What does Illinois General Information Letter ST 20-0023-GIL conclude about Nexus?

Plain-English summary

This General Information Letter answers a question from an out-of-state company that rents and sells large wooden "crane mats" (heavy timbers used to keep construction equipment from sinking into soft ground) to Illinois customers. The company had begun renting and selling the mats in Illinois and wanted the Department to confirm its understanding of the sales/use tax rules — specifically around nexus (whether it must collect Illinois tax at all), how delivery/freight charges are taxed, and how rentals of the mats are taxed.

Because a GIL only directs a taxpayer to the relevant regulations rather than ruling on specific facts, the Department did not confirm or deny the company's stated understanding. Instead, it laid out the general framework: an "Illinois Retailer" with a physical presence owes Retailers' Occupation Tax on its sales, while an out-of-state "remote retailer" only has to collect Use Tax if it has nexus with Illinois. Before October 1, 2018, that required some physical presence in the state. After the U.S. Supreme Court's Wayfair decision, Illinois adopted "economic nexus" — a remote retailer with no physical presence must still register and collect Use Tax if its cumulative Illinois sales are $100,000 or more, or it has 200 or more separate transactions with Illinois customers, measured over trailing 12-month periods checked quarterly. Beginning January 1, 2021, the Leveling the Playing Field for Illinois Retail Act extends this further: a "remote retailer" that meets the same $100,000/200-transaction thresholds must also collect and remit Retailers' Occupation Tax (state and local), not just Use Tax.

The letter also addresses two side issues the company raised. First, delivery/freight charges: under 86 Ill. Adm. Code 130.415 and the Kean v. Wal-Mart case, transportation and delivery charges are taxable when there is an "inseparable link" between the sale and delivery — generally when the charges aren't separately stated, or when the customer has no option to receive the goods without paying delivery. If the customer can buy the item without paying a delivery charge, then the delivery charge isn't taxable. Second, leases: Illinois taxes "conditional sales" (leases with a nominal buyout, e.g., $1) as regular sales subject to Retailers' Occupation Tax, but "true leases" (no buyout, or only a fair-market-value buyout, where the lessee can walk away without further obligation) are taxed differently — the lessor pays Use Tax on its own cost of the leased property, and the lease payments themselves are not subject to Retailers' Occupation Tax or Use Tax.

What this means for you

Out-of-state and remote sellers

If you sell into Illinois without a physical presence there, you need to track your cumulative Illinois sales and transaction count on a rolling 12-month basis, checked every quarter (end of March, June, September, December). Cross $100,000 in gross receipts or 200 separate transactions and you must register with the Department and collect Use Tax (and, from January 1, 2021 onward, Retailers' Occupation Tax as a "remote retailer" under the Leveling the Playing Field Act). Note that under 86 Ill. Adm. Code 150.803(c)(3)(E)(v), nontaxable sales generally still count toward these thresholds unless they are resales or other specifically excluded sales — only sellers who make exclusively nontaxable sales are excused entirely.

Businesses that both sell and rent equipment

If you offer both sales and rentals of the same equipment (as this crane-mat company does), treat them separately. A true lease with no guaranteed sale at the outset is not subject to Retailers' Occupation Tax on the rental payments — the lessor instead owes Use Tax on its own purchase cost of the equipment. But if the "rental" agreement effectively guarantees a sale (e.g., a nominal buyout), it's treated as a conditional sale, and the full sale price becomes subject to Retailers' Occupation Tax up front.

Anyone billing separately for freight or delivery

Whether your delivery/freight charge is taxable often comes down to how you structure your invoice: if the customer can decline delivery and pick up the item (or otherwise avoid the charge) without losing the ability to buy the item, the delivery charge is likely not part of the taxable selling price. If delivery is effectively mandatory to receive the goods, expect the charge to be taxed along with the sale.

Common questions

Q: Does this letter confirm that the crane-mat company's specific tax practices are correct?
A: No. This is a GIL, not a Private Letter Ruling, so it is not binding on the Department and does not rule on the taxpayer's specific facts — it only points the taxpayer to the relevant statutes and regulations. The taxpayer would need a PLR under 2 Ill. Adm. Code 1200.110 for a binding, fact-specific answer.

