Is a payment-localization company that briefly holds 'flash title' to goods -- or never holds title at all -- a marketplace facilitator responsible for Illinois sales tax on its merchant clients' sales?

Plain-English summary

A company in the international card-payment processing business helps e-commerce merchants sell to customers in other countries, handling currency conversion and payment processing so a merchant's foreign customers can pay in their own local currency. Under an older contract structure used before 2024, the company operated under two different legacy models required by the payment card networks (Visa, Mastercard, etc.): in "Model A," the company briefly held bare legal "flash title" to a merchant's goods for a moment during the transaction, purely to satisfy payment-network account rules; in "Model B," the company never held title or possession of the goods at all. Under both models, the company never operated its own storefront, never listed or advertised merchants' products, never controlled pricing or fulfillment, and never appeared as the seller on shipping documents -- its involvement was limited to processing payments and converting currency, appearing only as a small "badge" and a line on the customer's credit card statement alongside the merchant's own name.

The company asked the Department for a binding ruling that under both models, it was NOT a "retailer" for Illinois sales tax purposes -- not a remote retailer making "sales at retail," not an out-of-state retailer with Illinois physical presence, not a marketplace facilitator, and not a peddler/hawker/itinerant vendor -- so it had no sales tax collection or remittance obligation for its merchants' Illinois sales.

The Department declined to issue that as a formal, binding Private Letter Ruling, deciding existing regulations already addressed the issue, but its General Information Letter response leans favorably toward the company's overall position on the marketplace-facilitator question specifically. Illinois's marketplace facilitator definition has TWO required elements: (1) listing or advertising the seller's taxable goods on a marketplace, AND (2) directly or indirectly collecting payment from the customer and transmitting it to the seller. The Department emphasized that BOTH elements must be present -- doing only one doesn't make someone a marketplace facilitator. It then pointed to its own regulation's illustrative example, "Paymate": a payment processor appointed by merchants to handle credit card and debit card transactions, whose sole marketplace-related activity is handling the financial side of a sale between two parties. Because Paymate doesn't list or advertise the merchant's goods, the regulation says Paymate is NOT a marketplace facilitator. The Department added its own general statement that a payment processing system integrating with a third-party retailer's e-commerce platform, operating in the background to provide payment services, generally would not be considered the retailer for sales made over that platform.

That general guidance lines up closely with the facts the company described -- but the Department's response addresses the general legal framework rather than formally confirming the company's specific "flash title"/no-title contract models are covered by it.

What this means for you

Cross-border payment processors and payment localization services

The key test is conjunctive, not either/or: you need BOTH a listing/advertising role AND a payment-collection role to be a marketplace facilitator. If your role is limited to payment processing and currency conversion -- without operating a storefront, listing products, or controlling merchant pricing/fulfillment -- the Department's own "Paymate" example and general guidance suggest you likely aren't a marketplace facilitator, even if your role involves collecting and transmitting funds.

Payment processors with brief or "flash" title arrangements required by card network rules

Holding bare legal title for a moment, purely to satisfy payment card network account categorization requirements, isn't necessarily the same as being the "transferor" of the goods for sales tax purposes -- but this GIL doesn't give a formal, binding confirmation of that point for a specific fact pattern. If your business model relies on this distinction, consider requesting your own Private Letter Ruling for a binding answer, or structure contracts to minimize ambiguity about your limited role.

Businesses relying on general GIL guidance for a complex nexus question

This GIL illustrates why a detailed, novel fact pattern (like a payment processor's flash-title arrangement) may get a GIL pointing to the relevant general rules and analogous examples, rather than a specific "yes, you are/aren't liable" determination -- a genuine binding answer for your own specific facts requires a Private Letter Ruling request.

Common questions

Q: What are the two required elements of Illinois's marketplace facilitator definition?
A: (1) Listing or advertising the marketplace seller's taxable tangible personal property for sale, AND (2) directly or indirectly collecting payment from the customer and transmitting it to the seller. Both elements are required -- doing only one isn't enough.

Q: Is a payment processor that only handles financial transactions, without listing or advertising merchandise, a marketplace facilitator?
A: Generally no. The Department's own regulatory example ("Paymate") describes exactly this kind of processor as NOT a marketplace facilitator, because it fails the listing/advertising element.

Q: Did the Department confirm that this specific payment-localization company isn't liable for its merchants' Illinois sales tax?
A: Not formally. The Department declined to issue the requested binding Private Letter Ruling and instead explained the general legal framework and an analogous example, without a specific determination on the company's "flash title" (Model A) or no-title (Model B) contract structures.

Q: Does briefly holding "flash title" to goods make a payment processor the retailer?
A: The company argued no, since it couldn't actually control or redirect the goods and was merely a conduit required by payment network rules -- but the Department's response didn't formally rule on this specific point.

Q: What's the current marketplace facilitator remittance threshold in Illinois?
A: $100,000 in cumulative gross receipts from Illinois sales made through the marketplace. A separate 200-transaction threshold applied until it was removed effective January 1, 2026 by Public Act 103-983.

Citations and references

Statutes:

• 35 ILCS 120/1, 120/2(a), 120/2(c) (Retailers' Occupation Tax Act -- "sale at retail," marketplace facilitator nexus)
• 35 ILCS 105/2 (Use Tax Act -- "retailer maintaining a place of business in this State")

Regulations:

• 86 Ill. Adm. Code 130.101, 130.110, 130.115 (Retailers' Occupation Tax imposition; occasional sales; normal course of business)
• 86 Ill. Adm. Code 130.225 (drop-shipment transactions)
• 86 Ill. Adm. Code 130.1990 (peddlers, hawkers, and itinerant vendors)
• 86 Ill. Adm. Code 131.105, 131.107, 131.115 (remote retailer definitions and nexus thresholds)
• 86 Ill. Adm. Code 131.130, 131.135, 131.145, 131.150 (marketplace facilitator definition, thresholds, obligations, and exclusions -- including the "Paymate" example at 131.130(g))

Source

• Landing page: Illinois 2025 Sales Tax Letter Rulings
• Original PDF: ST25-0056-GIL.pdf

Original ruling text

ST 25-0056-GIL 10/28/2025 MARKETPLACE FACILITATOR
A person must carry out both activities specified in 86 Ill. Adm. Code 131.150(a)(1)
to qualify as a marketplace facilitator. (This is a GIL).
October 28, 2025
NAME, JD, CPA
COMPANY1
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated July 15, 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:
Please allow this letter to serve as a request for a Private Letter Ruling ("PLR")
pursuant to Illinois Administrative Code ("Ill. Admin. Code") 1200.110.
COMPANY2 (f.k.a. COMPANY1) is authorized to request a private letter ruling
on behalf of COMPANY ("COMPANY" or "the Company"), and an executed
power of attorney is attached hereto. COMPANY is resubmitting this Private
Letter Ruling request on the grounds that:
1.

This is truly a novel issue not adequately addressed in Illinois'
marketplace facilitator guidance because the guidance does
not clarify who the true seller of the goods is. While the
Company is committed to fulfilling its obligations, the lack of
guidance on this issue leaves uncertainly about the appropriate
course of action.

