When may an Illinois nonprofit with an E number hold a public fundraiser sale without Retailers' Occupation Tax?

Plain-English summary

Federal nonprofit status alone did not exempt an organization's retail sales. The organization first needed an Illinois exemption identification number, or E number, based on being exclusively religious, educational, or charitable.

Even an E-number holder generally owed Retailers' Occupation Tax on its sales. Illinois identified only three limited exceptions: sales to members, noncompetitive sales, and occasional dinners or similar activities. Sales to the public could not use the member exception, and sales of items also available from businesses could not use the noncompetitive exception. "Occasional" meant no more than twice per calendar year.

The Department did not decide whether the annual fundraiser—or separate events by six chapters—qualified.

What this means for you

Confirm the organization has an Illinois E number, then test each event separately for purchaser group, marketplace competition, and annual frequency.

Common questions

Q: Is a 501(c)(3) automatically exempt from Illinois sales tax?
A: No. The GIL required an Illinois E number.

Q: How often is "occasional"?
A: No more than twice in a calendar year under the cited rule.

Citations and references

• 86 Ill. Adm. Code 130.101, 130.2005, and 130.2007
• 2 Ill. Adm. Code 1200.120 (GILs)

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-10-0070.pdf

Original ruling text

ST 10-0070-GIL 08/10/2010 EXEMPT ORGANIZATIONS
Exclusively religious, educational, or charitable organizations that have been given E numbers
by the Department are allowed to engage in a very limited amount of retail selling without
incurring Retailers' Occupation Tax liability. See 86 Ill. Adm. Code 130.2005. (This is a GIL.)

August 10, 2010

Dear Xxxxx:
This letter is in response to your letter dated June 14, 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:
I am writing on behalf of the ORGANIZATION in request of a ruling as to whether the
ORGANIZATION is obligated to collect and remit retail [sic] occupation tax on its annual
sales.
Facts:
ABC is an Illinois non-profit organization dedicated to the preservation, conservation,
and study of ITEMS. ABC presently has approximately 500 members organized into 6
chapters around the state. Each spring, the Central Chapter of the ABC holds a
sale/fundraiser at which it sells ITEMS to the general public. A majority of ITEMS sold
are donated by the Chapter members; the balance is purchased from a local STORE.
The prices of the ITEMS sold are believed to generally be below normal retail value.
Currently, the Central Chapter collects the tax from buyers and transfers the tax
collected to the State ABC which files the sales tax return and remits the taxes to the
Illinois Department of Revenue. The net after-tax proceeds of the sale/fundraiser are
retained by the Central Chapter and used to make grants to local projects that use,
conserve or study ITEMS. In memory, the Central Chapter is the only chapter to hold a
sale or any similar fundraising event.
Questions:

1.

Does the annual sale qualify under the occasional fundraiser exception to the
general requirement that sales tax be collected and remitted?

2.

If the annual sale does qualify for exemption, would the answer be the same if
each Chapter held its own annual sale i.e., if there were sale/fundraisers held at
six locations around the state- one by each chapter?

Should you have additional questions, you may contact me at the address listed below.
We look forward to your response.

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.
The Illinois Retailers’ Occupation Tax is imposed upon the total gross receipts received by
retailers who make sales of tangible personal property to Illinois end users. Unless the sales are
specifically exempted, such retailers must collect and remit the sales tax. See 86 Ill. Adm. Code
130.101.
Organizations that are recognized as non-profit under Internal Revenue Code Section
501(c)(3), are not necessarily exempt organizations pursuant to Illinois tax law. Such organizations
must obtain an exemption identification number (an “E number”) to qualify. See 86 Ill. Adm. Code
130.2007.
Organizations that make application to the Department of Revenue and are determined to be
exclusively religious, educational, or charitable, receive an E number. The E number evidences that
the Department recognizes the organizations as exempt from incurring Use Tax when purchasing
tangible personal property in furtherance of their organizational purposes. If an organization does not
have an E number, then its purchases are subject to tax. Please be aware that currently only sales to
organizations holding the E number are exempt, not sales to individual members of the organization.
While organizations that have received an E number are, as a general matter, subject to
Retailers’ Occupation Tax upon their own sales of tangible personal property, there are three limited
exceptions where such organizations are authorized to engage in a restricted amount of retail selling
activity without incurring Retailers' Occupation Tax liability. The limited exceptions available to not-forprofit organizations described in 86 Ill. Adm. Code 130.2005 include: (1) Sales to Members (see 86 Ill.
Adm. Code 130.2005(a)(2)); (2) Noncompetitive Sales (see 86 Ill. Adm. Code 130.2005(a)(3)); and
(3) Occasional Dinners and Similar Activities (see 86 Ill. Adm. Code 130.2005(a)(4)).
Thus, if an organization holding an E number makes sales to both members and nonmembers,
then it would not qualify for that part of the exemption concerning sales to members. Further, if any of
the materials the E-number holder sells are available through business establishments, then its sales
would be in competition with business establishments and, thus, it would not qualify for that part of
the exemption concerning noncompetitive sales and, as such, its sales would be taxable. Lastly,
turning to the third part of the exemption, Occasional Dinners and Similar Activities, the Department’s
regulation provides, in part, that E-number holders may “occasionally” conduct certain activities they
may not be subject to tax whether or not such activities are open to the public. Note, however, the
regulation defines “occasional” to mean not more than twice in any calendar year. 86 Ill. Adm. Code
130.2005(a)(4).

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