Q: What are the current economic-nexus thresholds for remote sellers in Illinois?
A: $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate transactions with Illinois purchasers, measured over the preceding 12-month period and reassessed quarterly (end of March, June, September, and December).

Q: Are rental/lease payments for equipment used in Illinois subject to sales tax?
A: Under a "true lease" (no guaranteed sale, and any buyout option is at fair market value), the lease payments themselves are not subject to Retailers' Occupation Tax or Use Tax; instead, the lessor owes Use Tax on its own cost to acquire the property. A "conditional sale" (e.g., a nominal $1 buyout) is instead taxed as a full sale up front.

Q: Is freight or delivery charged on an Illinois sale taxable?
A: It depends on whether an "inseparable link" exists between the sale and the delivery. If delivery charges are not separately stated, or the customer has no option to receive the property without paying them, the charges are taxable. If the customer can buy the item without paying for delivery, the delivery charge is not part of the taxable selling price.

Q: When did Illinois's economic-nexus rules for remote retailers take effect, and did they change again later?
A: The Wayfair-based economic-nexus standard for Use Tax collection took effect October 1, 2018, under Public Act 100-587. Then, effective January 1, 2021, Public Acts 101-0031 and 101-0604 (the Leveling the Playing Field for Illinois Retail Act) require remote retailers meeting the same thresholds to also collect and remit Retailers' Occupation Tax, not just Use Tax.

Citations and references

Statutes:

• 35 ILCS 105/2 (Use Tax Act definition of "retailer maintaining a place of business in this State")
• 35 ILCS 120/2(b) (Retailers' Occupation Tax Act remote-retailer collection thresholds)
• 35 ILCS 120/1 (Retailers' Occupation Tax Act definition of "remote retailer")
• 35 ILCS 155/1 et seq. (Automobile Renting Occupation and Use Tax Act)
• Public Act 100-587 (Illinois economic-nexus standards effective October 1, 2018)
• Public Acts 101-0031 and 101-0604 (Leveling the Playing Field for Illinois Retail Act)

Regulations:

• 86 Ill. Adm. Code 150.201 (retailer maintaining a place of business in Illinois)
• 86 Ill. Adm. Code 150.310(a)(3) (credit for tax paid to another state)
• 86 Ill. Adm. Code 150.801 (registration requirement for retailers maintaining a place of business in Illinois)
• 86 Ill. Adm. Code 150.802 (physical-presence nexus)
• 86 Ill. Adm. Code 150.803, including 150.803(c)(2) and 150.803(c)(3)(E) (remote retailer nexus and Wayfair economic-nexus thresholds)
• 86 Ill. Adm. Code 130.415, including 130.415(b)(1)(B) (transportation and delivery charges)
• 86 Ill. Adm. Code 130.2010 (conditional sales vs. true leases)
• 86 Ill. Adm. Code 130.2013(g) (Retailers' Occupation Tax treatment of true lease receipts)
• 86 Ill. Adm. Code 270.115 (selling activities that trigger Retailers' Occupation Tax liability)
• 86 Ill. Adm. Code 131 (proposed rules for remote retailers and marketplace facilitators)
• 2 Ill. Adm. Code 1200.110 (procedures for requesting a Private Letter Ruling)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)

Cases:

• South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018), 138 S. Ct. 2080
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130
• 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)
• Brown's Furniture v. Wagner, 171 Ill.2d 410 (1996)
• Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 919 N.E.2d 926 (2009)

Subject

Nexus

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/st20-0023-gil.pdf

Original ruling text

ST 20-0023-GIL 10/01/2020

NEXUS

This letter discusses nexus. See South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018). See 86
Ill. Adm. Code 150.803. This is a GIL

October 1, 2020

Dear Xxxx:
This letter is in response to your letter dated February 4, 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 a STATE based company that is in the business of renting and selling
construction crane mats for use on large construction projects. These are large railroad
tie size wood timbers, bolted together ranging in size from 4’x12’ to 4’x30’ long. These
mats are laid down for heavy equipment (bulldozers, cranes, etc.) to drive on to avoid
sinking into soft ground. We have begun renting and selling these crane mats in Illinois.
My understanding from conversations with your sales tax department is as follows:
Sales of these mats are subject to Illinois use tax of 6.25% only, since
COMPANY does not have a physical location in Illinois. Sales /use tax is not
charged down to the county / city level because of this lack of a physical location
in Illinois.
Sales tax is calculated on freight charges invoiced to these customers as long as
the freight is included in the sales price and not a separate line item. No use tax
needs to be charged if freight is listed as a separate line item.
There is no use or sales tax on rentals of crane mats.
The purpose of this letter is to confirm our understanding of the Illinois sales and use
taxes as it pertains to our product, so we properly calculate, collect and remit the correct

