If a customer refuses to pay the sales tax an aircraft repair station charged, does the repair station still have to remit that tax to Illinois?

Plain-English summary

This General Information Letter answers a narrow but practical question: what happens when a retailer charges Illinois sales tax on a sale, and the customer simply refuses to pay it? The taxpayer here was an FAA-certified Part-145 aircraft repair station that had charged sales tax on materials, parts, and equipment installed into a customer's aircraft. The customer refused, in writing, to pay the tax, pointing to a pending override of the Governor's veto of House Bill 3902, which would restore a sales-tax exemption for aircraft maintenance materials.

The Department's answer turned out to be more about timing than about collection duties. Section 2-5(40) of the Retailers' Occupation Tax Act (35 ILCS 120/2-5(40)) had exempted aircraft parts, equipment, and materials incorporated into an aircraft during modification, refurbishment, or maintenance, but that exemption sunset by operation of law on December 31, 2014 under 35 ILCS 120/2-70. HB 3902 would have extended the exemption through December 31, 2024. The Governor vetoed HB 3902 on November 15, 2019, but the General Assembly overrode the veto, and the bill became Public Act 101-629, effective February 5, 2020.

Critically, P.A. 101-629 didn't just extend the exemption going forward — the General Assembly wrote in language stating it was the legislature's intent that the exemption "applies continuously from January 1, 2010 through December 31, 2024," bridging the gap between the 2014 sunset and the 2020 re-enactment. The catch: no credit or refund claims are allowed for tax that was already paid during the gap period (January 1, 2015 through February 5, 2020) as a result of the exemption's disallowance.

Applying that retroactive fix to the repair station's situation, the Department concluded that qualifying aircraft-parts purchases made from January 1, 2010 onward (and thereafter) are exempt from tax. Retailers that did not collect and remit tax on those purchases during the gap period are not liable for it. But retailers that did collect and remit the tax during that period cannot get a refund of what they already paid over.

What this means for you

Aircraft repair stations and similar retailers

If you sell parts, equipment, or materials that get incorporated into an aircraft as part of modification, refurbishment, or maintenance, that category of sale has been exempt from Illinois Retailers' Occupation Tax continuously since January 1, 2010 (through at least December 31, 2024) under Section 2-5(40), even though the exemption technically lapsed on paper between January 1, 2015 and February 5, 2020. If you didn't collect tax on qualifying sales during that gap, you are not on the hook for it now. If you did collect and remit it, you cannot get that money back.

Handling a customer who disputes tax you charged

As a general matter, a retailer that charges sales tax is expected to remit it to the Department regardless of whether the customer later pays the retailer back — the dispute here didn't actually require the Department to resolve that general collection-and-remittance question, because the underlying transaction turned out to be exempt once the retroactive language in P.A. 101-629 was applied. If your situation isn't covered by a specific retroactive exemption like this one, don't assume a customer's refusal to pay excuses you from remitting tax you already charged; verify whether an exemption genuinely applies before treating the amount as uncollectible.

Common questions

Q: Does a retailer have to remit sales tax to Illinois even if the customer won't pay it?
A: The letter doesn't issue a general ruling on that point, because the specific sale at issue turned out to be tax-exempt. The Department's response focused entirely on showing that Section 2-5(40)'s exemption for aircraft parts/materials/equipment applied continuously from January 1, 2010 through December 31, 2024, which meant there was no tax properly due on the qualifying sale in the first place.

Q: What is Section 2-5(40) of the Retailers' Occupation Tax Act?
A: It's the exemption covering "materials, parts, equipment...incorporated into...an aircraft as part of the modification, refurbishment...or maintenance of the aircraft." It originally sunset on December 31, 2014 under 35 ILCS 120/2-70.

Q: What did House Bill 3902 / Public Act 101-629 actually do?
A: HB 3902 was passed by the General Assembly to extend the Section 2-5(40) exemption through December 31, 2024. The Governor vetoed it on November 15, 2019, but the General Assembly overrode the veto, and it became P.A. 101-629, effective February 5, 2020. The Act also stated the legislature's intent that the exemption apply continuously back to January 1, 2010, bridging the 2014 sunset gap.

