Should a direct mail printing company charge Retailers' Occupation Tax or Service Occupation/Use Tax on printing, addressing, and mailing jobs, depending on who controls the mailing and where the items are delivered?

Plain-English summary

A commercial direct mail printing company in Illinois — which prints flyers, letters, brochures, catalogs, inserts, privacy statements, and similar customized print products, then also packages and mails them — asked the Department to confirm which of its transactions owe Retailers' Occupation Tax (Illinois's basic sales tax on tangible personal property) versus Service Occupation Tax / Service Use Tax (the tax that applies when tangible personal property is transferred only incidentally to a sale of a service).

The Department's answer turns on who controls the mailing and, separately, where the items end up:

• Printer prints, addresses, and mails at the customer's direction: Because the customer never loses control over the printed items (the customer dictates the mailing list and instructions), this is a taxable service transaction, and the printer owes Service Use Tax on 100% of the invoice — citing the earlier GIL ST 04-0200-GIL and the Illinois Appellate Court's decision in Deere & Co. v. Allphin, which held that mailing an agent controls at a customer's direction is a service, not a retail sale, even when the goods are later mailed out of state.
• Printer ships the order to a mail house, and the customer tells the printer what percentage of items go to Illinois addresses: Here the Department agreed that only the Illinois-bound percentage is subject to Retailers' Occupation Tax, applying 86 Ill. Adm. Code 130.2160(a)(1) (tax on property given away for advertising or other purposes apart from a sale of other property or service).
• Pure packaging-and-mailing services (no printing) are also Service Use Tax transactions.

The GIL also walks through the broader Service Occupation Tax framework: the four ways a "serviceman" can calculate tax liability (separately stated selling price, 50% of the entire bill, cost price if a registered de minimis serviceman, or Use Tax on cost price if an unregistered de minimis serviceman), the de minimis thresholds (35% of gross receipts generally, 75% for pharmacists and graphic arts/printing production), multi-service subcontracting rules between primary and secondary servicemen, and the interstate commerce exemption for goods physically delivered out of state and not returned (documentation required).

What this means for you

Printing and direct mail companies

Your invoicing approach should track who is actually directing the mailing. If your customer hands you a mailing list and tells you to print, address, and mail the pieces, that is a service transaction under Deere & Co. v. Allphin — you owe Service Use Tax on the whole invoice, regardless of where the pieces are ultimately delivered. If instead you ship a bulk order to a mail house and the customer simply tells you what portion is Illinois-bound, you only owe Retailers' Occupation Tax on that Illinois portion, per 86 Ill. Adm. Code 130.2160(a)(1). Keep documentation to prove which scenario applies to each job.

Businesses claiming the interstate commerce exemption

If you're a serviceman physically delivering goods from Illinois to a point outside Illinois (not to be returned), that transfer can be exempt under 86 Ill. Adm. Code 140.501(b) — even for unregistered de minimis servicemen under 140.108(a)(2)(B). But items mailed or delivered to Illinois addresses are always taxable, and you must retain documentation for every out-of-state delivery or the exemption will be denied.

Businesses near the de minimis threshold (including printers)

If the cost of tangible personal property you transfer incident to services is under 35% of your annual gross receipts from service transactions (75% for pharmacists and graphic arts/printing production businesses), you may qualify as a "de minimis" serviceman, which changes your tax base to cost price rather than selling price or 50% of the bill. The cost ratio calculation excludes materials not actually transferred to customers (e.g., items sold at retail, used from inventory, or incorporated into real estate repairs) — see 86 Ill. Adm. Code 140.105(c).

Accountants and tax professionals advising on multi-service (subcontracted) jobs

Where a primary serviceman subcontracts to a secondary serviceman, the tax point depends on whether each party is registered or de minimis. If the secondary serviceman doesn't separately state its cost of goods, the primary serviceman's presumed cost price is 50% of the secondary serviceman's total charge (86 Ill. Adm. Code 140.301(a), 140.145). Confirm registration status on both sides before advising on Certificates of Resale versus Use Tax self-assessment.

Common questions

Q: If my company prints something and mails it directly to recipients at the customer's direction, is the whole job taxed as a sale, or as a service?
A: As a service. Because the customer retains control over the mailing (providing the list and instructions), this GIL treats the printer as a serviceman who owes Service Use Tax on 100% of the invoice, following Deere & Co. v. Allphin and prior GIL ST 04-0200-GIL.

