Does a cafeteria operator owe Illinois Retailers' Occupation Tax on the extra subsidy an employer pays it to cover cafeteria losses?

Plain-English summary

A third-party food service company that runs cafeterias for Illinois employers asked the Illinois Department of Revenue whether it owes Retailers' Occupation Tax on the "subsidy" payments those employers sometimes pay it. Under the company's contracts, it collects money from employees for meals, but if those meal receipts fall short of the agreed contract price for running the cafeteria, the employer pays the difference at the end of the accounting period. That shortfall payment is the "employer subsidy," and it is calculated only after the period closes -- it is not tied to any particular meal sale.

The Department ruled that these subsidy payments are not part of the operator's taxable gross receipts and are therefore not subject to Retailers' Occupation Tax or Use Tax. The Department's reasoning rests on the Illinois Supreme Court's decision in Chet's Vending Service, Inc. v. Department of Revenue, 71 Ill. 2d 38 (1978), which held that a third-party payment counts toward a seller's "gross receipts" only if it can be tied to an individual sale. Because the subsidy here is a lump-sum, after-the-fact guarantee payment rather than a per-meal reimbursement, it fails that test, regardless of whether its purpose is to lower food costs for employees or to guarantee the operator a profit.

This is a Private Letter Ruling (PLR), not a General Information Letter. That means it was issued to one specific, but redacted, taxpayer ("COMPANY1") based on the exact facts that taxpayer described, and under 2 Ill. Adm. Code 1200.110 it legally binds the Department only as to that taxpayer -- no other business can rely on it directly, though it does show how the Department applies the gross-receipts test to similar cafeteria-subsidy arrangements.

What this means for you

Cafeteria and food-service operators with subsidy contracts

If your contract with an employer-client works the same way -- you collect the meal receipts, and the employer only pays you a make-up amount after the period ends if receipts fall short of an agreed price -- this ruling indicates that make-up payment should not be treated as taxable gross receipts. The key fact the Department relied on is that the subsidy is not calculated or paid at the time of any individual food sale.

Accountants and tax professionals

The controlling legal test is whether a third-party payment can be "related" to an individual sale as part of the "selling price." A payment that is a flat, period-end guarantee (not a per-transaction reimbursement) falls outside "gross receipts" under 35 ILCS 120/1 and 86 Ill. Adm. Code 130.401, per Chet's Vending Service. If your client's arrangement instead reimburses the operator a set amount tied to each meal or each sale, that reimbursement generally would be taxable, per the ruling's own opening statement of the rule.

Employers who contract out cafeteria operations

The ruling only addresses the operator's Retailers' Occupation Tax exposure on the subsidy payment itself -- it does not change the fact that regular sales of food and drink to employees remain taxable retail sales in the ordinary course.

Common questions

Q: Does this mean all payments from an employer to a cafeteria operator are tax-free?
A: No. The ruling explicitly distinguishes reimbursements tied to an individual sale (which are taxable gross receipts) from lump-sum subsidies calculated only after the accounting period and not tied to any specific sale (which are not). The facts here fall in the second category.

Q: Why did the Department follow the Chet's Vending Service case if it involved different facts?
A: The taxpayer itself flagged that the 1978 case was similar but not identical, so it requested a ruling rather than relying on the case alone. The Department examined the same legal test from that case -- whether the payment can be "related" to any individual sale -- and found the test was satisfied here too, so the outcome was the same.

Q: Can another cafeteria-services company rely on this PLR for its own tax position?
A: No. A PLR binds the Department only as to the taxpayer who requested it, and only to the extent the facts given were complete and accurate. Other companies with similar arrangements would need to request their own ruling or consult a tax professional, though this ruling is a useful indicator of the Department's reasoning.

Q: Does this ruling affect the sales tax charged to employees who buy meals?
A: No. The ruling only addresses whether the employer's subsidy payment to the operator counts as taxable gross receipts. It does not change the tax treatment of the amounts employees themselves pay for food and drink.

Q: How long is this ruling good for?
A: Per 2 Ill. Adm. Code 1200.110(e), a Private Letter Ruling is revoked and ceases to bind the Department 10 years after its date (here, July 17, 2025), or earlier if there is a relevant change in statutory law, case law, rules, or in the facts on which it was based.

