Does an out-of-state dry-cleaning/repair company that only picks up and delivers items in Illinois -- with no office or warehouse there -- have to register and collect Illinois tax?

Plain-English summary

An out-of-state industrial dry-cleaning company -- no Illinois office, warehouse, or storefront, but with employees who drive company vehicles into Illinois to pick up and deliver customers' work apparel and PPE for cleaning and repair performed entirely out of state -- got conflicting answers from different Department representatives about whether it had "physical presence nexus" in Illinois. This GIL untangles the confusion and, along the way, explains a bigger 2026 rule change that affects remote service providers generally.

First, on physical presence: the Department didn't resolve, one way or the other, whether pickup/delivery driving alone creates "physical presence" under the statutory definition (an office, warehouse, or an "agent or representative operating within the state"), calling it a fact-specific question and pointing the taxpayer to the Department's own published guides (PIO-113 and PIO-125) instead of giving a yes/no answer here.

But the more important point is that physical presence isn't the only route to an Illinois tax obligation anymore. Since the 2018 Wayfair decision let states tax remote sellers based on sales volume alone (no physical footprint required), Illinois adopted "economic nexus" for retailers in 2018 and, effective January 1, 2026, EXTENDED an equivalent economic-nexus rule to out-of-state SERVICE providers for the first time. Before 2026, an out-of-state serviceperson whose only connection to Illinois was meeting a sales threshold (no physical presence) wasn't taxed on services performed entirely outside the state -- only physical presence triggered service tax liability. Starting January 1, 2026, an out-of-state serviceperson with $100,000 or more in gross receipts from services to Illinois customers is now treated as "maintaining a place of business" in Illinois and can owe Illinois service occupation tax even on services performed 100% outside the state, shipped/delivered back to Illinois customers.

Whether that new economic-nexus liability actually requires registering to COLLECT tax turns on a second test: the servicepersons's "cost ratio" (materials transferred to customers as a percentage of service revenue). If that ratio is 35% or more (75% for prescription-drug or graphic-arts servicepersons), or if the company otherwise registers under the Retailers' Occupation Tax Act, it must register and collect. Below that ratio, a non-retail-registered out-of-state serviceperson generally isn't required to register even after crossing the $100,000 threshold -- though its customers may then owe use tax instead.

What this means for you

Out-of-state service businesses with any Illinois customers

Don't assume "no office, no warehouse, no employees stationed there" means no Illinois tax exposure. As of January 1, 2026, hitting $100,000 in gross receipts from Illinois customers can, by itself, create a registration/collection obligation for tangible property you transfer as part of your service (repaired goods, replacement parts, materials) -- even if every bit of the actual work happens outside Illinois.

Businesses with drivers or reps who cross into Illinois

Whether pickup/delivery driving alone creates "physical presence" nexus is genuinely fact-specific and wasn't resolved definitively in this letter -- the Department pointed to its own published flowcharts (PIO-113, PIO-125) rather than giving a blanket answer. If your only Illinois footprint is driver visits, get a specific read on your facts rather than relying on a general rule of thumb.

Accountants and tax professionals advising remote service clients

Compute the "cost ratio" carefully (materials cost ÷ total service revenue, excluding materials that are sold at retail, used internally, or built into real estate repairs) -- it determines both de minimis status AND, for post-2026 economic-nexus-only servicepersons, whether registration is required at all. A client under the 35%/75% threshold with no physical presence and no retail registration may have no Illinois service-tax registration obligation even after crossing $100,000 in receipts, though their customers could face use tax.

Common questions

Q: Does picking up and delivering goods in Illinois with company vehicles create nexus?
A: This letter doesn't resolve that question definitively -- the Department said it's fact-specific and pointed to its own published guidance (PIO-113, PIO-125) rather than answering directly for this taxpayer.

Q: What changed for out-of-state service providers starting January 1, 2026?
A: Illinois extended economic nexus to servicepersons: an out-of-state serviceperson with $100,000+ in gross receipts from Illinois customers is now treated as maintaining a place of business in Illinois, even with zero physical presence, and can be liable for service occupation taxes on services performed entirely outside the state.

