Were seed sales to farmers exempt as sales for resale, and did a seed seller have to register and file Illinois returns?

Plain-English summary

Seed sold for raising crops that the farmer would sell was a nontaxable sale for resale. Seed used to raise grass, crops, or plants for the purchaser's own use was a taxable retail sale.

A proper resale certificate was prima facie evidence when it contained the parties' names and addresses, item description, purchaser signature and date, and a valid registration or resale number or out-of-state certification. If the number was valid when accepted and the purchaser later consumed the seed, the Department generally proceeded against the purchaser.

Without an active number and certification, the sale was presumed retail, though other evidence could rebut that presumption. A seller making only resale sales was not required to register under the rule described; a seller making both wholesale and retail sales had to register, file monthly returns, and document exempt sales.

What this means for you

Ask how the crop will be used or sold, verify the resale number, and retain a complete certificate. Do not assume every sale to a farmer is for resale.

Common questions

Q: Was seed for a crop later sold by the farmer taxable?
A: No, as a sale for resale under this GIL.

Q: Was seed for grass the purchaser kept taxable?
A: Yes.

Q: Did mixed wholesale and retail activity require registration?
A: Yes under the rule described.

Subject

Sale For Resale

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-10-0107.pdf

Original ruling text

ST 10-0107-GIL 12/10/2010 SALE FOR RESALE
This letter concerns sales for resale. See 86 Ill. Adm. Code 130.1401. (This is a GIL.)

December 10, 2010

Dear Mr. Xxxxx:
This letter is in response to your letter dated October 18, 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 requesting a private letter ruling for Retailers [sic] Occupation Tax as it pertains to
INDIVIDUAL doing business as BUSINESS.
In July, 2010, I filed an REG-1 Illinois Business Registration Application, since I began
employing a salesman. Based on my response that I had Retail Sales, it triggered the
requirement of filing a quarterly Sales and Use Tax Return.
I am requesting a ruling that my business be exempt from filing a Sales and Use Tax
Return, since all of my seed sales are to farmers. Upon research of the Illinois
Department of Revenue Regulations: Title 86, Part 130, Section 130.2110 Sellers of
Seeds and Fertilizer: It is my understanding that a person who sells seeds to
purchasers who employ such seeds for raising crops for sale are selling seeds to
purchasers for the purpose of resale and are not required to remit Retailers' Occupation
Tax measured by their gross receipts from such sales.
Your consideration of this matter is greatly appreciated.

DEPARTMENT’S RESPONSE:
In general, 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.
When persons sell seeds to purchasers who use the seeds in raising crops that they will resell,
the sale of seeds is not taxable as a sale for resale. However, when persons sell seeds to
purchasers who use the seeds in raising grass, crops, or other plants that they use and not resell,
such vendors are engaged in the business of making retail sales of the seeds and are required to
remit Retailers’ Occupation Tax to the Department on their gross receipts from such sales. See 86 Ill.
Adm. Code 130.2110.
For general information regarding resale certificates, the Department’s regulation for resale
certificates, “Seller's Responsibility to Obtain Certificates of Resale and Requirements for Certificates
of Resale,” is found at 86 Ill. Adm. Code 130.1405.
A Certificate of Resale is a statement signed by the purchaser that the property purchased by
him is purchased for purposes of resale. Provided that this statement is correct, the Department will
accept Certificates of Resale as prima facie proof that sales covered thereby were made for resale.
In addition to the statement, a Certificate of Resale must contain:
1)
2)
3)
4)
5)

The seller's name and address;
the purchaser's name and address;
a description of the items being purchased for resale;
purchaser's signature, or the signature of an authorized employee or agent of the
purchaser, and date of signing;
Registration Number, Resale Number, or Certification of Resale to out-of-State
Purchaser.

The obligations of a seller with respect to accepting a Certificate of Resale were addressed in
Rock Island Tobacco and Specialty Company v. Illinois Department of Revenue, 87 Ill.App.3d 476,
409 N.E.2d 136, 42 Ill. Dec. 641 (3rd Dist. 1980). The Rock Island court held that when a retailer
obtains a proper Certificate of Resale that contains a registration or resale number that is valid on the
date it is given, the retailer’s liability is at an end. If the purchaser uses that item himself or herself
(i.e., it was not purchased for resale), the Department will proceed against the purchaser, not the
retailer, provided the above stated conditions are met. The purchaser’s registration or reseller number
can be verified at the Department’s website by clicking on the “Tax registration inquiry” box.
Failure to present an active registration number or resale number and a certification to the
seller that a sale is for resale creates a presumption that a sale is not for resale. This presumption
may be rebutted by other evidence that all of the seller’s sales are sales for resale, or that a particular
sale is a sale for resale. For example, other evidence that might be used to document a sale for
resale, when a registration number or resale number and certification to the seller are not provided,
could include an invoice from the purchaser to his customer showing that the item was actually
resold, along with a statement from the purchaser explaining why it had not obtained a resale number
and certifying that the purchase was a purchase for resale in Illinois. The risk run by companies in
accepting such a certification and the risk run by purchasers in providing such a certification is that an
Illinois auditor is more likely to go behind a certificate of resale that does not contain a signature and
require that more information be provided as evidence that the particular sale was, in fact, a sale for
resale.
If a person or entity makes sales that are exclusively (i.e., 100%) for resale, that person or
entity is not required to register under the Illinois Retailers' Occupation Tax Act when making such
sales. See Dearborn Wholesale Grocers, Inc. v. Whitler, 82 Ill.2d 471 (1980). However, if a person

or entity engages in making both wholesale and retail sales, they are required to register under the
Retailers' Occupation Tax Act and file monthly sales tax returns and document the exempt status of
their wholesale transactions. See Tri-America Oil Company v. Department of Revenue, 102 Ill.2d 234
(1984).
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