What corrections did Illinois provide for a 2015 survey on vehicle trade-ins, private sales, and long-term leases?

Plain-English summary

The Florida Department of Revenue asked Illinois to review a chart used in a publication about vehicles sold to residents of another state and vehicles bought elsewhere and brought into the state.

IDOR said it could not approve a publication other than its own, although the chart's Illinois information generally appeared correct. It then identified points that should be clarified.

For a retail motor-vehicle sale, a retailer could accept a trade-in to reduce taxable selling price under 86 Ill. Adm. Code 130.425. No trade-in credit applied to a private-party vehicle transaction. The letter also said no trade-in credit applied when a vehicle was sold for a qualifying lease longer than one year using the special selling-price definition discussed in Public Acts 98-628 and 98-1080.

Illinois imposed Vehicle Use Tax on private-party motor-vehicle transactions. People in the business of leasing or renting passenger cars were treated as retailers when they sold those vehicles, rather than as occasional sellers.

The letter further explained that a leasing company's purchase of a vehicle for a lease longer than one year was not exempt from Retailers' Occupation Tax or Use Tax. For qualifying vehicles sold on or after January 1, 2015, however, the cited Public Acts changed the taxable selling price to the amount paid under the lease contract rather than the leasing company's purchase price from the dealer.

What this means for you

This is an expressly historical 2015 survey response. It distinguishes retail sales, private-party transactions, and dealer sales to long-term lessors; those categories did not share the same trade-in and tax-base rules.

Common questions

Did IDOR formally approve the other state's chart? No.

Could a retail vehicle trade-in reduce taxable selling price? Yes, under the cited regulation.

Were private-party vehicle sales tax-free occasional sales? No. Illinois imposed a separate Vehicle Use Tax.

Citations and references

• 86 Ill. Adm. Code 130.101 and 150.101.
• 86 Ill. Adm. Code 130.425.
• 625 ILCS 5/3-1001 et seq.; 86 Ill. Adm. Code 151.101 et seq.
• Public Acts 98-628 and 98-1080.

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-15-0049-gil.pdf

Original ruling text

ST 15-0049 GIL – 07/30/2015 -MOTOR VEHICLES:
This letter responds to a survey concerning taxation of vehicles. (This is a GIL.)
July 30, 2015
Dear Ms. XXXX:
This letter is in response to your e-mail dated October 17, 2014, 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:
Each year the Florida Department of Revenue publishes information regarding the
taxability of the sale or transfer of motor vehicles that are:


sold in Florida to residents of another state; and



purchased in another state and brought into Florida.

In order for the information to be accurate, we are requesting that your agency review
the specific information related to your state in the attached document, and let us know
of any changes that occurred in the past year, or will occur for 2015, so that our
Department may continue to use and distribute accurate information.
For ease of completion, we have attached a Microsoft Word chart of the information, for
editing.
Thank you for your assistance. We would appreciate a return email with your edits and
comments to XXXX, at EMAIL, by November 14, 2014.
DEPARTMENT’S RESPONSE:
The Department cannot approve publications other than those issued by the Department of
Revenue. We advise you to consult Illinois statutes and administrative rules, as well as Department
publications on these matters. However, the information in the chart generally appears to be correct.
In the interest of limiting the dissemination of incomplete information, we offer the following additional
guidance and suggestions.

The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this State, any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as "sales" tax in Illinois. If the purchases
occur in Illinois, the purchasers must pay Use Tax to the retailer at the time of purchase. The retailers
are then allowed to retain the amount of Use Tax paid to reimburse themselves for the Retailers’
Occupation Tax liability incurred on those sales.
With respect to “Trade-in Credits,” for the sale of a motor vehicle subject to Retailers’
Occupation Tax, the retailer is allowed to accept a trade in to reduce the taxable selling price in
accordance with 86 Ill. Adm. Code 130.425. If, however, the motor vehicle is sold for the purpose of
leasing it for a defined period that is longer than one year and the transaction otherwise qualifies to
use the “selling price” as defined in P.A. 98-628 (see discussion below), then no trade in credit is
allowed. For a sale of a motor vehicle between private parties subject to tax under 625 ILCS 5/31001 et seq. (i.e. a non-retail transaction), a trade-in credit is not allowed. See 86 Ill. Adm. Code
151.101 et seq.
With respect to “Occasional or Isolated Sales,” the State of Illinois imposes a vehicle use tax
on private party (non-retail) transactions involving motor vehicles (commonly referred to as the
“Private Party Vehicle Use Tax” or “Private Vehicle Use Tax”). See 625 ILCS 5/3-1001 et seq.
However, persons engaged in the business of leasing or renting passenger cars are considered
retailers subject to the Retailers’ Occupation Tax when they sell those motor vehicles.
With respect to “Tax Information,” it is important to note that the first paragraph in this column
relates to “Retail Sales” while the remaining information in this column relates to “Private Party
Transactions.” Adding captions that note this would make this information more clear.
With respect to “Long-term leases of motor vehicles” (i.e., the purchase of a motor vehicle from
a motor vehicle dealer by a leasing company in order to lease the motor vehicle for a period of more
than one year), there is no exemption from Retailers’ Occupation Tax or Use Tax in Illinois. Please
note, however, that Public Acts 98-628 and 98-1080 changed the definition of “selling price” for sales
of motor vehicles of the first division and certain motor vehicles of the second division that are sold on
or after January 1, 2015 for the purpose of leasing the vehicle for a defined period of more than one
year, making the selling price equal to the amount paid under the lease contract, rather than the
amount the leasing company pays to the motor vehicle dealer to purchase the vehicle. While it does
not appear that this change would alter the information in the publication, it is worth noting.
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.
Sincerely,

Samuel J. Moore
Associate Counsel
SJM:mdb