2.

The Company is removing the request for the PLR to remain
confidential.

If the Illinois Department of Revenue ("Department") will not provide a PLR to
the Company on the issues described in this request, the Company would
respectfully request the Department to issue a General Information Letter. To
the best of COMPANY's knowledge, this matter is not under audit or in
litigation. To the best of COMPANY's knowledge, the Department has not
previously ruled on the same or any similar issues for the Company.
I.

FACTS

COMPANY ("COMPANY") is a company organized in the COUNTRY and is
engaged in business in the payment processing industry. COMPANY is
primarily engaged in providing card payment processing services and fraud
prevention services to international e-commerce merchants ("Merchants")
who sell their merchandise and/or services to end-customers ("Customers")
in countries other than the Merchant's home country. As part of its services,
COMPANY provides localization services that allow Merchants to list
products for sale and execute such sales to their Customers in the currency
of the Customers' home country.
Since inception, the manner in which COMPANY contracted with the
Merchants to provide its services has evolved and the most current iteration
began approximately at the start of 2024. This request for guidance is limited
to the two different operating models that were originally deployed in periods
preceding 2024 ("MODELS"). In the facts below, we will provide an overview of
relevant contractual terms of the MODELS, how COMPANY's services
function, and COMPANY's limited role in the Merchants' transactions with
their Customers.
MODELS
COMPANY provided its card payment processing services under two different
types of Master Service Agreements ("MSAs") that represent the two different
MODELS which we will refer to individually herein as "MODEL A" and "MODEL
B."
The different types of MSAs came about because of requirements imposed by
the payment card networks (e.g., Visa, Mastercard, etc.). As an innovative and
new type of payment localization service, the way COMPANY facilitated
international payments did not clearly fit into any available account
designations offered by the payment networks within their frameworks.
Lacking a clear option and needing to be categorized within the existing

scheme, COMPANY concluded that the merchant account categorization of
the payment networks most closely aligned with its payment flow model.
COMPANY's MSAs were therefore tailored to comply with the applicable
merchant account rules (e.g., a merchant account holder was required to take
title to goods) so that COMPANY could continue to accept payment methods
offered by the payment card networks. Notwithstanding this, COMPANY's
actual role in the sales by Merchants to Customers was largely limited to
merely acting as a traditional payment processor (e.g., Stripe, Square, PayPal,
etc. -aka a payment facilitator or "PayFac").
The main differentiator between the two MODELS for purposes of this request
is that MODEL A provided COMPANY, for a very brief time, title to the goods
sold by Merchants to Customers (hereinafter described as "flash title"). 1
Whereas, in MODEL B, COMPANY did not hold title to any goods being sold at
any time and merely acted as a payment collection agent. 2 Under both
MODELS, the actual services provided by COMPANY were identical despite
the changes in the contractual language.
Below is a summary of the key relevant characteristics of COMPANY's
relationship with the Merchants that are applicable to both MODELS:
1)
2)

3)

4)

1

All of COMPANY's MSAs included a paragraph stating that the
Merchants were responsible for collecting, remitting, and
otherwise administering any and all sales or use taxes. 3
COMPANY does not have a website where Customers can
browse, select, and purchase a Merchant's goods or services.
COMPANY is not in the business of making sales itself other
than sales of its payment processing service. COMPANY does
not engage in any solicitation of the items owned by the
Merchants via any communication medium for the purpose of
effecting the sale of such items.
COMPANY had no control over Merchants' e-commerce
platforms for purposes of being able to apply sales tax correctly
based on situsing rules, collecting or maintaining exemption
documentation, and/or otherwise administer sales taxes in any
way. COMPANY was provided some transaction level data, but
not 100% of the time and not enough to make an informed tax
assessment of the products or services sold.
COMPANY had no responsibility for the Merchant's website
displaying the goods available for sale, integrating systems for
the catalog of products, pricing, establishing and maintaining

Exhibit A -MODEL A - par. 3.2.9(a). Note that COMPANY was fonner1y known as "COMPANY3" but conducted business as "COMPANY."
Exhibit B - MODEL B - par. 5.4(a).
3
See, e.g., Exhibit A - MODEL A - Sch. B, par. 6; Exhibit B - MODEL B - par. 5.4(1).
2

5)

6)

7)

8)

customer accounts, applying discounts and promotions,
receiving and processing orders (aside from payment
processing services provided by COMPANY), liability for
defective products, or any other aspects of the retail
relationship with the end customer. The Merchant was solely
responsible for the accuracy of all product information
displayed on Merchants' websites . 4
COMPANY's name is not on any invoice or bill of lading for the
items sold by the Merchants, and COMPANY is not listed as an
exporter or importer of record for such transactions. The only
documentation related to the payments processed where
COMPANY's name is mentioned is in regard to the payment
card networks and is generally listed along with the Merchant's
name.
COMPANY never had any actual or constructive possession of
the goods or inventory that were the subject of the sales by the
Merchants. The Merchants handled all shipping and fulfillment
of the goods and were responsible for all fees associated with
inaccurate orders or replacements. 5
COMPANY had the risk of fraud for the transactions but had no
other responsibility to the Customer or Merchant's banks for
refunds, shipping, replacing the products, or risk for delays or
cancelled orders. 6
COMPANY does not control, participate in, assist with,
facilitate, or otherwise have any involvement in any of the
activities that are typical of a retail vendor making retail sales to
customers that would traditionally require the collection and
remittance of sales tax.

A typical transaction under either MODEL would generally function as follows.
A.

A Customer selects the products they wish to purchase from
the Merchant and puts them in a digital shopping cart on the
Merchant's website. 7 In the Merchant's digital shopping cart,
applicable taxes and delivery fees would be added to the total
purchase price. However, determination of tax collection
obligations is made by each Merchant independently as they
are responsible for collecting, remitting, and otherwise
administering any and all sales or use taxes. 8

Exhibit B -MODEL B - par. 8.1(a).
Exhibit A - MODEL A- par. 4.2.1(b).
6
Exhibit A - MODEL A- par. 3.2.9(b).
7
Exhibit B - MODEL B - par. 5.6 (a).
8
See, e.g., Exhibit A - MODEL A -Sch. B, par. 6; Exhibit B - MODEL B - par. 5.4(f).
4
5

B.
C.

D.
E.

In response to an electronic request by a Merchant for a
Transaction, COMPANY routes the requested transactions
through their systems. 9
The Customer then enters their payment information into the
Merchant's website. When the Customer enters their
information, a notice (referred to as a "badge") appears to notify
the Customer that they are transacting via COMPANY. This
badge is no different from what a Customer would see if they
were transaction with another payment facilitator, such as
PayPal. Once the Consumer's payment information is verified
by COMPANY, a Transaction shall be deemed to be executed. 10
The Merchant then ships the goods to the Customer and
handles all product-related needs that may follow.
Once the transaction has been settled, COMPANY is paid by the
Merchant based on a percentage of the volume of sales
processed by COMPANY. 11 The percentage can vary depending
on the payment type (e.g. PayPal, local credit cards, etc.) and
the countries that the transaction is dealing in. 12

