What does Illinois General Information Letter ST 20-0017-GIL say about sales tax nexus, marketplace facilitators, and related topics?

Plain-English summary

This document is not a ruling issued to a taxpayer about its own facts. It's the Illinois Department of Revenue's response to an outside publisher's annual multistate tax survey -- a questionnaire sent to every state asking each to fill in a spreadsheet describing its sales tax nexus policy, economic nexus thresholds, marketplace facilitator rules, sourcing rules, refund procedures, and more, so the answers could be compiled and published for other taxpayers' reference.

Illinois declined to complete the survey in its requested format, explaining that nexus determinations are too fact-specific to answer in the abstract through a General Information Letter. Instead of leaving the questions blank, though, the Department used the reply to summarize, in narrative form, several of its actual current rules as of 2020: how marketplace facilitators and marketplace sellers are defined and taxed, the $100,000-sales / 200-transaction economic nexus thresholds for marketplace facilitators, how digital downloads and canned software are treated, who can file a sales tax refund claim, the state's exposure to qui tam and class-action suits under the Illinois False Claims Act, and the fact that Illinois does not generally impose local use taxes on general merchandise.

Because none of this responds to a specific taxpayer's facts, it carries no binding force even for the requester, and it explicitly is not Department policy -- it's background information for whoever compiles and reads the survey results. Still, the substantive content mirrors rules the Department has stated in other letters, so it's a useful plain-language snapshot of Illinois's marketplace facilitator and nexus regime shortly after those rules took effect on January 1, 2020.

What this means for you

Marketplace facilitators and marketplace sellers

If you operate a marketplace connecting third-party sellers to Illinois customers, this letter restates the basics: you must register and collect Illinois Use Tax if, looking at the trailing 12 months on a quarterly basis, your (and your sellers') combined Illinois sales reach $100,000 or 200 separate transactions (excluding resales, vehicles/watercraft/aircraft/trailers required to be titled, and sales already subject to Retailers' Occupation Tax). Marketplace sellers are not responsible for collecting Use Tax on sales made through a qualifying facilitator's platform, and a seller is held harmless if the facilitator mishandles tax after being given correct information -- but the seller remains liable if it gave the facilitator bad information.

Sellers of digital goods and software

The letter draws a clear line: streaming or downloading video, text, or other data is not treated as a transfer of tangible personal property, so it isn't taxable under the Retailers' Occupation, Use, Service Occupation, or Service Use Tax Acts. But downloaded "canned" (pre-written, non-custom) software is taxable regardless of delivery method -- the Department treats it as tangible personal property.

Retailers considering a refund claim

Only the retailer that actually paid tax to the Department can file a claim for credit, and only after it has refunded (or unconditionally agreed to refund) the tax to the customer who bore the cost. A purchaser who simply paid tax to a retailer cannot file the claim directly with the state; that's a private matter between the retailer and customer, and filing for credit is voluntary, not mandatory.

Common questions

Q: Is this a ruling that applies to my business?
A: No. It's Illinois's answer to an outside organization's multistate survey about general sales tax policy, not a ruling on anyone's specific facts. It isn't binding and isn't a statement of Department policy, per the standard GIL disclaimer.

Q: What are the current marketplace facilitator nexus thresholds mentioned here?
A: $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate transactions into Illinois, measured on a rolling 12-month, quarter-by-quarter basis, counting both the facilitator's and its marketplace sellers' sales together (with certain exclusions).

Q: Does Illinois tax streaming video or downloaded data?
A: No -- the Department states that viewing or downloading video, text, or other data over the internet is not a transfer of tangible personal property and isn't subject to Retailers' Occupation, Use, Service Occupation, or Service Use Tax. Downloaded canned software is different and remains taxable.

Q: Are there local use taxes in Illinois I need to worry about?
A: According to this letter, generally no -- Illinois statutes do not, in general, authorize local use taxes on general merchandise, though the Department does administer home-rule municipal retailers' occupation and service occupation taxes (sales taxes) under 65 ILCS 5/8-11-1 and 5/8-11-5.

