Is an out-of-state online retailer a 'marketplace facilitator' under Illinois law if it processes payment for third-party sellers' goods but never names those sellers on its website?

Plain-English summary

The Illinois Department of Revenue addressed whether an out-of-state online retailer counts as a "marketplace facilitator" for Illinois sales and use tax purposes when it lets third-party sellers offer goods through its website.

The taxpayer's website listed third-party items alongside its own, processed all payments, and handled everything from checkout through delivery notifications the same way it did for its own goods. But it never named or identified the specific third-party seller anywhere on the website itself — the seller's name only appeared later, on the physical invoice/receipt shipped with the order.

Under 86 Ill. Adm. Code 131.130, a marketplace facilitator must both (1) list or advertise the marketplace seller's goods and (2) collect and transmit payment on the seller's behalf. The Department's guidance treats prong (1) — the "advertising" requirement — as met only if the third-party seller is actually identified to the purchaser on the marketplace itself. Because this retailer never identified its third-party sellers on the website (only after the sale, off-marketplace, on the receipt), it fails that first prong.

The conclusion: the retailer is not a marketplace facilitator. Instead, it is treated as the seller of the third-party items itself, the same as its own inventory. That also means none of its sales — including the third-party items — are sourced under the marketplace-facilitator sourcing rules; they instead fall under Illinois' traditional sourcing rules for an out-of-state retailer with Illinois physical presence (origin sourcing for sales where its own selling activity or inventory is in Illinois, and a Use Tax collection obligation for sales sourced from outside Illinois).

What this means for you

Online retailers hosting third-party sellers

If your website lets third parties sell goods but you never display or name those third-party sellers to the shopper before or during the transaction, Illinois will likely treat you — not the third-party seller — as the retailer responsible for tax on those sales, just as if the inventory were your own. Revealing the seller's identity for the first time on a post-sale receipt is not enough to make you a "marketplace facilitator" under this guidance.

Out-of-state retailers with an Illinois presence

If you're an out-of-state retailer with physical presence in Illinois (inventory, selling activity, etc. located here) and you don't qualify as a marketplace facilitator, your sales are sourced under the traditional rules in 86 Ill. Adm. Code 270.115 and 131.107 — origin sourcing when your selling activity or inventory is in Illinois, and Use Tax collection when the sale is sourced outside Illinois. The special marketplace-facilitator sourcing provisions in 86 Ill. Adm. Code 131.155 simply don't apply to you.

Accountants and tax professionals

This GIL is a useful illustration of how narrowly the Department reads the "listing or advertising" prong of the marketplace facilitator definition (86 Ill. Adm. Code 131.130(a)(1), (b)). The test focuses on whether the third-party seller is identified to the purchaser on the marketplace, not on whether the platform otherwise handles payment processing, fulfillment coordination, or eventual disclosure via invoice.

Common questions

Q: Does processing payment for third-party sellers automatically make a website a marketplace facilitator?
A: No. Under 86 Ill. Adm. Code 131.130(a)(1), a marketplace facilitator must both list/advertise the third-party seller's goods (with the seller identified) and collect/transmit payment. Handling payment alone isn't enough — the seller also has to be identified to the purchaser on the marketplace.

Q: If the third-party seller's name only appears on the packing slip or receipt, is that "identification" for marketplace facilitator purposes?
A: No, per this GIL. Identification that occurs after the sale is completed and outside the marketplace (e.g., on a physical invoice/receipt) does not satisfy the advertising prong of the marketplace facilitator definition.

Q: If a retailer is found not to be a marketplace facilitator, who is responsible for collecting tax on the third-party sales?
A: The retailer itself. It is treated as the seller of those items and must collect tax as it would on its own sales.

Q: How are sales sourced if the seller isn't a marketplace facilitator?
A: They fall outside the marketplace-facilitator sourcing rules in 86 Ill. Adm. Code 131.155 and instead follow Illinois' traditional sourcing framework — origin sourcing under 86 Ill. Adm. Code 270.115(c) and (d) and 131.107(a)(4) where the retailer's selling activity or inventory is in Illinois, or a Use Tax collection obligation where the sale is sourced outside Illinois.