COMPANY's Technology & The Customer Experience
In this section, relevant components of COMPANY's technology will be
described to show how the technology operated in the background of the
Merchant's website and what the Customers experienced.
Generally, COMPANY's payment processing system platform integrates with
the Merchant's e-commerce platform, but only to the extent it is necessary for
COMPANY to provide its payment processing services. 13 For this reason,
COMPANY did not consistently receive information from the Merchants
regarding what was being sold to make an informed decision regarding the
product's taxability. Secondly, Customers have little knowledge that
COMPANY is involved in the transactions, as shown by how the Customers
pay, what the Customers see on their bank statements, and the lack of
Customer support activities provided by COMPANY.
COMPANY provides Merchants with an API that integrates with the Merchant's
e-commerce platform. 14 Once integrated, the API can then identify certain
transactions where COMPANY's services are applicable 15 and apply the
Exhibit B - MODEL B - par. 5.6(b).
Exhibit B -MODEL B - par. 5.6(b}.
11
Exhibit A- MODEL A- par. 2.3; Exhibit B – MODEL B-par.12.1.
12
Exhibit A - MODEL A- Schedule A FEES.
13
Exhibit A - MODEL A- par. 3.1.2; Exhibit B – MODEL B- par. 2.2.
14
Exhibit B - MODEL B - par. 2.2; par. 5.3.
15
COMPANY’S services would be inapplicable, for instance, when the Merchant and the Customer are both wholly within the same
country.
9

10

relevant foreign exchange rates to the products in the Customer's home
currency. 16 When a Customer navigates to a Merchant's website, COMPANY's
API identifies what country the Customer is in and what country the Merchant
is in. Utilizing COMPANY's API, the Merchant's website then displays the
prices of the Merchant's products in the Customer's home currency using
information provided by COMPANY. 17 Although COMPANY's API is integrated
with the Merchant's e-commerce platform to identify and route certain
transactions for the purpose of currency conversion, this does not allow
COMPANY control over the Merchant's e-commerce system or pricing in any
way.
Once a Customer has selected the products they want to purchase and are
ready to check out, they will be directed to the Merchant's digital shopping
cart. After the Customer has entered a delivery address, the Merchant will
then add any applicable sales tax and delivery fees to the total. This total
amount due, which includes taxes and fees, is part of the information that is
sent to COMPANY so they may help facilitate payment for the transaction. The
Merchant is solely responsible for determining the application of sales taxes
to the transactions as it is the only party that has the full set of information
necessary to make such a determination (e.g., taxability, exemption
documentation, etc.) and control over the Merchant's digital shopping cart to
be able to add sales tax to the transaction. This is the case for both MODELS.
When the Customer comes to the point where they are required to pay the
Merchant for the goods, the Customer enters their payment details via the
Merchant's website which are then forwarded on to COMPANY to process the
payment via COMPANY's API. On the Merchant's checkout page, there is a
hyperlink labeled "Terms of Service" at the bottom that would bring the
Customer to COMPANY's terms of service if clicked on. Customers can
choose to view COMPANY's terms of service if they wish but are not required
to view or acknowledge COMPANY's terms of service to complete the
transaction. Once the transaction is complete, a charge will appear on the
Customer's billing statement with information about both COMPANY and the
Merchant.
In the payment card industry, there are what's known as "hard descriptors"
and "soft descriptors" which collectively comprise the line of text explaining a
transaction on a Customer's billing statement. The hard descriptor is required
to indicate the owner of the bank account to which the Customer's funds are
sent. Because COMPANY owns the bank account where the Customer's
payment is initially sent, COMPANY appears on the Customers' credit card
16
17

Exhibit B - MODEL B - par. 3.1.
Exhibit A - MODEL A -par. 1.11; Exhibit B – MODEL B - par. 2.3(ii).

statement as a hard descriptor. 18 For most of COMPANY's history, the hard
descriptor used for transactions processed by COMPANY was COMPANY's
name abbreviated as "COMPANY".
A soft descriptor will appear on a customer's credit card statement almost
immediately after the charge has been made. This soft descriptor is subject to
changes and shows a pending amount and preliminary description. This
preliminary description generally lists the Merchant as the vendor of the
products or services instead of who owns the bank account where the
payment is sent to. In COMPANY's case, the soft descriptor would show the
Merchant's name whose website the Customer ordered from.
Once the transaction is settled, the description appearing on a Customer's
billing statement will include COMPANY's hard descriptor (COMPANY) first
followed by the Merchant's soft descriptor name. For example, a purchase
from a Merchant named "ABC Company" using COMPANY's payment
processing services would appear on the Customer's billing statement as
"COMPANY0000..0023 -ABC Company (CA- 555-666-7788)." 19
After a Customer receives the products shipped by the Merchant, they may
wish to return the item, seek a refund, or require some other support from the
Merchant regarding their purchase. Under both MODELS, the Merchants are
solely responsible for all customer service matters, other than payment
related queries, including approving and issuing refunds as well as all fees
related to returning the item. 20 Other times, a Customer will dispute a charge
on their credit card due to fraud and the charge will be reversed. This reversing
of a charge is what is known as a "chargeback.". 21 COMPANY is only liable for
chargebacks that are the result of fraud. 22
If a Customer has a question about their order, they may wish to call a
customer service line. COMPANY is required to provide telephone support to
comply with payment card network protocols. However, because COMPANY
is not involved in the fulfillment of orders and has little knowledge of what was
sold, Customers are immediately re-routed to the Merchant's customer
service support telephone number to resolve any and all issues related to the
transaction.
Throughout this process, COMPANY's role and existence is largely invisible to
the Customer but for the Terms of Service hyperlink on the Merchant's
payment page and what they see on their credit card billing statement. The
Exhibit C - Example of Hard Descriptor.
Exhibit C - Example of Hard Descriptor.
20
Exhibit A- MODEL A- par. 4.2.1(b); Exhibit B -MODEL B - par. 8.1 (a).
21
MODEL B-par. 1.1(n).
22
Exhibit B- MODEL B - par. 5.12(a).
18
19

Customer proceeds through the transaction with the understanding that they
are doing business with the Merchant. While COMPANY's contract with the
Merchant may describe a more substantial role in the transaction, it is
important to understand that contractual language is merely present to
conform to payment card network rules but does not reflect COMPANY
stepping into the role of the retailer in any way.
II.

ISSUES

COMPANY requests a private letter ruling that:
1.

2.

III.

Under Legacy Model A, whether COMPANY was engaged in the
business of making "sales at retail" under ILCS Chapter 35 §
120/1, a retailer with physical presence in Illinois under Ill.
Admin. Code 131.107, a marketplace facilitator under Ill.
Admin. Code 131.130, or a peddler, hawker, or itinerant vendor
under Ill. Admin. Code 130.1990?
Under MODEL B, whether COMPANY was engaged in the
business of making "sales at retail" under ILCS Chapter 35 §
120/1, a retailer with physical presence in Illinois under Ill.
Admin. Code 131.107, a marketplace facilitator under Ill.
Admin. Code 131.130, or a peddler, hawker, or itinerant vendor
under Ill. Admin. Code 130.1990?

