What did Illinois report in its 2015 survey response about advertising, nexus, tax rates, and local sales taxes?

Plain-English summary

A publisher asked IDOR to update an annual state-tax questionnaire using laws in effect on July 1, 2015. IDOR declined to answer in the survey's format but provided a broad overview of advertising, nexus, rates, sourcing, and local taxation.

Illinois did not impose a tax specifically on advertising. When an advertising service transferred no tangible personal property, the letter said Retailers' Occupation Tax, Use Tax, Service Occupation Tax, and Service Use Tax generally did not apply. A transfer of property with the service could change the result.

For nexus, the letter distinguished an Illinois retailer, a retailer maintaining a place of business in Illinois, and an out-of-state retailer lacking sufficient nexus. Under the 2015 physical-presence framework it described, an office was unnecessary: an agent, representative, or repetitive delivery and installation in Illinois could create Use Tax collection duties. Customers of a seller without sufficient nexus still owed Use Tax and had to self-assess it.

The response also described then-effective affiliate and referral provisions. Certain affiliate contracts and tracked referrals could create a presumption that a retailer maintained a place of business in Illinois when cumulative Illinois receipts exceeded $10,000 during the preceding four quarterly periods. The referral presumption could be rebutted with proof that Illinois activities did not meet constitutional nexus standards.

The letter reported a 6.25% State general-merchandise rate and a 1% State rate for food, drugs, and medical appliances, while warning that local occupation taxes varied by jurisdiction and tax base. Local sourcing was fact-intensive, boundaries could overlap for special districts, and IDOR did not administer every local tax.

What this means for you

This page records the rules IDOR described for a survey dated July 1, 2015. It is useful as historical guidance, but its nexus tests, thresholds, rates, and local-tax details should not be assumed to state current law.

Common questions

Were advertising services themselves specifically taxed? No. Tax depended on whether tangible personal property was transferred.

Could Illinois activity create collection duties without an office? Under the framework described in the letter, yes; agents, representatives, or repetitive delivery and installation could be enough.

Did every Illinois locality impose or administer the same tax? No. Rates, covered items, boundaries, and administration varied.

Citations and references

• 86 Ill. Adm. Code 130.101, 140.101, 150.101, and 160.101.
• 86 Ill. Adm. Code 150.201(i) and 150.801.
• 35 ILCS 105/2(1.1) and (1.2).
• 86 Ill. Adm. Code 693.115(c).
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130.
• Quill Corp. v. North Dakota, 112 S.Ct. 1904 (1992).

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-15-0050-gil.pdf

Original ruling text

ST-15-0050 GIL - 08/18/2015 - MISCELLANEOUS
This letter responds to an annual survey. (This is a GIL.)

August 18, 2015

Dear Mr. XXXX:
This letter is in response to your letter dated June 25, 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:
The COMPANY 1 (COMPANY 1), in conjunction with COMPANY 2, annually
undertakes a major information collection effort with respect to the application of the tax
laws of the states. COMPANY 1's goal in gathering this information is to assemble and
publish the PUBLICATION (PUBLICATION). As the market has shown, such a
publication is a useful reference source for departments of revenue, attorneys,
corporate tax departments, and public accounting firms.
COMPANY 1 is in the process of updating the PUBLICATION for its 2016 annual
edition. Accordingly, we ask for your state's assistance in preparing this important
publication. I have attached two Microsoft Word files—one for income tax and one for
sales tax—to serve as this year's questionnaire. The questionnaire follows the same
format as in past years. (If you do not have a copy of your 2014 response, and it would
be helpful to you in completing the 2015 questionnaire, please let me know and I will
email you a copy.)
This year, the numbering scheme and the sequence of the questions remains
essentially the same. Also, please note that the new questions are highlighted in bold,
red font. Therefore, you should be able to easily follow the changes from last year to
this year. Because of anticipated time constraints for respondents, again this year we
are asking that you only respond to the questions for which your answers require a
change and the new questions. All unanswered questions will be considered the same
as last year's answer unless otherwise noted.