Citations and references

• 35 ILCS 120/1 (definition of "gross receipts" and "sale at retail")
• 35 ILCS 120/2 (imposition of Retailers' Occupation Tax on gross receipts)
• 35 ILCS 105/3 (imposition of Use Tax)
• 86 Ill. Adm. Code 130.101 (imposition of Retailers' Occupation Tax)
• 86 Ill. Adm. Code 130.401 (definition of gross receipts as all consideration received by the seller)
• 86 Ill. Adm. Code 150.101 (imposition of Use Tax)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures and 10-year expiration)
• Chet's Vending Service, Inc. v. Department of Revenue, 71 Ill. 2d 38 (1978)
• Ogden Chrysler Plymouth, Inc. v. Bower, 348 Ill. App. 3d 944 (2004)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0004-plr.pdf

Original ruling text

ST 25-0004-PLR 07/17/2025 GROSS RECEIPTS
If a retailer receives a reimbursement tied to an individual sale, the amount of that
reimbursement is considered part of the gross receipts received by the seller and is
subject to Retailers’ Occupation Tax. A reimbursement payment to a retailer that is
not related to an individual sale is not considered part of gross receipts. Chet’s
Vending Service Inc. v. Department of Revenue, 71 Ill. 2d 38 (1978).
July 17, 2025
NAME
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated May 16, 2025, 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.
Review of your request disclosed that all the information described in paragraphs 1
through 8 of Section 1200.110 appears to be contained in your request. This Private Letter
Ruling will bind the Department only with respect to COMPANY1 for the issue or issues
presented in this ruling, and is subject to the provisions of subsection (e) of Section
1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling is
conditioned upon the understanding that neither COMPANY1, nor a related taxpayer is
currently under audit or involved in litigation concerning the issues that are the subject of
this ruling request. In your letter you have stated and made inquiry as follows:
We represent COMPANY1, which is duly authorized to transact business in
Illinois ("Taxpayer"). We are submitting a private letter ruling request on behalf
of Taxpayer, pursuant to Illinois Administrative Code Section [sic] 2 §
1200.110, for a determination whether subsidies paid by an employer to a

COMPANY1/NAME
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July 17, 2025
third-party food service provider under a contractual agreement relating to the
operation of an employer provided cafeteria is subject to Illinois's Retailers'
Occupation Tax.
ISSUE
The issue is whether, under Illinois's sales and use tax, Taxpayer is required to
collect and remit Retailers' Occupation Tax on the subsidies it receives from
employers as part of a contractual agreement whereby Taxpayer operates the
employer's cafeteria and sells food and drink to the employer's employees.
FACTS
The Taxpayer is based in New York and is duly authorized to transact business
in Illinois. Taxpayer is a third-party food service provider and has entered into
various operating agreements with employers, each owning a cafeteria or
similar facility, (a) for providing meal and beverage services on the employer's
premises to employees, and (b) for providing other services and supplies.
Pursuant to Illinois Compiled Statutes ("ILCS") 35 ILCS 120/1 et seq., Taxpayer
charges Retailers' Occupation Tax for furnishing, preparing, and serving food,
meals, and drinks to its employer-client's employees as well as on the
subsidies it receives from the employers for costs associated with operating
each employer's cafeteria in Illinois.
Pursuant to the operating agreement with the Taxpayer, the employer
provides the physical plant and equipment, including all fixtures, tables,
chairs, equipment, silverware, chinaware, glassware, linens, kitchen utensils
and all other fixed and movable equipment and facilities necessary to the
efficient operation, transportation, and control of food service. Taxpayer and
each employer work together in determining operating policies, including
wage scales, selling price of food, size of portions, quality of food, recipes,
and menus. However, the employer's decision would prevail in any dispute
involving the aforementioned. The prices of all food items sold to employees
are always established by the employer and the prices are generally in
substantial relation to and always exceed cost.
The Taxpayer hires and supervises all cafeteria employees. The Taxpayer also
purchases, prepares and serves all food, and provides various bookkeeping,
housekeeping, and administrative services to each employer.
At the end of the period, the Taxpayer is entitled to receive a fixed
administration fee, plus reimbursement of the cost of conducting business,

