What does Illinois General Information Letter ST 19-0005-GIL conclude about Nexus?

Plain-English summary

A tax-law publisher sent Illinois a multistate SURVEY questionnaire asking the Department of Revenue to fill in a detailed form about the state's sales-tax nexus rules -- physical vs. economic nexus standards, which activities create nexus, marketplace-facilitator collection duties, and how local sales taxes are administered -- so Illinois's answers could be published alongside every other state's.

The Department declined to complete the survey in the format provided, explaining that nexus determinations "are very fact specific and cannot be addressed in the context of a General Information Letter." Instead, it volunteered a general summary of Illinois nexus law as it stood in February 2019:

• "Illinois Retailer" (physical-presence nexus): A seller that makes sales of tangible personal property in Illinois owes Retailers' Occupation Tax and must collect Use Tax from its customers. Physical-presence nexus can be established by "more than the slightest" physical presence in the state, per the Illinois Supreme Court's 1996 Brown's Furniture v. Wagner decision, building on the U.S. Supreme Court's older Scripto, National Bellas Hess, and Quill line of cases.
• "Wayfair nexus" (economic nexus): Following South Dakota v. Wayfair, Inc. (2018), which abrogated Quill's physical-presence rule, Illinois Public Act 100-587 requires an out-of-state remote retailer with no physical presence in Illinois to register and collect/remit Use Tax, effective October 1, 2018, if it has either $100,000 or more in cumulative gross receipts from Illinois sales or 200 or more separate Illinois transactions, tested quarterly over the preceding 12-month period. Once a retailer crosses the threshold, it must collect for a full year before re-testing. Sales for resale don't count toward the threshold, and a retailer making exclusively nontaxable sales isn't subject to Wayfair nexus at all -- but a retailer with any taxable sales must count all of its sales (other than resales) toward the threshold.
• Marketplace facilitators: As of this letter, "Illinois does not have a specific statute or rules regarding third-party marketplace facilitators," so marketplace facilitators generally were not required to collect and remit sales tax on behalf of out-of-state sellers using their platforms. (Illinois has since enacted its own marketplace-facilitator law; this GIL predates that statute and does not describe it.)
• Local sales tax: The Department itself administers home-rule municipal Retailers'/Service Occupation Taxes and audits state and local sales tax together, but Illinois generally does not authorize local use taxes on general merchandise, so those audits exclude local use tax on general merchandise.

What this means for you

Out-of-state and remote sellers

If you have no physical presence in Illinois, watch your Illinois sales volume: once you hit $100,000 in cumulative gross receipts or 200 separate transactions into Illinois in a trailing 12-month period (tested each quarter-end), you must register and collect Illinois Use Tax, and you must keep collecting for a full year even if your sales later drop below the threshold. Resales don't count toward the threshold, but if you make any taxable sales into Illinois, your nontaxable sales (other than resales) count too.

E-commerce businesses using marketplaces

As of this February 2019 letter, Illinois had no marketplace-facilitator statute, so a facilitator's own nexus with Illinois did not by itself create nexus for sellers using its platform, and facilitators were not required to collect tax for third-party sellers. This has changed since 2019 -- Illinois has since adopted marketplace-facilitator rules -- so don't rely on this GIL for the current marketplace-facilitator picture; check current Illinois law separately.

Accountants advising multistate sellers

This letter is a useful plain-English recap of Illinois's post-Wayfair nexus framework (economic nexus thresholds, the interaction between physical and economic nexus, and the resale/nontaxable-sales carve-outs), but it is a General Information Letter, not a Private Letter Ruling -- it is not binding on the Department and does not resolve any specific client's fact pattern. For a specific client, consider a PLR request under 2 Ill. Adm. Code 1200.110 or current Department regulations directly.

Common questions

Q: Why didn't Illinois just answer the survey?
A: The Department said nexus questions are too fact-specific to answer in the abstract, general format of a survey, and a GIL can only point to general regulations and guidelines rather than resolve specific facts.

Q: What are the Wayfair economic nexus thresholds in Illinois?
A: $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate transactions into Illinois, measured over the preceding 12-month period and tested quarterly (end of March, June, September, December), effective October 1, 2018.