Please complete the 2015 questionnaire and return it by July 31, 2015, via email to:
[email protected]. The enclosed questionnaire should be answered in
accordance with laws in effect as of July 1, 2015. If there is legislation pending or
recently enacted that would alter your answers, please explain any such changes that
you are aware of at the time the questionnaire is completed.
Beginning in the fall 2000, COMPANY 1 began a tuition assistance program for state
department of revenue employees in appreciation for their assistance in publishing the
PUBLICATION. A limited amount of tuition assistance is available for courses in
COMPANY 1's Online Graduate Certificate in State and Local Taxation. This Certificate
program is the first of its kind in the nation to be offered totally online. To receive the
Certificate, students must complete the four-course curriculum. For further information
about the program or available tuition assistance contact YYYY at the COMPANY 1
([email protected] or (XXX) XXX-XXXX.
If you have any questions about the questionnaire or a specific question, please contact
me at [email protected] (email) and I will promptly respond. Thank you for your
continued cooperation and support. Your contributions are extremely valuable in
maintaining the quality of this outstanding reference work. A complimentary copy of the
PUBLICATION will be sent to you when it is published next year.
[32] ADVERTISING AGENCIES
▪ Which services performed by an advertising agency are subject to sales/use tax (check all
that apply)?
 Developing concepts for advertising themes and campaigns
 Writing advertising copy or commercial jingles
▪ Production of preliminary art if:  No finished art is produced  Finished art is produced
▪ Production of finished art if delivered as:  Tangible personal property  Digital product
 Production of the master copy of a commercial video tape, if produced or stored in state
 Charge for copies of master copy of commercial video tape, if distributed in state
 Charges for advertising space in magazines and newspapers or airtime on television or
radio
 Web site design
 Web site maintenance
 Public relations time not associated with producing tangible personal property
 Public relations time associated with producing tangible personal property
 Creation of logos or animated graphics if included in total Web site design cost
 Creation of logos or animated graphics if separate and optional from Web site design cost
 Creation of online banner advertising if included in total Web site design cost
 Creation of online banner advertising if separate and optional from Web site design
 Creation of online videos if included in total Web site design cost
 Creation of online videos if separate and optional from Web site design cost

[44] LOCAL TAXATION

NEXUS. If your state imposes local sales/use taxes, a taxpayer:
 Must have a physical presence in each local jurisdiction to be required to collect the
tax
 Physical presence in one jurisdiction necessitates tax collection in all local
jurisdictions in the state
MEASURE OF TAX
▪ Is the measure of tax the same at the state and local jurisdictional level?
No
▪ If NO, how do they different?
 Exemptions differ, explain:
 Tax measure differs, explain:

 Yes 

RATE OF TAX
▪ Do all local jurisdictions impose a sales tax?
 Yes 
No
▪ If NO, what local jurisdictions do not impose a sales tax (check all that apply)?
 No local sales tax in any jurisdiction
 City
 County
 School District
 Special District (name:
________)
▪ Do all local jurisdictions impose a use tax?
 Yes 
No
▪ If NO, what local jurisdictions do not impose a use tax (check all that apply)?
 No local use tax in any jurisdiction
 City
 County
 School District
 Special District (name:
________)
▪ Do all local jurisdictions impose the same rate of tax
(e.g., all cities are authorized to impose a 0.5% sales tax)?
 Yes 
No
▪ If NO, what are the authorized rates or ranges of rates by taxing jurisdiction?
City __
County _
School District _
Special District (name:
________)
JURISDICTIONAL BOUNDARIES
▪ Do some local taxing jurisdictions have non-geographical boundaries
(e.g., eastern part of one county and the adjoining western part of another county)?
 Yes  No

ADMINISTRATION
▪ Does the state administer all local taxes, i.e., collect receipts and perform audits for local jurisdiction
 Yes

 No, local jurisdictions audit and collect their own taxes
[68] Common Mistakes Corporations Make In Filing Returns and Remitting taxes
▪ What are the most common mistakes that corporations make in filing sales and use tax returns and
remitting sales and use taxes? For ease of presentation in a chart, please organize your response as a
bullet point list, as follows:
1.