COMPANY1/NAME
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July 17, 2025
less receipts from sales of meals to the employees. The cost of conducting
business consists of the following: (i) the cost of all labor employed by the
Taxpayer, including payroll taxes and workmen's compensation; (ii) the cost
of all food supplies and other materials and supplies, including sales taxes,
delivery charges, etc.; and (iii) the cost of all supervision expenses. If, during
any accounting period, the gross receipts received from the employees for
cafeteria sales exceed the cost of conducting business, the Taxpayer is
required to pay the excess to the employer. If, however, the gross receipts
received from the employees for cafeteria sales are less than the agreed upon
contract price between the Taxpayer and the employer, the employer is
contractually obligated to pay the difference to the Taxpayer. This difference
paid to the Taxpayer is referred to as the employer subsidy.
The employer subsidy is not paid at the time of the food and drink purchase
and is not based upon individual sales of food and drink. Only after the end of
the accounting period is the amount of the subsidy calculated to comply with
the terms of the agreement on the amount that the employer is required to pay
the Taxpayer. The result of the employer subsidy is that the Taxpayer generally
does not have the full risk of loss in connection with the operations of the
employer's cafeteria. The payment of the employer subsidy results in a
guarantee payment by the employer to the Taxpayer.
RELEVANT LAW
Retailers' Occupation Tax is imposed on persons engaged in the business of
selling tangible personal property to buyers for use or consumption and is
measured by the seller's gross receipts from such sales made in the course of
the seller's business. 35 ILCS 120/2; Ill. Admin. Code 86 § 130.101. Sales of
tangible personal property, including food, are generally presumed taxable,
unless specifically exempted from taxation. Id.
A "sale at retail" means "any transfer of the ownership of or title to tangible
personal property to a purchaser, for the purpose of use or consumption, and
not for the purpose of resale in any form as tangible personal property to the
extent not first subjected to a use for which it was purchased, for a valuable
consideration: Provided that the property purchased is deemed to be
purchased for the purpose of resale, despite first being used, to the extent to
which it is resold as an ingredient of an intentionally produced product or
byproduct of manufacturing. For this purpose, slag produced as an incident
to manufacturing pig iron or steel and sold is considered to be an intentionally
produced byproduct of manufacturing. Transactions whereby the possession

COMPANY1/NAME
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July 17, 2025
of the property is transferred but the seller retains the title as security for
payment of the selling price shall be deemed to be sales." 35 ILCS 120/1.
"Food" is any solid, liquid, powder or item intended by the seller primarily for
human internal consumption, whether simple, compound or mixed, including
foods such as condiments, spices, seasonings, vitamins, bottled water and
ice. Ill. Adm in. Code 86 § 130.310(c)(1).
"Premises" is that area over which the retailer exercises control, whether by
lease, contract, license or otherwise, and, in addition, the area in which
facilities for eating are provided, including areas designated for, or devoted to,
use in conjunction with the business engaged in by the vendor. Vendor
premises include eating areas provided by employers for employees and
common or shared eating areas in shopping centers or public buildings if
customers of food vendors adjacent to those areas are permitted to use them
for consumption of food products. Ill. Admin. Code 86 § 130.310(c)(3).
Food for human consumption to be consumed off the premises where it is
sold (other than alcoholic beverages, food consisting of or infused with adult
use cannabis, soft drinks, candy, and food that has been prepared for
immediate consumption) is taxable at the reduced 1%. 35 ILCS § 120/2-10.
"Food prepared for immediate consumption" is taxed at the 6.25% state sales
and use tax rate." 35 ILCS 120/2-10.
Food prepared for immediate consumption means food that is prepared or
made ready by a retailer to be eaten without substantial delay after the final
stage of preparation by the retailer. This includes, but is not limited to, the
following: (1) all hot foods, whether sold in a restaurant, delicatessen, grocery
store, discount store, concession stand, bowling alley, vending machine or
any other location. At a grocery store, hot foods subject to the high rate of tax
include, but are not limited to, pizza, soup, rotisserie or fried chicken and
coffee; other examples of food prepared for immediate consumption include
popcorn or nachos sold at a movie concession stand; hot dogs sold by a street
vendor; and hot precooked meals sold to customers, such as a Thanksgiving
dinner. For these purposes, "hot" means any temperature that is greater than
room temperature; (2) sandwiches, either hot or cold, prepared by a retailer
to the individual order of a customer; [sic] salad, olive or sushi bars offered by
a retailer at which individuals prepare their own salads (hot or cold); (3) all
coffee, tea, cappuccino and other drinks prepared by a retailer for individual
consumption, (4) [sic] whether hot or cold, are subject to the high rate of tax;
and (5) all food sold for consumption on the premises where sold. Ill. Admin.
Code 86 § 130.310(c)(2)(A).

