Are Illinois's state Gas Revenue and Gas Use Taxes alternatives to a municipality's natural-gas tax, or can the local tax apply in addition?

Plain-English summary

Illinois state gas taxes and a municipality's gas tax were separate. The Department said the local tax was in addition to state tax, not an alternative that displaced it.

State Gas Revenue Tax

The Gas Revenue Tax applied statewide to persons distributing, supplying, furnishing, or selling gas for use or consumption and not for resale. The rate was the lower of:

• 2.4 cents per therm, or
• 5% of gross receipts from each customer for that customer's billing period.

The Department administered this tax, and receipts went to the State General Revenue Fund.

State Gas Use Tax

The Gas Use Tax applied statewide to the use of gas purchased out of state. Its rate was the lower of:

• 2.4 cents per therm, or
• 5% of the purchase price for the billing period.

Municipal gas taxes

A gas occupation tax imposed under Section 8-11-2 of the Illinois Municipal Code was administered by the municipality that elected to impose it. The Department said it had no authority or jurisdiction to provide guidance on those municipally administered taxes.

The GIL nevertheless answers the requester's central confusion: the local tax was in addition to tax imposed by the State.

What this means for you

Natural-gas suppliers and utilities

Do not treat a local gas tax as automatically replacing the state Gas Revenue or Gas Use Tax. Analyze state liability separately from the municipality's ordinance.

Businesses asking about a city ordinance

This GIL does not interpret the specific municipal rate or collection method. The Department directed that issue outside its authority because the municipality administers the tax.

Common questions

Q: What was the state Gas Revenue Tax rate described?
A: The lower of 2.4 cents per therm or 5% of each customer's gross receipts for the billing period.

Q: What was the state Gas Use Tax rate?
A: The lower of 2.4 cents per therm or 5% of the billing-period purchase price.

Q: Did a municipal gas tax replace the state tax?
A: No. The Department said the local tax was in addition to state tax.

Q: Would the Department interpret the city's gas-tax ordinance?
A: No. It said municipally imposed taxes under Section 8-11-2 were administered by municipalities and outside its authority.

Citations and references

• 35 ILCS 615/2 and 86 Ill. Adm. Code 470.110 — Gas Revenue Tax.
• 35 ILCS 173/5-10 and 86 Ill. Adm. Code 471.105 — Gas Use Tax.
• 65 ILCS 5/8-11-2 — municipal gas occupation tax authority, locally administered.

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-11-0102.pdf

Original ruling text

ST 11-0102-GIL 12/19/2011 GAS REVENUE TAX
The Gas Revenue Tax is imposed upon persons engaged in this State in the business of
distributing, supplying, furnishing or selling gas to persons for use or consumption and not for
resale. See 86 Ill. Adm. Code 470110. (This is a GIL.)

December 19, 2011

Dear Xxxxx:
This letter is in response to your letter dated December 7, 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:
ABC, a tax research compliance software company, is in the process of researching
taxes and fees imposed on utility services, specifically gas and electric. Illinois is a
deregulated state in which consumers may purchase their gas and electricity from
alternative suppliers.
Regarding gas the Statute 65 ILCS 5/8-11-2 on Municipal Tax on Utilities states: The
corporate authorities of any municipality may tax any or all of the following occupations
or privileges: Persons engaged in the business of distributing, supplying, furnishing or
selling gas for use or consumption within the corporate limits of a municipality of
500,000 or fewer population, and not for resale, at a rate not to exceed 5% of the gross
receipts there from [sic]. Persons engaged in the business of distributing, supplying,
furnishing, or selling gas for use or consumption within the corporate limits of a
municipality of over 500,000 population, and not for resale, at a rate not to exceed 8%
of the gross receipts there from [sic]. If imposed, this tax shall be paid in monthly
payments. ‘Person’ as used in this Section means any natural individual, firm, trust,
estate, partnership, association, joint stock company, joint adventure, corporation,
limited liability company, municipal corporation, the State or any of its political
subdivisions, any State university created by statute, or a receiver, trustee, guardian or
other representative appointed by order of any court.

