What does Illinois General Information Letter ST 18-0015-GIL conclude about Nexus?

Plain-English summary

An out-of-state distributor of garage door parts asked the Illinois Department of Revenue to confirm, in writing, something two Department employees had apparently told them by phone: that they did not need to charge Illinois sales tax, because their customers (garage door manufacturers, distributors, and installers) were not "end users" and the company's one Illinois-based employee (an engineer working from home) did not sell or distribute anything. Because the inquiry required more than pointing to a regulation, the Department responded with a General Information Letter (GIL) rather than a binding Private Letter Ruling — meaning it laid out the applicable law but did not certify the taxpayer's specific fact pattern.

On nexus, the Department walked through the three categories of retailers under Illinois law: (1) an "Illinois Retailer" that sells tangible personal property in Illinois and owes Retailers' Occupation Tax; (2) a retailer "maintaining a place of business" in Illinois (including through certain affiliate or click-through arrangements) that must collect and remit Use Tax; and (3) an out-of-state retailer with insufficient nexus, whose Illinois customers instead owe self-assessed Use Tax directly. The Department cited the Quill physical-presence test and Brown's Furniture for the proposition that any physical presence in Illinois — including an agent or representative who isn't a salesperson — can trigger Use Tax collection duties. The letter left it to the taxpayer to apply these standards to its own facts (including the newly hired Illinois-based engineer), rather than declaring outright that no nexus existed.

On the taxpayer's claim that its customers are "not the end user," the Department pushed back directly: sales to construction contractors (which the letter says includes garage door installers) are treated as sales to end users under Illinois law, because contractors who permanently affix property to real estate incur Use Tax on their purchase cost. So to the extent the distributor sells to installers who install the doors, those sales are not exempt "sales for resale," regardless of the contractor's own customer relationship.

Finally, for any sales that are genuine sales for resale (i.e., to non-contractor purchasers who resell without installing), the Department explained the Certificate of Resale requirements in detail — what the certificate must contain, when a seller can rely on it, and what happens if a valid certificate isn't obtained.

What this means for you

Out-of-state distributors and sellers

Whether you have "nexus" with Illinois isn't just about having a sales office there — any physical presence, including a non-sales employee like an engineer, can matter under Illinois's interpretation of the Quill/Brown's Furniture physical-presence standard. This GIL does not tell the taxpayer whether its specific engineer created nexus; it only supplies the legal framework. If you have any personnel or affiliated marketing arrangements touching Illinois, you need to run the facts through the three-category test (Illinois Retailer, retailer maintaining a place of business, or no-nexus out-of-state retailer) yourself or with counsel.

Sellers to construction contractors

If your Illinois customers are construction contractors, subcontractors, or specialized trade contractors (the letter specifically calls out installers of garage doors), Illinois treats them as end users, not resellers — even if they don't personally consume the product and even if you think of them as a "customer" rather than a "user." That means their purchases from you are subject to Use Tax based on their cost price, and you cannot treat those sales as exempt sales for resale just because a Certificate of Resale might otherwise apply to similar customers.

Anyone relying on resale exemptions

If you do have nexus and sell to genuine resellers, you need a properly completed Certificate of Resale (seller and purchaser name/address, item description, signature and date, and a registration/resale number or an out-of-state purchaser statement) to document the exemption. A valid certificate generally ends the seller's liability if the purchaser later misuses the item; without one, the sale is presumed taxable unless you can otherwise document a resale.

Common questions

Q: Did the Department confirm this distributor doesn't owe Illinois sales tax?
A: No. The letter is a GIL, not a binding ruling, and it does not adopt the taxpayer's conclusion. It sets out the general nexus rules and effectively tells the taxpayer to apply them to its own facts — including whether hiring an Illinois-based engineer creates the kind of physical presence that triggers Use Tax collection duties.

Q: Are sales to construction contractors treated as sales for resale?
A: No. The Department states plainly that construction contractors — including those who install and repair garage doors — are end users for Retailers' Occupation and Use Tax purposes, because they incorporate the property into real estate rather than resell it.

Q: What creates nexus for an out-of-state seller under this letter?
A: Nexus can arise from having a place of business in Illinois, from any agent or representative present in the state (not just salespeople), from repetitive delivery/installation activity, or from certain affiliate/click-through marketing arrangements that exceed $10,000 in referred sales over four quarters.