COMPANY1/NAME
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July 17, 2025
"Food prepared for immediate consumption" does not include: (1) doughnuts,
cookies, bagels or other bakery items prepared by a retailer and sold either
individually or in another quantity selected by the customer, provided they are
for consumption off the premises where sold; (2) whole breads, pies and
cakes prepared by a retailer, even when prepared to the individual order of a
customer; (3) sandwiches that are prepared by a retailer and placed in a deli
case or other storage unit; cold salads, jellos, stuffed vegetables or fruits sold
by weight or by quart, pint or other quantity by a retailer; (4) cheese, fruit,
vegetable or meat trays prepared by a retailer, either to the individual order of
a customer or premade and set out for sale; (5) food items sold by a retailer
that are not prepared or otherwise manufactured by that retailer, such as prepackaged snacks or chips, unless these items will be consumed on the
premises where sold (e.g., in a sandwich shop). For grocers, such items
include, but are not limited to, fruits, vegetables, meats, milk, canned goods
and yogurt. In addition, all sales of "candy" are subject to the high rate of tax.
Ill. Admin. Code 86 § 130.310(c)(2)(B).
If retailers provide seating or facilities for on-premises consumption of food,
all food sales are presumed to be taxable at the high rate as "food prepared
for immediate consumption." However, this presumption can be rebutted by
evidence that: (A) the area for on-premises consumption is physically
separated or otherwise distinguishable from the area where food not for
immediate consumption is sold; and (B) the retailer utilizes a means of
recording and accounting for collection of receipts from the sales of food
prepared for immediate consumption (high rate) and the sales of food that are
not prepared for immediate consumption (low rate). Ill. Admin. Code 86 §
l30.310(d)(1).
If a retailer does not provide seating or facilities for on-premises consumption
of food, then the low rate of tax will be applied to all food items except for
"food prepared for immediate consumption by the retailer" and soft drinks,
candy and alcoholic beverages. However, in order for the low rate of tax to
apply, retailers that sell both food prepared for immediate consumption and
food for consumption off the premises where sold must utilize means of
recording and accounting for collection of receipts from the sales of food
prepared for immediate consumption (high rate) and the sales of food that are
not prepared for immediate consumption (low rate). If these receipts are not
maintained, alt sales will be presumed to be at the high rate of tax. Ill. Admin.
Code 86 § 130.310(d)(2).

COMPANY1/NAME
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July 17, 2025
Though Illinois statutes do not specifically address the issue of whether
subsidies paid to food service providers to operate employer-provided
cafeterias are subject to Retailers' Occupation Tax, one older Illinois case
implies such payments would not be subject to the tax. In Chet's Vending
Service, Inc., the Supreme Court of Illinois held certain payments by an
employer to the operator of an employee cafeteria were not includable in the
operator's gross receipts because they were not part of a recognized taxable
exchange of tangible personal property for consideration. Chet's Vending
Service, Inc. v. Department of Revenue, 374 N.E.2d 468 (Ill. 1978). While this
case may be similar, there are differing facts, and therefore it might not be
entirely dispositive on Taxpayer's request, so Taxpayer is requesting this
ruling. It is important to note, there have been decisions in other jurisdictions
that have reached a similar conclusion, which was noted by the Illinois
Supreme Court in Chet's Vending Service, Inc. In Missouri, for example, an
administrative appeals commission found that subsidies paid by employers
to third-party food service providers were not subject to Missouri sales tax
because they were not paid by a purchaser at the time of sale, and thus did
not constitute gross receipts.
This letter is a request for clarification by the Illinois Department of Revenue
on how the Taxpayer is to treat the subsidies it receives from employers
pursuant to a contractual agreement between the Taxpayer and Illinois
employers.
QUESTION REGARDING OUR REQUEST FOR GUIDANCE