2.

3.

and so on
DEPARTMENT’S RESPONSE:
We are unable to respond to your survey in the format provided. However, we hope you find
the following information helpful.
Advertising Agencies
The State of Illinois does not specifically impose a tax on advertising. 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. 86 Ill. Adm. Code 130.101. The
Use Tax Act imposes a tax upon the privilege of using in this State tangible personal property
purchased at retail from a retailer. 86 Ill. Adm. Code 150.101. If no tangible personal property is
being transferred to the customers, then neither Illinois Retailers’ Occupation Tax nor Use Tax would
apply. Likewise, the Service Occupation Tax Act and Service Use Tax are imposed on the transfer of
tangible personal property incident to sales of service. 86 Ill. Adm. Code 140.101 and 160.101.
Depending on the nature of the transaction, Service Occupation Tax or Service Use Tax could apply,
but if no tangible personal property is being transferred to customers incident to the advertising
services being provided, then neither Illinois Service Occupation Tax nor Service Use Tax would
apply.

Nexus
An “Illinois Retailer” is one who makes sales of tangible personal property in Illinois. The Illinois
Retailer is then liable for Retailers' Occupation Tax on gross receipts from sales and must collect the
corresponding Use Tax incurred by the purchasers. Our regulations were recently amended in
response to the Illinois Supreme Court’s decision in Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130.
The regulations specify the selling activities that trigger Retailers’ Occupation Tax liability in Illinois.
Another type of retailer is the retailer maintaining a place of business in Illinois. The definition
of a “retailer maintaining a place of business in Illinois” is described in 86 Ill. Adm. Code 150.201(i).
This type of retailer is required to register with the State as an Illinois Use Tax collector. See 86 Ill.
Adm. Code 150.801. The retailer must collect and remit Use Tax to the State on behalf of the
retailer’s Illinois customers even though the retailer does not incur any Retailers' Occupation Tax
liability.

The United States Supreme Court in Quill Corp. v. North Dakota, 112 S.Ct. 1904 (1992), set
forth the current guidelines for determining what nexus requirements must be met before a person is
properly subject to a state's tax laws. The Supreme Court has set out a 2-prong test for nexus. The
first prong is whether the Due Process Clause is satisfied. Due process will be satisfied if the person
or entity purposely avails itself or himself of the benefits of an economic market in a forum state. Quill
at 1910. The second prong of the Supreme Court's nexus test requires that, if due process
requirements have been satisfied, the person or entity must have physical presence in the forum
state to satisfy the Commerce Clause. A physical presence is not limited to an office or other
physical building. Under Illinois law, it also includes the presence of any agent or representative of
the seller. The representative need not be a sales representative. Any type of physical presence in
the State of Illinois, including the vendor’s delivery and installation of his product on a repetitive basis,
will trigger Use Tax collection responsibilities. Please refer to Brown’s Furniture, Inc. v. Zehnder, 171
Ill.2d 410, (1996).
The final type of retailer is the out-of-State retailer that does not have sufficient nexus with
Illinois to be required to submit to Illinois tax laws. A retailer in this situation does not incur Retailers’
Occupation Tax on sales into Illinois and is not required to collect Use Tax on behalf of its Illinois
customers. However, the retailer’s Illinois customers will still incur Use Tax liability on the purchase
of the goods and have a duty to self-assess and remit their Use Tax liability directly to the State.
Beginning July 1, 2011, the definition of a “retailer maintaining a place of business” was
amended to include additional types of retailers. A retailer maintaining a place of business also
includes a retailer having a contract with a person located in this State under which:
A. The retailer sells the same or substantially similar line of products as the
person located in this State and does so using an identical or substantially
similar name, trade name, or trademark as the person located in this State; and
B. The retailer provides a commission or other consideration to the person located
in this State based upon the sale of tangible personal property by the retailer. See 35 ILCS
105/2(1.2).
These provisions only apply if the cumulative gross receipts from sales of tangible personal
property by the retailer to customers in this State under all such contracts exceed $10,000 during the
preceding 4 quarterly periods. Please note that in Performance Mktg. Ass'n, Inc. v. Hamer, 998 N.E.
2d 54 (2013) the Illinois Supreme Court struck down 35 ILCS 105/2(1.1) and 35 ILCS 110/2(1.1), a
“click-thru nexus provision” enacted in 2011. However, new provisions became effective January 1,
2015. The following provisions address the court’s concerns in Performance Mktg. Ass'n, Inc. v.
Hamer, 998 N.E. 2d 54 (2013).
Beginning January 1, 2015, a retailer maintaining a place of business also includes a retailer
having a contract with a person located in this State under which the person, for a commission or
other consideration based upon the sale of tangible personal property by the retailer, directly or
indirectly refers potential customers to the retailer by providing to the potential customers a
promotional code or other mechanism that allows the retailer to track purchases referred by such
persons.