Q: What do I need to accept a sale as exempt "for resale"?
A: A valid Certificate of Resale under 86 Ill. Adm. Code 130.1405, containing the seller's and purchaser's name and address, a description of the resold items, the purchaser's signature and date, and either a registration/resale number or an out-of-state purchaser statement.

Citations and references

Statutes, regulations, and rules:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposition)
• 86 Ill. Adm. Code 150.101, 150.130, 150.201, 150.801 (Use Tax imposition, credit, and retailer registration)
• 35 ILCS 105/2(1.1), 105/2(1.2) (affiliate and click-through nexus provisions)
• 86 Ill. Adm. Code 130.1940, 130.2075 (construction contractors as end users)
• 86 Ill. Adm. Code 150.310 (credit for tax paid to another state)
• 86 Ill. Adm. Code 130.1405 (Certificate of Resale requirements)

Cases:

• Quill Corp. v. North Dakota, 112 S.Ct. 1904 (1992)
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130
• Brown's Furniture, Inc. v. Zehnder, 171 Ill.2d 410 (1996)
• Performance Mktg. Ass'n, Inc. v. Hamer, 998 N.E.2d 54 (2013)
• Rock Island Tobacco and Specialty Co. v. Illinois Dep't of Revenue, 87 Ill.App.3d 476 (3rd Dist. 1980)

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-18-0015-gil.pdf

Original ruling text

ST 18-0015-GIL 04/13/2018 NEXUS
This letter addresses nexus, construction contractors, and sales for resale. See Quill Corp. v.
North Dakota, 112 S.Ct. 1904 (1992); 86 Ill. Adm. 130.1940; 86 Ill. Adm. Code 130.2075; and
86 Ill. Adm. 130.1405. (This is a GIL.)

April 13, 2018
Dear Xxxxx:
This letter is in response to your letter dated December 28, 2017, 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:
This week, I spoke to PERSON and PERSON1 and I would like formal approval of what
they confirmed and PERSON1 told me to write you to obtain it.
We are a distributor of garage door parts and components to garage door
manufacturers, distributors, and installers. We have distribution centers in CITY (HQ),
CITY1, CITY2, and CITY3 and have a manufacturing facility in CITY4, STATE and
CITY5, STATE1. We do not sell to the end user.
We recently hired (September) an engineer in Illinois but he is not selling or distributing
nor do we have a facility in Illinois. He is working out of his house and just designing.
Based on these facts, are we required to charge sales tax to our customers in Illinois?
Again, our customers are not the end user and our engineer is not selling nor
distributing.
I appreciate your response to this. Both PERSON and PERSON1 stated that we were
not required to charge sales tax. Another individual I talked to (did not get his name)
told me the same thing last week.
Could you please confirm this?
Thank you for your cooperation, understanding, and consideration.

ST 18-0015-GIL
Page 2

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. In Illinois, Use Tax is imposed on the privilege of using, in this State, any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 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.
NEXUS
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.
Another type of retailer is a retailer maintaining a place of business in Illinois. The definition of
a “retailer maintaining a place of business in this State” 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 2-prong 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).
The final 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.

ST 18-0015-GIL
Page 3
Beginning July 1, 2011, the definition of a “retailer maintaining a place of business in this
State” was amended to include additional types of retailers. A retailer maintaining a place of business
in this State 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

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. Please note that in Performance Mktg. Ass'n, Inc. v. Hamer, 998
N.E.2d 54 (2013) the Illinois Supreme Court struck down 35 ILCS 105/2(1.1) and 35 ILCS 110/2(1.1),
a “click-thru nexus provision” enacted in 2011. However, new provisions became effective January 1,
2015. The following provisions address the court’s concerns in Performance Mktg. Ass'n, Inc. v.
Hamer, 998 N.E. 2d 54 (2013).
Beginning January 1, 2015, a retailer maintaining a place of business in this State 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).
CONSTRUCTION CONTRACTORS
Your letter states that you do not sell to the end user. However, if you make sales to
construction contractors in Illinois, you are selling to the end user, because Illinois law treats
construction contractors as end users for Retailers’ Occupation and Use Tax purposes.
A contract that provides for both the sale and installation of tangible personal property that is
permanently affixed or incorporated into a structure is considered a construction contract. The tax
liabilities regarding construction contractors in Illinois may be found at 86 Ill. Adm. Code 130.1940
and 130.2075 on the Department’s website. The term construction contractor includes general

