Once an out-of-state remote retailer drops below Illinois's $100,000/200-transaction economic nexus thresholds and stops collecting tax, does that trailing nexus obligation ever come back, and how often must the retailer check?

Plain-English summary

A remote seller with a physical shop in another state, who also sells online to Illinois customers, wrote to the Illinois Department of Revenue asking about "Economic Nexus... concerning the Trailing Nexus Rule." The seller explained it had held an Illinois account ID for some time, had been advised that nexus "is not forever" but depends on each state, and had not met Illinois's $100,000-in-sales or 200-transaction threshold during 2023. The seller asked whether it would be required to collect tax from Illinois residents in 2024.

The Department responded with a GIL (not the binding PLR the specific-fact pattern might otherwise call for) laying out the general framework. The Illinois Retailers' Occupation Tax Act (35 ILCS 120/2) taxes persons in the business of selling tangible personal property for use or consumption in Illinois, and the Use Tax Act (35 ILCS 105/3) taxes the privilege of using property purchased anywhere at retail. Together these make up what's commonly called Illinois "sales tax." A "remote retailer" -- one with no office, warehouse, or other physical presence or representative in Illinois -- becomes obligated to collect and remit Illinois state and local retailers' occupation tax once its cumulative gross receipts from Illinois sales reach $100,000, or it makes 200 or more separate transactions into Illinois, per 86 Ill. Adm. Code 131.115(a). Once a remote retailer crosses either threshold, it must remit tax on all Illinois sales and file returns for one full year; at the end of that year it re-checks the prior 12 months, and if it still meets a threshold, the obligation rolls forward another year (131.115(b)-(c)).

If, at the end of a one-year remittance period, the retailer's trailing 12-month sales fall below both thresholds, it must notify the Department and may stop remitting state and local retailers' occupation tax (131.115(d)) -- though it may also choose to keep collecting Use Tax voluntarily as a courtesy to Illinois customers, who otherwise must self-assess and remit Use Tax themselves (86 Ill. Adm. Code 150.805). Critically, stopping is not the end of the story: once a remote retailer is no longer required to remit, it must redetermine its status on a rolling quarterly basis -- at the end of each quarter ending in March, June, September, and December, it re-examines the immediately preceding 12 months of Illinois sales against the same thresholds (131.115(a)(1)). If it meets either threshold again during that look-back window, it must resume remitting state and local retailers' occupation tax for the following 12-month period, and the cycle (131.115(e)) repeats.

What this means for you

Remote/out-of-state online sellers

Illinois nexus is not a one-time on/off switch. If your Illinois sales fall below $100,000 or 200 transactions and you stop collecting, you are not free of the analysis going forward -- you must keep re-testing your trailing 12-month Illinois sales every quarter (end of March, June, September, December). Cross either threshold again during any quarterly look-back, and you must resume collecting and remitting for the next full year. Build a recurring quarterly nexus check into your compliance calendar rather than a one-time annual review.

Accountants and tax professionals advising multistate/remote sellers

This GIL confirms Illinois's specific mechanics for what the letter itself calls "trailing nexus": the initial one-year commitment once a threshold is crossed (131.115(b)-(c)), the notification-and-stop procedure once thresholds aren't met (131.115(d)), the option to keep voluntarily collecting Use Tax for client goodwill (150.805), and -- the part clients most often miss -- the ongoing rolling QUARTERLY redetermination requirement once collection has stopped (131.115(e)). Clients who deregistered because a bad year dropped them below threshold still need a process to re-check every quarter, not just at their next annual renewal.

Illinois-based accountants for local retailers

This GIL does not change the underlying rules for retailers with an Illinois physical presence; it addresses only the specific mechanics that apply to "remote retailers" as defined at 86 Ill. Adm. Code 131.105 (no Illinois office, distribution house, warehouse, or other place of business or representative). A retailer that fulfills orders from Illinois inventory is not a remote retailer and is not governed by this threshold/redetermination framework.

Common questions

Q: What are the two dollar/transaction thresholds that trigger Illinois remote-retailer collection duties?
A: $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate transactions into Illinois, measured over a trailing 12-month period. See 86 Ill. Adm. Code 131.115(a).

Q: Once a remote retailer stops meeting the threshold and deregisters, is it done for good?
A: No. It must redetermine its status on a rolling quarterly basis -- at the end of each quarter (March, June, September, December), it checks the preceding 12 months of Illinois sales against the same thresholds, per 86 Ill. Adm. Code 131.115(a)(1) and (e).

Q: What happens if the retailer meets a threshold again during one of those quarterly look-backs?
A: It must resume remitting Illinois state and local retailers' occupation tax for the following 12-month period, and then re-examine its sales again at the end of that period. See 86 Ill. Adm. Code 131.115(e).

Q: Can a remote retailer keep collecting Illinois Use Tax even after it's no longer required to?
A: Yes. As a courtesy to Illinois customers (who would otherwise have to self-assess and remit Use Tax themselves), a remote retailer may notify the Department to voluntarily continue collecting and remitting Use Tax. See 86 Ill. Adm. Code 150.805.

