Does Illinois's drive-away permit exemption cover utility and car-hauler trailers sold to Indiana residents, or only RVs and cargo trailers?

Plain-English summary

An Illinois dealer selling utility trailers and flatbed car-hauler trailers asked whether sales to Indiana residents are exempt from Illinois's Retailers' Occupation Tax the same way RVs and "cargo trailers" reportedly are, after seeing a reference suggesting RVs and cargo trailers were treated differently from the general 6.25% rate.

Illinois law generally exempts a motor vehicle sold to a nonresident -- even if delivered to them in Illinois -- as long as the vehicle won't be titled in Illinois and either a drive-away permit is issued or the buyer has out-of-state registration plates to transfer to it. But there's a reciprocity catch: that exemption doesn't apply if the buyer's home state wouldn't offer the SAME exemption in reverse (i.e., wouldn't exempt an Illinois resident buying and titling a vehicle there).

Because of a 2006 change in Indiana law, the Department issued a specific bulletin (Informational Bulletin FY 2006-11) confirming that recreational vehicles and "cargo trailers" meeting Indiana's own definition -- sold by Illinois dealers, delivered in Illinois, but titled/registered in Indiana -- ARE exempt from Illinois Retailers' Occupation Tax when a drive-away permit is issued or plates are transferred. But that bulletin defines "cargo trailer" narrowly and specifically: a vehicle with no motive power, designed for carrying property, designed to be towed by a motor vehicle, and rated at a gross vehicle weight of at least 2,200 pounds.

The Department's answer here walks through the general framework and the specific RV/cargo-trailer exemption, but doesn't itself declare that this particular dealer's utility and car-hauler trailers qualify -- that determination depends on whether those specific trailers meet the "cargo trailer" definition's weight and design requirements, something the dealer needs to check product-by-product rather than assume from the general category name.

What this means for you

Trailer and RV dealers selling to Indiana (or other nonresident) buyers

Don't assume every trailer you sell automatically qualifies for the nonresident/drive-away exemption just because it's "a trailer." Check your specific trailer models against the regulatory "cargo trailer" definition (no motive power, designed for carrying property, designed to be towed, at least 2,200 lbs. GVWR) before treating a sale as exempt -- a lighter utility trailer that doesn't meet the weight threshold may not qualify even if a heavier cargo trailer would.

Dealers selling to buyers from states other than Indiana

This specific RV/cargo-trailer bulletin was issued because of a 2006 Indiana law change -- it's tied to Indiana's reciprocal treatment specifically. Don't assume the same result applies automatically for buyers from other states; the general reciprocity rule (35 ILCS 120/2-5(25-5)) requires checking whether that OTHER state would offer Illinois residents the same exemption in reverse.

Accountants and tax professionals for dealerships

When documenting an exempt nonresident sale, keep records showing both (1) the drive-away permit or transferred out-of-state plates, and (2) for trailers specifically, evidence the item meets the "cargo trailer" weight/design definition -- general "it's a trailer" documentation likely won't be sufficient to support the exemption on audit.

Common questions

Q: Are all trailers sold to nonresidents exempt from Illinois sales tax?
A: No. Only vehicles meeting the general nonresident/drive-away permit exemption criteria, and specifically for the Indiana RV/cargo-trailer bulletin, trailers meeting a specific "cargo trailer" definition (no motive power, built for carrying property, designed to be towed, at least 2,200 lbs. GVWR).

Q: What makes a trailer a "cargo trailer" for this exemption?
A: Per Informational Bulletin FY 2006-11 (referencing Indiana Code 6-2.5-5-39(a)): a vehicle without motive power, designed for carrying property, designed for being drawn by a motor vehicle, and having a gross vehicle weight rating of at least 2,200 pounds.

Q: Why is Indiana treated specially in this exemption?
A: A 2006 change in Indiana law prompted the Department to confirm reciprocal exempt treatment for RVs and cargo trailers sold by Illinois dealers but titled/registered in Indiana -- it's a response to that specific state law change, not a general nationwide rule.