Q: Is this letter binding on the Department for other taxpayers?
A: No. It's a General Information Letter, not a Private Letter Ruling. A GIL merely points to relevant regulations and sources of information; it is not a statement of Department policy and is not binding on the Department, even for the requesting taxpayer.

Citations and references

Statutes and rules:

• 35 ILCS 120/1 (Retailers' Occupation Tax Act; marketplace facilitator definitions)
• 35 ILCS 120/2(c); 35 ILCS 120/2-12 (marketplace facilitator collection thresholds and sourcing)
• 86 Ill. Adm. Code 131.105 (definitions: marketplace, marketplace seller)
• 86 Ill. Adm. Code 131.130 (marketplace facilitator definition; advertising/listing requirement)
• 86 Ill. Adm. Code 131.135 (marketplace facilitator tax collection obligations)
• 86 Ill. Adm. Code 131.155 (sourcing for marketplace facilitators and remote retailers)
• 86 Ill. Adm. Code 131.107 (origin sourcing for out-of-state retailers with Illinois presence)
• 86 Ill. Adm. Code 270.115 (factors for determining taxing jurisdiction)
• 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/st21-0032-gil.pdf

Original ruling text

ST-21-0032 08/24/2021 RETAILERS’ OCCUPATION TAX
This letter discusses marketplace facilitators. See 86 Ill. Adm. Code 131.130.
(This is a GIL.)
August 24, 2021
Dear NAME:
This letter is in response to your letter dated March 30, 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:
Re: Request for Written Advice Regarding Application of
Illinois Marketplace Facilitator Guidance
To Whom It May Concern:
Taxpayer's representative has been in discussions with the State of
Illinois regarding the issues documented below. Based on these
discussions, Taxpayer understands the Position stated below to be in
agreement with the State's interpretation of existing guidance. This
ruling request is intended to formalize that understanding in writing.
Please accept this memorandum as a request for a General
Information Letter regarding the application of Illinois Retailers'
Occupation Tax ("ROT'') and Use Tax to the below described fact
pattern.
I.

BACKGROUND

Taxpayer is a retailer headquartered outside of Illinois that makes sales
of tangible personal property to Illinois customers through its website.

COMPANY/NAME
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August 12, 2021
For Illinois sales and use tax purposes, Taxpayer is considered an outof-state retailer with physical presence in Illinois.
Taxpayer recently launched a program whereby it facilitates the sale of
third-party owned goods through its website. Taxpayer's website
contains general information regarding its third-party seller program;
however, no third-party sellers are individually named or otherwise
identified on Taxpayer's website. Taxpayer processes the transactions

• including payment - for third-party items, but the third-party seller
  maintains ownership and possession of the goods at all times until they
  are sold. After a customer has purchased a third-party item via
  Taxpayer's website, the third-party seller is responsible for delivery of
  the goods to the purchaser.
  Third-party item product listings are identical in all respects to product
  listings of Taxpayer's own items, except that third-party listings may
  include a link to the general landing page on Taxpayer's website that
  provides an overview regarding its third-party seller program.
  Therefore, while third-party items are identified as such, no third-party
  sellers are specifically identified to purchasers on Taxpayer's website.
  The purchase confirmation sent to the customer via email is identical
  in all respects to purchase confirmations for Taxpayer's own items. The
  physical invoice/receipt delivered to the purchaser along with the items
  purchased will identify the third-party seller. This is the first and only
  time the third-party seller is specifically identified to the purchaser.
  II.

ISSUE

1.

Is Taxpayer considered a Marketplace Facilitator under 35 ILCS
120/1 and 86 Ill Admin. Code 131.130?

2.

