Where did a fuel distributor source Illinois local tax on delivered fuel oil, warehouse lubricant sales, and card-lock gasoline sales?

Plain-English summary

A fuel distributor operated a central Illinois fuel-sales and administrative office, a separate lubricant warehouse and sales office, two fuel-storage facilities, and card-lock gasoline pumps.

IDOR sourced delivered fuel-oil sales to the central sales-office city. That office handled orders, pricing, credit, contracts, billing, customer service, dispatch, marketing, and procurement. The result did not change when fuel was bought from a third-party rack or drawn from company storage in another city.

Lubricant products sold from inventory stored at the separate warehouse were sourced to the warehouse city because at least three primary selling activities occurred there.

Gasoline sold through card-lock pumps was treated as over-the-counter selling and sourced to the city of each card-lock facility.

What this means for you

Different product lines and sales channels within one company can have different local sourcing. Inventory location mattered for warehouse lubricants, while the full composite of sales activities controlled delivered fuel oil and the physical pump controlled card-lock sales.

This PLR states that it ceases to bind IDOR ten years after July 29, 2016—July 29, 2026—or earlier if relevant law, rules, case law, or facts change.

Common questions

Where were delivered fuel-oil sales sourced? To the central sales-office city.

Where were warehouse lubricant sales sourced? To the warehouse city.

Where were card-lock gasoline sales sourced? To each pump facility's city.

Citations and references

• 86 Ill. Adm. Code 270.115(c)(2) and (c)(3)(A).
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130.
• 2 Ill. Adm. Code 1200.110(e).

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-16-0007-plr.pdf

Original ruling text

ST 16-0007 PLR 07/29/2016

LOCAL TAXES

The occupation of selling is comprised of the composite of many activities extending from the
preparation for, and the obtaining of, orders for goods to the final consummation of the sale by
the passing of title and payment of the purchase price. Thus, establishing where "the taxable
business of selling is being carried on" requires a fact-specific inquiry into the composite of
activities that comprise the retailer’s business. 86 Ill. Adm. Code 270.115. (This is a PLR.)

July 29, 2016

RE: Private Letter Ruling Request for COMPANY
Dear Xxxxx:
This letter is in response to your letter dated March 1, 2016, in which you request information
and the additional information you provided subsequent to submitting the request. 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.
Review of your request disclosed that all the information described in paragraphs 1 through 8
of Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY for the issue or issues presented in this ruling, and is
subject to the provisions of subsection (e) of Section 1200.110, governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that neither COMPANY nor a
related taxpayer is currently under audit or involved in litigation concerning the issues that are the
subject of this ruling request. In your letter you have stated and made inquiry as follows:
Please review this letter as a private letter ruling request as to the application of the
Illinois Department of Revenue’s (“Department”) new local sales tax sourcing
regulations to COMPANY.
This ruling is requested from and after its issuance until
there is a change in COMPANY’s material facts that are the basis of this ruling. Such a
private letter ruling request is proper under 86 Ill. Admin. Code § 1200.110.
There are no regulations that are clearly dispositive of the issues in this request. And,
there are no authorities that COMPANY or its representative is aware of that are
contrary to the ruling request made herein by COMPANY
To the best of the knowledge of both COMPANY and COMPANY’s representative, the
Department has not previously ruled on the same or a similar issue for COMPANY or a
predecessor. Neither COMPANY nor its representative has previously submitted the

