What does Illinois Private Letter Ruling ST 18-0010-PLR conclude about Computer Software?

Plain-English summary

This Illinois PLR addresses a narrow but common software-licensing question: for a software license to be exempt from Retailers' Occupation (sales) Tax under 86 Ill. Adm. Code 130.1935(a)(1), the license must be "evidenced by a written agreement signed by the licensor and the customer," among other requirements. Many SaaS and software companies split their contract into two documents -- a short, signed Order Form and a longer, hyperlinked Terms & Conditions Agreement that is never separately signed. The taxpayer here, a digital security software company delivering all products electronically (no tangible media), asked whether its signed Order Form, which incorporates the T&C Agreement by reference, satisfies that written-signature test even though the T&C Agreement itself is unsigned.

The Department agreed with the taxpayer's position. It held that the signed Order Form is the "written agreement" for purposes of Section 130.1935(a)(1)(A), and that the T&C Agreement is validly incorporated into it by reference under Illinois's long-recognized incorporation-by-reference doctrine. Together, the signed Order Form and the incorporated T&C Agreement constitute a written agreement satisfying the requirement -- the T&C Agreement does not need its own separate signature.

The ruling also addressed how the Order Form may be signed. The Department found that four of the taxpayer's five described signing methods satisfy the written-signature requirement: (1) a physical wet-ink signature; (2) a wet-ink signature that is then scanned to PDF; (3) signing via DocuSign; and (5) pasting a digital image of an authorized signature onto the PDF Order Form. The Department could not rule on method (4) -- using a "competing" e-signature product -- because the request did not give enough detail about how that product works. Consistent with prior Department guidance, a "click-through" or "check the box to accept" mechanism does not satisfy the signature requirement, and the taxpayer confirmed it never uses that method.

The Department did not rule on the other four prongs of the five-part exemption test (duplication/use restrictions, anti-sublicensing terms, replacement-copy policy, and end-of-license destruction/return of copies), nor on any SaaS-specific tax treatment -- the taxpayer expressly did not ask about those issues.

What this means for you

Software and SaaS companies

If your sales contract is split between a short signed order form and a longer, separately hosted terms-of-service or subscription agreement, this ruling supports treating the signed order form (properly incorporating the other document by reference) as satisfying the "written agreement signed by licensor and customer" prong of the canned-software license exemption -- provided the order form itself carries a wet, scanned-wet, DocuSign, or pasted-image signature. A bare "I agree" checkbox will not work for the order form or anything else in the chain.

In-house counsel and contract-ops teams

The Department's list of acceptable signing methods is useful as a compliance checklist when designing an e-signature workflow for software order forms: wet signature, scan-to-PDF of a wet signature, DocuSign, and pasted signature images were all approved; a "competing" e-signature product was left undecided for lack of detail; and click-through acceptance remains unacceptable. If you use a different e-signature platform, expect the Department to want specifics about how that platform captures, verifies, and authenticates the signature before it will bless the method.

Accountants and tax professionals

Remember that only the four accepted signing methods and the incorporation-by-reference conclusion are addressed here -- the Department did not rule on the other four prongs of the 130.1935(a)(1) test (duplication/use restrictions, anti-sublicense terms, replacement-copy policy, and return/destruction of copies at license end). All five prongs must independently be met for a software license to be exempt.

Common questions

Q: Can I rely on this ruling for my own company's software contracts?
A: No, not directly. This is a Private Letter Ruling under 2 Ill. Adm. Code 1200.110 -- it binds the Department only as to the specific taxpayer who requested it, and only to the extent that taxpayer's facts were complete and accurate. Other taxpayers cannot rely on it, though it does show how the Department reasons through similar fact patterns.

Q: Does a "click-to-accept" or "check the box" agreement ever satisfy the written-signature requirement?
A: No. The ruling reiterates the Department's long-standing position that click-through or shrink-wrap acceptance does not constitute a written agreement signed by the licensor and customer under 86 Ill. Adm. Code 130.1935(a)(1)(A).

Q: Does the Terms & Conditions Agreement itself need to be signed?
A: Not according to this ruling, as long as it is validly incorporated by reference into a properly signed Order Form that describes the T&C Agreement with sufficient specificity and shows the parties' intent to be bound by it.

Q: Did the Department decide whether the taxpayer's whole license arrangement is tax-exempt?
A: No. The Department only addressed the first prong of the five-part exemption test (the written-signature requirement) and the acceptability of specific signing methods. It did not rule on the other four prongs of 86 Ill. Adm. Code 130.1935(a)(1), and the taxpayer did not ask the Department to address the tax treatment of SaaS sales generally.