Q: Who can actually get a refund if sales tax was overpaid?
A: Only the retailer that paid the tax to the Department, and only after that retailer has refunded (or unconditionally committed to refund) the tax to the purchaser who originally bore it. See 86 Ill. Adm. Code 130.1501.

Citations and references

• 86 Ill. Adm. Code 150.804 (marketplace facilitators)
• 86 Ill. Adm. Code 130.201 (sales for resale)
• 86 Ill. Adm. Code 130.1935(a) (canned software)
• 86 Ill. Adm. Code 130.1501 (claims for credit/refund)
• Public Acts 101-0009 and 101-0604 (marketplace facilitator nexus, effective Jan. 1, 2020)
• 740 ILCS 175, Illinois False Claims Act
• 65 ILCS 5/8-11-1, Home Rule Municipal Retailers' Occupation Tax
• 65 ILCS 5/8-11-5, Home Rule Municipal Service Occupation Tax
• Geary v. Dominick's Finer Foods, Inc., 129 Ill. 2d 389 (1989)
• Harrison Sheet Steel Co. v. Lyons, 15 Ill. 2d 539 (1959)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2020.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2020/st20-0017-gil.pdf

Original ruling text

ST 20-0017-GIL 05/18/2020 MISCELLANEOUS
This letter responds to an annual survey. (This is a GIL.)

May 18, 2020

Dear Xxxx:
This letter is in response to your email dated January 6, 2020, 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 TAX SURVEY on behalf
of your state. 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.
Attached is an Excel spreadsheet containing the questions for 2020. You may notice that
this year’s questionnaire looks different than last year’s. As you will see, this year two
columns of the spreadsheet have all of your state’s responses and comments for 2019.
Adjacent columns are there for you to record your responses and comments for 2020. To
avoid any errors, please fill out the 2020 column even if the answer has not changed from
2019.
There has also been a change to how your comments are displayed this year. There is
now a comment box for each question and another for comments that apply to multiple
questions, instead of using one comment box for both general and question specific
comments If you are adding or revising question specific comments please use the 2020
comment box that relates to that question directly, If you are adding or revising comment
that applies to multiple questions or all questions in a category, please use the 2020
comment box at the end of the category. You can either scroll down for this comment or
click the hyperlinked text in the chart, If you would like to add or change information you
have previously recorded in the comments section, please make those modifications in
red font.

ST 20-0017-GIL
Page 2
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 questionnaires should be completed based on state law as of January 1, 2020.
Some new questions have been added to this year’s questionnaire. The new questions
and subsections are denoted in blue font.
In addition to the format change and addition of new questions, we have also included a
new column where you may include feedback or notes on the questions in this year’s
questionnaire. Information included in this column will not be published are part of our
survey report. Any feedback you choose to provide is greatly appreciated and will be
incredibly helpful in drafting future versions of our questionnaire.
Please return your questionnaires to us by March 13, 2020. Your completed Excel
spreadsheets should be e-mailed to me.
Your responses, along with the responses we receive from other states, will be published
by PUBLICATION, a leading publisher of international, federal, and state tax analysis.
More information about PUBLICATION can be found at WEBSITE.
If you have any questions about this or if there is any way I can help you to complete this
year’s questionnaire, please contact me.
I am looking forward to working with you.
……….
In your questionnaire, you have stated, in part, as follows:
Section I: Sales Tax Policies
A.
B.
C.
D.
E.
F.
G.

Identify any statute, regulation, or administrative pronouncement that sets
forth your state’s sales tax nexus policy.
Application of Nexus Standards
Economic Nexus: Sales Threshold
Nexus Enforcement Policies
Sales Tax Sourcing and Method of Delivery
Sharing Economy
Marketplace Facilitators (New for 2020)

Section II:

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

ST 20-0017-GIL
Page 3
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 retailer'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 retailer. A “No” response means that
an out-of-state retailer'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, set forth in
the comment section the factors that your state would consider in making a nexus
determination.
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
O.
P.