CONCLUSIONS
1.

Under MODEL A, COMPANY was not engaged in the business of
making "sales at retail" of the Merchants' goods because,
although it had flash title to the goods, it could not effectuate
sales to customers and the substance of the transactions was
between the Merchant and the Customers. COMPANY was not
a retailer with physical presence in Illinois because it did not
have an employee in the state and did not maintain or occupy
an office, place of distribution, or other place of business in
Illinois. It was not a marketplace facilitator because it did not
operate a physical or electronic place, forum, or platform to sell
the Merchants' goods. It was also not a peddler, hawker, or
itinerate vendor because it did not engage in sales techniques
on behalf of undisclosed principals. Accordingly, COMPANY
requests a ruling that it is not a retailer under Illinois law with
regard to the sales of goods by the Merchants and is not liable
for sales or use tax under MODEL A.

2.

IV.

Under MODEL B, COMPANY was not engaged in the business of
making "sales at retail" of the Merchants' goods because it did
not have actual or constructive possession or title to the goods
sold by the Merchants. COMPANY was not a retailer with
physical presence in Illinois because it did not have an
employee in the state and did not maintain or occupy an office,
place of distribution, or other place of business in Illinois. It was
not a marketplace facilitator because it did not operate a
physical or electronic place, forum, or platform to sell the
Merchants' goods. It was also not a peddler, hawker, or itinerate
vendor because it did not engage in sales techniques on behalf
of undisclosed principals. Accordingly, COMPANY requests a
ruling that it is not a retailer under Illinois law with regard to the
sales of goods by the Merchants and is not liable for sales or use
tax under MODEL B.

AUTHORITY

Generally, Illinois imposes its Retailers' Occupation Tax (herein after the
"sales tax") on persons engaged in the business of selling tangible personal
property ("TPP") at retail. 23 A "sale at retail" means any transfer of the
ownership of, the title to, the possession or control of, or the right to possess
or control of TPP to a purchaser for the purpose of consumption, and not for
the purpose of resale. 24
The tax is intended to be passed on to and borne by the purchaser but is
ultimately levied on the retailer and is paid by them to the state. 25 Illinois
provides the following different types of retailers who are relevant for
COMPANY's situation and are subject to sales tax collection and remittance
requirements:
1.
2.
3.

ILCS Chapter 35 § 120/2(a}.
ILCS Chapter 35 § 120/1.
25
Ill. Admin. Code 130.101(e}.
23
24

Remote retailers incurring sales tax using destination sourcing
for sales made to Illinois purchasers;
Marketplace facilitators incurring sales tax using destination
sourcing for sales made over the marketplace on behalf of
marketplace sellers to Illinois purchasers;
Out-of-State sellers with a physical presence in Illinois incurring
a use tax collection obligation for sales they make outside
Illinois and ship or deliver to Illinois purchasers; and

4.

Illinois retailers, including brick and mortar retailers, incurring
sales tax based on origin sourcing for sales made in Illinois. 26

Illinois generally provides that marketplace facilitators are "engaged in the
business of selling TPP at retail" when they meet the state's economic nexus
requirements. 27 A "marketplace facilitator'' means a person that, through an
agreement with a marketplace seller, helps facilitate retail sales of TPP that is
subject to tax by either listing or advertising the TPP for sale and by collecting
payment from customers and transmitting that payment to the marketplace
seller. 28 A "marketplace seller" means a person that makes sales through a
marketplace operated by an unrelated marketplace facilitator. 29 A
"marketplace" means a physical or electronic place, forum, platform,
application, or other method by which a marketplace seller sells or offers to
sell items. 30 Marketplace facilitators are generally responsible for collecting
and remitting sales tax on all sales facilitated through their marketplace. 31
Peddlers, hawkers, or itinerant vendors (herein after "itinerant vendors") are
also required to collect and remit tax on retail sales made by them in their own
name. 32 The state holds that persons who transport a supply of tangible goods
from place to place, solicit and negotiate sales of such goods, and
immediately deliver the goods sold are considered itinerant vendors. 33 When
such persons sell TPP at retail in Illinois on their own behalf, they are required
to register with the Department, file tax returns, and remit tax to the state. 34 It
is immaterial what methods are employed in consummating the sales,
whether by door-to-door sales, solicitation by telephone or mail, or by display
rooms in salesrooms. 35 However, such persons are not liable for the tax when
the sales are not made on their own behalf, but rather on behalf of a disclosed
principal such as a manufacturer or distributor. 36
In Illinois, a drop-shipment transaction is one in which out-of-state
purchasers that are not registered with the Department and that do not have
sufficient nexus with the state make purchases for resale from companies
that are registered with the Department and have those companies drop-ship
the property to the purchasers' customers in Illinois. 37 In this case, the
companies that drop-ship the property to the customers are selling the
Ill. Admin. Code 131.107(a)(1), (2), (4), (6).
ILCS Chapter 35 § 120/2(c).
28
ILCS Chapter 35 § 120/1; Ill. Admin. Code 131.130(a)(1).
29
ILCS Chapter 35 § 120/1.
30
ILCS Chapter 35 § 120/1
31
ILCS Chapter 35 § 120/2(c).
32
Ill. Admin. Code 130.1990(a)(1).
33
Ill. Admin. Code 130.1990(a)(1).
34
Ill. Admin. Code 130.1990(a)(1 ).
35
Ill. Admin. Code 130.1990(a)(2).
36
Ill. Admin. Code 130.1990(b)(1).
37
Ill. Admin. Code 130.225(a).
26
27

property to the purchaser as a sale for resale, and if the company is provided
a valid resale certificate from the purchaser, the sale is not subject to tax. 38
However, if the purchaser has sufficient contact with Illinois that would
require them to register with the Department, then they must collect and remit
the tax on all retail sales made by them. 39 Therefore, Illinois generally
considers the purchasers of the property to be liable for tax collection and
remittance in drop-shipment transactions if they have sufficient contact with
the state.
Illinois has long applied a substance over form approach when applying its
sales tax statutes. 40 For example, in Illinois Dept. of Rev. General Information
Letter ST 13-0033-GIL (2013), the Department applied this doctrine when a
Seller could not sell TPP to a Buyer due to Illinois regulatory requirements. 41 In
that case. the Seller operated a regulated business and did not hold itself out
as selling TPP at retail. The seller entered into an agreement with a Buyer to
sell a portion of the Seller's operating equipment and capital assets. Because
of Illinois regulatory requirements, the Seller was not allowed to sell the TPP
directly to the Buyer. Illinois instead required the Seller to transfer the assets
to an intermediary who will then transfer the assets to the Buyer. The
Department noted that if the intermediary were not involved in the
transaction, then the transaction would qualify for the occasional sale
exemption. The Department was asked whether this transaction would lead
to sales tax liability.
Ultimately, the Department found that no tax was due. The Department found
that because of the intermediary's limited role, the substance of the
transaction was between the Seller and the Buyer.
Accordingly, the transaction was an occasional sale. The Department listed
the following guidelines that, if fulfilled, allowed the intermediary's role in the
transaction to be excluded:
1.
2.
3.