Citations and references

Statutes and rules:

• 35 ILCS 120/2-25 (statutory definition of "computer software")
• 86 Ill. Adm. Code 130.1935 (canned computer software; license exemption criteria)
• 86 Ill. Adm. Code 130.1935(a)(1)(A)-(E) (five-part written-agreement/license exemption test)
• 2 Ill. Adm. Code 1200.110 (PLR procedure, binding effect limited to the requesting taxpayer)
• 2 Ill. Adm. Code 1200.120 (General Information Letters are non-binding)

Related Department guidance discussed in this ruling:

• ST 12-0011-GIL (02/29/2012) -- checkbox acceptance is not a signed written agreement
• ST 13-0049-GIL (09/11/2013) -- electronic signatures can satisfy the written-signature requirement
• ST 16-0038-GIL (08/18/2016) -- shrink-wrap/click-through agreements do not satisfy the requirement
• ST 95-0222-GIL (05/25/1995) -- a bona fide written agreement signed by both parties meets the requirement
• ST 07-0035-GIL (05/21/2007) -- signed supplementary forms do not help if the enforceable license itself is unsigned
• ST 06-0005-PLR (12/16/2006) -- an electronic signature that did not meet the statutory standard did not satisfy the requirement
• ST 18-0003-PLR (02/08/2018) -- verifiable, authenticable electronic signatures can satisfy the requirement; checkbox acceptance still does not
• International Star Registry of Illinois v. Omnipoint Marketing, LLC, 2006 WL 2598056 (N.D. Ill. 2006) -- incorporation by reference of hyperlinked terms can be enforceable

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0010-plr.pdf

Original ruling text

ST 18-0010-PLR 09/26/2018

COMPUTER SOFTWARE

This letter discusses the requirement in Section 130.1935(a)(1) regarding a written “signed”
agreement. See 86 Ill. Adm. Code 130.1945(a)(1). (This is a PLR.)

September 26, 2018

Re:

Request for Private Letter Ruling

Dear Xxxx:
This letter is in response to your letter dated June 14, 2018, 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.
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:
On behalf of our client, COMPANY (“Company”), and at the request of the Illinois
Department of Revenue (“Department”), we are re-submitting this request for a letter
ruling from the Department. This submission is revised to provide additional detail
regarding the process by which the Company and its customers sign contracts.
I.

Statement Relating to Request

Pursuant to Ill. Admin. Code 2 §1200.110(b), the Company makes the following
representations:
•

To the best of the Company’s or its representative’s knowledge, the Department
has not previously ruled on the same or similar issue for the taxpayer or a

ST 18-0010-PLR
Page 2
predecessor or the same or similar issue was requested but withdrawn before a
letter ruling was issued.
•

A signature of the taxpayer’s representative, and a duly executed power of
attorney in favor of the representative is enclosed.

•

Taxpayer’s identifying information is set out as follows:
COMPANY NAME
STREET ADDRESS
CITY, STATE ZIP CODE
FEIN: ##########

II.

Statement of Relevant Facts
•

The Company is a Delaware C-corporation, headquartered in CITY, STATE.

•

The Company is in the business of providing digital enterprise security solutions
by constantly monitoring, securing, authenticating and verifying as trusted all
users and their various devices. To accomplish this, the Company secures
access by employing adaptive and dynamic software that can instantly respond
to changes in user behavior and context. The Company achieves this using both
hosted (software-as-a-service) and on- premise software products. It also
provides implementation services and conducts customer training (a majority of
which are done remotely).

•

The Company does not provide any of its software products and services through
a tangible medium.
All software products and services are delivered
electronically.

•

The Company has customers located in the State of Illinois (“Customer”).

•

To enter into a contract with the Company for the Company’s products/services,
the Customer must sign a Subscription Order Form (“Order Form”).

•

The process of signing the Order Form is as follows:
o Once prepared, the Company and the Customer must sign the Order Form.
o The Company predominantly uses DocuSign software to electronically sign
various contracts, including Order Forms.
▪

1

See: https://www.WEBSITE

DocuSign software is a 3rd party electronic signature and digital
transaction management tool that can be used to replace manual, paperbased transactions and processes.1

ST 18-0010-PLR
Page 3
▪

An electronic signature, or eSignature, as defined by the Federal ESIGN
Act, is an “electronic sound, symbol or process, attached to or logically
associated with a contract or other record and executed or adopted by a
person with the intent to sign the record” (ESIGN). All 50 states have laws
that define electronic signatures in substantially the same way. 2

o Customers have several options to sign the Order Form. They may either:
▪

Physically sign the Order Form (i.e., wet signature). This rarely occurs.