Q: If I cross the $100,000 threshold, do I automatically have to register and collect?
A: Not necessarily. You must register if your cost ratio (materials transferred to customers ÷ total service revenue) is 35% or more (75% for prescription-drug/graphic-arts servicepersons) or if you're otherwise registered under the Retailers' Occupation Tax Act. Below that ratio and without retail registration, you generally aren't required to register even after crossing the threshold.

Q: What happens if I'm not required to register even though I crossed $100,000?
A: You'd owe Use Tax on your own cost for materials transferred to Illinois customers, payable to your supplier -- and if that supplier is out of state, no Illinois tax applies at all on that leg.

Q: Can I rely on this letter for my own dry-cleaning/service business?
A: No. This is a General Information Letter -- not binding on the Department, and it deliberately left the physical-presence question open as fact-specific. Get your own facts reviewed.

Citations and references

Statutes:

• 35 ILCS 120/2; 35 ILCS 105/2(1) (Retailers' Occupation Tax Act; physical-presence "retailer maintaining a place of business" definition)
• 35 ILCS 105/3 (Use Tax Act imposition)
• 35 ILCS 110/2(1) (physical-presence "serviceman maintaining a place of business" definition)
• 35 ILCS 115/2(g); 35 ILCS 115/3(b), (c), (g) (2026 economic-nexus expansion to out-of-state servicepersons; liability; SOT/SUT credit; tax-base methods)

Regulations:

• 86 Ill. Adm. Code 140.101, 140.105, 140.106, 140.108, 140.109 (Service Occupation Tax framework; cost ratio; de minimis)
• 86 Ill. Adm. Code 140.115 / 160.115 (Service Use Tax collection)
• 86 Ill. Adm. Code 130.701 (retailer registration)
• 86 Ill. Adm. Code 131.120(b) (economic-nexus receipts calculation)
• 86 Ill. Adm. Code 270.115 (destination vs. origin sourcing)

Cases:

• South Dakota v. Wayfair, Inc., 583 U.S. 1089 (2018)
• Quill Corp. v. North Dakota, 504 U.S. 298 (1992)

Source

• Landing page: Illinois 2026 Sales Tax Letter Rulings
• Original PDF: ST26-0020-GIL.pdf

Original ruling text

ST 26-0020-GIL 06/03/2026 SERVICE OCCUPATION TAX
Out-of-State servicepersons must determine whether they have physical presence
or meet the tax remittance threshold of $100,000 in cumulative gross receipts from
annual sales of service. If so, they must calculate whether they are de minimis or
not in order to determine their tax registration and remittance obligations. See 86 Ill.
Adm. Code 140.105-109. (This is a GIL).
June 3, 2026
NAME
EMAIL
ADDRESS
Dear NAME:
This letter is in response to your letter dated March 9, 2026, 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.
INQUIRY:
We respectfully request issuance of a General Information Letter regarding
the Department's interpretation and application of the physical presence
nexus standard contained in 35 ILCS 105/2(1) and 35 ILCS 110/2(1), as it
relates to the activities described below for “the Company.” Clarification on
this issue will help the Company determine whether it has a registration
obligation in Illinois and ensure compliance with the law.
Facts

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The Company's primary business activities include industrial dry cleaning,
repair, and alteration services performed on personal protective equipment
(PPE) and work apparel. The Company's customers include state and local
governments and political subdivisions, educational institutions, distributors,
and certain individual customers.
The Company is headquartered outside Illinois and operates multiple
facilities throughout the United States. The Company does not maintain an
office, warehouse, storefront, or any other brick­and-mortar place of
business in Illinois.
However, Company employees regularly drive business vehicles into Illinois
to pick up and deliver PPE for Illinois customers. The dry cleaning, repair, and
alteration services are performed at facilities located outside Illinois and
selling activities also occur outside Illinois.
Background
Based on research conducted by the Company's internal and external tax
professionals, we understand that the presence of employees, agents, or
other representatives operating within a state may create physical presence
nexus in that state.
The Illinois statute appears to coincide with that principle:
“'Retailer maintaining a place of business in this State: or any like term,
means and includes any of the following retailers: (1) A retailer having
or maintaining within this State, directly or by a subsidiary, an office,
distribution house, sales house, 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 such place of business or agent or other representative is
located here permanently or temporarily, or whether such retailer or
subsidiary is licensed to do business in this State.” (35 ILCS
10512(1)]
In addition, the definitions currently provided on the Department's website
appear to describe an “out-of-state seller” as an out-of-state retailer with
physical presence in Illinois under the same statutory definition.
Because the Company interpreted its activities as creating physical presence
nexus, we believed it had an obligation to register for a Service Occupation Tax

