Were alcohol sales by an Illinois park district at its annual community festival exempt from Retailers' Occupation Tax?

Plain-English summary

An Illinois park district operated a restaurant, golf pro shop, pool, and annual community festival. It regularly paid tax on its concessions, food, and alcohol, but had previously been told the festival might fit an occasional-sale exemption. It asked whether alcohol sold at the festival was exempt.

IDOR said no. The limited exceptions for member sales, noncompetitive sales, and occasional dinners apply to qualifying charitable, religious, and educational organizations with exemption numbers—not governmental bodies.

A governmental body owes Retailers' Occupation Tax when it sells tangible personal property to the public outside the direct performance of a governmental function. IDOR specifically concluded that a park district's alcohol sales at a festival were not the performance of a governmental function and were taxable.

Common questions

Did the occasional-dinner exception apply to the park district festival? No. Rule 130.2005 did not apply to governmental bodies.

Was alcohol treated differently from other festival property? IDOR expressly included alcohol in the taxable festival sales.

Citations and references

• 86 Ill. Adm. Code 130.2005(a)(2)-(4)
• 86 Ill. Adm. Code 130.2055(a)

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-13-0047.pdf

Original ruling text

ST 13-0047-GIL 09/10/2013 EXEMPT ORGANIZATIONS
Exclusively religious, educational, or charitable organizations are allowed to engage in a
very limited amount of retail selling without incurring Retailers' Occupation Tax liability.
See 86 Ill. Adm. Code 130.2005. (This is a GIL.)

September 10, 2013

Dear Xxxxx:
This letter is in response to your letter dated June 28, 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:
In past years, when we have collected revenue for beer sales at FESTIVAL, we
have not paid sales tax on these items. I have had numerous conversations with
Illinois Dept. of Revenue employees and their understanding was that our festival
fulfilled the requirements highlighted below, specifically:
What if an exempt organization sells items? (From “Sales & Property Tax
Exemption” (PIO-37) IDR website)
If your organization is exempt from paying sales taxes on its purchases, it still
must collect sales taxes on items it sells, except in three instances below.
•

The items are sold only to the organization’s members, students, patients,
or inmates.

•
•

The sales are from occasional dinners open to the general public, no more
than twice in any one year.
The sales are not in direct competition with businesses in the community.

In past years, the employees at the IDR have equated the “occasional dinners” to
our community festival. I call every year, to confirm that the regulations have not
changed. This year, I spoke to three different individuals, who were unfamiliar
with the exact rules. I finally spoke with the IDR General Help desk and she
found the publication. We seem to qualify for the exemption, but she brought up
that she doesn’t know whether alcohol is included in this exemption. She
suggested I call the Liquor Commission and they would know whether liquor is
exempt.
I have been trying to call the Liquor Commission in Chicago. The one in
Springfield referred all legal questions to Chicago. I have been on hold for a long
time and can’t get through to anyone in Chicago.
This is our scenario:
We own a restaurant, golf pro-shop and pool. We sell concessions, food, alcohol,
for which we always file and pay sales tax on a monthly basis.
We hold a community family-oriented festival every year. We sell alcohol to
defer our costs, as well to attract patrons. The festival is put on by the Park
District and our employees and volunteers work the festival.
In the past, we were told that our festival fell under the sales tax exemption. This
year, the question came up, by IDR, whether sale of alcohol is included in this
exemption.
Question for State of Illinois Liquor Control Commission Legal: Is alcohol
included in this exemption?
Question for State of Illinois Liquor Control Commission Legal: How do we
follow up every year to see whether the law has changed?
I spoke with IDR at the following IDR number: XXX-XXX-XXXX. The State
of Illinois Liquor Control Commission numbers I was given are the following:
XXX-XXX-XXXX.
A response to my inquiry would be appreciated.
I am going to be away from the office for the next two weeks, but I will be back
in the office on July 15th. If you have a response before I get back, or would like
to discuss any issues, please refer these to my Director.

DEPARTMENT’S RESPONSE:

Organizations that qualify as exclusively religious, charitable, or educational
organizations can apply to the Illinois Department of Revenue to obtain a tax exemption
identification number.
These numbers establish that the Department recognizes said
organizations as exempt from incurring Use Tax when purchasing tangible personal property in
furtherance of their organizational purposes. While organizations and institutions that are both
operated and organized exclusively for charitable, religious, or educational purposes are as a
general matter subject to Retailers' Occupation Tax upon their own sales of tangible personal
property, there are limited exceptions where such organizations are authorized to engage in a
restricted amount of retail selling activity without incurring Retailers Occupation Tax liability.
Exclusively charitable, religious and educational organizations that hold exemption numbers
may engage in sales to members, noncompetitive sales, and certain occasional dinners and
similar activities without incurring Retailers' Occupation Tax liability. 86 Ill. Adm. Code
130.2005(a)(2)-(4). Please note that Section 130.2005 does not apply to sales by governmental
bodies.
Section 130.2055(a) of the Administrative Code governs sales by governmental bodies.
Section 130.2055(a) provides that “the State of Illinois or any local governments in Illinois, or
any agency or instrumentality of any such government body, incurs Retailers' Occupation Tax
liability when it engages in the selling of tangible personal property at retail to the public other
than in the performance of a governmental function.” The object of this rule is to ensure that
governmental bodies do not have a competitive advantage when selling items that are also sold
by Illinois retailers. The Illinois General Assembly did not intend to give government a
competitive selling advantage over Illinois citizens.
An example of sales that may be made by a governmental body to the public that
involves the performance of a governmental function is the sale of motor vehicle license plates
by the State of Illinois. Where a governmental unit makes sales that are not in the direct
performance of its governmental function, the sales are taxable. Examples of taxable sales by
governmental units include the operation of concession stands by park districts, sales of smoke
detectors by fire protection districts, sales of leaf bags by municipalities, sales of T-shirts, caps
and mugs by State agencies, sales of books by libraries, and sales of books and supplies by
school districts to students.
It is the Department’s position that sales of alcohol by a governmental body are not in the
direct performance of its governmental function. Sales of tangible personal property, including
alcohol, by a governmental body at a festival are subject to Retailers’ Occupation Tax.
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:lms