Examples of mechanisms that allow the retailer to track purchases referred by such persons
include but are not limited to the use of a link on the person's Internet website, promotional codes
distributed through the person's hand-delivered or mailed material, and promotional codes distributed
by the person through radio or other broadcast media. These provisions apply only if the cumulative
gross receipts from sales of tangible personal property by the retailer to customers who are referred
to the retailer by all persons in Illinois under such contracts exceed $10,000 during the preceding 4
quarterly periods ending on the last day of March, June, September, and December. A retailer
meeting these requirements shall be presumed to be maintaining a place of business in Illinois but
may rebut this presumption by submitting proof that the referrals or other activities pursued within this
State by such persons were not sufficient to meet the nexus standards of the United States
Constitution during the preceding 4 quarterly periods. See ILCS 105/2(1.1).
Measure of Tax
The State Retailers’ Occupation Tax imposes a general merchandise rate on the sale of
tangible personal property of 6.25% of gross receipts. Food, drugs and medical appliances are taxed
at the State rate of 1%. Units of local government authorized by statute to impose an occupation tax
generally are allowed to set the rate of tax. Most units of local government cannot tax titled and
registered items, food, drugs and medical appliances as part of their occupation taxes. Occupation
taxes imposed by units of local government that are administered by the Illinois Department of
Revenue generally are subject to the same exemptions contained in the State Retailers’ Occupation
Tax Act.
Local Taxation
Whether a retailer must collect certain local taxes is a very fact intensive inquiry, and the
answer depends upon a number of factors. We suggest you refer to our regulations on sourcing
which were recently amended in response to the Illinois Supreme Court’s decision in Hartney Fuel Oil
Co. v. Hamer, 2013 IL 115130. The regulations specify the selling activities that trigger Retailers’
Occupation Tax liability in Illinois and in specific localities within Illinois. See, for example, 86 Ill. Adm.
Code 693.115(c).
Rate of Tax
Generally, home rule and non-home rule municipalities, counties, school districts and special
districts may impose occupation taxes. See Illinois Municipal Code (65 ILCS 5) and Counties Code
(55 ILCS 5). Special Districts (for example, airport, forest preserves, fire protection, park, sanitary,
transit and water) can be found in Chapter 70 of the Illinois Complied Statutes beginning with 70 ILCS
5 and ending at 70 ILCS 3720. Not all units of local government impose a local occupation tax. Not
all units of local government impose the same rate of tax. Not all units of local government impose a
use tax. A tax rate finder is located on the Department’s website.
Jurisdictional Boundaries
Generally, local occupation taxes that are imposed by units of local government are confined
to the geographic boundaries of the local government adopting the tax. However, some local
occupation taxes imposed by special districts may cover multiple jurisdictions, for example, transit
taxes.
Administration
The Department does not administer all local taxes. One must review the statute authorizing a
local tax to determine if the tax is administered by the Department.

Common Filing Mistakes
The Department has prepared a document that identifies common sales tax filing mistakes. It
is located on the Department’s website at:
http://tax.illinois.gov/Businesses/AvoidCommonSalesTaxFilingMistakes.htm

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,

Cara Bishop
Associate Counsel
CB:mdb