▪

Physically sign the order Form (i.e., wet signature), and then digitize the
entire Order Form, including signature, by scanning and converting it to a
Portable Document Format (“PDF”) file.

▪

Use DocuSign to sign the Order Form,

▪

Use a competing software product to electronically sign the Order Form,
or

▪

Digitally sign the Order Form by pasting a digital image of the signature of
an authorized representative of the Customer onto the PDF Order Form
file, then saving said file with the image of the signature embedded into
the Order Form.

o Under no circumstances is a “click-through” signature used by the Company or
its Customers. Digital or electronic signature are always obtained on the Order
Form.
•

The Order Form contains the following information (two Order Form examples
are enclosed as Attachment A):
o Information identifying both the Company and the Customer.
o Detailed description of the products/licenses,
quantities, and associated/itemized costs.

subscription

terms,

o Limited terms and conditions, including a hyperlink to the complete
Subscription Agreement (“T&C’s Agreement”).
o The Order Form is signed by both Company and Customer
representatives, either in ink or electronically (actual signatures, as
contrasted to check-box signatures).
•

2

The Order Form does not contain the full and complete terms of the software
licensing Agreement. The full terms and conditions are contained in the T&C

https://www.WEBSITE

ST 18-0010-PLR
Page 4
Agreement that are accessible by clicking on a hyperlink contained on the Order
Form.
•

The hyperlinked T&C Agreement (redacted T&C Agreement enclosed as
Attachment B) contains the full licensing subscription agreement between the
contracting parties, including:
o A comprehensive definition section;
o General terms and conditions, such as provision of service, license grant,
developer licenses, delivery, installation and acceptance of software, order
forms, resellers, supplemental terms;
o Responsibilities for service, such as customer responsibilities and
Company responsibilities;
o Fees and payment terms;
o Confidentiality terms;
o Proprietary right terms;
o Warranties and disclaimers terms;
o Indemnification terms;
o Limitations of Liability terms;
o Termination terms; and
o Other general provisions.

III.

Question Presented

Does the Company’s signed Order Form and accompanying licensing T&C Agreement
satisfy the first prong of the Illinois five-part test as prescribed by Ill. Admin. Code 86 §
130.1935(a)(1)(A)? The Company is not requesting the Departments ruling on prongs
two through five of the Ill. Admin. Code 86 §130.1935(a)(1).
Additionally, the Company is not requesting the Department to examine the
ramifications of sales of SaaS.

IV.

Company’s Position

The Company’s position is that the executed Order Form creates the written contract, a
binding agreement between the contracting parties. The T&C Agreement is, 1) not
required to be signed because a contract is formed when the Order Form is executed,

ST 18-0010-PLR
Page 5
and 2) the T&C Agreement is incorporated by reference into the contract as a whole.
Therefore, an unsigned T&C Agreement does not control the validity of the contract
created by the Order Form.
V.

Illinois Law
a. Sale of License of Computer Software
“Computer software” means all types of software including operational,
applicational, utilities, compliers, templates, shells and all other forms.3
Generally, sales of “canned” computer software are taxable retail sales in Illinois.
Sales of canned software are taxable regardless of the means of delivery. For
instance, the transfer or sale of canned computer software downloaded
electronically would be taxable. However, a license of software is not a taxable
retail sale if all of the following conditions are met:
•

The license is evidenced by a written agreement signed by the licensor
and the customer;4

•

The license restricts the customer’s duplication and use of the software;5

•

The license bars the customer from licensing, sublicensing, or transferring
the software to a third party (except a related party) without the permission
and continued control of the licensor;6

•

The licensor has a policy of providing another copy at minimal or no
charge if the customer loses or damages the software of permitting the
licensee to make and keep an archival copy;7 and

•

The customer must destroy or return all copies of the software to the
vendor at the end of the license period.8

It is very common for software to be licensed over the Internet and for a customer to
“check a box” that states that he or she accepts the license terms. The Department has
repeatedly held that acceptance in this manner does not constitute a written agreement
signed by the licensor and the customer for purposes of Ill. Admin. Code 86 §
130.1935(a)(1)(A). According to the Department, to meet the signature requirement for
an exempt software license, the agreement must contain the written signature of the
licensor and customer.9 The written signature can be made in either ink or
electronically.10
3

