Must an Illinois business making only wholesale sales register and file sales-tax returns, and how can it document purchases for resale?

Plain-English summary

The requester bought specialty paperboard and resold it to licensed manufacturers that incorporated it into pull-tab tickets. A business making exclusively wholesale sales did not have to register, file Retailers' Occupation Tax returns, or remit that tax.

Optional resale number

The wholesale business could still obtain an Illinois resale number so it could provide its suppliers with valid Certificates of Resale.

Obtaining that number did not expose the business to reporting or remittance duties as long as it made no taxable retail sales and remained exclusively wholesale.

The response did not say that certificates held from the wholesaler's customers automatically replaced documentation between the wholesaler and its own paper supplier.

Retail-sale distinction

When a person bought property intending to resell it to a customer for use or consumption, the initial purchase was for resale but the later sale to the user was a taxable retail sale.

What this means for you

Wholesale-only businesses

You may obtain a resale number for supplier documentation without becoming a monthly filer solely because of that number, provided every sale remains wholesale.

Suppliers

Document the exemption for the sale to your direct purchaser under the Certificate of Resale rule.

Common questions

Q: Must a 100% wholesale seller register and file?
A: No under this GIL.

Q: Can it obtain a resale number anyway?
A: Yes.

Q: Does the resale number itself create tax-return duties?
A: No while the business makes no taxable retail sales.

Citations and references

• 86 Ill. Adm. Code 130.201 and 130.210 — retail sales of tangible personal property.
• 86 Ill. Adm. Code 130.1405 — valid Certificates of Resale.

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-11-0062.pdf

Original ruling text

ST 11-0062-GIL 08/12/2011 SALE FOR RESALE
This letter discusses sales for resale. See 86 Ill. Adm. Code 130.1405. (This is a GIL.)

August 12, 2011

Dear Xxxxx:
This letter is in response to your letter dated May 26, 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:
I have a small business and I have a paper mill in the OUT-OF-STATE CITY area
produce a specialty paperboard product exclusively for my company by a written
agreement. The product’s only use is in the production of pull-tab tickets used primarily
for charitable fund raising [sic]. This product is sold and invoiced to me by the mill and
is shipped by the mill to my customer’s manufacturing plants in other states and
Canada. I invoice my customers. This product is sold in very large size sheets packed
on skids or large rolls of a high opaque paperboard and has no retail application in its
raw form. This product is only sold to government licensed pull-tab manufacturers.
Practically, its only use is as a component of a pull-tab ticket.
In talking with your Tax Assistance person on the phone today, she concurred with me,
that since everything that I sell in the State of Illinois is a component of a product that is
remanufactured into a ticket by the manufacturer; I am not required to have a Reseller’s
Permit. I would like get a written letter from you stating that no Sales Tax Exemption
Form is required, which is the reason for this letter. I have absolutely no retail sales
whatsoever—everything I sell is specifically wholesale and is remanufactured into
another product.
The mill is demanding a Sales Tax-Exemption Form from my customers to which they
ship my product. Although I don’t believe they are required, I have copies of the Sales
Tax Exemption Forms in my files for the customers to whom they ship in my behalf, but
since the product is sold to my company and invoiced by my company, I feel that is
sufficient and the mill is not entitled to said certificate.

Since the mill is threatening to charge sales tax on the aforesaid business, I would ask
that you respond to this as expeditiously as possible. Thank you for your attention to
this matter.

DEPARTMENT’S RESPONSE:
In Illinois, when a person purchases items of tangible personal property with the intention of
reselling them to purchasers for use or consumption, that person engages in making retail sales of
tangible personal property. This makes the initial purchase a purchase for resale, and the subsequent
sale is a taxable sale at retail subject to Illinois Retailers' Occupation and Use Tax liabilities. See the
Department’s regulations which can be found on its website, specifically 86 Ill. Adm. Code Sections
130.201 and 130.210.
However, persons who exclusively make wholesale sales are not required to register and remit
Retailers' Occupation Tax. The tax applies only to sales of tangible personal property for use and
consumption, and not for resale. Consequently, if all of your sales are for resale, you will not be
required to register, file returns and remit tax. You may, however, obtain a resale number from the
Department so that you have the ability to provide your suppliers with valid Certificates of Resale.
See 86 Ill. Adm. Code 130.1405. So long as you do not make taxable retail sales, and engage
exclusively in wholesale transactions, registration for a resale number will not expose you to reporting
and tax remittance requirements.
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