same or a similar issue to the Department but withdrew it before a letter ruling was
issued. Nor are the issues in this request part of any current audit with the Department
nor part of any pending litigation matter between the Department and COMPANY or any
related company of COMPANY.1
BACKGROUND
COMPANY is a fuel oil distribution company engaged in the business of selling fuel oil
and lubrication products in Illinois. While COMPANYs national headquarters is located
outside of Illinois, it has a fuel oil sales and administrative office in CITY 1 Illinois, a
lubrication products warehouse and sales office in CITY 2, Illinois, two fuel storage
facilities in Illinois (one in CITY 1, Illinois, and the other in CITY 3 Illinois) and leased
space for the parking of fleet vehicles in CITY 4, Illinois.
Sales of fuel oil for delivery in Illinois:
For its fuel oil sales for delivery in Illinois, COMPANY has its Illinois fuel oil sales office
and its Illinois administrative office related to fuel oil sales located at ADDRESS, CITY
1, Illinois (“CITY 1 Fuel Sales/Admin Office”). At this CITY 1 Fuel Sales/Admin Office,
COMPANY receives, accepts and processes purchase orders for fuel oil products; it
makes decisions there on fuel pricing, and credit checks and approvals; it solicits sales
and performs solicitation and marketing; it accepts purchase orders and signs written
contracts, does billing, and performs general customer service functions there, also.
COMPANY has three full-time employees stationed at this CITY 1 Fuel Sales/Admin
Office (the “office personnel”), including a Regional Sales Support person, a Billing
Manager and a Dispatcher. And, its two fuel oil sales representatives (each, a “Territory
Sales Manager”) are also based at this office. Likewise, all blanket or keep-full
contracts or purchase orders are received and accepted at this [sic] COMPANY’s CITY
1 Fuel Sales/Admin Office. No other COMPANY office handles fuel oil sales for delivery
in Illinois.
For fuel oil sold by COMPANY for delivery in Illinois, it is either purchased by
COMPANY at wholesale off the “rack” from third party oil producers or distributors, or is
delivered by taking it from two oil storage facilities of COMPANY located in CITY 2,
Illinois and CITY 3, Illinois. Note: No fuel oil sales orders are received, accepted,
negotiated, solicited or processed at COMPANY’s CITY 2 and CITY 3 storage facilities,
nor is fuel oil picked up from these facilities by customers of COMPANY, except for
gasoline pump sales noted below.
The sales related functions at the CITY 1 Fuel Sales/Admin Office include:
 Answer Customer Telephone Calls
 Reach out to existing customers for marketing/sales purposes
 Extend Credit to Customers (when warranted)
There is pending litigation between the LOCAL GOVERNMENT and COMPANY as to the proper sourcing of COMPANY’s sales
of fuel oil products in Illinois.
1


















Determine pricing for sales
Provide written quotes on pricing, as required
Accept Customer Orders
Determine applicable taxes
Enter orders into Operating System
Dispatch drivers for delivery of fuel product to customer
Bill the customer for deliveries
Answer technical/product questions from customers
Answer customer questions regarding fuel taxes
Interact with fuel suppliers
Monitor supplier cost and availability
Advise drivers where to pick up product (from suppliers or storage facility) based
on daily cost, availability and supplier volume agreements.
Analyze customer circumstances and approve arrangements for loan of fuel
dispensing equipment for customer; monitor and arrange for ongoing
maintenance of same, as needed
Solicit new customers via:
o Make “cold calls” to prospective customers
o Respond to bids received
o Follow up on leads generated by our website
Procure fuel oil product daily from various fuel suppliers

Additional Marketing functions include:
 Interact with call-in customers
 Develop and work a customer target list for new business
 Answer customer inquiries
 Work cooperatively with Outside Sales Personnel
 Send brochures to Customers
 Respond to bid requests
 Analyze customer buying trends and outreach (when needed)
 Send e-mail/fax blasts to groups of customers (on occasion)
Sales orders are handled at CITY 1 Fuel Sales/Admin Office, as follows:

1. Customer Call to Office: Office personnel review, determine pricing and/or
   pricing variations, review credit status, and approve customer orders received
   via telephone / e-mail, or fax and subsequently initiate an order in the office
   computer system, and process the order through delivery.
2. Customer Call to Outside Sales Personnel: Outside sales representatives
   forward any and all orders into the CITY 1 Fuel Sales Office. A Territory
   Sales Manager and/or office personnel review, determine pricing and/or
   pricing variations, review credit status, and approve such orders. Office
   personnel subsequently enter the order into the office computer system and

process the order through delivery. Fuel delivery drivers may also forward
sales orders into the Office - such orders are handled in the same manner.

