What does Illinois Private Letter Ruling ST 18-0011-PLR conclude about Agents?

Plain-English summary

This Private Letter Ruling addresses who owes Illinois Retailers' Occupation Tax (ROT) when a company sells goods through an intermediary that looks like the actual seller to the public. The general rule, from 86 Ill. Adm. Code 130.1915, is that when an auctioneer or agent sells on behalf of a known or disclosed principal, the tax is owed by that principal (as long as the principal is itself a retailer of the goods). But when an agent sells for an unknown or undisclosed principal, the agent itself is treated as the owner of the property and is on the hook for the tax.

The taxpayer in this ruling ("COMPANY") sells books and runs "book fair" fundraising events at Illinois PreK-12 schools in partnership with schools and Parent Teacher Organizations (PTOs). COMPANY selects the book titles, sets all prices, supplies and controls the point-of-sale (POS) system, retains title to the books until an end customer buys them at the fair, bears the risk of loss and credit card fraud, and has all credit/debit card payments deposited directly into its own bank account. Every customer receipt is printed with COMPANY's name, not the school's or PTO's. After the fair, the school or PTO remits collected cash and check proceeds to COMPANY, net of a "reward" (books, a gift card, or a cash reduction) that COMPANY provides for hosting the event.

The Department concluded that the school and PTO are acting merely as agents of COMPANY, and that COMPANY is a disclosed principal under 86 Ill. Adm. Code 130.1915(a)(2) because its identity is clearly shown to purchasers on the POS receipts. As the disclosed principal engaged in the business of selling books at retail, COMPANY -- not the school or PTO -- is responsible for remitting Retailers' Occupation Tax on the book sales and for collecting Use Tax from purchasers at the time of sale.

The ruling also addresses where that tax is owed. Applying the local-tax sourcing rules in 86 Ill. Adm. Code 270.115 (adopted after the Illinois Supreme Court's decision in Hartney Fuel Oil Co. v. Hamer), the Department found that COMPANY's selling activity -- the location where its sales personnel have authority to bind it, where the sale is consummated, and where payment is received -- occurs at the book fair itself. As a result, local Retailers' Occupation Tax on book fair sales, including books later shipped to a purchaser because they were out of stock at the fair, is sourced to the location of the book fair.

What this means for you

Vendors running school, PTO, or nonprofit fundraising sales events

If your company supplies the merchandise, sets the prices, controls the POS system, retains title until a retail sale occurs, and receipts are issued in your company's name, the Department will likely treat you -- not the host organization -- as the disclosed principal and retailer responsible for Retailers' Occupation Tax and Use Tax collection, even though volunteers from the host organization physically run the sale. Structure your recordkeeping (receipts, POS branding, invoices) with this in mind, and remember tax is sourced to the physical location of the event, not your headquarters.

Schools, PTOs, and nonprofit organizations hosting fundraisers

Under this ruling's facts, the school/PTO was found to be an agent, not the retailer, so it did not bear the Retailers' Occupation Tax liability itself. But that conclusion depended on specific facts -- who set prices, who held title, whose name appeared on receipts, and where the money flowed. If your organization's arrangement with a vendor differs (for example, if you set prices or receipts are issued in the school's name), the tax responsibility could shift. Also note the ruling's discussion of the separate exemptions available to schools and exclusively charitable/religious/educational organizations selling to their own members or students, or engaging in noncompetitive or occasional sales -- those exceptions are distinct from the agent/principal analysis and turn on their own conditions.

Accountants and tax professionals

The core test is 86 Ill. Adm. Code 130.1915(a)(2): a principal is "disclosed" when clearly identified to purchasers so they can determine who owns the goods being sold. Here, POS receipts bearing COMPANY's name (not the school's) were decisive, along with COMPANY's retention of title, price-setting authority, and direct receipt of card payment proceeds. For multi-jurisdiction sellers, also apply the five sourcing factors under 86 Ill. Adm. Code 270.115(b) (location of sales personnel with binding authority, location of contract acceptance, location of payment, location of inventory, and headquarters) to determine which local taxing jurisdiction's Home Rule County Retailers' Occupation Tax applies.

Common questions

Q: Who is the "seller" responsible for tax at a school book fair like the one described?
A: The Department found that COMPANY, not the school or PTO, is the seller and disclosed principal responsible for Retailers' Occupation Tax, because COMPANY set prices, retained title to the books, controlled the POS system, and receipts were issued in COMPANY's name.

