Does a manufactured (mobile) home dealer owe sales tax or use tax when it sells a home that gets permanently installed on a lot, versus one it just delivers without installing?

Plain-English summary

A manufactured (mobile) home dealer wrote to the Illinois Department of Revenue to confirm how it should be reporting sales and use tax on two common transactions: selling a brand-new manufactured home that it installs in its own mobile-home community, and later buying that same home back from the tenant and reselling it as-is, with no installation. The Department answered with a General Information Letter (GIL) rather than a binding Private Letter Ruling, laying out the general framework rather than a specific yes/no on the dealer's exact numbers.

The core distinction is whether the sale is "with installation" or "without installation." A manufactured home counts as installed or incorporated into real estate only when it is placed on a permanent foundation with its wheels, tongue, and hitch removed. Just setting the home on blocks and anchoring and skirting it, without removing the wheels, tongue, and hitch, does not count as incorporating it into real estate.

When a dealer sells with that kind of installation, the dealer is acting as a construction contractor under Illinois law and is treated as the end user of the home. The dealer owes use tax based on its own cost price for the home (not the retail price charged to the buyer), reported on Form ST-1. When a dealer sells without that kind of installation -- including sales to someone else who will install it, or to a contractor who will subcontract the installation -- the dealer must collect and remit sales tax on the sale price, reported on Form ST-556, unless a specific exemption applies (resale, an exempt organization's E-number, or delivery outside Illinois). If a home is truly incorporated into real estate before being resold in place, no sale of tangible personal property occurs at all, and no ROT/Use Tax is due on that later sale.

What this means for you

Manufactured/mobile home dealers

Track installation status carefully for every sale: removing the wheels, tongue, and hitch and setting the home on a permanent foundation is what flips a transaction from a taxable retail sale (Form ST-556, tax on sale price) to a construction-contractor use-tax event (Form ST-1, tax on your own cost price). You can buy homes tax-free for resale from your supplier if you sell both ways, but you must self-assess tax correctly depending on how each individual unit is ultimately sold.

Dealers who install homes in their own communities before selling

If you purchase and install a manufactured home in your own community before you have a buyer, you are the end user at the point of installation. You owe tax to your supplier (or must self-assess use tax on an out-of-state purchase) at that time -- you cannot treat that purchase as a tax-free resale purchase, and a later in-place resale to a tenant is not itself a new taxable event.

Accountants and tax professionals

This GIL is built entirely around the construction-contractor framework in 86 Ill. Adm. Code 130.1940 and 130.2075: contractors are taxed as consumers of the materials they incorporate into real estate, on cost price, not sale price. Note that the Department answered generally and did not confirm the taxpayer's specific recap of its own "new homes" and "used homes" scenarios as accurate -- it restated the controlling legal rule instead.

Common questions

Q: When does a manufactured home count as "incorporated into real estate" for tax purposes?
A: Only when it is placed on a permanent foundation with its wheels, tongue, and hitch removed. Merely blocking, anchoring, and skirting a home while leaving the wheels, tongue, and hitch attached does not count.

Q: Which form does a dealer use for each type of sale?
A: Sales without installation are reported on Form ST-556 (Sales Tax Transaction Return), with tax on the sale price. Sales with installation into real estate are reported on Form ST-1 (Sales and Use Tax and E911 Surcharge Return), with use tax on the dealer's own cost price, because the dealer is acting as a construction contractor.

Q: Are there exemptions available for manufactured home sales without installation?
A: Yes -- a sale for resale, a sale to an exempt organization with an active Illinois "E" number, or a sale where the dealer delivers the home outside Illinois. Note that the nonresident-purchaser exemption does NOT apply to manufactured homes; tax is due if the buyer takes possession in Illinois before removing the home to another state.

Q: Does reselling an already-installed home (bought back from a tenant) trigger tax again?
A: If the home is still installed/incorporated into real estate (on a permanent foundation, wheels/tongue/hitch removed) when resold, the Department says this is not considered a sale of tangible personal property at all, so no Retailers' Occupation Tax or Use Tax applies to that transaction.

Q: Is this letter binding on the Department for other manufactured home dealers?
A: No. This is a General Information Letter issued under 2 Ill. Adm. Code 1200.120 -- it directs taxpayers to the relevant rules but is not a statement of Department policy and is not binding, unlike a Private Letter Ruling issued under 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes and regulations:

• 86 Ill. Adm. Code 130.1940 (Construction Contractors and Real Estate Developers)
• 86 Ill. Adm. Code 130.2075 (Sales to Construction Contractors, Real Estate Developers and Speculative Builders)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedures)

Forms referenced:

• Form ST-556, Sales Tax Transaction Return (sales without installation)
• Form ST-1, Sales and Use Tax and E911 Surcharge Return (sales with installation, construction-contractor use tax)

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/ST24-0047-GIL.pdf

Original ruling text

ST 24-0047-GIL 12/27/2024 CONSTRUCTION CONTRACTORS
Retailers of manufactured (mobile) homes sell those items either with installation
(e.g., the retailer installs the manufactured home or incorporate the manufactured
home into real estate) or without installation (e.g., the retailer does not install or
incorporate the manufactured home into real estate). The manner in which the sale
of a manufactured home is taxed depends upon which of these two situations
applies. (This is a GIL.)
December 27, 2024
NAME
COMPANY
EMAIL
Dear NAME:
This letter is in response to your letter dated November 18, 2024, 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 https://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:
Attached is correspondence relating to clarification requested on sales/use
tax in the state of Illinois. I've copied my questions below:
I want to recap and put into writing for our sales tax file a phone conversation
I had with NAME1 about sales and use tax liability for us as a manufactured
home dealer.
Both of the below scenarios are related to installed manufactured homes.
New Homes:

