Does a solar company that delivers electricity to residential customers under a power purchase agreement owe Illinois's Electricity Excise Tax and Electricity Distribution Tax?

Plain-English summary

A business that installs residential solar systems through power purchase agreements (PPAs) or leases -- and separately, a related business acting as a gas and electric marketer -- asked the Department to sort out several Illinois public utility taxes that don't work like the state's general sales tax: the Electricity Excise Tax, the Electricity Distribution Tax (under the Public Utilities Revenue Act), the Gas Revenue Tax, and the Invested Capital Tax that piggybacks on both the electric and gas revenue taxes.

For the solar PPA business, the Department worked through its own illustrative example that closely matched the taxpayer's setup: a company installs solar panels on a customer's home under a PPA, the customer doesn't pay for the equipment or installation but agrees to buy all the electricity the system generates for a set term, and the company delivers that electricity to the customer for use. In that scenario:

• The company IS a "delivering supplier" under the Electricity Excise Tax Law -- the last supplier delivering electricity to the customer before receipt -- so it must register with the Department, collect the Electricity Excise Tax from the customer, and remit it.
• The company is NOT subject to the separate Electricity Distribution Tax (or its invested capital tax add-on) under the Public Utilities Revenue Act. That's because the definition of "alternative retail electric supplier" (the category subject to the distribution tax) specifically excludes an entity that owns, operates, sells, or arranges installation of a CUSTOMER'S OWN cogeneration or self-generation facility -- which is exactly what a residential solar PPA installer is doing.

So the two utility taxes point in opposite directions for the same PPA arrangement: excise tax applies, distribution tax doesn't.

For the gas and electric marketer side of the inquiry -- a business that sells gas and electricity it owns (both in and outside Illinois) to Illinois customers, without itself owning, leasing, or controlling any delivery infrastructure -- the Department explained that "delivering supplier" status (which drives Electricity Excise Tax and Gas Use Tax liability) depends on who is actually last in the chain delivering the commodity to the customer; a marketer that hands that job off to a utility isn't the delivering supplier under that definition. On the Gas Revenue Tax's invested capital add-on specifically, the Department gave a clear final answer: "alternative gas suppliers" as defined by the Alternative Gas Supplier Law (marketers, not the regulated public utilities that own delivery infrastructure) are NOT liable for that invested capital tax.

What this means for you

Residential solar installers using PPAs or leases

If your business delivers the electricity your equipment generates to a residential customer under a PPA or lease (rather than the customer owning the system outright), expect to register as a delivering supplier and collect the Electricity Excise Tax from the customer. But don't assume that also means you owe the separate Electricity Distribution Tax -- the self-generation/cogeneration installer exclusion likely takes you out of that one.

Gas and electric marketers who don't own delivery infrastructure

Whether you're a "delivering supplier" turns on whether you're the LAST party actually delivering the commodity to the customer -- if a utility handles delivery on your behalf, you likely aren't the delivering supplier for Electricity Excise Tax or Gas Use Tax purposes, even though you own and sell the underlying gas or electricity.

Gas marketers specifically

If you qualify as an "alternative gas supplier" under the Alternative Gas Supplier Law (220 ILCS 5/19-105) rather than a regulated public utility, you're not liable for the Gas Revenue Tax Act's invested capital tax add-on, regardless of your invested-capital numbers.

Common questions

Q: Does a solar PPA/lease company owe the Electricity Excise Tax?
A: Yes, if it delivers the electricity its system generates to the customer -- it's a "delivering supplier" that must register, collect the tax from the customer, and remit it.

Q: Does that same solar company also owe the Electricity Distribution Tax under the Public Utilities Revenue Act?
A: No, if it's installing and operating a customer-owned self-generation or cogeneration facility -- that arrangement is specifically excluded from the "alternative retail electric supplier" definition the distribution tax applies to.

Q: Is a gas or electric marketer that doesn't own delivery infrastructure a "delivering supplier"?
A: Generally no -- delivering-supplier status follows whoever is actually last in the chain delivering the commodity to the customer, which for many marketers is the local utility, not the marketer itself.

Q: Are "alternative gas suppliers" subject to the Gas Revenue Tax Act's invested capital tax?
A: No. The Department confirmed that alternative gas suppliers, as defined by the Alternative Gas Supplier Law, are not liable for that invested capital tax.