Q: We print an order and ship it to a mail house, and the customer tells us what percentage will be delivered to Illinois addresses. How is that taxed?
A: Only the Illinois-bound percentage is subject to Retailers' Occupation Tax, under 86 Ill. Adm. Code 130.2160(a)(1). The remainder (destined outside Illinois) is not subject to that tax under this analysis.

Q: Is a transaction that's purely packaging and mailing services (no printing) taxable the same way?
A: Yes — the Department's response confirms these are Service Use Tax transactions.

Q: What is a "de minimis serviceman" and why does it matter?
A: A serviceman whose annual aggregate cost price of tangible personal property transferred incident to services is less than 35% of total annual gross receipts from service transactions (75% for pharmacists and graphic arts/printing production). De minimis servicemen may calculate tax based on cost price rather than selling price, and if unregistered, they pay Use Tax to suppliers instead of collecting tax from customers.

Q: Can we avoid tax on items we mail out of state?
A: Possibly, under the interstate commerce exemption (86 Ill. Adm. Code 140.501(b)) for property physically delivered from Illinois to a point outside the state and not returned — but you must keep documentation for each such delivery, or the exemption will be denied. Items mailed to Illinois addresses remain taxable regardless.

Citations and references

Statutes and regulations:

• 35 ILCS 120/2; 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposition)
• 35 ILCS 105/3; 86 Ill. Adm. Code 150.101 (Use Tax imposition)
• 86 Ill. Adm. Code 130.2160(a)(1) (tax on property given away for advertising/other reasons)
• 86 Ill. Adm. Code 140.101–140.109 (Service Occupation Tax Act and serviceman's tax base methods)
• 86 Ill. Adm. Code 140.105(c) (de minimis cost-ratio calculation)
• 86 Ill. Adm. Code 140.145; 140.301(a) (multi-service transactions and secondary servicemen)
• 86 Ill. Adm. Code 140.501(b); 140.108(a)(2)(B) (interstate commerce exemption)
• 86 Ill. Adm. Code 160.101 (Service Use Tax)

Case law:

• Deere & Co. v. Allphin, 364 N.E.2d 117 (Ill. App. Ct. 1977)

Prior Department guidance:

• Illinois GIL ST 04-0200-GIL

Source

• Landing page: Illinois 2025 Sales Tax Letter Rulings
• Original PDF: ST 25-0041-GIL PDF

Original ruling text

ST 25-0041-GIL

7/24/2025

SERVICE OCCUPATION TAX

Under the Service Occupation Tax Act, servicemen are taxed on tangible personal
property transferred incident to sales of service. See 86 Ill. Adm. Code 140. (This is a
GIL.)
July 24, 2025
NAME
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter received April 11, 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.
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:
We are requesting a General Information Letter on behalf of one of our clients
regarding the taxability of their sales and services. The taxpayer is a
commercial direct mail printing company located in Illinois that prints flyers,
letters, brochures, catalogs, inserts, order forms, privacy statements and
more. Along with printing, the taxpayer also provides direct mailing services.
This service includes the printing, packaging and mailing of customized print
products to customers in Illinois and also out of state. All items printed are
individualized and only usable by the customer requesting the print.
The Taxpayer would like to confirm that their current process of remitting tax
is the correct approach. The taxpayer prints, addresses, and, under the
direction of the customer, mails the items to recipients. In this situation the
taxpayer is charging and remitting service use tax on 100% of the invoice. In
another situation the taxpayer prints the order as received from the customer

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and ships the order to a mail house in IL. The taxpayer is told by the customer
what percent of the mailings are being delivered to IL addresses and only
charges retailers’ occupation tax on that percent of the items.
Taxpayer is requesting a ruling to clarify which transactions should be
imposed retailers’ occupation tax and which transactions should be imposed
service occupation use tax. Could you please advise on the following
questions:
•
•

•

If the taxpayer is printing items and directly mailing to recipients at
the direction of a customer, would the entire project be subject to
service use tax?
If the taxpayer is printing and shipping items to a mail house and is
informed by the customer how many items are being delivered to IL
residents, would only the portion shipped to IL residents be subject
to retailers’ occupation tax?
If the taxpayer has transactions of purely packaging and mailing
services, would they be subject to service use tax?