The intermediary was merely acting as a conduit in facilitating
the exchange and had no beneficial interest in the transaction;
The intermediary was required to re-convey title to the end
purchasers upon receipt from the initial seller;
The intermediary had no liability for warranties to the end
purchaser;

Ill. Admin. Code 130.225(a).
Ill. Admin. Code 130.225(b).
40
JI Aviation, Inc. v. Dep’t of Rev., 335 Ill. App. 3d 905 (2002) (citing Estate of Weinert v. Commissioner of the Internal Rev. Service, 294
F.2d 750 (5th Cir.1961), "[T]ax law deals in economic realities, not legal abstractions."); Melvin C. Young v. Harry L. Hulman, Director of
Rev., et al., 39 Ill. 2d 219 (1968); Frank's Ice Cream Vending Carts v. The Dep 't of Rev., 34 Ill. 2d 324 (1966) ("[W)e must look to the
substance rather than the form of a transaction, and the categorization given to a relationship by the interested parties is not conclusive
of the nature of the relationship.")
41
Illinois Dept. of Rev. General Information Letter ST 13-0033-GIL, 07/30/2013.
38
39

4.
5.
6.

The intermediary was required to re-convey the purchase price
it received from the end purchaser;
The intermediary was contractually precluded from keeping any
portion of the purchase price from the end purchaser; and
The intermediary did not pay any closing costs of the
transaction.

The Department found that because the intermediary fit within all of the above
guidelines, it's limited role in the transaction was disregarded for sales tax
purposes. Specifically, the Department found that the intermediary had no
beneficial interest in the transaction because it was immediately required to
convey the TPP to the Buyer and the purchase price without a markup to the
seller. Thus, the intermediary was only involved in the transaction to satisfy
regulatory requirements and did not purchase the operating equipment and
capital assets to resell them for a profit. As such, the substance of the
transaction was between the Seller and Buyer, and the intermediary's limited
role was ignored for tax purposes.
Finally, Illinois generally provides that statutes that impose taxes should be
strictly construed insofar as they may operate to deprive a citizen of their
property or impose penalties upon them. 42 Conversely, statutes granting tax
exemptions are strictly construed against the taxpayer. 43
V.

ANALYSIS
1.

Under MODEL A, COMPANY was not engaged in the business
of making "sales at retail" of the Merchants' goods because,
although it had flash title to the goods, it could not
effectuate sales to customers and the substance of the
transaction was between the Merchant and the Customers.
COMPANY was not a retailer with physical presence in
Illinois because it did not have an employee in the state and
did not maintain or occupy an office, place of distribution, or
other place of business in Illinois. It was not a marketplace
facilitator because it did not operate a physical or electronic
place, forum, or platform to sell the Merchants' goods. It
was also not a peddler, hawker, or itinerate vendor because
it did not engage in sales techniques on behalf of
undisclosed principals. Accordingly, COMPANY requests a
ruling that it is not a retailer under Illinois law with regard to

United Legal Found. and the Elijah Muhammad Found. v. Illinois Dep't of Rev., 272 Ill. App. 3d 666 (1995); The People ex rel. Fern
Conner, County Collector v. Burgess-Norton Mfg. Co. 49111. 2d 397 (1971).
43
The People ex rel. Lawrence Cannon, County Collector v. Southern Illinois Hospital Corporation, 404 Ill. 66 (1949).
42

the sales of goods by the Merchants and is not liable for
sales or use tax under MODEL A.
COMPANY Was Not Making "Sales at Retail" Under ILCS Chapter 35 § 120/1.
Illinois provides that one type of retailer subject to collection and remittance
requirements is a remote retailer incurring sales tax based on sales to Illinois
purchasers. 44 Under MODEL A, although COMPANY did not have actual or
constructive possession over the goods sold by the Merchants, it did have
flash title to the goods. Illinois defines a "sale at retail" to mean a transfer of
title or possession of TPP for consideration. In reviewing this issue, we must
first analyze what it means to have the authority, power, or right to effectuate
a transfer to determine who is doing the "transferring."
The definition of a "sale at retail" implies that the party who has the actual
authority and right to effectuate the transfer of title or possession is the party
responsible for safes tax collection and remittance. From a tax policy
perspective, itinerant vendors are often responsible for sales tax collection
and remittance because they have the authority to cause the transfer of title
or possession to the customer. Similarly, a party that sets a sale in motion (the
"purchaser," as that term is used above) in a drop-shipment transaction is
liable for tax collection and remittance when it has sufficient contact with the
state. Thus, the focus of this analysis should be on which party in the
transaction has the ultimate authority to effectuate the transfer of title and/or
possession to the customer.
As presented in the facts, at no point in the course of the transaction does
COMPANY have any actual or constructive possession of the goods being
sold. The Merchant is the sole party responsible for handling inventory and
making arrangements for delivery to the Customer. Therefore, the Merchant is
the only party capable of effectuating the transfer of possession to the
Customer.
With regard to the title to the goods, title passes from the Merchant to
COMPANY and then from COMPANY to the Customer. However, COMPANY is
not the party "transferring" title to the Customer. Put another way, COMPANY
is not the party causing the title to transfer to the Customer because
COMPANY has no authority to initiate the chain of events which would cause
the title to transfer to the Customer. The Merchant is the only party to the
transaction who is authorized to accept a Customer's offer to purchase goods
which then sets in motion the process of transferring both possession and title
to the Customer. If the Merchant is the sole party who can cause title to
44

Ill. Admin. Code 131.107(a)(1).

transfer to the Customer, then the Merchant is the "transferor" -or the party
doing the "transferring" -as the term is used in the definition of a "sale."
COMPANY had no authority to initiate the sale or begin the process of
transferring title. It only received flash title because the Merchant received an
order to purchase goods and then authorized COMPANY to facilitate
payment. COMPANY could not exercise the degree of control that a person
usually could when making sales. For example, COMPANY could not retain
the property if it chose to or transfer title to anyone it wanted because title to
the property needed to be transferred to the Customers. Therefore, because
COMPANY could not effectuate the transfer of title and could not exercise the
degree of control that someone with title typically could, it technically did not
make a "sale at retail" under Illinois law.
In interpreting tax imposition statutes, the statute is generally construed in
favor of the taxpayer. 45 In contrast, tax exemption statutes are strictly
construed against the taxpayer. 46 Illinois's definition of a "sale at retail" means
a transfer of title or possession of taxable items for consideration. The
definition of a "sale at retail" is an essential and unavoidable component of
the state's Retailer's Occupation Tax imposition statute. Thus, the definition
of a "sale at retail," to the extent it is ambiguous in its application to
COMPANY, is construed against imposing the tax. The imposition statute
seeks to impose retail sales tax on the party making a "sale at retail" which is
the party engaging in the overt acts that comprise the sale (i.e., transferring
possession or title). As noted above, COMPANY was not "transferring"
possession or title because it was not capable of effectuating such transfers.
To the extent that the Department finds there is ambiguity as to who is doing
the "transferring," such ambiguity must be resolved in favor of COMPANY.
However, if it is found that COMPANY did make a "sale at retail," then the
substance, rather than the form, of the transaction should control. In Illinois
Dept. of Rev. General Information Letter ST 13-0033-GIL, the Department
applied the substance of form doctrine to find that no tax liability would be
imposed on the transaction. Dispositive in the Department's analysis was the
fact that the intermediary had a limited role in the transaction and was only
involved in the transaction to solely to comply with government regulation.
Specifically, the Department found that the intermediary had no beneficial
interest in the transaction because it was immediately required to convey the
TPP to the Buyer and the purchase price without a markup to the seller.
Accordingly, the intermediary did not purchase the operating equipment and
capital assets to resell them for a profit but was involved in the transaction
45
United Legal Found. and the Elijah Muhammad Found., 272 Ill. App. 3d 666 (1995); The People ex rel. Fem Conner, County Collector,
49 Ill. 2d 397 (1971).
46
The People ex rel. Lawrence Cannon, County Collector, 404 Ill. 66 (1949).