ST 20-0023-GIL
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sales/use tax to the State of Illinois. Please review this letter and confirm our
understanding or advise us of any corrections. Feel free to contact me in person to
discuss this matter.
DEPARTMENT’S RESPONSE:
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.
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.
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 has a physical presence in Illinois
will 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.
A retailer is required to collect Use Tax if it has a contract with a person
located in this State under which the person, for a commission or other

ST 20-0023-GIL
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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 a 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. The provisions of this paragraph 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 this state under such contracts
exceed $10,000 during the preceding four quarterly calendar ending on the last
day of March, June, September, and December;
A retailer required to collect Use Tax if it has a contract with a person
located in this State under which:
A)

B)

the retailer sells the same or substantially similar line of products as the
person located in this state and do so using an identical or substantially
similar name, trade name, or trademark as the person located in this state;
and
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.

The provisions of this paragraph apply only if the cumulative gross receipts from
sales of tangible personal property by you to customers in this state under all such
contracts exceed $10,000 during the preceding four quarterly periods ending on
the last day of March, June, September, and December.
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 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 non-physical presence nexus we will call “Wayfair
nexus.”

Public Act 100-587 implemented the U.S. Supreme Court Wayfair nexus standards. It requires
remote retailers with no physical presence in Illinois to register and collect and remit Use Tax, as
provided below:
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:

ST 20-0023-GIL
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2)

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.

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 12month period. If the retailer met either of the criteria in paragraph (1) for
the preceding 12-month 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, 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).
Public Acts 101-0031 and 101-0604 enacted the Leveling the Playing Field for Illinois Retail
Act. The Act implements a series of structural changes to the Illinois sales tax law that are intended
to “level the playing field” between Illinois-based retailers and remote retailers by imposing State and
local retailers’ occupation taxes on Illinois retailers, remote retailers and marketplace facilitators alike.
Public Acts 101-0031 and 101-0604 require “remote retailers” to collect and remit State and local
retailers’ occupation taxes. Beginning January 1, 2021, you must remit Retailers’ Occupation Tax if
you are a remote retailer and either of the following thresholds was met during the preceding four
quarterly periods ending on the last day of March, June, September, and December:
1)

The cumulative gross receipts from sales of tangible personal property by you to
purchasers in Illinois was $100,000 or more; or

ST 20-0023-GIL
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2)

you entered into 200 or more separate transactions for the sale of tangible personal
property to purchasers in Illinois. [35 ILCS 120/2(b)]