Q: Did the Department definitively tell this particular seller whether it must collect tax in 2024?
A: Not in so many words -- true to GIL practice, the Department explained the general legal framework and thresholds rather than applying them to state whether this specific seller's 2023 sales did or didn't require 2024 collection. The GIL is not binding and does not resolve an individual taxpayer's facts the way a PLR would.

Citations and references

Statutes:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act imposition of tax)
• 35 ILCS 105/3 (Use Tax Act imposition of tax)

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax)
• 86 Ill. Adm. Code 150.101 (Use Tax)
• 86 Ill. Adm. Code 150.805 (voluntary Use Tax collection)
• 86 Ill. Adm. Code 131.105 (definition of remote retailer)
• 86 Ill. Adm. Code 131.115 (remote retailer thresholds, remittance period, redetermination)
• 86 Ill. Adm. Code 131.120 (calculating sales to determine thresholds)
• 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/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0014-GIL.pdf

Original ruling text

ST 24-0014-GIL 03/27/2024 REMOTE RETAILERS
If a remote retailer is no longer required to remit State and local retailers’ occupation taxes, it
must redetermine, on a rolling quarterly basis, whether it is obligated to once more begin
remitting State and local retailers’ occupation taxes. For each quarter ending on the last day
of March, June, September, and December, the remote retailer must examine its sales for the
immediately preceding 12-month period to determine whether it met either of the tax
remittance thresholds in 86 Ill. Adm. Code 131.115(a)(1). If it met either of those thresholds
during that 12-month lookback period, it must remit State and local retailers’ occupation taxes
for the following 12-month period. At the end of that 12-month period, it must examine its
sales to determine if it must continue to remit tax. See 86 Ill. Adm. Code 131.115(e). (This is
a GIL.)
March 27, 2024
NAME
COMPANY
ADDRESS
Dear NAME:
This letter is in response to your letter dated December 21, 2023, 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 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:
To whom it may concern,
Please advise your official stance for Economic Nexus for an out-of-state Remote
Seller concerning the Trailing Nexus Rule. We have a shop in CITY STATE and
sell online. Our Tax ID ends in XXXX. We’ve had IL Account ID: XXXX-XXXX
since X/XX/XX.
We have COMPANY1 handling our tax returns and were advised nexus is not
forever, but depends on each state. I understand your evaluation period is the
calendar year and your threshold is $100,000 or 200 sales. For 2023, we have
not met either. Would we be required to collect taxes from Illinois residents in
2024?
Please let us know. I can be reached at EMAIL or by calling PHONE.

COMPANY/NAME
Page 2
March 27, 2024
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in
this State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is
imposed on the privilege of using, in this State, any kind of tangible personal property
that is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as “sales” tax in Illinois.
If the purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at
the time of purchase. The retailers are then allowed to retain the amount of Use Tax paid
to reimburse themselves for their Retailers’ Occupation Tax liability incurred on those
sales. If the purchases occur outside Illinois, purchasers must self- assess their Use Tax
liability and remit it directly to the Department.
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 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

B)

The remote retailer enters into 200 or more separate
transactions for the sale of tangible personal property to
purchasers in Illinois.

See 86 Ill. Adm. Code 131.115(a).
For information on how to calculate sales to determine whether a retailer meets
either of these thresholds see 86 Ill. Adm. Code Sections 131.115 and 131.120. 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 and is required to file all applicable returns for
one year. See 86 Ill. Adm. Code 131.115(b). At the end of that one-year period, during
which the remote retailer was remitting taxes, the remote retailer shall determine whether
it met either threshold for the preceding 12-month period. If the remote retailer has again
met a threshold for that 12-month period, the remote retailer remains required to remit all
applicable State and local retailers’ occupation taxes and file returns for the subsequent
year. 86 Ill. Adm. Code 131.115(c).

COMPANY/NAME
Page 3
March 27, 2024
If, at the end of that one-year period, a remote retailer determines that its sales to
Illinois purchasers did not meet either threshold, the remote retailer must notify the
Department and discontinue remitting State and local retailers’ occupation taxes. See
86 Ill. Adm. Code 131.115(d). As a courtesy to its Illinois customers, the remote retailer
may notify the Department to change its registration status to voluntarily collect and
remit Use Tax, since its Illinois customers will still incur a Use Tax liability that they must
otherwise self-assess and remit directly to the Department. See 86 Ill. Adm. Code
150.805 for additional information. Please note that all notifications made under 86 Ill.
Adm. Code 131.115(d) shall be made electronically as required by the Department.
If a remote retailer is no longer required to remit State and local retailers’
occupation taxes, it must redetermine, on a rolling quarterly basis, whether it is obligated
to once more begin remitting State and local retailers’ occupation taxes. For each
quarter ending on the last day of March, June, September, and December, the remote
retailer must examine its sales for the immediately preceding 12-month period to
determine whether it met either of the tax remittance thresholds in 86 Ill. Adm. Code
131.115(a)(1). If it met either of those thresholds during that 12- month lookback period,
it must remit State and local retailers’ occupation taxes for the following 12-month
period. At the end of that 12-month period, it must examine its sales to determine if it
must continue to remit tax. See 86 Ill. Adm. Code 131.115(e).
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,
Tom Grudichak
Associate Counsel
TG:rkn