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and/or Use Tax account and submitted a registration application. However,
the application was subsequently rejected.
A Revenue Tax Specialist Ill explained that the Company does not have a
physical presence nexus in the state or a registration requirement. We
reiterated that it makes regular deliveries into Illinois using company vehicles,
which we believe fits the definition of an “agent or representative operating
within the State ... temporarily.” We were then referred to other Department
personnel who explained that, "Physical presence is established by selling
products in Illinois. Not by employee presence." Since that response still
didn't align with our research, we were advised to speak with the Sales Tax
Department. The next representative explained the Department's position as
follows:
“OUT OF STATE RETAILER: PHYSICAL PRESENCE: HAVING/MAINTAINING AN
OFFICE/DISTRIBUTION HOUSE/SALE HOUSE/WAREHOUSE OR OTHER
PLACE OF BUSINESS. You do not have this. You pick up items from IL. You
remove items from IL. You mend items out of state. You return items to IL.
Services in IL are not subject to tax. The transfer of TPP with the course of
service can become taxable; but for a remote retailer, your sales into our state
would have to be more than $100K per year to apply with no physical
presence. Until you have reached $100K per year in revenue from a taxable
source for sales and use tax, this does not apply to you.”
We appreciate the assistance provided by these representatives; however,
because the explanations either did not address whether the presence of
employees operating in Illinois affects nexus or appeared inconsistent with
the cited statute, we respectfully request assistance from your office.
We also understand that most services are not taxable in Illinois, but our
interpretation of statute was that the taxability of products or services does
not trigger a registration requirement. Rather, establishing physical presence
nexus and/or economic nexus triggers a requirement to register. Once
registered, the Company would determine whether any of its services were
taxable and would go through the normal procedures to collect and remit tax
and file tax returns if applicable.
Request for Clarification
The Company respectfully requests clarification on the following questions:

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1.
2.
3.
4.

Whether the regular pickup and delivery of goods serviced outside
Illinois to customers located in Illinois using company vehicles
constitutes physical presence nexus under 35 ILCS 105/2(1).
Whether the presence of employees who work in Illinois and/or reside
in Illinois and perform services for the Company in the state
constitutes physical presence nexus under 35 ILCS 105/2(1).
Whether establishing sales tax nexus in Illinois creates a registration
obligation even if the Company's Illinois transactions are not ultimately
subject to Illinois sales or use tax.
How the Department interprets the terms “operating”, “agent”, and
“representative” as used in 35 ILCS 105/2(1) in the phrase “any agent
or other representative operating within this State.”

We appreciate any guidance the Department is able to provide.
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling or leasing tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. The Use Tax Act imposes a tax
upon the privilege of using in this State tangible personal property purchased, including
leased, at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code 150.101. These taxes
comprise what is commonly known as “sales” tax in Illinois. If the purchases occur in
Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase. The
retailers are then allowed to retain the amount of Use Tax paid to reimburse themselves for
their Retailers’ Occupation Tax liability incurred on those sales. If the purchases occur
outside Illinois, purchasers must self-assess their Use Tax liability and remit it directly to the
Department.
Retailers’ Occupation Tax and Use Tax do not apply to sales of service, including,
among others, dry cleaning, repair, and alteration services. The Service Occupation Tax Act
imposes a tax upon persons engaged in this State in the business of making sales of service,
based on tangible personal property transferred incident to sales of service. Under the
Service Occupation Tax Act, businesses providing services (i.e., servicepersons) are taxed
on tangible personal property transferred as an incident to sales of service. See 86 Ill. Adm.
Code 140.101. For Illinois servicepersons, including servicepersons maintaining a place of
business in this State, the transfer of tangible personal property to service customers may
result in either Service Occupation Tax liability or Use Tax liability for servicepersons,
depending upon which tax base they choose to calculate their liability. Servicepersons who
make retail sales that are sourced in Illinois, even if those sales are a small part of their