Q: Do sales for resale count toward the threshold?
A: No. Sales for resale are excluded from the Wayfair nexus threshold count.

Q: Were marketplace facilitators required to collect Illinois sales tax as of this letter?
A: No. As of February 2019, Illinois had no marketplace-facilitator statute or rules, so facilitators generally were not required to collect and remit tax on behalf of out-of-state sellers on their platforms. This GIL does not reflect any later Illinois marketplace-facilitator law.

Q: Does Illinois have a local use tax on general merchandise?
A: No. Illinois generally does not authorize local use taxes on general merchandise, even though the Department does administer and audit local Retailers'/Service Occupation Tax (sales tax) alongside the state tax.

Citations and references

Statutes, regulations, and cases:

• 35 ILCS 105/2 (definition of "retailer maintaining a place of business in this State")
• 86 Ill. Adm. Code 150.201, 150.801, 150.802, 150.803 (Use Tax registration and Wayfair/economic nexus threshold)
• 86 Ill. Adm. Code 270.115 (selling activities triggering Retailers' Occupation Tax)
• 86 Ill. Adm. Code 150.101 et seq., 160.101 et seq. (Service Occupation/Use Tax)
• 65 ILCS 5/8-11-1, 65 ILCS 5/8-11-5 (Home Rule Municipal Retailers'/Service Occupation Tax)
• Illinois Public Act 100-587 (effective October 1, 2018)
• South Dakota v. Wayfair, Inc., 585 U.S. ___, 138 S. Ct. 2080 (2018)
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130
• Brown's Furniture v. Wagner, 171 Ill.2d 410 (1996)
• Quill Corp. v. North Dakota, 504 U.S. 298 (1992)
• National Bellas Hess v. Dept. of Revenue, 386 U.S. 753 (1967)
• Scripto v. Carson, 362 U.S. 207 (1960)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0005-gil.pdf

Original ruling text

ST 19-0005-GIL 02/28/2019 NEXUS
This letter responds to a questionnaire regarding nexus. See South Dakota v. Wayfair, Inc.,
138 S. Ct. 2080 (2018). This is a GIL

February 28, 2019

Dear Xxxx:
This letter is in response to your email dated November 16, 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.
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 writing to ask you to complete the questionnaires for the 2019 SURVEY on
behalf of your state. Attached is an Excel spreadsheet containing the questions for
2019. One column of the spreadsheet has all of your state’s responses for 2018. An
adjacent column is there for you to record your responses for 2019. To avoid any
errors, please fill out the 2019 column even if the answer has not changed from 2018.
Additionally, we ask that you note where you have intentionally left questions blank. We
are required to follow-up regarding any unanswered questions; and making note of
intentionally unanswered questions allows us to process and analyze the data faster.
This can be accomplished by typing “blank” or “no response” in the answer column or
simply noting in your email that questions were left blank intentionally.
The survey covers many of the gray areas of state tax law. Your responses will provide
useful guidance for taxpayers in complying with your state’s laws.
The questionnaires should be completed based on state law as of January 1,
2019.
If you would like to add or change information you have previously recorded in the
comments section, please make those modifications in red font.
Some new questions have been added to this year’s questionnaires.
questions and subsections are denoted in blue font.

The new

ST 19-0005-GIL
Page 2

Please return your questionnaires to us by January 31, 2019. Your completed
Excel spreadsheets should be e-mailed to me at [email protected].
Your responses, along with the responses we receive from other states, will be
published by COMPANY, a leading publisher of international, federal, and state tax
analysis. More information about COMPANY can be found at www.XXX.com.
If you have any questions about this or if there is any way I can help you to complete
this year’s questionnaires, please contact me.
In your questionnaire, you have stated, in part, as follows:
Section XII. Sales Tax Policies
A.
B.
C.

Please identify any statute, regulation, or administrative pronouncement
that sets forth your state’s sales tax nexus policy.
Adherence to the Physical Presence and/or Economic Presence Nexus
Standards
Economic Nexus: Sales Threshold (new for 2019)

C. Economic Nexus: Sales Threshold (New for 2019)

2018
2019
Response Response

Please answer "Yes" or "No" to the questions below. If your response to question 2 in Part
B of Section XII, above, is "No," please answer "Not Applicable."

