Does transferring titled trucks from LLC members to the LLC itself qualify for the flat $15 Vehicle Use Tax rate as a business reorganization, instead of the regular vehicle-value-based tax?

Plain-English summary

A trucking company was reorganizing: its trucks had been purchased and titled by individual members of an LLC (with Retailers' Occupation Tax already paid at purchase), and the company wanted to transfer title of the trucks into the LLC's own name without changing who actually owned them economically. The taxpayer asked Illinois to confirm this counted as a "business reorganization," which would mean only a flat $15 Vehicle Use Tax per vehicle instead of the regular tax based on the vehicle's model year or selling price.

The Department explained the rule but could not answer the question. Illinois Vehicle Use Tax normally applies whenever a motor vehicle is acquired by gift, transfer, or purchase (625 ILCS 5/3-1001), but a flat $15 rate applies instead when a vehicle that already paid Retailers' Occupation Tax or Use Tax is transferred as part of a business organization, reorganization, dissolution, or partial liquidation where beneficial ownership does not change (86 Ill. Adm. Code 151.105(d)). Because the taxpayer's letter did not identify who owned each truck, in what percentages, and who would own the LLC and in what percentages after the transfer, the Department said it could not tell whether beneficial ownership was actually staying the same.

What this means for you

Business owners reorganizing under an LLC

If you are moving vehicle titles from individual owners into an LLC (or between related business entities) and want the $15 flat Vehicle Use Tax rate instead of the regular tax, you need to be ready to show, with specifics, that the same people end up with the same percentage economic interest in the vehicles before and after the transfer. A general statement that ownership "isn't changing" is not enough — the Department wants the actual ownership percentages of the individuals and of the resulting LLC members.

Accountants and tax professionals

This GIL is a useful illustration of how thin a factual record can leave a request unanswered: the Department did not deny the flat-rate treatment, it simply said it lacked the ownership breakdown needed to apply 86 Ill. Adm. Code 151.105(d). When advising a client on a similar reorganization, gather and document the pre- and post-transfer ownership percentages up front, ideally in the letter ruling request itself, or request a binding Private Letter Ruling under 2 Ill. Adm. Code 1200.110 with the complete facts so the Department can give a definitive answer.

Anyone relying on this letter

Because this is a General Information Letter, it is not binding on the Department and does not resolve this taxpayer's own question — it only explains the legal standard. Do not treat it as approval of any particular reorganization; it shows what facts the Department needs, not what the answer would be.

Common questions

Q: Does moving vehicle titles into an LLC automatically qualify for the flat $15 Vehicle Use Tax?
A: No. The flat $15 rate under 86 Ill. Adm. Code 151.105(d) only applies if the vehicle was previously subject to Retailers' Occupation Tax or Use Tax and its beneficial ownership does not change as part of an organization, reorganization, dissolution, or partial liquidation.

Q: What did the Department actually decide in this letter?
A: Nothing conclusive. It stated the facts provided were insufficient to determine whether the transfer qualified, because the letter did not specify who owned each vehicle, their ownership percentages, and the LLC members' resulting ownership percentages.

Q: What is the normal (non-reorganization) Vehicle Use Tax based on?
A: Under 625 ILCS 5/3-1001, the tax is generally based on the motor vehicle's model year, unless its selling price is $15,000 or more, in which case a different calculation applies.

Q: Why did the Department issue a GIL instead of a Private Letter Ruling here?
A: The Department responds with a binding Private Letter Ruling (under 2 Ill. Adm. Code 1200.110) only when a taxpayer follows that specific procedure with complete facts. Here, the nature and completeness of the inquiry called for a General Information Letter instead, which under 2 Ill. Adm. Code 1200.120 merely points the taxpayer to relevant rules and is not binding on the Department.

Q: What should the taxpayer do next?
A: Resubmit with the missing ownership details — who owns each vehicle and in what percentage, who the resulting LLC members will be, and their percentage interests in the LLC — so the Department (or a formal PLR request) can apply 86 Ill. Adm. Code 151.105(d) to the actual facts.

Citations and references

Statutes and rules:

• 625 ILCS 5/3-1001 (Vehicle Use Tax on the privilege of using a motor vehicle acquired by gift, transfer, or purchase)
• 86 Ill. Adm. Code 151.105(d) (flat $15 rate for vehicles transferred in a business reorganization with no change in beneficial ownership)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• 2 Ill. Adm. Code 1200.120 (General Information Letters are not binding on the Department)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2022.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2022/st22-0017-gil.pdf

Original ruling text

ST-22-0017-GIL 07/06/2022 VEHICLE USE TAX
This letter discusses whether a transfer of a motor vehicle qualifies as a business
reorganization for purposes of the Vehicle Use Tax. 625 ILCS 5/3-1001. (This is
a GIL.)
July 6, 2022
NAME/ADDRESS
Dear Mr. XXX:
This letter is in response to your letter dated May 26, 2022, 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 represent COMPANY, a trucking company located at STREET
ADDRESS in the C I T Y , STATE.
I am I [sic] the process of doing a business reorganization as their
trucks (## in total) were purchased and titled by members of the LLC;
the Retailers' Occupation Tax was paid at the time of purchase, and
we are transferring title of the trucks to the LLC without a change in the
beneficial ownership.
The Secretary of State's office is asking for a letter stating that this is a
business reorganization and the amount due is $15.
I would very much appreciate receiving a letter from you to this effect
DEPARTMENT’S RESPONSE:
Section 3-1001 of the Illinois Vehicle Code imposes a tax on the privilege of
using, in this State, any motor vehicle acquired by gift, transfer, or purchase. 625 ILCS

COMPANY
Page 2
July 6, 2022
5/3-1001. With certain exceptions, the amount of tax is based upon the model year of
the motor vehicle unless the selling price of the motor vehicle is $15,000 or more. A flat
tax rate of $15 is imposed for each motor vehicle acquired in a transaction when a
motor vehicle which has once been subjected to the Retailers’ Occupation Tax or Use
Tax is transferred in connection with the organization, reorganization, dissolution, or
partial liquidation of an incorporated or unincorporated business wherein the beneficial
ownership is not changed. 86 Ill. Adm. Code 151.105(d).
Based on the limited information you provided, the Department cannot determine
whether the transfer of the motor vehicles would qualify as a reorganization for
purposes of the Vehicle Use Tax. Specifically, it is unclear who the owners of each of
the vehicles are and their percentage of ownership in each of the vehicles, who the
members of the LLC will be, and what their percentage of ownership will be in the LLC.
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
RSW:rkn