You are a “remote retailer” if you do not maintain within this State, directly or by a subsidiary, an
office, distribution house, sales house, warehouse or other place of business, or any agent or other
representative operating within this State under your authority or a subsidiary of yours, irrespective of
whether such place of business or agent is located here permanently or temporarily or whether you or
your subsidiary is licensed to do business in this State. 35 ILCS 120/1.
The Department has filed proposed rules implementing the new requirements for remote
retailers and marketplace facilitators. The proposed rules can be found on the Department’s website.
86 Ill. Adm. Code 131.
DELIVERY CHARGES
The Department’s regulation regarding transportation and delivery charges can be found at 86
Ill. Adm. Code 130.415 and incorporates the decision rendered in Kean v. Wal-Mart Stores, Inc., 235
Ill. 2d 351, 919 N.E.2d 926 (2009). At issue in Kean was whether shipping charges for certain
Internet purchases of tangible personal property were subject to Illinois sales tax. The Court found in
Kean that an “inseparable link” existed between the sale and delivery of the merchandise plaintiffs
purchased from Wal-Mart’s Internet store. Thus, the court concluded that the outgoing transportation
and delivery charges were part of the gross receipts subject to the Retailers’ Occupation Tax. 86 Ill.
Adm. Code 130.415(b)(1)(B)(i). An inseparable link exists when (a) the transportation and delivery
charges are not separately identified to the purchaser on the contract or invoice or (b) the
transportation and delivery charges are separately identified to the purchaser on the contract or
invoice, but the seller does not offer the purchaser the option to receive the property in any manner
except by the payment of transportation and delivery charges added to the selling price of an item
(e.g., the seller does not offer the purchaser the option to pick up the tangible personal property or the
seller does not offer, or the purchaser does not qualify for, a free transportation and delivery option).
86 Ill. Adm. Code 130.415(b)(1)(B)(ii). In contrast, if the customer can purchase the tangible personal
property without payment of transportation or delivery charges to the retailer, then an inseparable link
does not exist and the delivery charges should not be included in the selling price of the tangible
personal property. 86 Ill. Adm. Code 130.415(b)(1)(B)(ii)-(iii).
LEASES
Please note that, except for transactions subject to the Rental Purchase Agreement
Occupation and Use Tax Act and the Automobile Renting Occupation and Use Tax Act, the State of
Illinois taxes leases differently for Retailers’ Occupation Tax and Use Tax purposes than the majority
of other states. For Illinois sales tax purposes, there are two types of leasing situations: conditional
sales and true leases. A conditional sale is usually characterized by a nominal or one dollar purchase
option at the close of the lease term. Stated otherwise, if lessors are guaranteed at the time of the
lease that the leased property will be sold, the transaction is considered to be a conditional sale at the
outset of the transaction, thus making all receipts subject to Retailers’ Occupation Tax. See 86 Ill.
Adm. Code 130.2010.
A true lease generally has no buyout provision at the close of the lease. If a buyout provision
does exist, it must be a fair market value buyout option in order to maintain the character of the true

ST 20-0023-GIL
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lease. Lessors of tangible personal property under true leases in Illinois are deemed end users of the
property to be leased. As end users of tangible personal property located in Illinois, lessors owe Use
Tax on their cost price of such property. The State of Illinois imposes no tax on lease receipts.
Consequently, lessees incur no tax liability. See 86 Ill. Adm. Code 130.2010.
The above guidelines are applicable to all true leases of tangible personal property in Illinois
except for automobiles leased under terms of one year or less, which are subject to the Automobile
Renting Occupation and Use Tax found at 35 ILCS 155/1 et seq.
A lease contract meeting the following conditions would generally be considered to be a true
lease rather than a conditional sale:
1)

a customer who has otherwise met the requirements of the agreement can cease
making payments and return the property at the end of any lease term without
further payment obligation,

2)

the customer is never under any obligation to purchase the property, and

3)

the agreement does not guarantee a sale of the tangible personal property at the
inception of the contract.

Under the type of lease agreement described above, a lessee is free to walk away from the
lease at the end of each lease term and therefore a sale of the property is not guaranteed at the time
the lease is entered into. It is the Department’s opinion that such an agreement would be a true
lease. A lessor engaging in this type of lease should pay Use Tax to his supplier for all items that he
purchases to lease. Receipts from the rental of tangible personal property under a true lease are not
subject to Retailers’ Occupation Tax liability. See 86 Ill. Adm. Code 130.2013(g). Therefore, none of
the monthly lease payments would be subject to Retailers’ Occupation Tax.
If the lessors already paid taxes in another state with respect to the sale, purchase, or use of
the tangible personal property, they would be exempt from Use Tax to the extent of the amount of
such tax properly due and paid in such other state. 86 Ill. Adm. Code 150.310(a)(3).
Under Illinois law, lessors may not “pass through” their tax obligations to lessees as taxes.
However, lessors and lessees may make private contractual arrangements for a reimbursement of
the tax to be paid by the lessees. If lessors and lessees have made private agreements where the
lessees agree to reimburse the lessors for the amount of the tax paid, then the lessees are obligated
to fulfill the terms of the private contractual agreements.
In a conditional sale situation, if the out-of-State lessor does not have nexus and is not
registered with the Department, the lessee/purchaser is obligated to self-assess and remit Use Tax.
Since the lessee/purchaser owes Use Tax on the amount of each installment payment, he or she is
required to register with the Department to make such tax payments. In many cases out-of-State
lessors in these situations register with the Department to collect and remit the use Tax as a courtesy
to their customers.

ST 20-0023-GIL
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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,

Richard S. Wolters
Associate Counsel

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