1. Your state calculates whether or not the economic nexus threshold has been met
   based on sales made:
   a. in the current calendar year
   NEW
   b. in the previous calendar year
   NEW
   c. in the immediately preceding 12-month period
   NEW
   d. in the immediately preceding four quarters
   NEW
   e. over a different period of time
   NEW
   If your answer to question 1.e is "yes," please explain:

2. Your state counts the following type of transaction when determining whether or not an
   out-of-state corporation has nexus with your state:
   a. wholesale sales (i.e., sales for resale) delivered into your
   NEW
   state
   b. tax-exempt sales of tangible personal property delivered
   NEW
   into your state (e.g., only sales of exempt medical products)
   c. sales of services delivered into or sourced to your state
   NEW
   d. sales of items delivered electronically into your state
   NEW
   e. sales of intangible personal property delivered into your
   NEW
   state
   D.
   E.

Nexus Enforcement Policies
Sourcing and Method of Delivery

ST 19-0005-GIL
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F.
Sharing Economy and Marketplace Facilitator Transactions
F. Sharing Economy and Marketplace Facilitator
2018
2019
Transactions
Response Response

9. Does your state require third-party marketplace facilitators
   to collect and remit sales tax on sales made by out-of-state
   NEW
   corporations using their platforms?
10. If a third-party marketplace facilitator is required to collect
    and remit sales tax for all sales they facilitate that are
    NEW
    delivered into your state, is the marketplace seller relieved of
    liability for the tax?

Section XIII. Sales Tax Nexus Creating Activities
Please indicate “Yes” or “No” to show whether each of the following activities or
relationships performed by an out-of-state corporation would, by itself, create
substantial nexus with your state for purposes of triggering the imposition of sales tax
collection requirements on the out-of-state corporation. When determining whether the
listed activity/relationship would create substantial nexus, assume that each item is the
only activity/relationship the out-of-state corporation has in your state. Also assume that
the out-of-state corporation has no property or employees located in your state.
A “Yes” response means that an out-of-state corporation's performance of the listed
activity/relationship would, by itself, create substantial nexus and trigger the imposition
of sales tax collection requirements on the out-of-state corporation. A “No” response
means that an out-of-state corporation's performance of the listed activity/relationship
would not, by itself, trigger nexus for purposes of your state's sales tax.
For the questions that you believe require more than a “Yes” or “No” answer, please set
forth in the comments section the factors that your state would consider in making a
nexus determination.
A.

General Activities

2018
2019
Response Response

7. stores inventory in your state.
   NEW
8. at least one employee telecommutes from a home located
   in your state and performs back-office administrative
   business functions, such as payroll, accounting, or IT
   NEW
   assistance, as opposed to direct customer service or other
   activities directly related to the employer's commercial
   business activities.
   A. General Activities

B.
C.
D.
E.

Remote Sales
Temporary or Sporadic Presence
Activities of Unrelated Parties
Financial Activities

ST 19-0005-GIL
Page 4

F.
G.
H.
I.
J.
K.
L.
M.
N.
O.
P.

Activities with Affiliates
Internet Activities
Activities Related to Digital Property
Distribution and Delivery
Third-Party Solicitation Activities and Attributional Nexus
Transactions Involving Franchise Agreements
Service Providers
Cloud Computing
Registration with State Agencies/Departments
Drop Shipment Transactions
Use of Third-Party Facilitators (New for 2019)

P. Use of Third-Party Facilitators (New for 2019)

2018
2019
Response Response

The out-of-state corporation makes sales into your state from outside the state (e.g., by
telephone, over the internet, via catalog/direct mail, or otherwise) through a third-party
facilitator and:

