Did a one-time or minimal Illinois sale by an out-of-state seller automatically limit it to collecting only the 6.25% Illinois Use Tax?

Plain-English summary

An out-of-state seller said it had no Illinois physical presence and had supplied products and services to an Illinois client only once or minimally. It asked for a binding statement that it needed to pay only 6.25% Illinois tax.

IDOR declined to decide nexus in a General Information Letter because nexus is fact-intensive and better addressed through an audit investigation. The letter instead described three historical categories: an Illinois retailer owing Retailers' Occupation Tax; a retailer maintaining an Illinois place of business that must collect Use Tax; and an out-of-state retailer lacking sufficient nexus, whose Illinois customers self-assess Use Tax.

Under the authorities cited in 2016, physical presence included agents or representatives and repetitive delivery and installation, not only an office. The letter also summarized then-existing affiliate and referral provisions, including $10,000 sales thresholds measured over the preceding four quarters.

Without more facts, IDOR could not say which tax obligations applied.

What this means for you

The letter is a historical map of Illinois's 2016 nexus analysis, not current clearance for remote sales. A seller should confirm current law and document its people, representatives, delivery and installation activity, affiliates, referral arrangements, and Illinois selling activities.

Common questions

Did IDOR issue the requested binding answer? No. It responded with a nonbinding GIL and declined a specific determination.

Was an Illinois office the only historical physical-presence trigger? No. The letter also identified agents, representatives, and repetitive delivery and installation.

Citations and references

• 86 Ill. Adm. Code 270.115, 150.201, and 150.801.
• 35 ILCS 105/2(1.1) and (1.2).
• Quill Corp. v. North Dakota, 504 U.S. 298 (1992); Brown's Furniture, Inc. v. Zehnder, 171 Ill. 2d 410 (1996); Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130.

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-16-0069-gil.pdf

Original ruling text

ST 16-0069-GIL 12/30/2016 NEXUS
This letter discusses nexus. See Quill Corp. v. North Dakota, 112 S.Ct. 1904 (1992).
(This is a GIL.)

December 30, 2016

Dear Xxxxx:
This letter is in response to your letter dated December 9, 2016, in which you requested
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 requesting a letter that states that we are only required to pay 6.25%
sales tax in the state of Illinois because we are an out of state seller. Our office
is headquartered in CITY, STATE with no physical presence in Illinois. We have
a client headquartered in CITY, with offices in Illinois in which we provided
product and services on a one time or minimal basis.
Can you please provide a binding letter for our files?
If there is anything you need, please let us know.
DEPARTMENT’S RESPONSE:
Determinations regarding nexus are very fact specific and cannot be addressed in the
context of a General Information Letter. We believe that nexus determinations are best made
by auditors who are able to conduct the fact-intensive investigation that is required to make
these determinations. However, we can provide you with basic guidelines that may be used to
determine whether a seller would be considered “an Illinois retailer” subject to Retailers’

ST 16-0069-GIL
Page 2

Occupation Tax liability or "a retailer maintaining a place of business in Illinois" subject to Use
Tax collection duties from their Illinois customers.
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
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. See 86 Ill. Adm. Code 270.115.
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. 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 2prong 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).
Another 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

ST 16-0069-GIL
Page 3

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.
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 35 ILCS 105/2(1.1).
Without more detailed information, we are unable to make a determination as to which
specific taxes your client will incur.
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,

Debra M. Boggess
Associate Counsel
DMB:bkl