3. eTank Orders: “eTAnk” refers to telemetry technology for customer fuel tanks
   that electronically monitors a customer’s fuel tank and sends an inventory
   signal/ order to the CITY 1 Fuel Sales Office via Internet. Office personnel
   enter into “keep full” agreements for eTank monitoring of customer accounts,
   and then monitor “eTank” customer inventory levels on a daily basis, review
   credit status, and initiate orders as needed to balance customer demands
   with average order size. In some cases, customer usage spikes, creating an
   “eTank alert”; office personnel then identifies this situation as an “emergency
   order” and arranges for expedited delivery, etc.
4. Scheduled Orders. Some customers have contracted for a “standing order”
   with the CITY 1 Fuel Sales Office. Examples include agreements for daily,
   weekly, 3X per week, once a month, etc. deliveries. CITY 1 office personnel
   monitor these contract requirements, review credit status, and initiate delivery
   as agreed with the customer.
5. Billing. Billing for fuel oil deliveries are processed and sent out by office
   personnel at the CITY 1 Fuel Sales Office.
   Gasoline Pump sales:
   At COMPANY’s CITY 2 and CITY 3, Illinois locations there is a card-lock facility where
   fuel pumps are stationed and customers with card-lock accounts can purchase gasoline
   at the pump. For Illinois Retailers’ Occupation Tax purposes, these gas pump sales are
   treated by COMPANY as sold from the CITY 2 facility and the CITY 3 facility,
   respectively, and not from CITY 1.
   Sales of lubricants:
   COMPANY has a sales office at ADDRESS, CITY 2, Illinois where it stores and sells
   lubricants. As to sales of lubricants by COMPANY for delivery into Illinois, all orders are
   received at this facility, prices set or negotiated at this facility, orders accepted and
   processed at this facility, and all the lubricants are either picked up or delivered from
   this facility. For Illinois Retailers’ Occupation Tax purposes, these lubricant sales are
   treated by COMPANY as sold from this CITY 2 facility, and not from CITY 3. No fuel oil
   sales are made or processed though this facility.
   Leased truck space:
   COMPANY lease [sic] space for some of its truck [sic] in CITY 4, Illinois. No fuel oil is
   stored on this facility, nor are any sales of fuel oil or lubricant made from this facility.
   Additional Information:

Both the CITY 1 Fuel Oil Sales/Admin Office and the CITY 2 lubricant sales office are
under general supervision of the Regional Vice President (“RVP”) in the Company. The
RVP serves as the National Fuels Sales Manager for COMPANY, and also, supervises
all lubricant sales for COMPANY in the Midwest. The RVP does not enter into sales
contracts of fuel oil (or lubricant products), and is not involved in and does not manage
the day to day operations of the various offices, but merely supervises the overall
operations of the offices. He divides his time among i) the CITY 1 location; ii) the CITY
2 location; iii) the location of the newly acquired CITY 5, WI lubricant business: and iv)
locations on the road for company-wide sales meetings; meetings with suppliers; and
meetings with existing and potential customers for both product lines.

RULINGS REQUESTED

1. COMPANY requests that a ruling be issued that confirms that its sales of fuel oil for
   delivery in Illinois by its trucks whether purchased off the rack from third party
   distributors, or taken from its own storage facilities in CITY 2 or CITY 3, are properly
   sourced to COMPANY’s CITY 1 fuel Sales/Admin Office location in CITY 1, Illinois.
2. COMPANY requests that a ruling be issued that confirms that its sales of lubricant
   products from its CITY 2 lubricant sales and storage facility from inventory stored at
   its CITY 2, Illinois facility are properly sourced to COMPANY’s CITY 2 facility.
3. COMPANY requests that a ruling be issued that confirms that its gasoline sales at
   pumps at its CITY 2 and CITY 3, Illinois facilities are properly soused [sic] to these
   facilities.