1. Are the subsidies that employers pay to the Taxpayer as part of a
   contractual arrangement to maintain and operate the employer's
   cafeteria subject to Retailers' Occupation Tax in Illinois?
   REQUIREMENTS PURSUANT TO ILL. ADMIN. CODE 2 § 1200.110
   Below are the general rules and prohibitions regarding the issuance of private
   letter rulings in Illinois and Taxpayer's response [to] same:
2. A request for a private letter ruling must be made by, or on behalf of,
   an identified taxpayer. A request for ruling may be made by a
   taxpayer, or by a taxpayer's representative under a power of attorney
   from that taxpayer. The Department will not issue letter rulings to
   taxpayer representatives for anonymous or unidentified taxpayers.
   The relevant statutes and regulations have been sufficiently stated
   above. This requirement is satisfied.

COMPANY1/NAME
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July 17, 2025
Taxpayer has identified itself as COMPANY1.

2. Taxpayers must make separate requests for ruling by tax type.
   Taxpayer is only requesting a ruling for one tax type. This requirement is
   satisfied.
3. A private letter ruling will not be issued on alternative plans of
   proposed transactions or hypothetical situations.
   This is an actual fact pattern and is not hypothetical. This requirement is
   satisfied.
4. A private letter ruling on behalf of multiple taxpayers will generally
   not be issued.
   This private letter ruling is only on behalf of one taxpayer. This
   requirement is satisfied.
5. Private letter rulings will not be issued to business, trade, industrial
   associations or to similar groups concerning the application of tax
   laws to members of the groups.
   This private letter ruling is being requested by an interested taxpayer and
   not as part of an association, membership, group, or other third party.
   This requirement is satisfied.
6. A private letter ruling will not be issued if, at the time the ruling is
   requested, the identical issue is involved in the taxpayer’s return for
   an earlier period and that issue is being examined as a part of a
   Department audit or is pending in litigation in a case involving the
   taxpayer or a related taxpayer in which the Department is named as
   a plaintiff or defendant.
   This issue is not being examined by the Illinois Department of Revenue
   as part of an audit. This requirement is satisfied.
7. If there is case law or there are regulations dispositive of the subject
   of the request, the Department will decline to issue a private letter
   ruling on the subject.

COMPANY1/NAME
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July 17, 2025
Taxpayer addresses this issue previously. Taxpayer believes Chet's
Vending Service, Inc. v. Department of Revenue is similar but not
identical in facts and would therefore not necessarily be controlling or
dispositive authority in this matter. This requirement is satisfied.
If the applying taxpayer satisfies these requirements, the following
information must also be provided:

1. The request must contain a complete statement of all material facts.
   Taxpayer has included a complete statement of facts. This requirement
   is satisfied.
2. All contracts, licenses, agreements,
   documents relevant to the request.

instruments

or

other

The relevant documentation has been included as part of this request.
This requirement is satisfied.

3. An identification of the tax period at issue, and disclosure of whether
   an audit or litigation is pending with the Department of Revenue.
   The relevant tax period is calendar year 2023. Taxpayer is unaware of any
   pending audit or litigation with the Department of Revenue. This
   requirement is satisfied.
4. A statement that to the best of the knowledge of both the taxpayer
   and the taxpayer's representative the Department has not previously
   ruled on the same or a similar issue for the taxpayer or a
   predecessor, or whether the taxpayer or any representatives
   previously submitted the same or a similar issue to the Department
   but withdrew it before a letter ruling was issued.
   "To the best of the knowledge of both Taxpayer and Taxpayer's
   representative the Department of Revenue has not previously ruled on
   the same or a similar issue for the Taxpayer or a predecessor, or whether
   the Taxpayer or any representatives previously submitted the same or a
   similar issue to the Department of Revenue but withdrew it before a
   letter ruling was issued." This requirement is satisfied.