ST 18-0015-GIL
Page 4

contractors, subcontractors, and specialized contractors such as landscape contractors. This would
include persons who install and repair garage doors. In Illinois, construction contractors are deemed
end users of tangible personal property purchased for incorporation into real property. As end users
of such tangible personal property, these contractors incur Use Tax liability for such purchases based
upon their cost price of the tangible personal property. See 86 Ill. Adm. Code 130.1940 and 86 Ill.
Adm. Code 130.2075.
Therefore, any tangible personal property that a construction contractor purchases that he or
she will permanently affix to or incorporate into real property in this State will be subject to Use Tax. If
such contractors did not pay the Use Tax liability to their suppliers, those contractors must register
and self-assess their Use Tax liability and pay it directly to the Department. If the contractors have
already paid a tax in another state regarding the purchase or use of such property, they will be
entitled to a credit against their Illinois Use Tax liability to the extent that they have paid tax that was
properly due to another state. See 86 Ill. Adm. Code 150.310.
With respect to your sales to Illinois construction contractors, you must determine, based on
the information above regarding nexus, whether your company must register with the Illinois
Department of Revenue and collect Use Tax from these customers.
SALE FOR RESALE
With respect to your sales to persons other than construction contractors or other end users in
Illinois, the following is a discussion of the Department’s rule on sales for resale.
If a seller has nexus in Illinois, in order to document the fact that its sale to a purchaser is a
sale for resale, a seller is obligated by Illinois to obtain a valid Certificate of Resale from the
purchaser. See 86 Ill. Adm. Code 130.1405. A Certificate of Resale is a statement signed by the
purchaser that the property purchased by him is purchased for purposes of resale. In addition to the
statement that the property is being purchased for resale, a Certificate of Resale must contain:
1)
2)
3)
4)
5)

The seller's name and address;
The purchaser's name and address;
A description of the items being purchased for resale;
Purchaser's signature, or the signature of an authorized employee or agent of the
purchaser, and date of signing; and
Registration Number, Resale Number, or a statement that the purchaser is an
out-of-State purchaser who will sell only to purchasers located outside the State
of Illinois.

The Department provides a standard form for documenting sales for resale. This form can be
obtained from the Department’s website.
The obligations of a seller with respect to accepting a Certificate of Resale were addressed in
Rock Island Tobacco and Specialty Company v. Illinois Department of Revenue, 87 Ill.App.3d 476,
409 N.E.2d 136, 42 Ill. Dec. 641 (3rd Dist. 1980). The Rock Island court held that when a retailer
obtains a proper Certificate of Resale that contains a registration or resale number that is valid on the
date it is given, the seller’s liability is at an end. If the purchaser uses that item himself or herself (i.e.,
it was not purchased for resale), the Department will proceed against the purchaser, not the seller,

ST 18-0015-GIL
Page 5
provided the above stated conditions are met. The purchaser’s registration or reseller number can be
verified at the Department’s website by clicking on the “Tax registration inquiry” box.
Failure to present an active registration number or resale number and a certification to the
seller that a sale is for resale creates a presumption that a sale is not for resale. This presumption
may be rebutted by other evidence that all of the seller’s sales are sales for resale or that a particular
sale is a sale for resale. For example, other evidence that might be used to document a sale for
resale, when a registration number or resale number and certification to the seller are not provided,
could include an invoice from the purchaser to his customer showing that the item was actually
resold, along with a statement from the purchaser explaining why it had not obtained a resale number
and certifying that the purchase was a purchase for resale in Illinois. The risk run by a seller in
accepting such other documentation and the risk run by purchasers in providing such other
documentation is that an Illinois auditor is more likely to require that more information be provided as
evidence that the particular sale was, in fact, a sale for resale.
In sum, a valid resale certificate must contain all of the information required in 86 Ill. Adm.
Code 130.1405. For your reference, this information is also listed above.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Samuel J. Moore
Associate Counsel

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