Did Illinois decide whether a satellite-TV installation company owed sales or use tax on equipment reimbursed by the service provider?

Plain-English summary

The Department did not decide whether the satellite-TV installation company owed Illinois sales or use tax. The company proposed buying receiving equipment from an out-of-state vendor, installing it for customers who subscribed to a satellite provider, and receiving reimbursement from that provider.

The GIL says the exact arrangement between the installer and provider was unclear. Because of that uncertainty, the Department could not give a specific answer about tax liability or how the company should register. It instead identified Department letters ST 03-0035-GIL and ST 10-0006-PLR as discussing apparently similar or related issues.

What this means for you

Do not treat reimbursement or direct shipment alone as deciding Illinois tax. Document who buys and owns the equipment, who sells or transfers it to the customer, how the provider reimburses the installer, who invoices each charge, and what installation and registration duties the contracts create before applying current law.

Common questions

Q: Did the Department say the equipment purchase was exempt?
A: No. It gave no specific tax determination.

Q: Did the GIL explain which Illinois registration the installer needed?
A: No. The Department said the unclear arrangement prevented a specific response.

Q: Did the GIL incorporate the conclusions of the two earlier letters?
A: No. It only directed the requester to them as discussing similar or related issues.

Subject

Sale At Retail

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0012.pdf

Original ruling text

ST 11-0012-GIL 03/28/2011 SALE AT RETAIL
This letter provides references to other Department-issued letters that discuss the taxation of
satellite TV equipment provided to customers who sign up for satellite TV service. See 86 Ill.
Adm. Code 130.401. (This is a GIL).

March 28, 2011

Dear Xxxxx:
This letter is in response to your letter dated January 24, 2011, 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:
At the request of our client, we respectfully request a taxability determination with
regard to various transactions associated with the following facts.
The installation company (our client) is about to become an authorized dealer for a
Satellite Service Provider and is concern [sic] about its tax responsibilities in the State.
The installation company will solicit customers to sign up for satellite service involving
equipment installation. Upon acceptance and activation of the customer, the agreement
states that the installation company installing the customer’s satellite will receive, from
the Satellite Service Provider, reimbursement for the full cost of the acquired equipment.
The Satellite Service Provider will bill the customer directly for the satellite television
services. The installation company will buy the satellite receiving equipment from an
out of state, [sic] unrelated third party vendor and will make no use of the equipment.
The Satellite Service Provider refuses to charge the installation company a sales tax,
stating that it’s against their policy. As a result, my client purchases equipment without
sales tax.
Is the installation company (our client) responsible for a sales or use tax? If yes, please
specify. In order to do business with the Satellite Service Provider, the installation
company is required to provide an IBT number for the Satellite Service Provider.
Please explain how the registration should be filed with your office.

I would like to thank you in advance for your prompt attention to this matter. If you have
any questions, please contact me.

DEPARTMENT’S RESPONSE:
We are unable to determine the exact nature of the arrangement your client has with the
satellite service provider. Therefore, we are unable to provide any specific information in response to
your inquiry. However, we suggest you review several previous letters issued by the Department that
are located on the Department’s website www.tax.illinois.gov: ST 03-0035 (GIL) and ST 10-0006
(PLR). These letters discuss issues that appear to be similar or related to the issues raised in your
letter.
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