General Activities
Remote Sales
Other Remote Sales Transactions
Temporary or Sporadic Presence
Activities of Unrelated Parties
Financial Activities
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

Section III. Refund Claims, Qui Tam and Class Action Lawsuits
A.
B.

Refund Claims
Qui Tam and Class Action Lawsuits

XV. Local Sales Taxes
A.
Local Sales Taxes
DEPARTMENT’S RESPONSE:
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.

ST 20-0017-GIL
Page 4
Nexus:
Effective January 1, 2020, nexus in Illinois includes marketplace facilitators, meeting certain
thresholds. See Public Acts 101-0009 and 101-0604. Marketplace facilitators, meeting either of the
two thresholds are required to register to collect and remit Illinois Use Tax for sales made through their
marketplace. Marketplace sellers selling through the marketplace are not responsible for collecting
and remitting Illinois Use Tax on those sales. See 86 Ill. Adm. Code 150.804.
Marketplace Facilitator:
Marketplace facilitator means a person who, pursuant to an agreement with an unrelated thirdparty marketplace seller, directly or indirectly through one or more affiliates facilitates a sale by an
unrelated third-party marketplace seller by performing both of the following activities: (1) Listing or
advertising for sale by the marketplace seller in a marketplace, tangible personal property that is subject
to Illinois Use Tax; and (2) either directly or indirectly, through agreements or arrangements with third
parties, collecting payment from the customer and transmitting that payment to the marketplace seller
regardless of whether the marketplace facilitator receives compensation or other consideration in
exchange for its services. If a marketplace facilitator meets certain thresholds, it is considered a retailer
maintaining a place of business in Illinois for each sale of tangible person made through its marketplace
resulting in Illinois Use Tax. A marketplace facilitator must register to collect and remit Illinois Use Tax
to the Illinois Department of Revenue.
Marketplace Seller:
Marketplace seller means a person that sells or offers to sell tangible personal property through
a marketplace operated by an unrelated third-party marketplace facilitator. A marketplace seller only
includes persons who incur an Illinois Use Tax liability on their sales to Illinois purchasers. Sales of
tangible personal property to Illinois purchasers that are subject to Illinois Retailers’ Occupation Tax
are not subject to the provisions of 86 Ill. Adm. Code 150.804.
A marketplace seller shall be held harmless for liability for the collection and remittance if Illinois
Use Tax when a marketplace facilitator fails to correctly collect and remit tax after having been provided
with information by a marketplace seller to correctly collect and remit tax.
If a marketplace facilitator demonstrates to the satisfaction of the Illinois Department of Revenue
that its failure to correctly collect and remit Illinois Use Tax on a sale resulted from its good faith reliance
on incorrect or insufficient information provided by a marketplace seller, it shall be relieved of liability
for the tax on that sale. In that case, a marketplace seller is liable for any resulting Illinois Use Tax due.
Note: Sales to Illinois purchasers made through the marketplace resulting in Illinois Retailers’
Occupation Tax liability are the responsibility of the marketplace seller. In that case, the marketplace
seller is considered the retailer for sales resulting in Retailers’ Occupation Tax liability and the
marketplace seller must register to remit Illinois Retailers’ Occupation Tax and any applicable local
taxes to the Illinois Department of Revenue.
Economic Nexus – Sales Thresholds:
A marketplace facilitator must meet either of the following thresholds to be considered the retailer
for each sale of tangible personal property made through its marketplace on behalf of marketplace
sellers: (1) the cumulative gross receipts from retail sales of tangible personal property to purchasers

