Does an out-of-state furniture retailer with no Illinois office have to collect Illinois Retailers' Occupation Tax as a remote retailer, or just remit Use Tax?

Plain-English summary

An out-of-state company with no Illinois office, warehouse, or other physical presence asked the Illinois Department of Revenue whether it had to collect the full local sales tax rate (10.25% was mentioned, for a Chicago delivery) or just the flat 6.25% Use Tax rate as a "remote retailer" selling furniture to an Illinois customer, with some goods going straight to the customer and some going through a storage facility until installation.

The Department explained that whether a remote retailer must collect Illinois Retailers' Occupation Tax (ROT) — the state and local sales tax charged at the destination rate — depends on two thresholds measured over the retailer's Illinois sales:

• $100,000 or more in cumulative gross receipts from Illinois sales, or
• 200 or more separate transactions delivered to Illinois purchasers.

If a remote retailer meets either threshold, it's treated as engaged in the business of selling at the Illinois location where the property is delivered, and it must collect and remit all applicable state and local ROT at that destination's combined rate (which is how a rate like 10.25% in Chicago comes into play). If the retailer meets neither threshold, it isn't required to collect ROT, though it may still choose to remit the flat 6.25% Use Tax as a courtesy to its Illinois customers (who otherwise owe that Use Tax themselves). Retailers below the thresholds must recheck their numbers every quarter, since crossing a threshold later in the year changes their obligations going forward.

The letter also flagged an important wrinkle in the taxpayer's own facts: because the company mentioned using a warehouse, the Department noted that if the company (rather than someone else) has a possessory interest in that warehouse, it would not be a remote retailer at all — it would have an Illinois place of business and would owe ROT regardless of the thresholds. The Department assumed no possessory interest for purposes of answering the question, since the letter didn't make that clear.

What this means for you

Out-of-state and remote sellers

If you have no Illinois office, warehouse, or sales presence, you're a "remote retailer" for Illinois tax purposes — but only if you also don't have a possessory interest in any Illinois storage or warehouse space you use. Track your cumulative Illinois gross receipts and transaction count. Once you hit $100,000 in sales or 200 transactions in a rolling measurement period, you must register to collect and remit destination-based state and local ROT (which can run well above the base 6.25% rate depending on the local jurisdiction). Below those thresholds, you can remit the simpler flat 6.25% Use Tax instead, but that's a courtesy, not a requirement — your customers otherwise owe that use tax themselves if you don't collect it.

Business owners using third-party warehouses

Where your goods sit before delivery matters. If you (rather than a landlord or unrelated third party) have a possessory interest in an Illinois warehouse or storage facility, that presence can make you a regular retailer — not a remote one — and you'd owe destination-based ROT on Illinois sales regardless of your sales volume. Get clear about who legally controls any Illinois storage space you use.

Accountants and tax professionals

This GIL is a good plain-English walkthrough of the Illinois economic nexus regime for remote sellers under 35 ILCS 120/2(b) and 86 Ill. Adm. Code 131.115: the $100,000/200-transaction thresholds, quarterly redetermination for sellers below the thresholds, and the destination-sourcing rule once a threshold is crossed. Remember that as a GIL it only points to the regulations — it isn't binding guidance, and the possessory-interest question here was left as an assumption because the facts were unclear.

Common questions

Q: What makes a retailer a "remote retailer" under Illinois law?
A: A retailer with no Illinois office, distribution house, sales house, warehouse, or other place of business (and no agent or representative operating in Illinois), whether or not it's licensed to do business here. A retailer that fills orders from its own Illinois inventory is not a remote retailer. See 35 ILCS 120/1 and 86 Ill. Adm. Code 131.105.

Q: What are the thresholds that trigger collection of Retailers' Occupation Tax?
A: $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate Illinois transactions, measured under 86 Ill. Adm. Code 131.115 and 131.120. Meeting either one is enough.

Q: What rate applies once a remote retailer crosses a threshold?
A: The full state and local Retailers' Occupation Tax rate in effect at the Illinois location where the property is shipped, delivered, or where the purchaser takes possession — not just the flat 6.25% Use Tax rate.

Q: What if a remote retailer doesn't meet either threshold?
A: It isn't required to collect and remit ROT, but it may register to collect the flat 6.25% Use Tax anyway as a courtesy, since its Illinois customers otherwise owe that use tax directly to the Department. Retailers below the thresholds must recheck their status every quarter.

Q: Does using an Illinois warehouse change the analysis?
A: Yes, if the retailer itself has a possessory interest in the warehouse — that gives it an Illinois place of business, so it's not a remote retailer at all and must collect ROT regardless of the thresholds. The Department noted this letter's facts didn't clarify who controlled the warehouse, so it answered assuming the company had no possessory interest.