COMPANY1/NAME
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5. A statement of authorities supporting the taxpayer's views, an
   explanation of the grounds for that conclusion and the relevant
   authorities to support that conclusion.
   Taxpayer outlined its authorities and explained them accordingly in the
   "Relevant Law" section. This requirement is satisfied.
6. A statement of authorities contrary to the taxpayer's views.
   Taxpayer did not find any authorities that suggest such subsidies are
   subject to Retailers' Occupation Tax. This requirement is satisfied.
7. An identification of any specific trade secret information taxpayer
   requests be deleted from the publicly disseminated version of the
   private letter ruling.
   Taxpayer does not have any trade secret information included in this
   request. This requirement is satisfied.
8. The signature of the taxpayer or the taxpayer's representative. A
   taxpayer's representative must also provide a properly executed
   power of attorney.
   A property executed power of attorney is included in this request. This
   requirement is satisfied.
   CONCLUSION
   Taxpayer believes it satisfies all the requirements to obtain a private letter
   ruling pursuant to Ill. Admin. Code 2 § 1200.110. Should you need additional
   information regarding this request or if you would like to discuss this matter
   further, please contact me by phone at PHONE or email at EMAIL at your
   earliest convenience.
   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

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July 17, 2025
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.
Under Section 1 of the Retailers’ Occupation Tax Act, “Gross receipts” from the sales
of tangible personal property at retail means the total selling price or the amount of such
sales. 35 ILCS 120/1. The Department, in its own administrative rules, has further clarified the
definition of “gross receipts” as all the consideration actually received by the seller, except
traded-in tangible personal property. 86 Ill. Adm. Code 130.401. The consideration received
by the seller is not limited to a single source, and the consideration does not have to be paid
solely by the purchaser. See generally Ogden Chrysler Plymouth, Inc. v. Bower, 348 Ill.App.3d
944 (2004). However, consideration received by the seller from one or more parties must be
tied to a particular sale.
In Chet’s Vending Service Inc. v. Department of Revenue, 71 Ill. 2d 38 (1978), the court
reviewed whether the “fixed fee” monthly subsidy payments or the “guarantee” payments
made by an employer to a caterer making food and beverage sales to the employer’s
employees were subject to Retailers’ Occupation Tax. The Department argued that the
payments by the employer “represent[ed] a ‘two-party split’ of the consideration for the
transfer of tangible personal property between the employer and employee and that the
payments received from both must be combined in computing the retailers’ occupation tax.”
Id. at 42. The court, however, disagreed.
The evidence shows no basis for relating any portion of the fixed fee or
guarantee payment to any individual sale as part of the “selling price.” To
construe the terms “selling price” and “gross receipts” in the manner for which
[the Department] contends would require us to hold that the manual or
cafeteria-type sales at each industrial location during a calendar month were
one sale to both the employer and the employees, the “selling price” of which
was the aggregate of the sums received from the employees and the monthly
payment received from the employer. . . . We have considered the arguments
of the parties concerning the nature of the payments and conclude that
whether the payments were made for the purpose of enabling plaintiff to reduce
the cost of the food and beverages which it sells to the employees or to
guarantee it a profit from its operation is wholly irrelevant. Under the clearly
defined terms employed in the statute, the payments were not includable in
plaintiff's “gross receipts.”
Id. at 42-43. The test enunciated by the court is whether there is any basis for “relating”
any portion of the third-party payment to any individual sale.

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In applying this test to the employer subsidy payments described in your letter, the
Department has determined that such subsidy payments are not related to individual sales of
tangible personal property. Therefore, such subsidy payments are not includable in gross
receipts subject to Retailers’ Occupation Tax or Use Tax.
The factual representations upon which this ruling is based are subject to review by
the Department during the course of any audit, investigation, or hearing and this ruling shall
bind the Department only if the factual representations recited in this ruling are correct and
complete. This Private Letter Ruling is revoked and will cease to bind the Department 10
years after the date of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or
earlier if there is a pertinent change in statutory law, case law, rules or in the factual
representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this
Private Letter Ruling, you may contact me at (217) 524-0034. If you have further questions
related to the Illinois sales tax laws, please visit our website at https://tax.illinois.gov/or
contact the Department’s Taxpayer Information Division at (800) 732-8866.
Very truly yours,

Samuel J. Moore
Chairman, Private Letter Ruling Committee
SJM:GLE