1. the third-party facilitator has nexus with your state.
   NEW
2. the third-party facilitator facilitates sales meeting or exceeding
   your state’s economic nexus threshold, but the out-of-state
   NEW
   corporation does not meet or exceed this threshold.
3. the third-party facilitator stores inventory for the out-of-state
   NEW
   corporation in your state.
4. the third-party facilitator stores inventory for the out-of-state
   corporation in your state without the out-of-state corporation’s
   knowledge (e.g., the third-party facilitator holds the out-of-state
   NEW
   corporation’s inventory for order fulfillment, and the out-of-state
   corporation is not provided with information about where its
   inventory is stored).
   Section XV. Local Sales Taxes (New for 2019)
   Section XV. Local Sales Taxes (New for 2019)
5. Do local jurisdictions in your state impose their own
   corporate income tax or sales tax? (If no, please respond
   “N/A” to questions 2 through 5 below.)
6. Are local sales taxes administered by your state?
7. Are local sales tax jurisdictions required to follow the
   same nexus standards used for state corporate income
   taxes purposes?
8. Are local sales tax jurisdictions required to follow the
   same definitions of products and services used for state
   corporate income tax purposes?
9. Are local sales tax audits conducted by your state?
   DEPARTMENT’S RESPONSE:

2018
2019
Response Response
NEW
NEW
NEW

NEW
NEW

ST 19-0005-GIL
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We are unable to respond to your nexus survey in the format provided. Determinations
regarding nexus are very fact specific and cannot be addressed in the context of a General
Information Letter. 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’ Occupation Tax liability
or “a retailer maintaining a place of business in Illinois” subject to Use Tax collection duties from their
Illinois customers.
ECONOMIC NEXUS – SALES THRESHOLD
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, e.g., 86 Ill.
Adm. Code 270.115.
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 Illinois” is found at 35 ILCS 105/2 and described further,
in part, 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.
Nexus and Wayfair nexus:
An out-of-State retailer (a “remote retailer”) making sales to Illinois purchasers from locations
outside Illinois is required to register with the Department and collect and remit Use Tax on those
sales if it falls within the definition of a “retailer maintaining a place of business in this State” in
Section 2 of the Use Tax Act, 35 ILCS 105/2. The Department is authorized to require these retailers
to act as tax collectors because they have established sufficient contacts, or nexus, with Illinois.
There are two groups of remote retailers that must collect Use Tax on sales to Illinois purchasers:
1)
Remote retailers with a physical presence in Illinois. Prior to October 1, 2018, remote
retailers had to have a physical presence in Illinois before they could be required to
collect Use Tax. The types of activities constituting a physical presence, as limited by
the series of court cases described below, are found in Section 2 of the Use Tax Act’s
definition of a “retailer maintaining a place of business” in Illinois. See, 35 ILCS 105/2.
The physical presence requirement was established in a series of United States
Supreme Court decisions. See, for example, Scripto v. Carson, 362 U.S. 207 (1960);
National Bellas Hess v. Department of Revenue of the State of Illinois, 386 U.S. 753
(1967); Quill Corporation v. North Dakota, 504 U.S. 298 (1992). In 1996, the Illinois
Supreme Court ruled that remote retailers need only “more than the slightest” physical
presence to be required to collect Use Tax. See Brown’s Furniture v. Wagner, 171 Ill.2d
410 (1996). Any remote retailer that currently has a physical presence in Illinois will
continue to be required to act as a Use Tax collector. Regulations describing these
types of retailers are found at 86 Ill. Adm. Code 150.801 and 150.802.
2)

Remote retailers without a physical presence in Illinois. In South Dakota v. Wayfair,
Inc., 585 U.S. ___ (2018), 138 S. Ct. 2080, the U.S. Supreme Court upheld a South
Dakota statute that imposed tax collection obligations on remote retailers that met

ST 19-0005-GIL
Page 6

specific selling thresholds but had no physical presence in the state. This decision
abrogated the longstanding physical presence requirement of Quill, deeming it
“unsound and incorrect.” Illinois Public Act 100-587 enacted nexus standards, effective
October 1, 2018, that are virtually identical to those upheld in Wayfair. This nonphysical presence nexus we will call “Wayfair nexus.”
Following are the requirements for Wayfair nexus in Illinois. Public Act 100-587 (adding item
(9) to the definition of “retailer maintaining a place of business in this State” at 35 ILCS 105/2)
requires remote retailers with no physical presence in Illinois to register and collect and remit Use
Tax, as provided below (see emergency and proposed rules found at 86 Ill. Adm. Code 150.803):
1)
Beginning October 1, 2018, a retailer making sales of tangible personal property to
purchasers in Illinois from outside of Illinois must register with the Department and
collect and remit Use Tax if:
a)
The cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois are $100,000 or more; or
b)
The retailer enters into 200 or more separate transactions for the sale of tangible
personal property to purchasers in Illinois.
2)