Citations and references

Statutes and regulations:

• 35 ILCS 120/1 (definition of remote retailer)
• 35 ILCS 120/2(b) (economic nexus thresholds for remote retailers)
• 86 Ill. Adm. Code 131.105 (remote retailer defined)
• 86 Ill. Adm. Code 131.110 (remote retailer tax liability and destination sourcing)
• 86 Ill. Adm. Code 131.115 (thresholds, calculation, and quarterly redetermination)
• 86 Ill. Adm. Code 131.120 (calculating sales toward thresholds)
• 86 Ill. Adm. Code 131.125 (registration status changes)
• 2 Ill. Adm. Code 1200.110 (private letter ruling procedure)
• 2 Ill. Adm. Code 1200.120 (general information letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2021.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2021/st21-0005-gil.pdf

Original ruling text

ST 21-0005 01/28/2021 RETAILERS’ OCCUPATION TAX AND USE TAX
This letter discusses remote retailers. 86 Ill. Adm. Code 131. (This is a GIL.)
January 28, 2021
Dear Xxxx:
This letter is in response to your letter dated January 4, 2021, 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:
I am contacting you from BUSINESS. We are an COMPANY based in STATE
I am contacting you because we have are [sic] registered in the state of Illinois as a
Use Tax Permit Remote Seller with Certificate registration number xxxx-xxxx.
We have a client in Chicago, II who we are purchasing furniture and accessories
for. The Furniture is being shipped to their location and to a storage facility until they
are ready to install.
We have no office or physical presence in the State of Illinois, I would like to know if
we are required to collect the full sales tax rate of 10.25% or 6.25% rate as a
remote seller.
DEPARTMENT’S RESPONSE:
A Remote Retailer is a retailer that does 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 the authority of the retailer or its
subsidiary, irrespective of whether that place of business or agent is located in Illinois permanently or
temporarily or whether the retailer or subsidiary is licensed to do business in this State. A retailer that
fulfills any orders from its inventory in Illinois is not a remote retailer. See 35 ILCS 120/1; 86 Ill. Adm.
Code 131.105. As of January 1, 2021, a remote retailer is engaged in the occupation of selling at
retail in Illinois for purposes of the Retailers’ Occupation Tax Act if either of the following thresholds is
met:
A) The cumulative gross receipts from sales of tangible personal property to purchasers in
Illinois are $100,000 or more; or

ST-21-0005
Page 2
January 28, 2021
B) The remote retailer enters into 200 or more separate transactions for the sale of tangible
personal property to purchasers in Illinois.
See 35 ILCS 120/2(b); 86 Ill. Adm. Code 131.115. A remote retailer meeting either of these
thresholds is liable for all applicable State and local retailers' occupation taxes administered by the
Department on all retail sales shipped or delivered to Illinois purchasers. See 86 Ill. Adm. Code
131.110(a); Section 131.115(a). Sections 131.115 and 131.120 further discuss how to calculate
sales to determine whether a retailer meets either of these thresholds.
You have referenced the use of a warehouse in your letter. It is unclear from your letter who
has a possessory interest in this warehouse. If your company has a possessory interest in this
warehouse, you are not a remote retailer. For the purposes of this letter, we assume you do not have
such a possessory interest, and you are, in fact, a remote retailer.
If you are a remote retailer meeting either threshold, you are deemed to be engaged in the
business of selling at the Illinois location to which the tangible personal property is shipped or
delivered or at which possession is taken by the purchaser. State and local retailers' occupation
taxes are incurred at the rate in effect at this location. See 86 Ill. Adm. Code 131.110(b).
If, pursuant to the criteria set out in Section 131.115, the remote retailer determines that its
sales to Illinois purchasers did not meet either threshold, it is not required to collect and remit State
and local retailers’ occupation taxes. However, it may notify the Department that it wishes to change
its registration status to collect and remit use tax as a courtesy to its Illinois purchasers, since those
purchasers will still incur a use tax liability that they must otherwise self-assess and remit directly to
the Department. See 86 Ill. Adm. Code 131.115(d). Remote retailers not required to remit State and
local retailers’ occupation taxes must redetermine, on a rolling quarterly basis, whether they are
obligated to begin remitting State and local retailers’ occupation taxes. See 86 Ill. Adm. Code
131.115(e).
Please review the criteria for determining whether your company meets either threshold set out
in 86 Ill. Adm. Code 131.115. If your company meets either threshold, you must change your
registration with the Department to reflect your new status and begin collecting and remitting all State
and local retailers’ occupation taxes in effect at the location of the Illinois purchaser. See 86 Ill. Adm.
Code 131.125. However, if your company does not meet either threshold, you may continue in your
current registration status with the Department and remit Illinois Use Tax as a courtesy to your
customers at the rate of 6.25%.
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,
Alexis K. Overstreet
Associate Counsel
AKO:rkn