
Automated information retrieval or data processing charges are not included in gross
charges as well. Ill. Reg. § 495.100(c).
Analysis
Based on the foregoing, we respectfully request a determination that the call tracking
services are not subject to Illinois ROT, SOT or the telecommunications excise tax.

CLIENT provides call tracking services to Retailers. This service allows Retailers to
monitor, record, and view real time information about prospective customers, measure
the results of the advertising initiative, and collect prospective customer data relative to
the referrals. The information provided in this service, like data processing and
information services, is individual to each Retailer; customers are referred to one
Retailer based on certain criteria (e.g., location of customer, etc.).
The information gathered from that referral is then recorded and reported to that specific
Retailer and is not provided to any other Retailer; the information gathered cannot be
shared or sold to any other party or be made generally available. The Retailer pays for
the data and it is exclusive to the Retailer; CLIENT cannot resell the information to any
other Retailer or incorporate that information into another report furnished to a different
Retailer. The information provided is in the intangible form and TPP is not transferred in
the transaction. It presents similar facts to General Information Letter 02-0105 whereby
the Department held that the information services and electronic downloads of
information were not subject to the Illinois ROT or SOT.
Furthermore, Retailer is not only purchasing the use of 1-800 numbers, it is purchasing
the tracking and reporting capability of that specific number. The primary purpose for
Retailer to procure the call tracking services from CLIENT is to obtain information
regarding prospective customers, not the use of the line. The fact that CLIENT charges
Retailer a subscription fee rather than a telecommunications or line charge further
supports the position the information or other services and not telecommunications
services are being sold. The fee for the use of the 1-800 numbers is included in the fee
for the tracking and reporting service. Illinois specifically excludes data processing and
information services from the definition of ‘gross charges’ for purposes of the
telecommunications excise tax. The call tracking service should be deemed to be either
an information service or data processing service as CLIENT is manipulating
information furnished by the caller to the Retailer through a series of operations
involving an interaction of processes, methods, personnel and computers, which is then
transferred electronically to the Retailer.
As such, CLIENT is providing nontaxable information services or some other nontaxable
data processing services to the Retailers. Information services are not subject to tax
nor are the electronic downloads, as they are deemed to be intangible property.
Further, CLIENT is not providing a telecommunications service as they are charging a
subscription fee and the true object of the transaction is the call tracking service and the
electronic download, which are specifically not subject to the Illinois ROT or SOT.
If you have any questions regarding this request or require additional information,
please contact me.

DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization” provides that
“[w]hether to issue a private letter ruling in response to a letter ruling request is within the discretion of
the Department. The Department will respond to all requests for private letter rulings either by
issuance of a ruling or by a letter explaining that the request for ruling will not be honored.” 2 Ill. Adm.
Code 1200.110(a)(4). Based on the limited information you provided in your letter, the Department is
unable to give you a binding determination regarding the taxability of the transactions about which
you inquired. As a result, the Department has decided not to issue a PLR and issue this GIL instead.

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.
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 86 Ill.
Adm. Code 140.101 through 140.109 regarding sales of service and Service Occupation Tax.
Services that involve the transfer of tangible personal property (such as, for example, written reports,
other tangible media and training manuals) incident to a sale of service may be subject to either
Service Occupation Tax liability or Use Tax liability. Please note, however, information or data that is
electronically transferred or downloaded is not considered the transfer of tangible personal property in
this State. See 86 Ill. Adm. Code 130.2105(a)(3). Based on the above, therefore, if no tangible
personal property is transferred, then there would be no retailers’ occupation tax or use tax liability.
The Telecommunications Excise Tax is imposed upon the act or privilege of originating or
receiving intrastate or interstate telecommunications in Illinois at the rate of 7% of the gross charges
for such telecommunications purchased at retail from retailers. See 35 ILCS Sections 630/3 and
630/4. Telecommunications retailers collect tax from end users and remit it to the Department. See 86
Ill. Adm. Code 495.140. Retailers of telecommunications are persons who engage in the business of
making sales of telecommunications at retail. 86 Ill. Adm. Code 495.110. Thus, if a provider of
services uses telecommunications, such as 1-800 numbers, and does not resell those 1-800 numbers
to its customers, then it would not be making sales of telecommunications. Rather, it would be the
end user of those telecommunications and would owe telecommunications excise tax to the supplier
of those telecommunications. For example, Company A obtains 1-800 numbers from the telephone
company and remits telecommunications excise tax on those purchases. Company A receives calls
on those 1-800 numbers and then connects the 1-800 calls to Company B via Company B’s separate
telephone number. In that scenario, Company A is generally considered the end user of the 1-800
telecommunications service and, therefore, would owe telecommunications excise tax to the
telephone company from whom it received the telecommunications services (i.e., the 1-800
numbers).
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