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business, are required to register with the Department and remit Retailers’ Occupation Tax.
See 86 Ill. Adm. Code 130.701.
The Service Use Tax is a privilege tax imposed on the privilege of using, in this State,
tangible personal property that is received anywhere as an incident to a purchase of service
from a serviceperson. However, if the serviceperson would not be taxable under the Service
Occupation Tax despite all elements of the sale of service occurring in Illinois, then the tax
imposed by the Service Use Tax Act does not apply to the use of such property in this State.
Any evidence that property was sold by any person for delivery to a person residing in or
engaged in business in this State shall be prima facie evidence that such property was sold
for use in this State.
If a service transaction does not involve the transfer of any tangible personal property
to the customer, then it would not be subject to Retailers’ Occupation Tax, Use Tax, Service
Occupation Tax, or Service Use Tax. When dry cleaners or laundries transfer tangible
personal property as an incident to the furnishing of their services, those transactions are
taxable under the Service Occupation Tax Act. See 86 Ill. Admin. Code 140.140(e).
Calculation of Tax Incurred by Servicepersons and Cost Ratio
Servicepersons may calculate their tax base in one of four ways: (1) Service
Occupation Tax on the separately-stated selling price of tangible personal property
transferred incident to the service; (2) Service Occupation Tax on 50% of the serviceperson’s
entire bill; (3) Service Occupation Tax on the serviceperson’s cost price if the serviceperson
is a de minimis serviceperson who makes any retail sales of tangible personal property to
purchasers in this State or who elects to be registered under Section 2a of the Retailers’
Occupation Tax Act; or (4) Use Tax on the serviceperson’s cost price if the serviceperson is
de minimis and does not make any retail sales of tangible personal property to purchasers
in Illinois and is not otherwise registered under Section 2a of the Retailers’ Occupation Tax
Act. See 35 ILCS 115/3(g); 86 Ill. Adm. Code 140.105–140.106.
Using the first method, servicepersons may separately state the selling price of each
item transferred as a result of sales of service. The tax is based on the separately stated
selling price of the tangible personal property transferred. If servicepersons do not wish to
separately state the selling price of the tangible personal property transferred, those
servicepersons must use the second method where they will use 50% of the entire bill to
their service customers as the tax base. Both of the above methods provide that in no event
may the tax base be less than the cost price of the tangible personal property transferred.
See 86 Ill. Adm. Code 140.106(a). Servicepersons who incur Service Occupation Tax on their
selling price should provide their suppliers with Certificates of Resale when purchasing the
tangible personal property to be transferred as a part of sales of service and are required to

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collect the corresponding Service Use Tax from their customers. See 86 Ill. Adm. Code
140.106(b) and (e).
The third way servicepersons may account for their tax liability only applies to de
minimis servicepersons who have either chosen to be registered, are required to be
registered because they incur Retailers’ Occupation Tax liability with respect to a portion of
their business, or are remote servicepersons making any retail sales of tangible personal
property to Illinois purchasers. Servicepersons must calculate their cost ratio to determine
whether they are de minimis. The cost ratio is a measure of the amount of tangible personal
property transferred incident to a sale of service. It is calculated by comparing the
serviceperson’s materials cost to their total income from services. The cost of materials that
are not transferred to customers incident to a service, such as those sold at retail, removed
from inventory for use, or incorporated into repairs of real estate, must be excluded when
determining the cost ratio. See 86 Ill. Adm. Code 140.105(c). Servicepersons may qualify as
de minimis if they determine that their annual aggregate cost price of tangible personal
property transferred incident to sales of service is less than 35% of their annual gross
receipts from service transactions (75% in the case of pharmacists and persons engaged in
graphic arts production). See 86 Ill. Adm. Code 140.109.
Registered de minimis servicepersons and remote de minimis servicepersons
making any retail sales to Illinois purchasers are authorized to pay Service Occupation Tax
based upon the cost price of tangible personal property transferred incident to sales of
service. Servicepersons that incur Service Occupation Tax based upon their cost price
collect the Service Use Tax from their customers. They remit tax to the Department by filing
returns and do not pay tax to their suppliers. They provide suppliers with Certificates of
Resale for the tangible personal property transferred to service customers. See 86 Ill. Adm.
Code 140.109(a)(1) and (a)(4).
The final method of determining tax liability may be used by de minimis
servicepersons that are not otherwise required to be registered under Section 2a of the
Retailers’ Occupation Tax Act and, beginning January 1, 2026, de minimis out-of-State
servicepersons who do not make any retail sales of tangible personal property to purchasers
in Illinois. See 35 ILCS 115/2(g). Such de minimis servicepersons handle their tax liability by
paying Use Tax to their suppliers. If their suppliers are not registered to collect and remit tax,
the servicepersons must register, self-assess, and remit Use Tax to the Department. The
servicepersons are considered to be the end-users of the tangible personal property
transferred incident to service. Consequently, they are not authorized to collect a “tax” from
their service customers. See 86 Ill. Adm. Code 140.108.
Servicepersons who incur and remit Service Occupation Tax to the Department have
a Service Use Tax collection obligation and shall collect Service Use Tax from users at the
time of purchase. The Service Use Tax shall be based on the selling price of the tangible