Citations and references

Statutes:

• 35 ILCS 640/2-3, 640/2-4, 640/2-7, 640/2-7.5, 640/2-9 (Electricity Excise Tax Law)
• 35 ILCS 620/1, 620/2a.1 (Public Utilities Revenue Act -- electric distribution and invested capital tax)
• 220 ILCS 5/1602, 5/16-128(a) (Public Utilities Act -- alternative retail electric supplier definition and self-generation exclusion)
• 35 ILCS 615/2, 615/2a.1, 615/1, 615/2a.2 (Gas Revenue Tax Act)
• 35 ILCS 175/5-1, 173/5-5 (Gas Use Tax Law -- delivering supplier definition)
• 220 ILCS 5/19-100 et seq., 5/19-105 (Alternative Gas Supplier Law)

Source

• Landing page: Illinois 2025 Sales Tax Letter Rulings
• Original PDF: ST25-0059-GIL.pdf

Original ruling text

ST 25-0059-GIL 11/04/2025 PUBLIC UTILITY TAXES
This letter discusses the Electricity Excise Tax Law, the Public Utilities Revenue Tax
Law, and the Gas Revenue Tax Act in relation to solar panels and power purchase
agreements. See 35 ILCS 620, 35 ILCS 640, and 35 ILCS 615. (This is a GIL).
November 4, 2025
NAME
COMPANY
EMAIL
Dear NAME:
This letter is in response to your letter dated October 1, 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:
I am looking for some guidance around a few of the utility’s taxes.
For a business that installs solar systems on residential homes either through
power purchase agreements or leases, are they responsible for the Electricity
Excise Tax and the Electricity Distribution Tax? In this case, I believe we would
be considered the delivering supplier and subject to the Electricity Excise
Tax. Seems possible that we would be subject to the Electricity Distribution
Tax as well, but not sure how we would charge both to the customers.
For a business that is considered a supplier (electric and gas marketer) of gas
and electric, are they subject to the Gas Revenue Tax for gas sales? We are
the supplier and do not deliver it as the utility companies do that. We own gas
in Illinois and outside of Illinois and both are sold to customers in Illinois. Then

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November 4, 2025
for electric sales, are they subject to either the Electricity Excise Tax or
Electricity Distribution Tax? It appears that we wouldn’t be since we are the
delivering supplier and we don’t own, lease, or control the infrastructure to
deliver the electricity.
For the Invested Capital Tax for gas, I don’t think we would be subject since
we aren’t regulated by the Illinois Commerce Commission.
For the Invested Capital Tax for electric, I don’t think we would be subject
since we don’t own, lease, or control the infrastructure to deliver the
electricity.
I really appreciate any guidance you can provide.
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed
on the privilege of using, in this State, any kind of tangible personal property that is
purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code 150.101.
These taxes comprise what is commonly known as “sales” tax in Illinois.
Sales of (1) electricity delivered to customers by wire; (2) natural or artificial gas that
is delivered to customers through pipes, pipelines, or mains; and (3) water that is delivered
to customers through pipes, pipelines, or mains are not subject to tax under these Acts. 35
ILCS 120/2; 35 ILCS 105/3.
Electricity Excise Tax Law
The Electricity Excise Tax Law imposes a tax “on the privilege of using in [Illinois]
electricity purchased for use or consumption and not for resale.” 35 ILCS 640/2-4. The tax
is imposed on the user or consumer of electricity and is collected and remitted to the
Department by the delivering supplier. 35 ILCS 640/2-9. The tax upon the user or consumer
of electricity is based upon the amount of kilowatt-hours delivered by the delivering supplier
to the user in this State. The delivering supplier must register with the Department. 35 ILCS
640/2-7.5.
“Delivering supplier” means any person engaged in the business of delivering
electricity to persons for use or consumption and not for resale, but not an
entity engaged in the practice of resale and redistribution of electricity within