Per 86 Ill. Adm. Code 470.110: There is imposed upon persons engaged in the
business of distributing, supplying, furnishing or selling gas to persons for use or
consumption and not for resale, a tax at the rate of 5% of the gross receipts from any
such business, 2.4 cents per therm of all gas which is so distributed, supplied, furnished
or sold or transported to or for each customer in the course of such business, or 5% of
the gross receipts received from each customer from such business, whichever is the
lower rate as applied to each customer for that customer’s billing period. This tax is an
occupation tax. It is imposed upon taxpayers, as defined in the Act, and is not imposed
upon persons for whom services within the Act are rendered by such taxpayers, nor is it
imposed upon the act of rendering such services. The amount of tax payable by a
taxpayer is to be measured by, or to [sic] computed upon a basis of, the gross receipts
of the taxpayer from the business of distributing, supplying, furnishing or selling gas for
use or consumption.
Per 86 Ill. Adm. Code 471.105: A purchase of out-of-State gas occurs when a
purchaser enters into a contract outside of this State with a supplier to purchase gas at
a wellhead located in Oklahoma. The purchaser then contracts with an Illinois utility for
the delivery of that gas to the purchaser’s place of business in Illinois. The sale of that
gas occurs outside of this State and the seller is not liable for Gas Revenue Tax on the
sale of that gas. Unless otherwise exempt under this Part, the purchaser incurs Gas
Use Tax liability at the rate or rates set forth in Section 471.110 of this Part on the
purchase of the out-of-State gas. 86 Ill. Adm. Code 471.110 states: Alternate tax
rate. Purchasers of out-of-State gas may elect an alternative tax rate of 2.4 cents per
therm. This rate is referred to as the ‘alternate tax rate’. Those purchasers of out-ofState gas who elect the alternative tax rate do not file returns or pay the tax directly to
the Department. [35 ILCS 173/5-10] Such purchasers pay tax to their delivering
suppliers who are registered to collect the tax under Section 471.120.
Based on the above:
1.
2.
3.

Is the 5% (or 8%) imposed on alternative suppliers, or is it only imposed on
Public Utilities?
Why is the 2.4 cents per therm option not mentioned in the statutes?
How does the collector determine which to apply – the 5% rate or the 2.4 cents
rate? On the Form RG-1 it seems as if both are applied.

The CITY Municipal Code Section 82-441 regarding the Municipal Natural Gas Use Tax
states: A tax is imposed on the privilege of using or consuming natural gas in the city
that is purchased in a sale at retail at the rate of five cents .05 ($.05) per therm. The
ultimate incidence of and liability for payment of the tax is on the retail purchaser and
nothing in this section shall be construed to impose a tax on the occupation of
distributing, supplying, furnishing, selling or transporting natural gas. To prevent
multiple taxation, the use of natural gas in the city by a retail purchaser shall be exempt
from the tax imposed by this section if the gross receipts from the sale at retail of such
natural gas to the retail purchaser are properly subject to a tax imposed upon the seller
of such natural gas pursuant to the city’s municipal utility tax, as amended from time to
time...authorized pursuant to section 82-11-2 of the Illinois Municipal Code (65 ILCS
5/8-11-2). The mayor and city finance director are each authorized to enter into a
contract for the collection of the tax imposed by this section with any public utility
providing natural gas service in the city. The contract shall include and substantially
conform with the following provisions: The public utility will collect the tax from retail
purchasers as an independent contractor.

Based on the above:
1.

Am I interpreting the local municipal code correctly in that only one tax is
imposed – either the Gas Revenue Tax or the local imposition?

2.

If so, how does the public utility determine whether or not to collect the 5% under
65 ILCS 5/8-11-2 (or the 2.4 cents per therm rate) or the .05 cent per them rate
set at the local level?

Thank you in advance for all your help.

DEPARTMENT’S RESPONSE:
It appears you may be getting confused between the State-imposed gas taxes and locallyimposed taxes. Section 470.110 of the Illinois Administrative Code (86 Ill. Adm. Code 470.110)
implements the Gas Revenue Tax Act. 35 ILCS 615/. Section 2 of the Act imposes upon persons
engaged in the business of distributing, supplying, furnishing or selling gas to persons for use or
consumption and not for resale at the rate of 2.4 cents per therm or 5% of the gross receipts received
from each customer from such business, whichever is the lower rate. 35 ILCS 615/2. The Gas
Revenue Tax Act is State-wide tax administered by the Department. Tax revenues received by the
Department are deposited into the State General Revenue Fund.
The Gas Use Tax Law imposes a State-wide tax on the privilege of using in this State gas
obtained in a purchase of out-of-state gas at the rate of 2.4 cents per therm or 5% of the purchase
price for the billing period, whichever is the lower rate. 35 ILCS 173/5-10; 86 Ill. Adm. Code 471.105.
Section 8-11-2 of the Illinois Municipal Code (65 ILCS 5/8-11-2) is not administered by the
Department of Revenue; it is administered by municipalities that elect to impose a gas occupation tax.
The Department has no authority or jurisdiction to provide guidance in regards to municipallyadministered taxes imposed under this section of the Illinois Municipal Code. The local tax is in
addition to any tax imposed by the State.
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