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personal property transferred incident to the sale of service if stated separately on the
invoice from the serviceperson. If not stated separately, then the tax will be imposed on 50%
of the entire billing from the serviceperson. However, the Service Use Tax which is collected
by a registered de minimis serviceperson or remote serviceperson with no retail sales into
this State shall be based upon the serviceperson’s cost price of tangible personal property
transferred incident to the serviceperson’s sales of service. 86 Ill. Adm. Code 160.115.
Physical Presence and Economic Nexus
In South Dakota v. Wayfair, Inc., 583 U.S. 1089 (2018), the U.S. Supreme Court upheld
a South Dakota statute that imposed tax collection obligations on remote retailers that met
specific selling thresholds but had no physical presence in the state. This decision
abrogated the longstanding physical presence requirement of Quill, deeming it “unsound
and incorrect.” See Quill Corporation v. North Dakota, 504 U.S. 298 (1992). Illinois Public
Act 100-587 enacted nexus standards, effective October 1, 2018, that were virtually
identical to those upheld in Wayfair. Effective January 1, 2026, Illinois Public Act 104-006,
amended the nexus standards. For the purposes of this letter, this non-physical presence
nexus is referred to as “economic nexus.” Physical presence nexus remains a way to
determine whether a serviceperson is a serviceman maintaining a place of business in this
State, as set forth at 35 ILCS 110/2(1), in addition to economic nexus. Effective January 1,
2026, an out-of-State serviceperson has economic nexus if the serviceperson makes sales
of service to Illinois purchasers with gross receipts totaling $100,000 or more from sales of
service and therefore meets the definition of “serviceman maintaining a place of business
in this State”.
With respect to the meaning of the clause “any agent or other representative
operating within this State”, which appears in the definition of serviceman maintaining a
place of business in this State, determining whether physical presence exists is very factspecific. It may be helpful to review the Department’s Out-of-State Sales Resource Page,
paying special attention to PIO-113, Out-of-State Retailer or Serviceperson Maintaining a
Place of Business in Illinois Registration Flowchart, and PIO-125, Determining Physical
Presence or When the Tax Remittance Threshold Has Been Met and Where a Sale Is Sourced
– Sales and Use Tax Help Guide, found on the Department’s website at
https://tax.illinois.gov/research/taxinformation/sales/level-the-playing-field.html.
If an out-of-State serviceperson makes both taxable and nontaxable sales of service
into Illinois, all sales of service are included in the calculation of economic nexus, including
the nontaxable sales of service (other than sales for resale and other sales specified at 86
Ill. Adm. Code 131.120(b)). See 86 Ill. Adm. Code 131.120(b).
Out-of-State Sales of Service