merely to satisfy regulatory requirements. As such, the substance of the
transaction was between the Seller and Buyer, and the intermediary's limited
role was ignored for tax purposes.
Similarly, COMPANY was merely an intermediary that title was transferred
through to comply with payment network requirements as understood at the
time. As COMPANY was offering a new type of payment localization service,
its method for facilitating international payments did not fit into any available
account designations offered by payment networks. As a result, COMPANY
concluded that the merchant account categorization most closely aligned
with its payment model. To fit this account categorization, COMPANY's MSAs
under MODEL A were written to provide it with flash title to the Merchants'
goods. COMPANY had no interest in the transaction except as a payment
processor for the Merchants. COMPANY's role in the transaction was similar
to that of the intermediary in Illinois Dept. of Rev. General Information Letter
ST 13-0033-GIL in that it was merely acting as a conduit in facilitating the
exchange, was required to convey title to the goods to the purchaser and had
no responsibility for the quality of the goods. Additionally, COMPANY did not
purchase the goods from the Merchants to mark up the price and then sell it
to the Customers. COMPANY merely held bare legal title to the goods for a
brief period of time after the sale from a Merchant to a Customer to comply
with payment network requirements.
Further, when a Customer wished to purchase an item from a Merchant, it
navigated to the Merchant's website, not COMPANY's. COMPANY does not
have a website where Customers can browse or purchase a Merchant's
goods. When the goods were shipped to a Customer, the Merchant handled
all shipping and fulfillment of the goods. COMPANY's name is not on any
invoice or bill of lading, and it is not listed as the importer or exporter of record
for the transactions. Other than assuming the risk of fraudulent transactions
as the payment processor, COMPANY had no responsibility to the Customer
or the Merchants' banks for refunds, replacing products, or cancelled
orders. 47
The Merchants were also substantively the sellers from the Customers'
perspective. The Customers would interact directly with the Merchants'
website when browsing and selecting products to purchase. Once a
Customer was ready to check out, the only indication that COMPANY was
involved in the transaction was a badge at the bottom of the website and a link
to the COMPANY's terms of service. Once the Customer's credit card was
charged, the soft descriptor on their statement would list the Merchants as
the seller, and the hard descriptor would appear as an abbreviation of
47

Exhibit A - MODEL A- par. 3.2.9(b).

COMPANY's name along with the Merchant's name. If a Customer wished to
return an item or seek a refund, the Merchants were solely responsible for
those customer service matters excluding payment processing related
inquiries.
For the above reasons, COMPANY's brief holding of title to the goods should
not make it subject to collection and remittance requirements in Illinois. The
language in the MODEL A MSAs that gave COMPANY flash title to the goods
were a way to comply with payment network requirements, but the
transactions were truly between the Customers and the Merchants.
Therefore, under MODEL A, COMPANY should not be subject to collection and
remittance requirements.
COMPANY Was Not a Retailer With Physical Presence in Illinois Under Ill.
Admin. Code 131.107.
Illinois provides that out-of-state sellers with physical presence in Illinois
incur a use tax collection obligation for sales they make outside Illinois and
that are delivered to Illinois purchasers. 48 As discussed above, COMPANY is
not making "sales" of the Merchants' goods. Further, COMPANY does not have
physical presence in Illinois. COMPANY does not have employees, an office
or other business location, or a distribution warehouse or other fulfillment
location in the state. Therefore, it is not an "out-of-state seller with physical
presence in Illinois" and therefore does not have a use tax collection
obligation in the state.
Illinois also provides that Illinois retailers, such as brick and mortar retailers,
incur sales tax based on sales made in Illinois. 49 As both previously discussed,
COMPANY is not making "sales" of the Merchants' goods and does not have
physical presence in Illinois. Therefore, it is not an Illinois retailer that incurs
sales tax based on sales made in Illinois.
COMPANY Was Not a Marketplace Facilitator Under Ill. Admin. Code
131.130.
Illinois provides that one type of retailer subject to collection and remittance
requirements is a marketplace facilitator incurring sales tax based on sales
made over a marketplace on behalf of marketplace sellers to Illinois
purchasers. 50 A "marketplace facilitator" means a person that facilitates retail
sales of TPP that is subject to tax by either listing or advertising the TPP for sale
and by collecting payment from customers and transmitting that payment to
Ill. Admin. Code 131.107(a)(4).
Ill. Admin. Code 131.107(a)(6).
50
Ill. Admin. Code 131.107(a)(2).
48
49

the marketplace seller. 51 A "marketplace" means a physical or electronic
place, forum, platform, application, or other method by which a marketplace
seller sells or offers to sell items. 52 The applicable administrative code
provides the following example that is instructive for COMPANY's situation:
Paymate is a payment processing business appointed by merchants to
handle payment transactions from various channels, such as credit
cards and debit cards. Its sole activity with respect to marketplace
sales is to handle financial transactions between two parties on the
marketplace. Paymate is not a marketplace facilitator because it does
not engage in [listing or advertising the marketplace seller's TPP for
sale]. 53
Although COMPANY does provide payment processing services to the
Merchants, COMPANY does not list or advertise the Merchants' TPP for sale.
COMPANY does not have any physical or electronic place, forum, platform, or
application where Customers can browse, select, or purchase items other
than its own website which facilitates sales of its own payment localization
and processing services. COMPANY's website also does not have links,
banners advertisements, or other references that direct Customers to the
Merchants' websites. Further, COMPANY has no responsibility (and is not
paid by the Merchants to) engage in promoting, marketing, or advertising of
the goods. Therefore, it is similar to Paymate in the example above. Although
COMPANY provides payment processing services for the Merchants, it is not
a marketplace facilitator because does [sic] not list or advertise the
Merchants' TPP for sale.
COMPANY Was Not Peddler, Hawker, or Itinerant Vendor Under Ill. Admin.
Code 130.1990.
Illinois imposes a sales tax collection and remittance obligation on persons
who transport a supply of tangible goods from place to place, solicit and
negotiate sales of such goods, and immediately deliver the goods sold. 54
When such persons sell TPP at retail in Illinois on their own behalf, they are
required to register with the Department, file tax returns, and remit tax to the
state. 55 It is immaterial what methods are employed in consummating the
sales, whether by door-to-door sales, solicitation by telephone or mail, or by
display rooms in salesrooms. 56 However, such persons are not liable for the
tax when the sales are made on behalf of another such as a manufacturer or
Ill. Admin. Code 131.130(a)(1).
ILCS Chapter 35 § 120/1
53
Ill. Admin. Code 131.130(Example 2).
54
Ill. Admin. Code 130.1990(a)(1).
55
Ill. Admin. Code 130.1990(8)(1).
56
Ill. Admin. Code 130.1990(8)(2).
51
52