Ill. Admin. Code 86 § 130.1935(a).
Ill. Admin. Code 86 § 130.1935(a)(1)(A).
5
Ill. Admin. Code 86 § 130.1935(a)(1)(B).
6
Ill. Admin. Code 86 § 130.1935(a)(1)(C).
7
Ill. Admin. Code 86 § 130.1935(a)(1)(D).
8
Ill. Admin. Code 86 § 130.1935(a)(1)(E).
9
Illinois Dept. of Rev. General Information Letter No. ST 12-0011-GIL, 02/29/2012.
10
See: Ill. General Information Letter ST 13-0049 GIL (09/11/2013)
4

ST 18-0010-PLR
Page 6

b. The Doctrine of Incorporation by Reference
The legal doctrine of “incorporation by reference” is a method of making a
secondary document part of a primary document by including in the primary
document a statement that the secondary document should be treated as if it
were contained within the primary one.11 Most attorneys are familiar with the
incorporation by reference doctrine, and there is case law from virtually every
state upholding its application. It is often used, and in many different legal
contexts, such as in creating laws, in drafting contracts, and in trust and estate
law.
Historically, the State of Illinois has recognized the doctrine of incorporation by
reference in several contexts, including wills, trusts, estates, contract law and
even in its own legislation.12
VI.

Authorities in Support of Requested Ruling

We have reviewed all relevant Illinois tax statutes, regulations and administrative
opinions issued by the Department but were unable to locate authority directly on point.
However, the following cited authority supports the position advocated by the Company.
VII.

Authorities Contrary to Requested Ruling

We have reviewed all relevant Illinois tax statutes, regulations, and administrative
opinions issued by the Department but were unable to locate authority directly
challenging the validity of a signed software licensing agreement.
VIII.

Discussion/Analysis

The Department has stated on numerous occasions that software licensed over the
Internet requiring the customer to check a box that states he or she accepts the license
terms or a “shrink wrap” licensing agreement does not constitute a written agreement
signed by the licensor and the customer for purposes of 86 Ill. Admin. Code
130.1935(a)(1)(A).13 To meet the signature requirement for an exempt software license,
the agreement must contain the written signature of the licensor and customer. 14 To
satisfy the “written signature” requirement the signature must be with an ink signature or
an electronic signature.15
As discussed above, the Company and its Customers use electronic or digital
signatures to execute the Order Forms. ‘Shrink-wrap’ or ‘click-through’ agreements are
not used in any circumstance. For purposes of this analysis, the Company and
Black’s Law Dictionary 126 (9th ed. 2009)
See: In Re Estate of Meskimen, 39 Ill. 2d 415 (1968); 5 ILCS 100/5-75 of the Illinois Administrative Procedure Act.
13
Illinois Dept. of Rev. General Information Letter ST 16-0038-GIL, 08/18/2016.
14
See Ill. Gen. Info. Letter No. ST 12-0011-GIL (2/29/12).
15
Ill. General Information Letter ST 13-0049 GIL (09/11/2013).
11
12

ST 18-0010-PLR
Page 7
Customer’s use of either Docusign, software or any of the other above-mentioned
methods of electronically/digitally signing the Order Form are consistent with the
Departments ruling in Il. General Information Letter ST 13-0049 GIL (09/11/2013), and
should fall squarely within the requirements of 86 Ill. Admin. Code 130.1935(a)(1)(A).
However, neither the Department nor Illinois courts have examined the issue at hand –
if multiple documents encompassing the entire licensing agreement are used, which
one of those documents must contain the written signature in order for §
130.1935(a)(1)(A) to be satisfied?
As discussed in the facts above, the Company uses two documents which, in
combination, encompass the full software licensing contract. The signed Order Form
incorporates by reference the T&C Agreement. Without a signature by both parties on
the Order Form, there is no valid contract and therefore no licensing agreement.
Specifically, the Order Form states that,
“Customer’s use of such products is subject to the subscription agreement
located at: www.WEBSITE”
The T&C Agreement contains the following clause, found at Section 2.8:
“Order Forms. Customer and its Affiliates may place orders under this
Agreement by executing Order Form(s). When an Affiliate of Customer signs an
Order Form under this Agreement, the Affiliate shall be considered the Customer
for purposes of such Order Form and shall be bound by the terms and conditions
of this Agreement.” [emphasis added].
Therefore, the Order Form creates the contract, not the T&C Agreement. But, both
forms taken together encompass the entirety of the contract.
a. The signed Order Form is a “written agreement” because it
imposes the terms and conditions of the Agreement on the
Customer.
The Order Form should be deemed the “written agreement” for purposes of the first
requirement of 86 Ill. Admin. Code § 130.1935(a)(1)(A), and when signed by both the
Company and Customer, it creates a binding software licensing agreement.
In ST 95-0222-GIL, the Department wrote that,
“To the extent that the licensor and licensee enter into a bonafide agreement that is in
writing and signed by both parties, the requirement of § 130.1935(a)(1)(A) is met.”16
[emphasis added]

