Illinois State Tax Rulings

Does Illinois use tax apply to inventory given away for free, can tax paid to another state be credited, and does marketplace-held inventory create nexus?

Three answers. First, when a donor possesses or can control tangible personal property in Illinois and gives it away for free, the donor has 'used' the property in Illinois and owes Use Tax on its cos…

Is a program enrollment fee for an overnight immersive role-play experience subject to Illinois's Hotel Operators' Occupation Tax?

Yes. A facility that assigns participants overnight sleeping accommodations as part of a structured program -- even a private immersive role-play experience with no public lodging or reservations -- i…

Does a livestock shade system qualify for Illinois's farm machinery and equipment sales tax exemption?

No. Illinois's farm machinery and equipment exemption doesn't cover livestock shade systems, permanent or portable, because they're built from ordinary building materials and function like real estate…

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?

It depends on your numbers, not just your physical footprint: an out-of-state serviceperson with no Illinois office or warehouse can still have to register and collect Illinois tax once it hits $100,0…

Did Illinois eliminate the 200-transaction economic nexus threshold for remote retailers, and how does the $100,000 threshold work?

Yes. Beginning January 1, 2026, Illinois dropped the 200-separate-transactions test for remote retailers; only the $100,000 cumulative gross receipts threshold, measured on a rolling 12-month lookback…

Does an infusion-therapy provider owe Illinois sales tax on the prescription drugs it administers to patients, and at what rate?

An infusion-therapy provider is a "serviceperson" subject to Illinois's Service Occupation Tax on the prescription drugs it transfers to patients as part of treatment -- not exempt -- but qualifying p…

If a waste disposal company requires customers to use its own dumpsters as part of the service, is providing the dumpster a taxable lease or part of a nontaxable service?

It's part of the service, not a taxable retail lease. Since the dumpster has little to no value to the customer without the waste-removal service and can't be rented separately, its "true object" is t…

Are late fees for overdue lease or rental payments subject to Illinois sales tax?

Yes. A late charge or penalty added because a customer paid past the due date becomes part of the seller's or lessor's taxable gross receipts in Illinois -- and since Illinois began taxing most tangib…

I'm a U.S. citizen living in Illinois with retirement savings from a former Swedish employer -- can I subtract those distributions from my Illinois income once I start taking them?

Likely not under the specific subtraction described. A private Swedish employer pension doesn't fit within the U.S. Internal Revenue Code sections (402-408) that Illinois's retirement-income subtracti…

Are sales of products to Amtrak exempt from Illinois sales tax, and what records does a retailer need to keep to prove it?

Yes -- sales of tangible personal property to Amtrak are exempt from Illinois state and local Retailers' Occupation Tax and Use Tax under federal law, even though Amtrak can't get a standard exemption…

Do I have to charge Illinois sales tax when I sell Deal-of-the-Day vouchers for golf tee times or pro-shop merchandise?

No -- selling a Deal-of-the-Day voucher itself is never subject to Illinois sales tax, because the voucher is intangible property. Whether tax applies when the voucher is REDEEMED depends on what it's…

Should Illinois's cannabis purchaser excise tax and local cannabis taxes be added on top of the retail price, and do they get taxed again themselves?

Yes, cannabis purchaser excise tax and local (municipal/county) cannabis taxes are separately stated additional charges on top of the retail price -- and none of those tax add-ons become part of the s…

I'm a dual US/UK citizen living in Illinois receiving a private UK employer pension -- can I subtract it from my Illinois income like an earlier Department letter suggested might be possible?

Not under the specific subtraction the taxpayer asked about. Illinois's retirement-income subtraction under 35 ILCS 5/203(a)(2)(F) only covers amounts tied to particular U.S. Internal Revenue Code sec…

Does the required dyed diesel fuel tax notice have to appear on the front of an invoice, or can it be on the back if the front references it?

A generic front-of-invoice reference to "warnings on the reverse side" is not enough -- the Department concluded that referencing EPA/IRS warnings on the back, without mentioning the Illinois Departme…

If I charge a fee to autograph a poster a customer already owns, is that fee subject to Illinois sales tax?

Signing a poster the CUSTOMER already owns and brings to you is a pure service with no transfer of tangible personal property, so it's not subject to Illinois sales tax by itself. But if you sell the …

How does Illinois's new 2025 lease tax interact with Chicago's Personal Property Lease Transaction Tax on a leased motor vehicle?

