Did an out-of-state CPAP seller using an Illinois drop shipper have to collect Illinois tax from Illinois customers?

Plain-English summary

An out-of-state corporation planned to sell CPAP supplies online and use an Illinois product drop shipper. It asked whether it had to collect Illinois sales tax on a website sale to an Illinois resident.

IDOR did not answer the collection question because the request contained only limited information. The GIL instead directed the seller to Illinois's drop-shipment regulation and resale-certificate requirements.

It described a standard drop shipment as a transaction in which an out-of-state purchaser buys property for resale from an Illinois-registered company and has that company ship the property directly to the purchaser's Illinois customer.

What this means for you

This GIL is a procedural pointer, not a holding that the seller did or did not have a collection duty. A drop-shipment analysis needs the parties' registration, resale documentation, sale structure, and other facts required by the cited regulations.

Common questions

Did IDOR tell the CPAP seller to collect tax? No determination was made.

Why not? The letter supplied too few facts.

Which rules did IDOR identify? The drop-shipment and certificate-of-resale regulations.

Citations and references

• 86 Ill. Adm. Code 130.225 and 130.1405.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0033-gil.pdf

Original ruling text

ST 15-0033 GIL 06/18/2015 SALE FOR RESALE

This letter discusses the standard drop-shipment scenario and certificates of resale. See 86
Il. Adm. Code 130.225 and 86 Ill. Adm. Code 130.1405.

June 18, 2015

Dear Ms. XXXX:

This letter is in response to your letter May 7, 2015, 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:

We are a OUT-OF-STATE Corporation that is getting set up to sell CPAP
Supplies, and we will be using an on-line product drop shipper that is located in Illinois.

Our question to you is this, if we were to make a sale to an Illinois resident from
our website, would we need to collect Illinois sales tax?

| searched the Illinois Sales Tax site, but could not find a conclusive answer.

DEPARTMENT’S RESPONSE:

The Department’s regulations regarding Drop Shipments can be found at 86 Ill. Adm. Code
130.225 and Seller’s Responsibility to Obtain Certificates of Resale and Requirements for Certificates
of Resale at 86 Ill. Adm. Code 130.1405. A drop-shipment situation is normally one in which out-of
State purchaser (Purchaser) makes a purchase for resale from a company (Company) which is
registered with Illinois and has that Company drop-ship the property to Purchaser's customer
(Customer) located in Illinois.

| wish we could be more helpful but your letter provided only limited information. 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:mdb