16

Illinois Dept. of Rev. General Information Letter ST 95-0222-GIL, 05/25/1995.

ST 18-0010-PLR
Page 8
The signed Order Form is, in the words of the Department, a “bonafide agreement”
between the Company as licensor and Customer as licensee, and it therefore meets the
requirements of §130.1935(a)(1)(A)
In ST 07-0035-GIL, the Department focused on the enforceability of the licensing
agreement and wrote the following,
“If the agreement for the licensing is enforceable without the written
signature of the licensor and the customer, then we believe that the
signing of the Agreement Profile or Purchase Order attached to your letter
would not meet the requirements of 86 Ill. Adm. Code
§130.1935(a)(1)(A).17”
Here, the Department states that if the licensing agreement is enforceable without a
signature, then obtaining written signatures on the supplementary/secondary forms,
such as an agreement profile, or a purchase order, will not meet the Departments
criteria for a “written signature.” Presumably, this is because the enforceable licensing
agreement itself was not signed by the licensor and licensee. However, the Company’s
facts are the reverse of the facts in GIL ST 07-0035-GIL. In the case of the Company,
the Order Form is the licensing agreement, and is enforceable only if signed by both
parties. The additional T&C Agreement is the supplementary document. Therefore, the
written signatures on the Order Form are sufficient to meet the requirements of §
130.1935(a)(1)(A) even though the T&C Agreement itself is not signed.
b. The Doctrine of incorporation by reference necessitates that we
treat the Order Form and the Agreement as a single document.
As discussed above, Illinois has long accepted and employed the doctrine of
incorporation by reference. Specifically, in 2006, the court in the Northern District of
Illinois examined the sufficiency of a signed paper contract, which incorporated by
reference a document containing terms and conditions.18 The case, International Star
Registry, concerned a disputed paper contract, which stated:
“…by my signature below, I certify that I have read and agree to the
provisions set forth in this invoice and to the terms and conditions posted
at www.WEBSITE.”
The court found a choice of venue clause in the website’s terms of sale to be
enforceable. The clause was contained in a page displaying three hyperlinks, all of
which were found by the court to be incorporated by reference. The court found these
to be enforceable because the external documents were described with the requisite
specificity, and the parties’ intent to be bound by the terms and clearly expressed.
Just as the Illinois District Court found the hyperlinked terms and conditions enforceable
due to their incorporation by reference in International Star Registry, it would likely find
the hyperlinked T&C Agreement used by the Company to be incorporated by reference
17
18

Illinois Dept. of Rev. General Information Letter ST 07-0035-GIL, 05/21/2007.
International Star Registry of Illinois v. Omnipoint Marketing, LLC, 2006 WL 2598056 (N. D. Ill. 2006).

ST 18-0010-PLR
Page 9
as well. The Order Form, as the primary/external document, describing with the
requisite specificity the parties intent to be bound by the T&C Agreement, as the
secondary document.
Therefore, because the T&C Agreement should be deemed incorporated by reference
into the Order Form, which is signed by both parties, the two documents, in
combination, should meet the requirements of § 130.1935(a)(1)(A).
IX.