ST 20-0017-GIL
Page 5
in Illinois made through the marketplace by both the marketplace facilitator and marketplace sellers are
$100,000 or more; or (2) the marketplace facilitator and marketplace sellers selling through the
marketplace cumulatively enter into 200 or more separate transactions through the marketplace for the
sale of tangible personal property to purchasers in Illinois.
The thresholds are determined by examining the gross receipts and number of separate
transactions (see, 86 Ill. Adm. Code 150.804), excluding the following types of sales: (1) sales for resale
must be excluded (see, 86 Ill. Adm. Code 130.201); (2) sales of tangible personal property that are
required to be registered with an Illinois agency, including motor vehicles, watercraft, aircraft, and
trailers, when these sales are made from locations outside Illinois to Illinois purchasers must be
excluded; and (3) sales made through the marketplace on behalf of a marketplace seller or by a
marketplace facilitator that are subject to Retailers’ Occupation Tax must be excluded.
A marketplace facilitator shall determine on a quarterly basis, ending on the last day of March,
June, September, and December, whether it meets either of the thresholds listed above for the
preceding 12-month period. If the marketplace facilitator meets either threshold for a 12-month period,
it 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 for all sales made over its marketplace.
At the end of that one-year period, the marketplace facilitator shall determine whether it met
either threshold during the preceding 12-month period. If the marketplace facilitator met either threshold
for the preceding 12-month period, it 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 for all sales made
over its marketplace.
If, however, at the end of a one-year period a marketplace facilitator that was required to collect
and remit the Use Tax determines that it did not meet either threshold during the preceding 12-month
period, the marketplace facilitator shall subsequently determine on a quarterly basis, ending on the last
day of March, June, September, and December, whether it meets either threshold for the preceding
12-month period.
Activities Related To Digital Property:
The Department does not consider the viewing and downloading of video, text and other data
over the internet to be the transfer of tangible personal property. Therefore, such viewing and/or
downloading activity over the internet would not be subject to liability under the Retailers' Occupation
Tax Act, Use Tax Act, Service Occupation Tax Act, or Service Use Tax Act. Please note, however, the
transfer of any canned software (or update of canned software) is considered the transfer of tangible
personal property and will be subject to Retailers' Occupation Tax and Use Tax liability, regardless of
the means of delivery. See 86 Ill. Adm. Code 130.1935(a). The transfer or sale of canned software
downloaded electronically would be taxable.
Refund Claims:
If a taxpayer pays an amount of tax under the Retailers' Occupation Tax Act that is not due,
either as a result of a mistake of fact or an error of law, the taxpayer may file a claim for credit with the
Department. See 86 Ill. Adm. Code 130.1501. Please note that only persons who have actually paid
tax to the Department can file a claim for credit. In other words, if a purchaser has paid tax to the
retailer, only that retailer can file a claim for credit. No credit shall be given the taxpayer unless the

ST 20-0017-GIL
Page 6
taxpayer shows that he or she has borne the burden of the tax or has unconditionally repaid the amount
of the tax to the purchaser from whom it was collected. The retailer must first refund tax money paid
by the purchaser before proceeding with the claim.
Once the retailer has done this, he or she must apply for the credit in the manner described in
the regulation. Retailers are not required by law to apply for such credits; rather, this procedure is
voluntary. Whether or not the retailer refunds the tax paid and files a claim for credit with the Department
is a private matter between the retailer and the purchaser.
Qui Tam and Class Action Lawsuits:
Pursuant to the Illinois False Claims Act, 740 ILCS 175, a private party acting as a relator on
behalf of the State, may bring a lawsuit against a taxpayer for underpaying sales tax. Further, Illinois
courts have recognized class action suits for recovery of wrongly paid taxes. See Geary v. Dominick's
Finer Foods, Inc., 129 Ill. 2d 389 (1989); Harrison Sheet Steel Co. v. Lyons, 15 Ill. 2d 539 (1959).
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. Generally, there are no
local use taxes administered by the Department on general merchandise.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:bkl