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Effective January 1, 2026, a “serviceman maintaining a place of business in this
State” that makes sales of service to Illinois customers from a location or locations outside
of Illinois is engaged in the business of making sales of service in Illinois for the purposes of
the Service Occupation Tax Act, and is liable for all applicable State and locally imposed
service occupation taxes administered by the Department on all tangible personal property
transferred as an incident of a sale of service made by the serviceperson to Illinois
customers from locations outside of Illinois. See 35 ILCS 115/3(b). Prior to January 1, 2026,
servicepersons whose only nexus was meeting the economic threshold were not considered
to be engaged in the business of making sales of service in this State; therefore, State and
local service occupation taxes were not imposed on such servicepersons. Such
servicepersons were required to collect and remit Service Use Tax for sales of service to
Illinois customers sourced outside of Illinois. See 86 Ill. Adm. Code 160.115(a).
Out-of-State servicepersons making sales of service to Illinois purchasers from
locations outside Illinois may be required to register with the Department and collect
Service Use Tax and remit State and local service occupation taxes on those sales. If the
serviceperson meets the definition of a “serviceman maintaining a place of business in this
State” in Section 2 of the Service Use Tax Act, 35 ILCS 110/2, and either (1) has a cost ratio
equal to or greater than 35% (75% in the case of servicepersons transferring prescription
drugs or engaged in graphic arts production), or (2) is required or elects to register under
Section 2a of the Retailers’ Occupation Tax Act, the serviceperson must register with the
Department to collect Service Use Tax and remit State and local service occupation taxes
on sales of service to Illinois purchasers from locations outside of Illinois. Servicepersons
maintaining a place of business in this State who have paid Service Occupation Tax to the
Department on a sale of service are not liable to the Department for Service Use Tax on the
same transaction. See 35 ILCS 115/3(c).
Out-of-State servicepersons who also make any retail sales to Illinois customers,
even if those sales are a small part of their business, are required to register with the
Department and remit, with respect to those transactions, Retailers’ Occupation Tax, if they
meet the definition of “retailer maintaining a place of business in this State”. Any out-ofState serviceperson maintaining a place of business in this State who is required or has
elected to register under Section 2a of the Retailers’ Occupation Tax Act or makes any retail
sales to Illinois customers must register with the Department to collect Service Use Tax and
remit State and local service occupation taxes on all of their sales of service to Illinois
customers as well. If such serviceperson is a de minimis serviceperson, the Service
Occupation Tax for such serviceperson is based upon the serviceperson’s cost price of
tangible personal property transferred incident to the serviceperson’s sales of service. See
86 Ill. Adm. Code 160.115.
Finally, out-of-State servicepersons who are not required to register under the
Retailers’ Occupation Tax Act, make no retail sales to Illinois customers, and whose cost

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ratio is less than 35% (less than 75% in the case of servicepersons transferring prescription
drugs or engaged in graphic arts production) are not required to register with the Department
to collect Service Use Tax and remit State and local service occupation taxes on their sales
of service to Illinois consumers. This is true even if a serviceperson meets the definition of
“serviceman maintaining a place of business in this State” (e.g., has met the tax remittance
threshold of $100,000 or more in gross receipts from sales of service to purchasers in
Illinois). Such servicepersons would owe Use Tax on their cost price of the tangible personal
property that they transfer to Illinois customers incident to sales of service and pay that use
tax to their supplier. If that supplier is located outside of Illinois, no Illinois tax is imposed.
This option is unavailable to any out-of-State de minimis serviceperson making any sales at
retail to purchasers in Illinois, regardless of whether they meet a tax remittance threshold
under the Retailers’ Occupation Tax Act. Such out-of-State de minimis servicepersons may
register and elect to remit Service Occupation Tax on their cost price of tangible personal
property transferred as an incident of a sale of service.
Destination Sourcing
Out-of-State servicepersons who qualify as “servicemen maintaining a place of
business in this State” due to physical presence incur State and local service occupation
tax liability based on destination sourcing for sales they make outside Illinois and ship or
deliver the tangible personal property transferred to Illinois purchasers. Such
servicepersons incur State and local service occupation taxes using origin sourcing for sales
for which their selling activities occur in Illinois. Out-of-State servicepersons who only have
economic nexus, and who are required or elect to remit State and local service occupation
taxes on tangible personal property transferred incident to a sale or service are also subject
to destination sourcing. See 35 ILCS 120/2-12; 86 Ill. Adm. Code 270.115. Servicepersons
with no physical presence or economic nexus may voluntarily collect and remit Service Use
Tax on sales into Illinois as a courtesy to their customers. See 35 ILCS 110/7.
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,
Edward Mroczkowski
Associate Counsel
EM:slc
Printed by the authority of the State of
Illinois Electronic Only - One Copy
Issued 06/03/2026, Redacted 06/08/2026