APPLICABLE LAW
Local retailers occupation taxes are sourced under the regulations based on a
composite of selling activities by the seller. See e.g., 86 Ill. Admin. Code § 270.115.
Under the regulations, there are five primary factors. See e.g., Section 270.115(c)(1).
Under this primary factors test, a retailer needs to have at least three of these five
primary factors at its sales location to consider its sales as occurring at that location. If
less than three factors are at a selling location in Illinois (and no more than two of the
primary factors occur outside of Illinois), then the six additional secondary factors (see
e.g. Section 270.115(c)(4)) shall be considered to determine the location of the sale in
Illinois. In those instances where the secondary factors are used along with the primary
factors, either the inventory location or the headquarters location will be deemed the
location of the sale based on the location that has the greater number of combined
factors with respect to the sales at issue.
The primary factors are: (1) location of sales personnel exercising discretion and
authority to solicit customers on behalf of a seller and to bind the seller to the sale; (2)
location where the seller takes action that binds it to the sale, which may be acceptance
of purchase orders, submission of offers subject to unilateral acceptance by the buyer,

or other actions that bind the seller to that sale; (3) the location where payment is
tendered and received, or from which invoices are issued with respect to each sale; (4)
location of inventory if tangible personal property that is sold is in the retailer’s inventory
at the time of its sale or delivery; and (5) the location of the retailer’s headquarters,
which is the principal place from which the business of selling tangible personal property
is directed or managed. In general, this is the place at which the offices of the principal
executives are located. When executive authority is located in multiple jurisdictions, the
place of daily operational decision making is the headquarters. See, e.g., 86 Ill. Admin.
Code § 270.115(c)(2).
The secondary factors are: (1) location where marketing and solicitation occur; (2)
location where the seller engages in activities necessary to procure goods for sale; (3)
location of the retailer’s officers, executives or employees with authority to set prices or
determine other terms of sale if determinations are made in a location different than that
identified in subsection (c)(1)(A); (4) location where purchase orders or other
contractual documents are received when purchase orders are accepted, processed or
fulfilled in a location or locations different from where they are received; (5) location
where title passes; and (6) location where the retailer displays goods to prospective
customers, such as a showroom. See, e.g., 86 Ill. Admin. Code § 270.115(c)(4).
For over the counter sales, “if a purchaser is present at a place of business owned or
leased by a retailer and there enters into an agreement with the retailer’s sales
personnel to purchase tangible retailers’ personal property, and makes payment for that
property at the same place of business, then the retailers’ occupation tax for that sale is
incurred at the retailers’ occupation tax for that sale is incurred at [sic] the retailer’s
place of business where the sale occurred regardless of whether the purchaser takes
immediate possession of the tangible personal property, or the retailer delivers or
arranges for the property to be delivered to the purchaser.” 86 Ill. Admin. Code §
270.115(c)(3).
Moreover, if a purchaser, having no prior commitments to the retailer, agrees to make a
purchase of tangible personal property and makes payment over the phone, in writing or
over the internet, and then takes possession of the property at a retailer’s place of
business, the sale shall be deemed to occur at that place of business, if the retailer
regularly stocks similar items there. 35 ILCS 120/2-12(2).

ANALYSIS
Applying the sourcing regulation to COMPANY’s situation, all of COMPANY’s taxable
fuel oil sales for delivery in Illinois should be sourced to its CITY 1 Fuel Sales/Admin
Office in CITY 1, Illinois. At COMPANY’s CITY 1 Fuel Sales/Admin Office, at least three
of the five primary selling activities occur for all of its fuel oil sales, including: (1) the
location where COMPANY’s employees are stationed who can exercise discretion to
negotiate and bind COMPANY on such sales; (2) the location where offers are prepared
and made; and where purchase orders are accepted; and (3) the location where
invoices are sent out to customers. This is sufficient under the regulations to source