If Taxpayer is not considered a Marketplace Facilitator under 35
ILCS 120/1 and 86 Ill. Admin. Code 131.130, are all of Taxpayer's
sales, including sales deemed to be Taxpayer's, sourced pursuant
to Illinois' traditional sourcing rules found in 35 ILCS 120/2-12, 86
Ill. Admin. Code 220.115, and 86 Ill. Admin. Code 270.115?

III .

POSITION

1.

Pursuant to 86 Ill. Admin. Code 131.130(b), Taxpayer is not
considered a Marketplace Facilitator for Illinois sales and use tax
purposes because the third-party marketplace seller is not
identified to the purchaser on the marketplace.

COMPANY/NAME
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August 12, 2021
2.

Because Taxpayer is not considered Marketplace Facilitator, all
of Taxpayer's sales, including sales deemed to be Taxpayer's,
are sourced pursuant to Illinois' traditional sourcing guidance.

IV.

DISCUSSION

Illinois defines a marketplace facilitator as:
"a person who, pursuant to an agreement with an unrelated third-party
marketplace seller, directly or indirectly through one or more affiliates
facilitates a retail sale by an unrelated third-party marketplace seller
by:
1.

listing or advertising for sale by the marketplace seller in a
marketplace, tangible personal property that is subject to tax
under the Retailers' Occupation Tax Act; and

2.

either directly or indirectly, through agreements 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."1

A marketplace is "a physical or electronic place, forum, platform,
application, or other method by which a marketplace seller sells or
2
offers to sell items." Marketplace seller means "a person that makes
sales through a marketplace operated by an unrelated third party [sic]
marketplace facilitator." 3
As of January 1, 2021, marketplace facilitators that make sales
through their marketplace of tangible personal property to Illinois
purchasers totaling $100,000 or 200 separate transactions are subject
to applicable retailers' occupation taxes based on the location to which
the tangible personal property is delivered or at which possession is
taken by the purchaser 4
However, taxpayers that do not indicate to purchasers on the
marketplace that the items are being sold on behalf of identified
marketplace sellers do not meet the advertising provision of the

35 ILCS 120/1; 86 Ill. Admin. Code 131.105; 86 Ill. Admin. Code 131.130(a)(1).
35 ILCS 120/1; 86 Ill. Admin. Code 131.105.
3
35 ILCS 120/1; 86 Ill. Admin. Code 131.105.
1
2

4

35 ILCS 120/2(c); 35 ILCS 120/2-12(7); 86 Ill. Admin. Code 131.130(f); 86 Ill. Admin. Code131.135(a).

COMPANY/NAME
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August 12, 2021
marketplace facilitator definition.5 Such taxpayers are considered the
sellers of the it ems and are required to collect tax as they would on
their own sales. 6
While Taxpayer sells third-party merchandise on its website, it is not
considered a marketplace facilitator under Illinois tax rules. Taxpayer
does hold agreements with unrelated third parties and processes
payment for all transactions on its website. However, under Illinois
regulations, Taxpayer does not list or advertise items for sale by thirdparty marketplace sellers. The Illinois Department of Revenue ("DOR")
has issued specific administrative guidance regarding what constitutes
listing or advertising items for sale by third-party sellers. Specifically,
the third-party sellers must be identified on the marketplace as the
seller of the items.
In no instance does Taxpayer identify any third-party sellers on its
website (i.e., the marketplace). If a third-party seller is identified to the
purchaser, such identification occurs after the transaction has been
completed and entirely outside of the marketplace (via the physical
invoice/receipt delivered to the purchaser).
While Illinois' marketplace facilitator regulations in Title 86 Part 131 of
the Illinois Administrative Code provide sourcing guidance to
marketplace facilitators, they do not provide guidance to entities that
do not meet the definition of a marketplace facilitator. Rather, such
taxpayers must look elsewhere to determine whether and how their
sales are subject to tax in Illinois. Section 131.155 provides direct
sourcing guidance to marketplace facilitators and remote retailers, and
directs out of state retailers with physical presence in Illinois to refer to
Illinois' traditional sourcing guidance to determine how their sales may
be subject to tax in the state.7 Because Taxpayer does not meet the
definition of a marketplace facilitator, it must look to outside Title 86
Part 131 of the Illinois Administrative Code to determine how and where
its sales may be subject to tax in Illinois.
V.