Our understanding is that the taxpayer should charge and remit service use
tax on transactions of direct packaging and mailing services. Direct packaging
and mail services are not explicitly defined in the Illinois Administrative code.
In the Illinois General Information Letter ST 04-0200-GIL, the department’s
response discusses the ability for the serviceman to retain the ability to
exercise control over the shipment as what will determine their liability for use
tax. Because the customer does not lose control over the tangible personal
property, the service is taxable.
On transactions where the customer provides a mailing list and instructs the
taxpayer to print, address, and mail items on the customer’s behalf, we
believe the case of Deere & Co. v. Allphin applies, and the taxpayer should be
charging and remitting IL retailers’ occupation tax on the full price of the job.
Deere & Co. v. Allphin concerned advertising brochures and other printed
material the taxpayer purchased from a commercial printer in Illinois. The
printer, at the request of Deere, delivered the material to a mailing company
also located in Illinois where the printed materials were placed in envelopes,
addressed, sorted and mailed to dealers and customers of Deere. The court
held that advertising brochures mailed out of state by an agent of the taxpayer
was subject to the Illinois service use tax because the taxpayer through an
agent exercised power incidental to ownership over the brochures prior to
their being placed in the stream of interstate commerce when Deere furnished

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mailing lists to the agent and directed the agent to address them. The
brochures did not begin their journey into interstate commerce until they were
delivered to the post office.2802
Deere & Co. v. Allphin, 364 N.E.2d 117 (Ill. App. Ct. 1977 ).
Transactions where the taxpayer receives an order from the customer for
print, ship the order to a mail house in IL, and are informed what percent of
the prints are being delivered to IL recipients, require the taxpayer to charge
and remit retailers’ occupation tax on the percent of the order that is being
shipped to IL recipients. In this case, we believe Ill. Admin. Code tit. 86, §
130.2160(a)(1) applies.
Per Ill. Admin. Code tit. 86, § 130.2160(a)(1)
Persons engaged in the business of selling tangible personal property to
purchasers who give such property away for advertising or for any other
reason, apart from their sale of other tangible personal property or service, are
engaged in the business of selling tangible personal property at retail and are
liable for Retailers’ Occupation Tax when making such sales.
We look forward to your guidance on these tax matters. If you have any
questions or need any additional information regarding the situations in this
letter, you may contact me by email at EMAIL. Thank you in advance for your
consideration in this matter.
DEPARTMENT’S RESPONSE:
Retailers’ Occupation Tax
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.

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Service Occupation Tax
Retailers’ Occupation and Use Taxes do not apply to sales of service. The Service
Occupation Tax Act and Service Use Tax are imposed on the transfer of tangible personal
property incident to sales of service. See 86 Ill. Adm. Code 140.101 and 160.101. If the
transactions you are inquiring about do not involve the transfer of any tangible personal
property, then they generally would not be subject to Service Occupation Tax or Service Use
Tax. For general information, see 86 Ill. Code 140.101 through 140.109 regarding sales of
service and Service Occupation Tax.
A serviceman’s liability may be calculated in one of four ways: 1) separately stated
selling price of tangible personal property transferred incident to service; 2) 50% of the
serviceman’s entire bill; 3) Service Occupation Tax on the serviceman’s cost price if he is a
registered de minimis serviceman; or, 4) Use Tax on the serviceman’s cost price if he is a de
minimis serviceman not otherwise required to be registered under Section 2a of the
Retailers’ Occupation Tax Act.
Using the first method, servicemen may separately state the selling price of each
item transferred as a result of the sale of service. The tax is then calculated on the separately
stated selling price of the tangible personal property transferred. If the servicemen do not
separately state the selling price of the tangible personal property transferred, they must
use 50% of the entire bill to the service customer as the tax base. Both of the above methods
provide that in no event may the tax base be less than the serviceman’s cost price of the
tangible personal property transferred. See 86 Ill. Adm. Code 140.106. These methods result
in the customer incurring a Service Use Tax liability. See 86 Ill. Adm. Code 160.101.
The third way servicemen may account for their tax liability only applies to de minimis
servicemen who have either chosen to be registered or are required to be registered because
they incur Retailers’ Occupation Tax liability with respect to a portion of their business. See
86 Ill. Adm. Code 140.109. Servicemen may qualify as de minimis if they determine that the
annual aggregate cost price of tangible personal property transferred incident to the sale of
service is less than 35% of the total annual gross receipts from service transactions (75% in
the case of pharmacists and persons engaged in graphic arts production).
The cost ratio is a measure of the amount of tangible personal property transferred
with a service. It is calculated by comparing the serviceman’s product cost to his total
income from services. The cost of materials that are not transferred to customers incident
to a service, such as those sold at retail, removed from inventory for use, or incorporated
into repairs of real estate, must be excluded when determining the cost ratio. See 86 Ill.
Adm. Code 140.105(c).