distributor and such itinerant vendor is disclosed to the buyer. 57 Here,
COMPANY is not an itinerant vendor because it did not make "sales" or engage
in sales techniques on behalf of the Merchants. Even if it was found that
COMPANY did make "sales" or engage in sales techniques, then it was acting
on behalf of disclosed principals and therefore was not liable for sales tax
collection and remittance.
As discussed in the section dealing with whether COMPANY made "sales at
retail," COMPANY was not making "sales" on behalf of the Merchants because
it could not initiate the chain of events to cause title or possession to be
transferred. As discussed in the marketplace facilitator section, COMPANY
does not engage in listing or advertising the Merchants' goods for sale. It also
does not engage in door-to-door sales, solicitation by telephone or mail,
displaying goods for sale in sales rooms, or negotiating for the sale of the
Merchants' goods. Therefore, COMPANY is not an itinerant vendor for the
Merchants and is liable for Illinois sales tax.
Even if it was found that COMPANY did engage in making "sales" and sales
techniques on behalf of the Merchants, Illinois provides that itinerant vendors
who sell on behalf of disclosed principals are not liable for tax. 58 The
Customers are well aware that they are purchasing goods from the Merchants
and not COMPANY. Although there are indications that COMPANY is
processing the payment for the Merchants, such as their badge at the bottom
of the website and a link to their terms of service, the Customers navigate to
the Merchants' website to purchase goods, not COMPANY's. Further, the soft
and hard descriptors on the Customers' bank statements both list the
Merchants' name. Therefore, if it is found that COMPANY is an itinerant vendor
for the Merchants, it is also working on behalf of a disclosed principal and
therefore is not liable for the tax.
It Would Be Impractical for COMPANY to Collect Sales Tax on Behalf of
The Merchants.
It would also be impractical for COMPANY to collect and remit sales tax on
behalf of the Merchants because COMPANY had no control over the
Merchants' e-commerce platforms for purposes of adding sales tax to
transactions. This is especially true when the Merchants agreed in their MSAs
with COMPANY to be liable for all applicable taxes associated with the
transactions. Although COMPANY had some transaction level details, it did
not have enough information to make informed tax determinations across all
transactions and Merchants. Therefore, it is not practical to hold it
accountable for collecting and remitting sales tax.
57
58

Ill. Admin. Code 130.1990(b)(1).
Ill. Admin. Code 130.1990(b)(1).

1.

Under MODEL B, COMPANY was not engaged in the business
of making "sales at retail" of the Merchants' goods because
it did not have actual or constructive possession or title to
the goods sold by the Merchants. COMPANY was not a
retailer with physical presence in Illinois because it did not
have an employee in the state and did not maintain or
occupy an office, place of distribution, or other place of
business in Illinois. It was not a marketplace facilitator
because it did not operate a physical or electronic place,
forum, or platform to sell the Merchants' goods. It was also
not a peddler, hawker, or itinerate vendor because it did not
engage in sales techniques on behalf of undisclosed
principals. Accordingly, COMPANY requests a ruling that it
is not a retailer under Illinois law with regard to the sales of
goods by the Merchants and is not liable for sales or use tax
under MODEL B.

COMPANY Was Not Making "Sales at Retail" Under ILCS Chapter 35 § 120/1.
Under MODEL B, COMPANY did not have flash title to the goods sold by the
Merchants. It did not have actual or constructive possession over the goods
either. Therefore, COMPANY did not transfer title or possession of TPP in
exchange for consideration and did not make "retail sales" under Illinois law. 59
Because COMPANY did not make sales, it is not subject to collection and
remittance requirements.
COMPANY Was Not a Retailer With Physical Presence in Illinois Under Ill.
Admin. Code 131.107.
For the same reasons discussed above under the MODEL A analysis,
COMPANY was not a retailer with physical presence in Illinois liable for sales
or use tax collection for purposes of MODEL B.
COMPANY Was Not a Marketplace Facilitator Under Ill. Admin. Code 131.130.
For the same reasons discussed above under the MODEL A analysis,
COMPANY was not a marketplace facilitator liable for sales tax collection for
purposes of MODEL B.
COMPANY Was Not Peddler, Hawker, or Itinerant Vendor Under Ill. Admin.
Code 130.1990.
59

ILCS Chapter 35 § 120/1.

For the same reasons discussed above under the MODEL A analysis,
COMPANY was not a itinerate vendor liable for sates tax collection for
purposes of MODEL B.
*

*

*

*

*

For all of the above reasons, we ask the Department to confirm our
understanding that COMPANY is not responsible for sales and use tax for
transactions between the Merchants and their Customers under either
MODEL period. Under MODEL A, COMPANY was not making sales because it
never had possession of the goods, could not effectuate the transfer of title,
and could not control the goods in a manner that a person with title usually
could. Under MODEL B, it did not hold possession or title to the goods, and
therefore could not make a sale. Under both MODELS, COMPANY did not have
the characteristics of a retailer with physical presence in Illinois, marketplace
facilitator, or itinerate vendor. Therefore, COMPANY is not responsible for
sales and use tax in Illinois for the sales by the Merchants.
Thank you for your prompt consideration of this matter. If this ruling request
does not provide sufficient information to support our conclusions reached
herein, we request a meeting to state our positions more fully with respect to
the foregoing. If the Department disagrees with any part or all our conclusions
reached in this letter, we respectfully request the Department to contact us
prior to issuance of a letter in response to this request. Please contact either
me or NAME1 at PHONE or EMAIL.
DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization”
states that “[w]hether to issue a private letter ruling in response to a letter ruling request is
within the discretion of the Department. The Department will respond to all requests for
private letter rulings either by issuance of a ruling or by a letter explaining that the request
for a ruling will not be honored.” See 2 Ill. Adm. Code 1200.110(a)(4). The Department has
reviewed your request and decided to issue a general information letter because there are
regulations dispositive of the subject of the request.
The Retailers’ Occupation Tax Act imposes a tax on persons engaged in this State in
the business of selling tangible personal property at retail to purchasers for use or
consumption. See 86 Ill. Adm. Code 130.101. Use Tax is imposed on the privilege of using,
in this State, tangible personal property that is purchased anywhere at retail from a retailer.
See 86 Ill. Adm. Code 150.101. These taxes comprise what is commonly known as “sales