COMPANY/NAME
Page 2
December 27, 2024
We, as the dealer, purchase a new manufactured home from a manufacturer.
We then install the home onto a lot within our mobile home community by
skirting, removing the hitch and axles, anchoring, and hooking up utilities.
When the installation is complete, we are subject to reporting and remitting
use tax on the ST1 at our purchase price of the manufactured home. When we
sell this home in our community to our first tenant, we do NOT charge sales
tax and report the sale on the ST556. This transaction is then considered
complete.
Used Homes:
Assume the tenant from the above new home sale example moves out of the
home we sold them. We buy the home back from them as it sits to resell (there
is no transportation of the home). When we resell the home, we charge the
new buyer sales tax and report the sale on the ST556.
Please confirm the above is accurate for record-keeping purposes.
Is this something you can help with?
DEPARTMENT’S RESPONSE:
Retailers of manufactured (mobile) homes sell those items either with installation
(e.g., the retailer installs the manufactured home or incorporate the manufactured home
into real estate) or without installation (e.g., the retailer does not install or incorporate the
manufactured home into real estate). The manner in which the sale of a manufactured
home is taxed depends upon which of these two situations applies. For purposes of the
Retailers’ Occupation Tax, a manufactured home is considered to be installed or
incorporated into real estate when it is placed on a permanent foundation with its wheels,
tongue, and hitch removed. Setting a manufactured home up on blocks and anchoring and
skirting it, without removing its wheels, tongue, and hitch does not constitute installing or
incorporating it into real estate.
If you are a manufactured home dealer who sells manufactured homes both with and
without installation, then you may certify to your supplier that you are buying the
manufactured homes for resale and thereafter account to the Department of Revenue for
the tax when you sell them either with or without installation.
When you sell a manufactured home without installation, you must report the sale
and remit the tax collected using Form ST-556, Sales Tax Transaction Return. Sales without

COMPANY/NAME
Page 3
December 27, 2024
installation include sales in which your delivery and set up do not constitute incorporating
the manufactured home into real estate as described above (e.g., the wheels, tongue, and
hitch are not removed), sales to someone who will subsequently install or incorporate the
manufactured home into real estate (e.g., a contractor), and sales to a purchaser who will
subcontract the installation or incorporation of the manufactured home into real estate.
These transactions are taxable unless they qualify for one of the following specific
exemptions: (i) a sale for resale (Step 5, Box B of Form ST-556); or (ii) a sale to an exempt
organization with an active Illinois sales tax exemption “E” number (Step 5, Box C of Form
ST-556); or (iii) a sale in which you deliver the manufactured home or cause it to be delivered
outside Illinois (Step 5, Box F of Form ST-556). Note that manufactured homes do not qualify
for the exemption for a sale to a nonresident purchaser (Section 5, Box A, of Form ST-556).
You must collect tax if you sell a manufactured home to a person who is not a resident of
Illinois and who will take possession of the manufactured home in Illinois, before removing
it to another state. The sale is taxable because the customer took possession of the
manufactured home in Illinois.
When you sell a manufactured home with installation by incorporating it into real
estate, you are acting as a construction contractor and must pay the tax based on your cost
price of the manufactured home and other items that become part of the real estate. Report
these sales and pay the tax using Form ST-1, Sales and Use Tax and E911 Surcharge Return.
The tax amount is based on your cost price, rather than the retail selling price, of the
manufactured home because, in Illinois, construction contractors are considered the end
user of an item, rather than the person for whom the construction is being performed. The
reporting period for reporting your use tax liability on Form ST-1 is established by the date
you install the manufactured home. If you purchased the manufactured home from an
Illinois supplier, you must include your cost price of the manufactured home on Line 4a of
Form ST-1 along with your taxable receipts and pay tax at the rate on line 4b. If you
purchased the manufactured home from an out-of-State supplier who does not incur
Retailers’ Occupation Tax liability, you must report and pay Use Tax directly to the
Department using Step 5 (Tax on Purchases) of Form ST-1. For more information on what
taxes are due, see 86 Ill. Adm. Code Sections 130.1940, “Construction Contractors and Real
Estate Developers,” and 130.2075, “Sales to Construction Contractors, Real Estate
Developers and Speculative Builders.”
If you are a manufactured home dealer who purchases manufactured homes and
installs them in your own manufactured home community before you sell them, then you
are the user of the manufactured home and you cannot purchase the manufactured home
tax-free for resale. Instead, you owe tax to your supplier when you purchase the
manufactured home if your supplier is registered for Retailers’ Occupation Tax. If you
purchased the manufactured home from an out-of-State supplier who does not incur
Retailers’ Occupation Tax liability, you must report and pay Use Tax directly to the
Department using Step 5 (Tax on Purchases) of Form ST-1.

COMPANY/NAME
Page 4
December 27, 2024
For purposes of the Retailers’ Occupation Tax and Use Tax, if you sell a manufactured
home that is installed or incorporated into real estate (i.e., that is placed on a permanent
foundation with its wheels, tongue, and hitch removed) no tax is due, because, for purposes
of these tax Acts, this is not considered a sale of tangible personal property.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,

SLM:slc

Samuel J. Moore
Associate Counsel