Q: What's the difference between a "known/disclosed" principal and an "unknown/undisclosed" principal for sales tax purposes?
A: Under 86 Ill. Adm. Code 130.1915(a), if an agent or auctioneer sells for a principal whose identity is clearly disclosed to purchasers (so buyers can tell who owns the goods), the principal owes the tax, provided the principal is a retailer of that property. If the principal is unknown or undisclosed, the agent itself is treated as the owner of the property and must remit the tax.

Q: Where is the tax owed -- at COMPANY's headquarters or at the school where the book fair is held?
A: The ruling found that the local Retailers' Occupation Tax is sourced to the book fair's location, because that is where COMPANY's sales personnel had authority to bind it, where sales were consummated, and where payment was tendered and received, applying the sourcing framework in 86 Ill. Adm. Code 270.115 following Hartney Fuel Oil Co. v. Hamer.

Q: Can my organization rely on this ruling if we run a similar book fair or vendor fundraiser?
A: No, not directly. This is a Private Letter Ruling issued under 2 Ill. Adm. Code 1200.110, and it binds the Department only as to the specific taxpayer ("COMPANY") who requested it, and only to the extent the facts recited in the ruling are correct and complete. It also expires after 10 years or sooner if the law or facts change. Other taxpayers -- even those running very similar fundraising arrangements -- cannot rely on this PLR as binding precedent and should request their own ruling or consult a tax professional if their facts differ.

Citations and references

• 35 ILCS 120 (Retailers' Occupation Tax Act)
• 86 Ill. Adm. Code 130.101 (imposition of Retailers' Occupation Tax)
• 86 Ill. Adm. Code 130.1915 (Auctioneers and Agents)
• 86 Ill. Adm. Code 130.2005(a)(1)(E) (education organizations' Retailers' Occupation Tax liability and exceptions)
• 86 Ill. Adm. Code 150.101, 150.130 (Use Tax; credit for Retailers' Occupation Tax paid)
• 86 Ill. Adm. Code 220.115(b), 270.115 (local tax sourcing rules)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130, 376 Ill. Dec. 294 (2013)
• Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316 (1943)

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-18-0011-plr.pdf

Original ruling text

ST 18-0011-PLR 09/28/2018 AGENTS
An auctioneer acting on behalf of an unknown or undisclosed principal is responsible for
Retailers’ Occupation Tax on the gross receipts from the sale. However, if the auctioneer is
acting on behalf of a known or disclosed principal, the sale of tangible personal property is
taxable to the principal and not the auctioneer if the principal is a retailer of the tangible
personal property being sold at the auction. See 86 Ill. Adm. Code 130.1915. (This is a PLR).

September 28, 2018

Dear Xxxxx:
This letter is in response to your letter dated July 20, 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:
I am writing on behalf of COMPANY which would like to request a Private Letter Ruling
Pursuant to Ill. Admin. Code 2 §1200.110 for tax periods MONTH 20XX and forward
based on the facts below.
COMPANY makes the following representations:
COMPANY is not currently under audit and 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 predecessor nor was the same or a similar request
made but withdrawn before a letter ruling was issued. Additionally, a duly executed
power of attorney appointing me to assist them with their request is enclosed.
COMPANY’s address is: ADDRESS.
Statement of Relevant Facts

ST 18-0011-PLR
Page 2

COMPANY is a corporation that sells content and technical solutions to PreK-12
libraries, classrooms and school districts. Recently, COMPANY proposed teaming up
with Illinois schools and their Parent Teacher Organizations (“PTO”), which would host
book fairs as fund raising events for their school. The fair provides the students,
parents and teachers with the opportunity to purchase books from a variety of
publishers selected by COMPANY.
Book Fair Specifics
Prior to the event COMPANY’s Coordinator, a COMPANY employee, will work with the
school and its PTO to help develop a plan for a successful book fair. The Coordinator
will work with the school and PTO to understand certain factors like student ages,
number of students, curriculum offered and the student body’s reading capabilities.
Based on this and other information the Coordinator will select, from a number of predetermined options, a book fair plan that fits a particular school or PTO. The book fair
plan will outline the number and types of books offered, as well as anticipated sales
numbers, which are merely a forecast used for school/PTO planning. Based on the size
of the fair, the school or PTO is allowed to select a certain number of tabletop displays
from several pre-determined or standard modules. The book selection is determined by
COMPANY. The schools cannot customize the title selection, but they can request that
certain titles be added if they provide a list of requested titles at least 12 weeks prior to
the first day of the book fair. The added titles are generally special interest items like
titles that support a summer reading program or titles for an author signing. COMPANY
establishes the price for the products, which COMPANY pre-populates into a point of
sale (“POS”) system. COMPANY provides the POS system to the school for purposes
of recording sales and for processing credit and debit card purchases during the book
fair. Parent volunteers run the book fairs. They receive the books, set up the displays,
refill book inventory as purchases are made and run the POS system. Receipts
generated by the POS system bear COMPANY’s information not that of the school.
COMPANY pays the freight cost to ship the book fair items; books, reusable shipping
containers, displays, and POS system to the school. It also pays the freight to return
the displays, POS system and unsold product in the reusable shipping containers back
to COMPANY’s facility after the fair is over. The end customer can either leave the fair
with the book he wants to buy or if it is out of stock COMPANY will ship the out of stock
books to the school hosting the book fair for subsequent distribution to the end
customer.