CONCLUSION

Taxpayer is not considered a marketplace facilitator for Illinois sales and
use tax purposes because Taxpayer does not indicate to purchasers on its
marketplace the identity of any third-party sellers. Pursuant to 86 Ill.
Admin. Code 131.130(b), Taxpayer does not meet the advertising prong of
the marketplace facilitator definition and is not subject to Illinois sales
5

86 Ill. Admin. Code 131.130(b).
86 Ill. Admin. Code 131.130(b).
7
86 Ill. Admin. Code 131.155(e).
6

COMPANY/NAME
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August 12, 2021
and use tax collection requirements as a marketplace facilitator.
Further, because Taxpayer is not considered a marketplace facilitator
in Illinois, it must look outside of Title 86 Part 131 of the Illinois
Administrative Code to determine how and where its sales may be
subject to t ax in Illinois.

We appreciate your consideration of this matter. Please let us know if
you have any questions or require any additional information in order
to issue a General Information Letter.
DEPARTMENT’S RESPONSE:
A marketplace facilitator is a person who, pursuant to an agreement with an
unrelated third-party marketplace seller, directly or indirectly through one or more
affiliates facilitates a retail sale by an unrelated third-party marketplace seller by:
A) Listing or advertising for sale by the marketplace seller in a marketplace,
tangible personal property that is subject to tax under ROTA; and
B) 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.
86 Ill. Adm. Code 131.130(a)(1). If none of the tangible personal property sold over a
marketplace is identified to purchasers on the marketplace as tangible personal
property sold on behalf of an identified marketplace seller, the requirements of (a)(1)(A)
are not met. 86 Ill. Adm. Code 131.130(b). If an online marketplace does not indicate
to purchasers using the marketplace that the sales are made on behalf of any identified
marketplace sellers, it is simply an online retailer making its own sales. See 131.130,
Example 4. All unidentified sales made over such an online marketplace are
considered the sales of the online retailer. See 131.130(b). Tax liability from these
sales depends on the activities of the online retailer.
Every retailer in this State must determine the taxing jurisdictions where it is
engaged in the business of selling with respect to each of its sales by applying the
standards set forth in Section 270.115(c) and (d), except when a retailer is engaged in
particular selling activities identified by a statute that specifies the taxing jurisdiction
where retailers engaged in those activities shall remit retailers' occupation tax. See, for
example, 86 Ill. Adm. Code 270.115(c) and (d). If you are engaged in any special
selling activity where your remittance of retailers’ occupation tax would be directed by
statute rather than these rules, please refer to the applicable statute.

COMPANY/NAME
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August 12, 2021
Out-of-State retailers with a physical presence in Illinois incur a Use Tax
collection obligation for sales made outside Illinois and shipped or delivered to Illinois
purchasers. Such retailers also incur State and local retailers' occupation taxes using
origin sourcing for any sales made in Illinois. 86 Ill. Adm. Code 131.107(a)(4). For
example, an out-of-state retailer incurs a Use Tax collection obligation for sales made to
Illinois purchasers when its selling activities occur outside Illinois and the inventory used
to fill purchases for Illinois purchasers is located outside Illinois. See 86 Ill. Adm. Code
270.115(c) and (d) for factors used to make this determination. If either its selling
activities occur in Illinois or its inventory is located in Illinois for a sale made to an Illinois
purchaser, the out-of-state retailer is considered an Illinois retailer for that transaction
and is subject to State and local retailers' occupation taxes at the origin rate at the
location where the selling activities occur or the location where the inventory is located.
See 86 Ill. Adm. Code 270.115(c) and (d) for factors used to make this determination.
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