Is electronic access to Illinois county title records, delivered entirely online to an out-of-state customer, subject to Illinois sales tax?

Plain-English summary

An Illinois technology company planned to give a California title company electronic access to title records owned by an Illinois county. The Department did not make an unconditional transaction or filing determination from the limited facts.

Information or data transferred or downloaded electronically was not tangible personal property. Thus, if the company made no transfers of tangible property in Illinois, the GIL said it might not need to register or file Department returns.

Software distinction

Canned software remained taxable tangible personal property regardless of delivery method, including electronic transmission.

Custom software prepared to a customer's special order might not be a taxable retail sale. Canned-software updates were taxable; qualifying custom-software updates might not be.

The response did not say that county ownership of the records itself created an exemption, nor did it expressly classify the access platform as information rather than software.

What this means for you

Electronic data providers

Document what the customer receives. Pure electronic information access and a transfer of canned-software functionality do not receive the same treatment.

Remote customers

The customer's out-of-state location was part of the facts, but the GIL's stated rule focused on whether tangible personal property was transferred in Illinois.

Common questions

Q: Is electronically transferred information tangible personal property?
A: No under the rule stated.

Q: Is canned software nontaxable merely because it is delivered online?
A: No.

Q: Did the GIL definitively excuse the company from filing?
A: No. It said the company might not need to register or file if it transferred no tangible property in Illinois.

Citations and references

• 86 Ill. Adm. Code 130.2105(a)(3) — electronically transferred information or data.
• 86 Ill. Adm. Code 130.1935 — canned software, custom software, and updates.

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-11-0059.pdf

Original ruling text

ST 11-0059-GIL 07/29/2011 MISCELLANEOUS
Information or data that is electronically downloaded is not considered the transfer of tangible
personal property personal property in this State. See 86 Ill. Adm. Code 120.2105. (This is a
GIL.)

July 29, 2011

Dear Xxxxx:
This letter is in response to your letter dated February 14, 2011, in which you requested
information. We apologize for the delay in responding to your letter. 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 would like to request written verification of a telephone conversation a member of my
staff had with the Department of Revenue today concerning the following sales tax
question.
An Illinois based technology company is entering into a contract with a California based
title company to give the California company electronic access to title records owned by
COUNTY, Illinois. Since the records are owned by an Illinois municipality, and what is
being sold is electronic access, and the data will be delivered electronically, is there
Illinois sales tax due on the sale of the access rights?
The DOR person stated that the sale would not be subject to Illinois sales tax. They
said my client should include the sale in total sales, and then exempt it as service sales.
Could you please corroborate or correct the above in writing? Thank you in advance for
your help in this matter.

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 the 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 their Retailers' Occupation Tax liability incurred on those sales. If the purchases occur
outside Illinois, purchasers must self assess their Use Tax liability and remit it directly to the
Department.
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). However,
canned computer software is considered taxable tangible personal property regardless of the form in
which it is transferred or transmitted, including tape, disc, card, electronic means or other media. See
86 Ill. Adm. Code 130. 1935. If the computer software consists of custom computer programs, then
the sales of such software may not be taxable retail sales. See Section 130.1935(c). Custom
computer programs or software must be prepared to the special order of the customer. Charges for
updates of canned software are fully taxable pursuant to Section 130.1935. If the updates qualify as
custom software under Section 130.1935(c), they may not be taxable.
Based on the very limited information provided, if your client makes no transfers of any
tangible personal property in this State as described above, it may not need to register or file returns
with the Department.
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,

Terry D. Charlton
Senior Counsel, Sales & Excise Taxes
TDC:msk