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a building prior to January 2, 1957, and who, in any case where more than one
person participates in the delivery of electricity to a specific purchaser, is the
last of the suppliers engaged in delivering the electricity prior to its receipt by
the purchaser.
“Delivering supplier maintaining a place of business in this State”, or any like
term, means any delivering supplier having or maintaining within this State,
directly or by a subsidiary, an office, generation facility, transmission facility,
distribution facility, sales office or other place of business, or any employee,
agent or other representative operating within this State under the authority of
such delivering supplier or such delivering supplier’s subsidiary, irrespective
of whether such place of business or agent or other representative is located
in this State permanently or temporarily, or whether such delivering supplier
or such delivering supplier’s subsidiary is licensed to do business in this State.
“Purchaser” means any person who acquires electricity for use or
consumption and not for resale, for a valuable consideration.
“Use” means the exercise by any person of any right or power over electricity
incident to the ownership of that electricity, except that it does not include the
generation, production, transmission, distribution, delivery or sale of
electricity in the regular course of business or the use of electricity for such
purposes.
35 ILCS 640/2-3.
The tax imposed by the Electricity Excise Tax Law shall be collected from the
purchaser by any delivering supplier maintaining a place of business in this State with
respect to the electricity delivered by such delivering supplier to or for the purchaser. 35
ILCS 640/2-7. The delivering supplier is also required to file a return and remit the tax. 35
ILCS 640/2-9. If your Company is not delivering electricity as that term is defined in the Act,
then it will not incur Electricity Excise Tax. The Illinois utility delivering the electricity would
collect the appropriate amount of Electricity Excise Tax from the persons (other than selfassessing purchasers) to whom the electricity was delivered for use or consumption. See
also 35 ILCS 640/2-7.
To the extent Company is delivering electricity to an end user or consumer for
purchase, such Company is the delivering supplier and is required to collect the electricity
excise tax from the purchaser and remit to the Department.
Public Utilities Revenue Act

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Section 2a.1 of the Public Utilities Revenue Act imposes a tax on invested capital and
on distribution of electricity in this State. 35 ILCS 620/2a.1. The tax upon the distributors of
electricity is based upon the amount of kilowatt-hours distributed by the taxpayer in this
State during the taxable period. See 35 ILCS 620/2a.1(a). Electric cooperatives that are
required to file reports with the Rural Utilities Service are taxed at a rate equal to 0.8% of
such cooperative’s invested capital for the taxable period.
“Distributing electricity” means delivering electric energy to an end user over
facilities owned, leased, or controlled by the taxpayer.
“Taxpayer” for purposes of the tax on the distribution of electricity imposed by
this Act means an electric cooperative, an electric utility, or an alternative
retail electric supplier (other than a person that is an alternative retail electric
supplier solely pursuant to subsection (e) of Section 16-115 of the Public
Utilities Act), as those terms are defined in the Public Utilities Act, engaged in
the business of distributing electricity in this State for use or consumption and
not for resale.
“Taxpayer” for purposes of the Public Utilities Revenue Tax means a person
engaged in the business of distributing, supplying, furnishing or selling
electricity for use of consumption and not for resale.
35 ILCS 620/1.
“Alternative retail electric supplier” means every person, cooperative,
corporation, municipal corporation, company, association, joint stock
company or association, firm, partnership, individual, or other entity, their
lessees, trustees, or receivers appointed by any court whatsoever, that offers
electric power or energy for sale, lease or in exchange for other value received
to one or more retail customers, or that engages in the delivery or furnishing
of electric power or energy to such retail customers, and shall include,
without limitation, resellers, aggregators and power marketers, but shall not
include . . . (v) the entity that owns, operates, sells, or arranges for the
installation of a customer’s own cogeneration or self-generation facilities, for
the installation of such facility, or operating the facility on behalf of such
customer, provided however that any such third party owner or operator of a
facility built after January 1, 1999, complies with the labor provision of Section
16-128(a) as though such third party were an alternative retail electric
supplier, . . . .
220 ILCS 5/1602. See also 220 ILCS 5/16-128(a).