tax” in Illinois. Purchases of tangible personal property are subject to Illinois sales tax
unless a purchase qualifies for an exemption under Illinois law.
Before October 1, 2018, out-of-State retailers had to have a physical presence in
Illinois before they could be required to collect Use Tax. The types of activities constituting
a physical presence are found in Section 2 of the Use Tax Act’s definition of a “retailer
maintaining a place of business in this State”. See 35 ILCS 105/2. Regulations describing
these types of retailers are found at 86 Ill. Adm. Code 150.201; 150.801 and 150.802.
In South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), the U.S. Supreme Court
upheld a South Dakota law that imposed sales tax obligations on retailers meeting specific
gross sales or transaction thresholds, even if they had no physical presence in the state. The
Court’s decision removed the long-standing requirement of physical presence. In response,
Illinois P.A. 100-0587, effective October 1, 2018, amended the definition of a “retailer
maintaining a place of business in this State” to include nearly identical nexus thresholds to
those upheld in Wayfair. Following this, Illinois P.A. 101-0009, effective January 1, 2020,
expanded the nexus standards to include marketplace facilitators. See 35 ILCS 105/2; 86
Ill. Adm. Code 150.803 and 804.
Effective January 1, 2021, Public Acts 101-0031 and 101-0604 implemented a series
of structural changes to Illinois sales tax laws intended to “level the playing field” between
Illinois-based retailers and remote retailers by imposing State and local retailers’
occupation taxes on Illinois retailers, remote retailers, and marketplace facilitators alike.
The regulations at 86 Ill. Adm. Code, 131 et seq., sets forth the provisions and requirements
for remote retailers and marketplace facilitators.
Marketplace Facilitator
A marketplace is a physical or electronic place, forum, platform, application, or other
method by which a marketplace seller sells or offers to sell items. See 86 Ill. Adm. Code
131.105. A marketplace seller is a person who makes sales through a marketplace operated
by an unrelated third-party marketplace facilitator. Id. A marketplace facilitator is a person
who, pursuant to an agreement with an unrelated third-party marketplace seller, directly or
indirectly through one or more affiliates, facilitates a retail sale by an unrelated third-party
marketplace seller by:
1) Listing or advertising for sale by the marketplace seller in a marketplace, tangible
personal property that is subject to tax under the Retailers’ Occupation Tax Act;
and
2) Either directly or indirectly, through agreements or arrangements with third
parties, collecting payment from the customer and transmitting that payment to
the marketplace seller, regardless of whether the marketplace facilitator receives
compensation or other consideration in exchange for its services. 86 Ill. Adm.

Code 131.130(a)(1). A provision on a marketplace of functionality for connection
to a payment mechanism meets these requirements. See 86 Ill. Adm. Code
131.130(a)(1)(B).
Beginning January 1, 2021, a marketplace facilitator, as defined above, is considered
a retailer 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:
1) The cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois made through the marketplace by the marketplace
facilitator and by marketplace sellers are $100,000 or more; or
2) The marketplace facilitator and marketplace sellers selling through the
marketplace cumulatively enter into 200 or more separate transactions for the
sale of tangible personal property to purchasers in Illinois. See 86 Ill. Adm. Code
131.135(a).
A marketplace facilitator meeting either threshold is required to register with the
Department, file returns, and remit all applicable State and local retailers’ occupation taxes
administered by the Department for all sales made through the marketplace to Illinois
purchasers, including its own sales and sales made on behalf of marketplace sellers. See
86 Ill. Adm. Code 131.145(a) and 131.145(c). Please note that beginning January 1, 2026,
the 200-transaction threshold for marketplace facilitators has been removed. See Article
25 Public Act 103-983.
A marketplace seller is generally not liable for State and local retailers’ occupation
taxes for sales of tangible personal property sold to Illinois purchasers through a
marketplace. See 86 Ill. Adm. Code 131.145(b) and 131.150(a). The marketplace facilitator
would be liable for the applicable taxes on these sales unless the marketplace seller
provides it with incorrect information. See 86 Ill. Adm. Code 131.145(d). The Department is
prohibited from collecting State and local retailers’ occupation taxes from both the
marketplace facilitator and the marketplace seller on the same transaction. See 86 Ill. Adm.
Code 131.145(l) and 131.150(h).
The Department has encountered various marketing and payment arrangements
used by ecommerce businesses. Notably, the broad language of the statute and
administrative rules concerning marketplace facilitators allows for its application to many
different types of ecommerce businesses. See 35 ILCS 120/1; 86 Ill. Adm. Code 131.105.
This language enables a marketplace facilitator to be regarded as the retailer, even if it never
owns the goods, ships the goods, or has any privity of contract with the marketplace
customer beyond facilitating the sale in accordance with 86 Ill. Adm. Code 131.130(a)(1).
However, despite such broad language, there are limitations. Examples of activities that do
not meet the requirements of 86 Ill. Adm. Code 131.130(a)(1) are listed at 131.130(g). One

such example clarifies when a third-party payment processor is not regarded as a
marketplace facilitator.
EXAMPLE 2: Paymate is a payment processing business appointed by
merchants to handle payment transactions from various channels, such as
credit cards and debit cards. Its sole activity with respect to marketplace
sales is to handle financial transactions between two parties on the
marketplace. Paymate is not a marketplace facilitator because it does not
engage in the activities described in subsection (a)(1)(A).
In the above example, Paymate did not qualify as a marketplace facilitator because
it did not operate a marketplace that listed or advertised products for sale by marketplace
sellers. A person must carry out both activities specified in 86 Ill. Adm. Code 131.150(a)(1)
to qualify as a marketplace facilitator.
Remote Retailer
A remote retailer is a retailer that does not maintain within this State, directly or by a
subsidiary, an office, distribution location, sales office, 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 the purposes of the Retailers’ Occupation Tax Act and 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, if either of the following thresholds is met:
1) The cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois are $100,000 or more; or
2) 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). Beginning January 1, 2026, the 200-transaction threshold for remote
retailers has been removed. See Article 25 Public Act 103-983.
The Retailers’ Occupation Tax Act imposes a tax on persons engaged in this State in
the business of selling tangible personal property at retail to purchasers for use or
consumption. The tax is measured by the seller’s gross receipts from sales made in the
course of such business. See 86 Ill. Adm. Code 130.101. Thus, the retailers’ occupation tax
applies to retailers in the business of selling tangible personal property, but only to the
extent such sales are made in the person’s normal course of business. Conversely, the

retailers’ occupation tax is not imposed upon persons who are not engaged in the business
of selling tangible personal property or who make a sale of tangible property outside their
normal course of business. See 86 Ill. Adm. Code 130.110. Such sales are commonly
referred to as “occasional sales”. See 86 Ill. Adm. Code 130.110 for examples of exempt
occasional sales by a retailer.
A person is engaged in making sales in the normal course of business if such person
habitually engages in selling tangible personal property for use or consumption, or who, in
any manner or at any time, advertises, solicits, offers for sale, or holds itself out to the public
to be a seller of such tangible personal property for use or consumption. See 86 Ill. Adm.
Code 130.115. Generally, a payment processing system that integrates with a third-party
retailer’s ecommerce platform and operates in the background to provide payment
processing services would not be considered the retailer for sales made over a third-party
retailer’s ecommerce platform.
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 (217) 782-3336.
Very truly yours,
Thomas Grudichak
Associate Counsel
TG:slc