Q: Does this letter confirm the specific dealer's utility and car-hauler trailers qualify?
A: The letter explains the general framework and the RV/cargo-trailer bulletin but does not itself declare that these particular trailer models qualify -- the dealer needs to check its own products against the "cargo trailer" definition.

Q: Can I rely on this letter for my own trailer sales?
A: No. This is a General Information Letter -- not binding on the Department. Confirm your specific trailer models and any relevant reciprocity rules for your buyer's home state with a tax professional.

Citations and references

Statutes:

• 35 ILCS 120/2-5(25) (drive-away permit exemption for nonresident motor vehicle sales)
• 35 ILCS 120/2-5(25-5) (reciprocity requirement)

Other authority cited by the Department:

• Illinois Informational Bulletin FY 2006-11 (RV/cargo trailer exemption for Indiana-titled vehicles)
• Indiana Code 6-2.5-5-39(a) ("cargo trailer" definition referenced by the bulletin)

Source

• Landing page: Illinois 2026 Sales Tax Letter Rulings
• Original PDF: ST26-0005-GIL.pdf

Original ruling text

ST 26-0005-GIL

1/27/2026

MOTOR VEHICLES

Recreational vehicles and cargo trailers meeting certain requirements that are sold
in Illinois to Indiana residents are eligible for the drive-away permit exemption of the
Retailers’ Occupation Tax. (This is a GIL).
January 27, 2026
COMPANY
ADDRESS
Dear COMPANY:
This letter is in response to your letter postmarked December 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:
I am asking about the taxes on vehicles for the State of Indiana. I read
that there is a tax charge of 6.25% except for RV’s and Cargo Trailers (see
attachment). My question is, does that include all trailers? I currently sell
utility and car hauler trailers (flatbed), do I need to charge tax for the trailers I
sell to someone in Indiana or are they exempt?
DEPARTMENT’S RESPONSE:
The Retailers’ Occupation Tax Act imposes a tax upon 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, any kind of 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.

COMPANY
Page 2
January 27, 2026
Item (25) of Section 2-5 of the Retailers’ Occupation Tax Act provides an exemption
from the tax for “. . . a motor vehicle sold in this State to a nonresident even though the motor
vehicle is delivered to the nonresident in this State, if the motor vehicle is not to be titled in
this State, and if a drive-away permit is issued to the motor vehicle as provided in Section 3603 of the Illinois Vehicle Code or if the nonresident purchaser has vehicle registration
plates to transfer to the motor vehicle upon returning to his or her home state.” (35 ILCS
120/2-5(25))
Item (25-5) of Section 2-5 of the Retailers’ Occupation Tax Act provides in part that
“[t]he exemption under item (25) does not apply if the state in which the motor vehicle will
be titled does not allow a reciprocal exemption for a motor vehicle sold and delivered in that
state to an Illinois resident but titled in Illinois.” (35 ILCS 120/2-5(25-5))
However, based on a 2006 change in Indiana law, the Department released
Informational Bulletin FY 2006-11 which notified retailers who file Form ST-556, Sales Tax
Transaction Returns, that effective July 1, 2006 recreational vehicles and cargo trailers
meeting certain requirements that are sold by Illinois dealers, with delivery in Illinois but
titling and registration in Indiana, are exempt from Retailers’ Occupation Tax if a drive-away
permit is issued to the Indiana purchaser or the Indiana purchaser has vehicle registration
plates to transfer to the vehicle upon returning to Indiana.
Informational Bulletin FY 2006-11 defines a “cargo trailer” as “a vehicle without
motive power; designed for carrying property; designed for being drawn by a motor vehicle;
and having a gross vehicle weight rating of at least 2,200 pounds.” See also Indiana Code 62.5-5-39(a).
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,

George L. Encarnacion, Jr.
Associate Counsel
GLE:sce