Could a direct-sales company file and remit Illinois sales tax for its independent consultants, and where did 2013 home-party and website sales go on the return?

Plain-English summary

A direct-sales company asked how to report sales made through independent consultants, home parties, and consultant websites.

IDOR said a manufacturer, importer, or wholesaler could ask the Department to approve an RR-80 agency agreement. Under that arrangement, the supplier registered, filed returns, and remitted Retailers' Occupation Tax for local distributors based on the selling price to the ultimate customer. The distributors generally did not have to register or file, but they needed to retain the agreement; they could also opt out and remit their own tax.

For the 2013 return discussed in the letter, home-party sales were reported on Line 4a with applicable state and local tax. Website sales shipped from an Illinois warehouse also went on Line 4a, with tax based on the warehouse location. Website sales shipped from outside Illinois to an Illinois customer went on Line 6a.

Common questions

Was RR-80 the relevant form? Yes. It was the Agency Agreement used to seek Department approval.

Could consultants still file for themselves? Yes. A distributor could opt out of the agency arrangement.

Did a website customer's ZIP code alone control the tax in this letter? No. IDOR focused on where the order was accepted or the shipment originated under the described rules.

Citations and references

• 35 ILCS 120/1 et seq.
• 86 Ill. Adm. Code 130.550
• 86 Ill. Adm. Code 270.115

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0030.pdf

Original ruling text

ST 13-0030-GIL 06/11/2013 RETURNS
A manufacturer or wholesaler whose products are sold by numerous distributors in
Illinois may assume the responsibility of collecting and remitting Retailers’ Occupation
Tax on behalf of all sales made by those distributors under the provisions of 86 Ill. Adm.
Code 130.550. See 86 Ill. Adm. Code 130.550. (This is a GIL.)
June 11, 2013
Dear:
This letter is in response to your letter dated May 16, 2013, 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:
Our COMPANY registered to collect sales tax in Illinois. We are a Direct Sales
Company, using Independent Consultants to sell our products. We offer a cash and
carry system, but the Consultant also has a company sponsored website through which
their customers can order.
When the Consultants orders, they buy at a discount but are taxed on the retail value of
the item. They should collect the sales tax from the client at the time of purchase. If
they have a home party, tax is collected from that location.
If the client buys on the Consultant’s website, they pay full retail price and pay sales tax.
They are taxed according to their zip code.
I filed for December 2012 and have been asked to amend three times. I was told to use
line 4-A and 6-A. No one seems to know what line we need to file on. I was told there
used to be a form we needed to sign, but no one knew where to find it. Is that form
Reg/RR-80, which was found using Google?
Please advise on which line we are to file on.
Please advise if we should file form Reg/RR-80.
DEPARTMENT’S RESPONSE:
The Retailers’ Occupation Tax Act, 35 ILCS 120/1 et seq., imposes a tax upon persons engaged in
the business of selling tangible personal property at retail. The State tax rate is 6.25% of gross

ST 13-0030-GIL
June 11 2013
Page 2
receipts for most items, and a lower rate of 1% for qualifying food, drugs and medical appliances.
Local occupation taxes may also be applicable.
Information concerning the "Filing of Returns for Retailers by Suppliers Under Certain Circumstances"
may be found at 86 Ill. Adm. Code 130.550. This regulation explains that manufacturers, importers or
wholesalers can enter into an "agency agreement" with the Department, whereby they register, file
returns and remit Retailers' Occupation Tax on behalf of their local distributors. Please note that such
arrangement must be accepted by the Department and is subject to any written objections of the
retailers that would be affected.
The Agency Agreement (RR-80) may be used to obtain approval of such an arrangement with the
Department. Under this type of agreement, the manufacturers, importers or wholesalers sell products
to local distributors and collect tax from the distributors based upon the selling price to the ultimate
consumers. The applicable tax is not based upon the sale to the local distributors. The appropriate
tax must be collected for the sale to the distributors' ultimate customers, which includes State and any
applicable local tax. In general, the determination of any local tax liability will depend on the location
where the purchase order is accepted from the ultimate customer. See 86 Ill. Adm. Code 270.115.
When manufacturers, importers or wholesalers operate under this type of agency agreement, the
local distributors need not register, file returns or remit taxes since the manufacturers, importers or
wholesalers have agreed to this responsibility. The local distributors should, however, retain a copy
of the agreement. If they fail to provide such documentation upon demand by the Department, they
will be required to register, file returns, and remit the appropriate amount of tax directly to the
Department. Distributors who prefer to register and remit their own taxes may opt out of the agency
agreement.
Taxpayers may acquire form RR-80 (Agency Agreement) by contacting the Department’s
Central Registration Unit, attention Manager, located at Illinois Department of Revenue, 101 West
Jefferson, Springfield, Illinois 62702.
When sales are made in Illinois, for example, at a home party, State Retailers’ Occupation Tax, and
any applicable local tax, is due and should be reported on Line 4a. If a sale is made on a web site
and the product is shipped to the customer from a warehouse located within Illinois, the sale should
be reported on Line 4a and State Retailers’ Occupation Tax, and any applicable local tax, paid based
on the location of the warehouse. If a sale is made on a web site and the product is shipped from
outside of Illinois to a customer in Illinois, the sale should be reported on Line 6a.
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