such sales of fuel oil products for delivery in Illinois to COMPANY’s CITY 1 Fuel
Sales/Admin Office in CITY 1, Illinois.
In addition, because COMPANY’s sales of fuel oil for delivery in Illinois are principally
managed and directed from its CITY 1 Fuel Sales/Admin Office in CITY 1, it can also be
said that under the Department’s sourcing regulations this CITY 1 Fuel Sales/Admin
Office is, in substance, the Illinois headquarters of the company for these sales, making
it even more clear that this CITY 1 Fuel Sales/Admin Office is the proper office to
source fuel sales for delivery in Illinois.
Finally, even looking at the secondary factors, since COMPANY: (1) performs marketing
and solicitation at it [sic] CITY 1 Fuel Sales/Admin Office; (2) procures fuel oil supply for
the company’s sales of fuel oil products, as approved by the CITY 1 Fuel Sales/Admin
Office; and (3) has employees with authority to set prices at this CITY 1 Fuel
Sales/Admin Office, even if COMPANY did not meet at least 3 of the primary factors,
under the secondary test its CITY 1 Fuel Sales/Admin Office should still be the
appropriate location to source its fuel sales for delivery in Illinois.
As to COMPANY’s lubricant sales, since these sales orders are received, entered into
and processed from COMPANY’s CITY 2, Illinois office from inventory at this CITY 2,
Illinois facility, these sales should be sourced at this CITY 2 location under either 86 Ill.
Admin. Code § 270.115(c)(2), 86 Ill. Admin. Code § 270.115(c)(3) or 35 ILCS 120/212(2).
Finally, as to gasoline sales from the pump at the card-lock facilities in CITY 2 and CITY
3, Illinois, these sales should be sourced to these locations under either 86 Ill. Admin.
Code § 270.115(c)(3) or 35 ILCS 120/2-12(2).
If you have any questions, need any additional documents or facts, or contemplate
issuing a private letter ruling different from that requested above, please call. We
reserve the right to withdraw this private letter ruling request if a negative ruling on any
portion is contemplated.
Thank you again for your time and consideration of this
matter.
DEPARTMENT’S RESPONSE:
In response to the Illinois Supreme Court decision in Hartney Fuel Oil Co. v. Hamer, 2013 IL
115130, 376 Ill. Dec. 294 (2013), the Illinois Department of Revenue revised the administrative rules
that govern the sourcing of local retailers’ occupation taxes. See 86 Ill. Adm. Code 270.115. The rules
provide that:
The occupation of selling is comprised of "the composite of many activities extending
from the preparation for, and the obtaining of, orders for goods to the final consummation of
the sale by the passing of title and payment of the purchase price". Ex-Cell-O Corp. v.
McKibbin, 383 Ill. 316, 321 (1943). Thus, establishing where "the taxable business of selling is
being carried on" requires a fact-specific inquiry into the composite of activities that comprise

the retailer’s business. Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130, paragraph 32 (citing
Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321-22 (1943)).
Based on a review of the activities described in your letter and an analysis of the Department’s
regulations found at 86 Ill. Adm. Code 270.115, the Department finds that, with respect to sales of
fuel oil for delivery in Illinois, whether purchased by COMPANY off the rack from third party
distributors and delivered by its trucks or taken from its own storage facilities in CITY 2 or CITY 3 and
delivered by its trucks, COMPANY is engaged in three or more primary selling activities in CITY 1,
Illinois and, therefore, these sales should be sourced to CITY 1, Illinois. See 86 Ill. Adm. Code
270.115(c)(2).
Further, based on a review of the activities described in your letter and an analysis of the
Department’s administrative rules found at 86 Ill. Adm. Code 270.115, the Department finds that, with
respect to sales of lubricant products by COMPANY from its CITY 2 location from inventory stored at
its CITY 2, Illinois facility, COMPANY is engaged in three or more primary selling activities in CITY 2,
Illinois and, therefore, these sales should be sourced to CITY 2, Illinois.
Finally, with respect to gasoline sales at pumps at its CITY 2 and CITY 3, Illinois card-lock
facilities, based on a review of the activities described in your letter, the follow-up information
provided, and an analysis of the Department’s administrative rules found at 86 Ill. Adm. Code
270.115, the Department finds that COMPANY is engaged in the business of making over-thecounter sales at these locations and, therefore, these gasoline sales should be sourced to CITY 2
and CITY 3, respectively. See 86 Ill. Adm. Code 270.115(c)(3)(A).
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this Private Letter
Ruling, you may contact me at (217) 782-2844. If you have further questions related to the Illinois
sales tax laws, 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
Chairman, Private Letter Ruling Committee

RSW:SJM:bkl