Can an Illinois retailer deduct part of its gross receipts from sales of E15 fuel as gasohol or majority blended ethanol fuel?

Plain-English summary

A retailer preparing to sell E15 through metered pumps asked which Illinois fuel deduction it should claim: the gasohol line or the majority blended ethanol fuel line.

IDOR said neither applied. The letter described E15 as 85% gasoline and 15% ethanol. Statutory "gasohol" required a 90% gasoline and 10% denatured-ethanol blend, while "majority blended ethanol fuel" required 70% to 90% ethanol and 10% to 30% gasoline.

Because E15 fit neither defined product and had no separate statutory deduction or exemption, all gross receipts from its sale were subject to Retailers' Occupation Tax without deduction.

What this means for you

A fuel's everyday or marketing label does not decide whether it qualifies for a statutory deduction. The product must meet the percentages in the Illinois definition. Under this 2016 GIL, an 85%-gasoline/15%-ethanol E15 blend did not qualify for either cited deduction.

Common questions

Could the retailer report E15 on the gasohol deduction line? No.

Could it use the majority blended ethanol fuel line? No.

How much of the E15 gross receipts did IDOR say was taxable? All of them, without deduction.

Citations and references

• 35 ILCS 105/3, 3-40, and 3-44.
• 35 ILCS 120/2-10.
• 86 Ill. Adm. Code 130.101.
• 86 Ill. Adm. Code 150.101 and 150.130.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2016.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2016/st-16-0005-gil.pdf

Original ruling text

ST 16-00005-GIL 02/01/2016 GROSS RECEIPTS
Gross receipts from sales of E15 (a blend of 85% gasoline and 15% ethanol) are
subject to Retailers’ Occupation Tax without deduction (unlike gasohol and
majority blended ethanol fuel, for which deductions are authorized by statute).
See 35 ILCS 120/2-10. (This is a GIL.)

February 1, 2016

Dear Xxxxx:
This letter is in response to your letter dated November 17, 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:
RE: Interpretation of Sales Tax Discount available for the sales of E15.
We are needing to get an authoritative opinion as to which deduction line
to use on Form ST-1, Schedule A, Section 2, Specific fuels sales tax
exemption, line 22-Gasohol or line 26-Majority blended ethanol fuel.
We will begin selling E15 ( a blend of 85% gasoline-15% ethanol) at retail
in the coming months and need to be prepared to collect and report the
appropriate sales tax as a result of selling E-85 through metered pumps at
retail.
Thank you in advance for your prompt attention to this matter.
I may be reached by phone at XXX-XXX-XXXX, by e-mail or by mail at
ADDRESS.

DEPARTMENT’S RESPONSE:
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. The tax is measured by the seller's
gross receipts from retail sales made in the course of such business. "Gross receipts"
means the total selling price or the amount of such sales. The retailer must pay
Retailers' Occupation Tax to the Department based upon its gross receipts, or actual
amount received, from the sale of the tangible personal property.
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 35
ILCS 105/3; 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 the
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 Retailers' Occupation Tax
which they are required to and do pay to the Department with respect to the same sale.
If the retailer does not collect the Use Tax from the purchaser for remittance to the
Department, the purchaser is responsible for remitting the Use Tax directly to the
Department. See 86 Ill. Adm. Code 150.130.
No deduction from gross receipts is authorized when calculating tax on sales of
E15 fuel (a blend of 85% gasoline and 15% ethanol). The deductions you reference in
your letter are for specific products other than E15. They are gasohol and majority
blended ethanol fuel. “Gasohol” is defined as motor fuel that is a blend of denatured
ethanol and gasoline that contains no more than 1.25% water by weight. The blend
must contain 90% gasoline and 10% denatured ethanol. See 35 ILCS 105/3-40.
“Majority blended ethanol fuel" is defined as motor fuel that contains not less than 70%
and no more than 90% denatured ethanol and no less than 10% and no more than 30%
gasoline. See 35 ILCS 105/3-44. The specific statutory deductions allowed for gasohol
and majority blended ethanol fuel are found in Section 2-10 of the Retailers’ Occupation
Tax Act. See 35 ILCS 120/2-10. Unlike gasohol and majority blended ethanol fuel,
there is no statutory deduction or exemption for E15. As a result, all of the gross
receipts from sales of E15 are subject to tax, without deduction.
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,

Samuel J. Moore
Associate Counsel
SJM:bkl