Conclusion

In conclusion, the Company’s contract, represented by the Order Form and the T&C
Agreement, should satisfy §130.1935(a)(1)(A) and be deemed a valid written agreement
because of the operation of the doctrine of incorporation by reference and because the
signed Order Form creates the contract, no [sic] the supplementary T&C Agreement.
DEPARTMENT’S RESPONSE:
“‘Computer software’ means a set of statements, data, or instructions to be used directly or
indirectly in a computer in order to bring about a certain result in any form in which those statements,
data, or instructions may be embodied, transmitted, or fixed, by any method now known or hereafter
developed, regardless of whether the statements, data, or instructions are capable of being perceived
by or communicated to humans, and includes prewritten or canned software.” 35 ILCS 120/2-25.
Generally, sales of “canned” computer software are taxable retail sales in Illinois. Canned computer
software is considered to be tangible personal property regardless of the form in which it is
transferred or transmitted, including tape, disc, card, electronic means, or other media. 86 Ill. Adm.
Code 130.1935. However, if the computer software consists of custom computer programs, then the
sales of such software may not be taxable retail sales. Custom computer programs or software are
prepared to the special order of the customer. The selection of pre-written or canned programs
assembled by vendors into software packages does not constitute custom software unless real and
substantial changes are made to the programs or creation of program interfacing logic. See 86 Ill.
Adm. Code 130.1935(c)(3). Computer software that is not custom software is considered to be
canned computer software.
If transactions for the licensing of computer software meet all of the criteria provided in Section
130.1935(a)(1), neither the transfer of the software nor the subsequent software updates will be
subject to Retailers' Occupation Tax. A license of software is not a taxable retail sale if:
A)

It is evidenced by a written agreement signed by the licensor and the customer;

B)

It restricts the customer’s duplication and use of the software;

C)

It prohibits the customer from licensing, sublicensing or transferring the software to a
third party (except to a related party) without the permission and continued control of the
licensor;

D)

The licensor has a policy of providing another copy at minimal or no charge if the
customer loses or damages the software, or permitting the licensee to make and keep

ST 18-0010-PLR
Page 10
an archival copy, and such policy is either stated in the license agreement, supported by
the licensor’s books and records, or supported by a notarized statement made under
penalties of perjury by the licensor; and
E)

The customer must destroy or return all copies of the software to the licensor at the end
of the license period. This provision is deemed to be met, in the case of a perpetual
license, without being set forth in the license agreement.

If a license of canned computer software does not meet all the criteria the software is taxable.
In order to comply with the requirements as set out in Section 130.1935(a)(1), there must be a
written “signed” agreement. A license agreement in which the customer electronically accepts the
terms by clicking “I agree” does not comply with the requirement of a written agreement signed by the
licensor and customer. The Department previously held that an electronic signature did not comply
with the requirement of Section 130.1935(a)(1)(A) that the license be evidenced by a written
agreement signed by the licensor and the customer. ST 06-0005-PLR (December 16, 2006). In ST
18-0003-PLR (February 8, 2018), the Department decided that an electronic license agreement in
which the customer accepts the license by means of a signature in electronic form that is attached to
or is part of the license, is verifiable, and can be authenticated will comply with the requirement of a
written agreement signed by the licensor and customer. A license agreement in which the customer
electronically accepts the terms by clicking “I agree” remains unacceptable.
The Department also stated in ST 18-0003-PLR that whenever an order form incorporates
terms and conditions from another document, the Department will review the order form and the
document that is incorporated by the order form to determine if all the requirements of Section
130.1935(a)(1) have been met. The Department found, however, that the information provided in the
request describing the nature of the electronic signature was insufficient for the Department to
determine whether the order form along with the subscription agreement met the requirements of
Section 130.1935(a)(1) that there be a written “signed” agreement.
In your letter you describe 5 methods of executing the order form.
1.

Physically sign the Order Form (i.e., wet signature).

2.

Physically sign the order Form (i.e., wet signature), and then digitize the entire Order
Form, including signature, by scanning and converting it to a Portable Document Format
(“PDF”) file.

3.

Use DocuSign to sign the Order Form,

4.

Use a competing software product to electronically sign the Order Form, or

5.

Digitally sign the Order Form by pasting a digital image of the signature of an authorized
representative of the Customer onto the PDF Order Form file, then saving said file with
the image of the signature embedded into the Order Form.

The Department finds that methods 1, 2, 3 and 5 meet the requirement for a written signed
agreement for purposes of Section 130.1935(a)(1)(A). The Department has insufficient information

ST 18-0010-PLR
Page 11
on the software products that compete with DocuSign to determine whether method 4 meets the
requirement of Section 130.1915(a)(1)(A).
The Department finds that the Order Form signed using one of the four acceptable methods
will meet the requirements of Section 130.1935(a)(1)(A). In addition, the Department finds that the
signed Order Form and the T & C’s Agreement that is incorporated into the Order Form constitute a
written agreement under Section 130.1935 for the purpose of determining if all the requirements of
Section 130.1935(a)(1) have been met.
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 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:bkl