A retailer shall determine on a quarterly basis, ending on the last day of March, June,
September, and December, whether he or she meets either of the criteria of paragraph
(1) for the preceding 12-month period. If the retailer meets either of the criteria of
paragraph (1) for a 12-month period, he or she is considered a retailer maintaining a
place of business in Illinois and is required to collect and remit the Use Tax and file
returns for one year.
a)
At the end of that one-year period, the retailer shall determine whether he or she
met either of the criteria of paragraph (1) during the preceding 12-month period.
If the retailer met either of the criteria in paragraph (1) for the preceding 12month period, he or she is considered a retailer maintaining a place of business
in Illinois and is required to collect and remit Use Tax and file returns for the
subsequent year.
b)
If at the end of a one-year period a retailer that was required to collect and remit
the Use Tax determines that he or she did not meet either of the criteria in
paragraph (1) during the preceding 12-month period, the retailer shall
subsequently determine on a quarterly basis, ending on the last day of March,
June, September, and December, whether he or she meets either of the criteria
of paragraph (1) for the preceding 12-month period.

In determining whether a remote retailer meets the thresholds above, sales for resale are
excluded. See 86 Ill. Adm. Code 150.803(c)(3)(E)(i). In addition, if a remote retailer makes
exclusively nontaxable sales, he or she is not subject to the Wayfair nexus requirements. See 86 Ill.
Adm. Code 150.803(c)(2). If, however, the remote retailer makes both taxable and nontaxable sales
into Illinois, all sales are included, including the nontaxable sales (other than sales for resale and
other sales specified at 86 Ill. Adm. Code 150.803(c)(3)(E)).
See 86 Ill. Adm. Code
150.803(c)(3)(E)(v). Illinois taxes tangible personal property transferred incident to a service under
the Service Occupation Tax and the Service Use Tax (see 86 Ill. Adm. Code 150.101 et seq. and
160.101 et seq.), but does not tax services per se.
THE SHARING ECONOMY AND MARKETPLACE FACILITATOR TRANSACTIONS

ST 19-0005-GIL
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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.
Illinois does not have a specific statute or rules regarding third-party marketplace facilitators.
Therefore, third-party marketplace facilitators generally are not required to collect and remit sales tax
on sales made by out-of-state corporations using the facilitators’ platforms.
SALES TAX NEXUS CREATING ACTIVITIES – GENERAL ACTIVITIES
The physical presence required to establish physical presence nexus 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). Generally, storing inventory or having an employee in Illinois
creates nexus in Illinois. It should be noted, however, that if an out-of-state retailer has inventory in
Illinois and makes a sale to a purchaser located in Illinois and ships the item from the inventory in
Illinois, this would generally be considered to be a sale subject not to Use Tax, but to Retailers’
Occupation Tax, sourced to the inventory location. See, e.g., 86 Ill. Adm. Code 270.115(d)(2).
USE OF THIRD-PARTY FACILITATORS
Nexus with Illinois can be created through a physical presence in Illinois or an economic
presence in Illinois as discussed above. Whether an out-of-state corporation that uses a third-party
facilitator to make sales in Illinois has nexus with Illinois will be determined based on the contacts
between the out-of-state corporation and Illinois. Having property in Illinois or making sales into
Illinois that meet the statutory threshold to establish economic nexus as discussed above will create
nexus for the out-of-state corporation. The fact that the third-party facilitator has nexus in Illinois
would not, in and of itself, establish nexus for the out-of-state corporation.
LOCAL SALES TAXES
The Illinois Department of Revenue is responsible for administering local retailers’ occupation and
service occupation taxes. See, e.g., 65 ILCS 5/8-11-1, Home Rule Municipal Retailers’ Occupation
Tax and 65 ILCS 5/8-11-5, Home Rule Municipal Service Occupation Tax. Illinois statutes do not, in
general, authorize the imposition of local use taxes on general merchandise. Therefore, while the
Department audits State and local Retailers’ Occupation and Service Occupation Taxes, these audits
do not include local use taxes on general merchandise.

ST 19-0005-GIL
Page 8

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
SJM:rkn