COMPANY Risks
COMPANY retains title to the books until the end customer: a student, a parent or a
teacher purchases the books during the fair. Risk of loss remains with COMPANY prior
to the sale to the end customer at the book fair. COMPANY also retains risk of loss on
all inventory returned to its facility at the completion of the fair. COMPANY has credit
risk related to potential credit card fraud, as COMPANY’s POS system processes all
credit card transactions at the fair. All credit and debit card payments processed by
COMPANY’s POS system flow directly into COMPANY’s bank account. Onsite

ST 18-0011-PLR
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payments made by cash or check to the school or the PTO are also recorded through
the POS system. Each end customer, no matter the method of payment, receives a
“COMPANY” POS receipt showing the amount paid upon completion of their order.
After the book fair closes, the school or PTO completes the “closeout” form to select
their reward for hosting the book fair based on sales per the POS system. When the
“closeout” has been completed, COMPANY emails a PDF invoice to the school or PTO,
which details the amount the school or PTO is required to remit to COMPANY, which is
the total of cash and checks collected, net of any cash reward. COMPANY bears the
financial risk in the event a school or PTO fails to pay over sales proceeds from cash or
check transactions made during the course of the fair.
Benefit for Schools and PTO
At the conclusion of the fair, the school or PTO selects the type of “reward” they would
like to receive. The reward is based on the revenue generated by the fair, the fund
raising aspect mentioned above. COMPANY provides three options to the school or
PTO to claim its reward and the school or PTO may allocate the reward as they like
among the three options. The first is “Book Profit” – these are books the school keeps
while the fair is onsite. Since COMPANY is giving away the product, COMPANY selfassesses use tax based on the cost of the product. The second option is a “COMPANY
Gift Card”. The school or PTO may redeem their gift card for product from COMPANY’
“WEBSITE” after the event. The taxability of the products acquired through redemption
of the gift card is dependent upon the school or PTO’s tax status. The third option is a
“Cash Reward”. The “Cash Reward” is generally provided as a reduction in the amount
the school or PTO owes COMPANY for cash or check sales made during the book fair.
In other words, the “Cash Reward” allows the school or PTO to retain a portion of the
cash or check sales proceeds collected during the course of the book fair. In the
instances where the payment due COMPANY at the end of the fair is less than the
amount of the cash reward, COMPANY will send a check to the school or PTO for the
difference. Although the school or PTO host the book fair and provide volunteers to run
the event as a fund raiser, the proceeds, net of any cash reward, are remitted to
COMPANY. The school or PTO benefit through the rewards they earn.
Questions Presented
Who is considered the seller of the books to end users at book fairs held in Illinois – the
school/PTO or COMPANY? If the seller is the school/PTO, are the book sales to the
end user subject to Retailer’s [sic] Occupation Tax? If the seller is COMPANY, are the
book sales to the end user subject to Retailer’s [sic] Occupation Tax? In either case, if
the sales are subject to tax, how is the rate of tax determined?
Illinois Law
Under Section 130.1915, receipts from any sale, when made by an agent who is acting
for a known or disclosed principal, are taxable to the principal, provided the principal is
engaged in the business of selling such tangible personal property at retail. For a sale
to qualify under this subsection (a)(2), the principal must be clearly disclosed to the