Q: Can a retailer get a refund of sales tax it collected and remitted during the 2015–2020 gap period?
A: No. The statutory language in P.A. 101-629 expressly says "no claim for credit or refund is allowed for taxes paid as a result of the disallowance of this exemption" between January 1, 2015 and the February 5, 2020 effective date of the amendatory Act.

Q: What's the difference between a PLR and a GIL, and why did this taxpayer get a GIL?
A: A Private Letter Ruling (PLR) is binding on the Department for the specific taxpayer and facts presented, and requires following the procedures in 2 Ill. Adm. Code 1200.110. A General Information Letter (GIL) simply points a taxpayer to relevant regulations or other information and is not binding on the Department, per 2 Ill. Adm. Code 1200.120. The Department determined that the nature of this inquiry warranted a GIL rather than a binding PLR.

Citations and references

• 35 ILCS 120/2-5(40) (Retailers' Occupation Tax Act — aircraft parts/equipment/materials exemption)
• 35 ILCS 120/2-70 (statutory sunset provision)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)
• P.A. 101-629 (enacting House Bill 3902, overriding the Governor's veto, effective February 5, 2020)

Subject

Retailers’ Occupation Tax

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/st20-0025-gil.pdf

Original ruling text

ST 20-0025-GIL 10/08/2020

RETAILERS’ OCCUPATION TAX

This letter discusses Section 2-5(40) of the Retailers’ Occupation Tax Act. 35 ILCS 120/2-5(40).
(This is a GIL.)

October 8, 2020

Dear Xxxx:
This letter is in response to your letter dated January 20, 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:
COMPANY requests a ruling on the proper treatment of sales tax that is uncollectible from its
customer. Taxpayer is requesting expeditious handling of this matter to mitigate late payment
penalties and interest.
COMPANY is an FAA-certified (###) Part-145 aircraft repair station. In compliance with current
law, COMPANY charges appropriate sales tax to all customers, unless they provide a taxexempt certificate.
One of our customers has refused, in writing, to pay the sales tax charged on
materials/parts/equipment incorporated into his aircraft. He bases his refusal on a pending
legislature vote to override the Governor’s veto of bill HB3902. Bill HB3902 would reinstate a
sales-tax exemption on “materials, parts, equipment...incorporated into...an aircraft as part of
the modification, refurbishment...or maintenance of the aircraft” in effect from January 1, 2010
to December 31, 2014 (see attached).
COMPANY charged sales tax to the customer; the customer refuses to pay it.
Ruling Request:
•

Is COMPANY required to report and remit to IDOR sales tax which its customer refuses
to pay to COMPANY?

ST 20-0025-GIL
Page 2
DEPARTMENT’S RESPONSE:
Section 2-5(40) of the Retailers’ Occupation Tax Act (35 ILCS 120/2-5/40) sunset by operation
of law on December 31, 2014. See 35 ILCS 120/2-70. HB 3902 passed the General Assembly and
expressly continued the exemption until December 31, 2024. The Governor vetoed HB 3902 on
November 15, 2019. The Governor’s veto was overridden by the General Assembly, and HB 3902
became effective on February 5, 2020. P.A. 101-629. By enactment of P.A. 101-629, Section 2-5(40)
continues through December 31, 2024.
The General Assembly included additional language in HB 3902 to address the period from the
date Section 2-5(40) sunset by operation of law (December 31, 2015) and the date of enactment of HB
3902 (February 5, 2020).
“It is the intent of the General Assembly that the exemption under this paragraph (40)
applies continuously from January 1, 2010 through December 31, 2024; however, no
claim for credit or refund is allowed for taxes paid as a result of the disallowance of this
exemption on or after January 1, 2015 and prior to the effective date of this amendatory
Act of the 101st General Assembly.”
As result of HB 3902, Section 2-5(40) was in effect for the period January 1, 2010, until
February 5, 2020. Qualifying purchases made during this period and thereafter are exempt from
tax. Retailers that did not collect and remit the tax during this period are not liable for the tax.
However, retailers that did collect and remit the tax during this period cannot file a claim for a
refund of tax paid during this period.
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) 7823336.

Very truly yours,

Debra Boggess
Associate Counsel
DMB:bkl