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Servicemen do not have the option of determining whether they are de minimis on a
transaction-by-transaction basis. Registered de minimis servicemen are authorized to pay
Service Occupation Tax (which includes local taxes) based upon their cost price of tangible
personal property transferred incident to the sale of service. Such servicemen should give
suppliers resale certificates and remit Service Occupation Tax using the Service Occupation
Tax rates for their locations. This method also results in the customer incurring a Service Use
Tax liability.
The final method of determining tax liability may be used by de minimis servicemen
that are not otherwise required to be registered under Section 2a of the Retailers’
Occupation Tax Act. Such de minimis servicemen handle their tax liability by paying Use Tax
to their suppliers. If their suppliers are not registered to collect and remit tax, the servicemen
must register, self-assess and remit Use Tax to the Department. These servicemen are
considered to be the end-users of the tangible personal property transferred incident to
service. Consequently, they are not authorized to collect a “tax” from the service
customers. See 86 Ill. Adm. Code 140.108. Under this method the customer incurs no
Service Tax liability.
Multi-Service Transaction – Secondary Servicemen
Multi-service situations exist when a primary serviceman subcontracts work to a
secondary serviceman. See 86 Ill. Adm. Code 140.145. A primary serviceman engages the
services of a secondary serviceman in order to obtain part or all of the products and services
desired by the service customer. The point at which Service Occupation Tax or Use Tax will
be incurred depends upon whether the primary and secondary servicemen are registered or
de minimis. In multi-service situations, a primary serviceman’s cost price is determined
either by the separately stated selling price of the tangible personal property transferred
from a secondary serviceman, or if the secondary serviceman does not separately state the
cost of goods, it is presumed that the primary serviceman’s cost price is 50% of the
secondary serviceman’s total charge. 86 Ill. Adm. Code 140.301(a).
When both primary servicemen and secondary servicemen are registered, primary
servicemen provide secondary servicemen with a Certificate of Resale. A primary
serviceman would then incur Service Occupation Tax based upon the separately stated
selling price of the property or 50% of the bill to the service customers. If the primary
serviceman is registered and de minimis (that is, under the 35% threshold, or 75% for
pharmacists and printers), the primary serviceman may choose to remit Service Occupation
Tax to the Department based upon the cost price of tangible personal property purchased
from the secondary serviceman. If the cost price of the tangible personal property is not
separately stated by the secondary serviceman, the cost price will be deemed to be 50% of
the total bill from the secondary serviceman. Upon selling their product, such servicemen

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are required to collect the corresponding Service Use Tax from their customers. 86 Ill. Code
140.145.
If an unregistered de minimis serviceman subcontracts service work to another
unregistered de minimis secondary serviceman, the primary serviceman does not incur a
Use Tax liability if the secondary serviceman (i) has paid or will pay Use Tax on the cost price
of any tangible personal property transferred to the primary serviceman and (ii) certifies that
fact in writing to the primary serviceman. This certification option is only available in multiservice situations when both the primary and secondary servicemen are unregistered and
de minimis. 86 Ill. Code 140.145.
Transactions involving multiple servicemen work best if both the primary and
secondary servicemen are registered. This will enable both parties to utilize Certificates of
Resale. If the primary serviceman is registered and the secondary serviceman is not
registered, it is possible that tax will be incurred at more than one point during the course of
sale of a particular item. This will occur if the unregistered secondary serviceman has paid
Use Tax with respect to an item of tangible personal property, then transfers that property to
a primary serviceman who will, in turn, incur a Service Occupation Tax liability when
transferring the item to the service customer.
Interstate Commerce
Please note, an exemption is available for property resold as an incident to a sale of
service under an agreement by which the serviceman is obligated to make physical delivery
of the goods from a point in this State to a point outside this State, not to be returned to this
State, provided such delivery is actually made. See 86 Ill. Adm. Code 140.501(b). Please
note unregistered de minimis servicemen may also claim the interstate commerce
exemption. See 86 Ill. Adm. Code 140.108(a)(2)(B). However, tangible personal property that
is delivered or mailed to locations in Illinois is subject to tax. Documentation must be
retained to support the exemption for each delivery of tangible personal property made in
interstate commerce. If sufficient documentation is not retained for a delivery, the
exemption will be denied.
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.
Kind regards,
George L. Encarnacion, Jr.

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Associate Counsel
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