ST 18-0011-PLR
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purchasers by the agent so that the purchasers are able to determine who owns the
goods that are being sold.
Under 130.1915(a) every agent, acting for an unknown or undisclosed principal is
deemed to be the owner of the tangible personal property, and upon the sale of such
property to a purchaser for use or consumption, is required to file a return of the receipts
from the sale and to pay to the Department a tax measured by such receipts.
Generally, under Section 130.2005(a)(1)(E) education organizations incur Retailers’
Occupation Tax liability when they engage in selling tangible personal property at retail
except in three situations:
A) The first exception is that the sales by such an organization are not taxable if
they are made to the organization’s members, or to its students in the case of
a school. Examples of sales that come under this exemption are sales of
uniforms, insignia and Scouting equipment by Scout organizations to their
members; sales of Bibles by a church to its members, and sales of choir
robes by a church to the members of the church’s choirs. The selling
organization would incur Retailers’ Occupation Tax liability if it should engage
in selling any of the foregoing items at retail to the public. However, selling of
school books and school supplies by schools at retail to students shall not be
deemed to be “primarily for the purpose of” the school which does such
selling. Consequently, schools incur Retailers’ Occupation Tax liability when
they engage in selling school books or school supplies at retail to their
students or to others.
B) The second exception is that sales by exclusively charitable, religious or
educational organizations are not subject to the Retailers’ Occupation Tax
when it can be said that such selling is noncompetitive with business
establishments. Specific rules have been established for determining that
such selling is noncompetitive, one of which is all of the proceeds must go to
the charity.
C) The third exception is the occasional dinners, socials or other similar activities
which are conducted by exclusively charitable, religious or educational
organizations or institutions are not taxable, whether or not such activities are
open to the public. This exemption does not extend to “occasional” sales, by
exclusively charitable, religious or educational organizations or institutions, of
hats, greeting cards, cookbooks, flag kits and other similar items because
these are not “occasional dinners, socials or similar activities” within the
meaning of the Act, and the selling of these kinds of items at retail even on an
occasional basis does generally place the selling organization in substantial
competition with business establishments.
The Retailers’ Occupation Tax Act, 35 ILCS 120, imposes a tax upon persons engaged
in this State in the business of selling tangible personal property to purchasers for use
or consumption. Finally, under Section 220.115(b)(5) the proper taxing jurisdiction is

ST 18-0011-PLR
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determined by applying the provisions in subsections (b)(1) and (b)(4), a seller incurs
Home Rule County Retailers’ Occupation Tax in the county if its predominant and most
important selling activities take place in the county.
Conclusion
Please provide us your thoughts to the questions presented above. If you need any
additional information to address our questions above, please do not hesitate to contact
me.
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. 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 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 reduce the amount of Use Tax they must remit by the amount of
Retailers' Occupation Tax liability which they are required to and do pay to the Department with
respect to the same sales. See 86 Ill. Adm. Code 150.130.
It is the Department’s position that the school and PTO are acting as agents of COMPANY.
COMPANY selects the books to be offered at the fair, sets the price for the books, provides the POS
system, retains title to the books, and all credit card and debit sales are processed to COMPANY’s
bank account
Subsection (a)(2) of the Department’s regulation, 86 Ill. Adm. Code 130.1915 Auctioneers and
Agents, states:
“The receipts from any such sale, when made by an auctioneer or agent who is acting
for a known or disclosed principal, are taxable to the principal, provided the principal is
engaged in the business of selling such tangible personal property at retail. For a sale
to qualify under this subsection (a)(2), the principal must be clearly disclosed to the
purchasers by the auctioneer or agent so that the purchasers are able to determine who
owns the goods that are being sold.”
Your letter states that “[r]eceipts generated by the POS system bear COMPANY’s information
not that of the school.” Also, “[e]ach end customer, no matter the method of payment, receives a
“COMPANY’s Book Fairs” POS receipt showing the amount paid upon completion of their order.”
The Department finds that COMPANY is a disclosed principal, and the gross receipts are taxable to
COMPANY. COMPANY is responsible for remitting Retailers’ Occupation Tax on the book sales.
COMPANY also is required to collect Use Tax from the purchasers at the time of purchase.
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

ST 18-0011-PLR
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that govern the sourcing of local retailers’ occupation taxes. See, for example, 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)).” 86 Ill. Adm. Code 270.115(b)(2).
A retailer is engaged in the business of selling in only one location for each sale but may be
engaged in the business of selling in different locations for different sales. Taxpayers that divide
selling activities among personnel located in multiple jurisdictions shall consider the following selling
activities to determine where they are engaged in the business of selling with respect to each sale:
A)

Location of sales personnel exercising discretion and authority to solicit customers on
behalf of a seller and to bind the seller to the sale;

B)

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;

C)

Location where payment is tendered and received, or from which invoices are issued
with respect to each sale;

D)

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

E)

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.

Based on a review of your letter, the location of the sales personnel with authority to bind
COMPANY, the location where COMPANY takes action to bind it to the sale, and the location where
payment is tendered and received is the location of the book fair.
“A retailer engaging in three or more primary selling activities in one location in the
State after a particular sale shall remit the retailers' occupation tax imposed by the
taxing bodies with authority to impose retailers' occupation tax on those engaged in the
business of selling in that location.” 86 Ill. Adm. Code 270.115(c)(2).

ST 18-0011-PLR
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The Department finds that tax on sales made at a book fair is determined by the location of the
book fair. This includes sales of books made to purchasers at the book fair and subsequently
shipped to the purchaser.
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

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