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If a company is not distributing electricity or is not a taxpayer as those terms are
defined in the Public Utilities Revenue Act, then it will not incur electricity distribution tax.
The Illinois utility would incur the tax under the Public Utilities Revenue Act on the
distribution of that electricity.
For example, a company originates a contract with a customer to install a solar
facility on the customer’s residential home. Customer does not pay for the materials or
installation of the solar panels but agrees to buy all electricity generated from the solar
facility from the company for 10 years. The company delivers the electricity to the customer
for use or consumption and not for resale. The company owns, operates, and maintains the
solar facility and collects electricity excise tax from the customer. In this example, the
company is not an “alternative retail electric supplier” (or “taxpayer”) because it is excluded
under item (v) of the definition of “alternative retail electric supplier” in the Public Utilities
Revenue Act (incorporating the definition from the Public Utilities Act), and as such, is not
subject to the electricity distribution tax under the Public Utilities Revenue Act.
Gas Revenue Tax Act
Section 2 of the Gas Revenue Tax Act imposes a tax upon persons engaged in the
business of distributing, supplying, furnishing or selling gas to persons for use or
consumption and not for resale at the rate of 2.4 cents per therm of all gas which is so
distributed, supplied, furnished, sold or transported to or for each customer in the course
of such business, or 5% of the gross receipts received from each customer from such
business, whichever is the lower rate as applied to each customer for that customer’s billing
period. 35 ILCS 615/2; 86 Ill. Adm. Code 470.110(a). The Act also states that “such taxes
are not imposed with respect to any business in interstate commerce, or otherwise to the
extent to which such business may not, under the Constitution and statutes of the United
States, be make the subject of taxation by this State.” 35 ILCS 615/2.
Under the Gase Use Tax Law, gas use tax is imposed on the privilege of using in Illinois
gas obtained in a purchase of out-of-State gas. A “purchase of out-of-State gas” is
specifically defined to mean a transaction for the purchase of gas from any supplier in a
manner that does not subject the seller of that gas to liability under the Gas Revenue Tax
Act. See 35 ILCS 175/5-1. Section 5-50 of the Gas Use Tax Law lists the only uses of gas that
not subject to gas use tax liability. 86 Ill. Adm. Code 471.101.
“Delivering supplier” means any person engaged in the business of delivering
gas to persons for use or consumption and not for resale, and who, in any case
where more than one person participates in the delivery of gas to a specific
purchaser, is the last of the suppliers engaged in delivering the gas prior to its
receipt by the purchaser. A person, such as a gas utility, that provides for the
delivery of customer owned gas through gas lines that are connected to the

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customer’s residence or place of business is considered a delivering supplier.
A person who transports gas through an interstate pipeline directly to a
customer in this State who uses that gas for its own use or consumption and
not for resale is considered a delivering supplier. A person who sells gas to an
end user, but does not provide for delivery of the gas to such end user, is not
considered a delivering supplier.
EXAMPLE: A customer purchases gas for use in its business from a gas
marketer and has the customer’s local utility company deliver the gas to that
customer’s place of business. In that instance, the customer’s local utility
company is the delivering supplier.
35 ILCS 173/5-5; 86 Ill. Adm. Code 471.101
The Gas Revenue Tax is not a tax or fee imposed on the consumer of the gas; it is an
occupation tax. The tax is imposed upon persons engaged in the business of distributing,
supplying, furnishing, or selling gas to persons for use or consumption. However,
distributors or suppliers of gas are authorized, but not required, under the Public Utilities
Act to collect a “reimbursement” from purchasers of gas. 220 ILCS 5/9-222.
Section 2a.1 of the Gas Revenue Tax Act imposes upon persons engaged in the
business of distributing, supplying, furnishing, or selling gas and subject to the tax imposed
by Section 2 of the Act, an additional tax in an amount equal to 0.8% of such persons’
invested capital for the taxable period. The invested capital tax is not imposed upon persons
who are not regulated by the Illinois Commerce Commission. 35 ILCS 615/2a.1
“Invested capital” means: “that amount equal to (i) the average of the
balances at the beginning and end of each taxable period of the taxpayer’s
total stockholder’s equity and total long-term debt, less investments in and
advances to all corporations, as set forth on the balance sheets included in
the taxpayer’s annual report to the Illinois Commerce Commission for the
taxable period; (ii) multiplied by a fraction determined under Sections 301 and
304(a) of the “Illinois Income Tax Act”… .
35 ILCS 615/1.
The taxpayer must file a return for invested capital tax purposes that provides, among
other things, the “total proprietary capital and total long-term debt as of the beginning and
end of the taxable period as set forth on the balance sheets included in the taxpayer’s
annual report to the Illinois Commerce Commission for the taxable period.” 35 ILCS
615/2a.2.

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The Alternative Gas Supplier Law was enacted by the General Assembly effective
February 8, 2002. 220 ILCS 5/19-100 et seq. The new law amended the Public Utilities Act
and created a new category of gas suppliers known as “alternative gas suppliers.” An
“alternative gas supplier” includes any person “that offers gas for sale, lease or in exchange
for other value received to one or more customers, or that engages in furnishing of gas to
one or more customers …” but excludes gas public utilities as defined by Section 3-105 of
the Public Utilities Act. 220 ILCS 5/19-105.
The Department has reviewed the legislative history and language of the Gas
Revenue Tax Act, the Alternative Gas Supplier Law, and related legislation. It is the
Department’s conclusion that alternative gas suppliers as defined by the Alternative Gas
Supplier Law (220 ILCS 5/19-105) are not liable for the invested capital tax imposed by
Section 2a.1 of the Gas Revenue Tax Act.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,
Kimberly Rossini
Associate Counsel
(217) 782-7055
KAR:slc