Motor vehicle leases aren't covered by Illinois's new 2025 lease-tax law at all -- vehicles keep their pre-2025 tax treatment (dealers owe Retailers' Occupation Tax, lessors owe Use Tax, lessees owe n…

I receive Canada Pension Plan and Old Age Security payments, plus a private Canadian employer pension -- which of these can I subtract from my Illinois income as retirement income?

It depends on how each payment is federally categorized, which Illinois doesn't independently decide. Canada Pension Plan and Old Age Security payments appear analogous to U.S. Social Security under t…

Our multistate unitary group thinks Illinois's standard single-sales-factor throwback formula grossly overstates our Illinois income -- can we petition to use an equally weighted three-factor formula, or drop throwback sales, instead?

Not on this showing. Illinois lets a taxpayer petition for an alternative apportionment method under IITA § 304(f), but only by proving the standard formula produces a genuinely distorted result -- no…

Is software sold with a click-through license taxable in Illinois, and does it matter whether the software is downloaded or purely cloud-based?

It depends on delivery and license terms: software delivered purely through the cloud with nothing downloaded is generally not taxable (it's a nontaxable service), but software that includes any local…

My out-of-state company has no offices or employees in Illinois, but we own inventory that sits in an Illinois contract packager's warehouse before being shipped to customers nationwide -- does that create Illinois income tax nexus?

The Department won't give a binding yes/no on nexus outside of an audit -- it's too fact-specific for a letter ruling. But it did flag that owning a stock of merchandise sitting in an Illinois warehou…

Who owes Illinois tax on the parts used in a free "goodwill" vehicle repair that a manufacturer directs its dealer to perform?

It depends on who initiates the free repair. If a dealer does a goodwill repair entirely on its own, the dealer owes Use Tax on its own cost for the parts. But if a manufacturer directs the repair and…

Are residential elevators, stairlifts, and patient lifts taxed at Illinois's reduced 1% medical appliance rate, or the standard 6.25% rate?

No -- residential elevators, vertical platform lifts, stairlifts, and overhead patient lifts are taxed at Illinois's standard 6.25% state sales tax rate (plus applicable local taxes), not the reduced …

Are a MedSpa's hormone therapy, Botox, and wellness services subject to Illinois sales tax, and how do bundled memberships get taxed?

The Department declined to answer each of the MedSpa's 12 specific service-by-service questions individually, and instead reiterated the general framework: a pure service with no tangible personal pro…

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

Only recreational vehicles and "cargo trailers" that meet a specific regulatory definition (built to be towed, designed for carrying property, and rated at least 2,200 pounds gross vehicle weight) qua…

Are fees charged for parking violations (like parking near a fire hydrant) subject to Illinois's Parking Excise Tax?

No -- a separately stated charge for a parking-rule violation (like parking near a fire hydrant or too close to a crosswalk) is not related to or incidental to the actual privilege of using the parkin…

Is a lessee being double-taxed if their equipment lease already had sales tax paid at signing, before Illinois started taxing lease payments themselves in 2025?

It feels like double taxation but isn't legally recognized as such: the tax paid when a lessor originally bought equipment to lease (pre-2025 Use Tax on the lessor's cost) and the NEW tax now added to…

Can a construction-equipment rental company with one Illinois office source all its rental receipts to that office for local sales tax purposes, regardless of where the equipment is delivered or picked up?

No -- a single-location origin-based approach isn't automatically approved. For a lease with recurring periodic payments where the equipment is delivered to the customer, Illinois sources each payment…

Does a mobile home park owner/dealer owe Illinois sales tax when it resells a used, previously-titled manufactured home out of its park inventory?

Yes. Once a mobile home park owner becomes a licensed dealer and holds a manufactured home in its park inventory, its sale of that home to a purchaser -- whether it's the home's first sale or a later …

Does a waste-hauling broker owe Illinois sales/use tax on charges for roll-off dumpster and portable-toilet services when it subcontracts the actual dumpsters and toilets to third-party haulers?

Yes, but as Service Occupation Tax, not Retailers' Occupation Tax on a rental: the Department ruled that delivering a dumpster or portable toilet to a customer's site is a taxable 'lease' of tangible …

Does equipment used to turn captured landfill methane into pipeline-quality renewable natural gas (RNG) qualify for Illinois's manufacturing machinery and equipment sales tax exemption?

No. The Department ruled that this taxpayer's RNG facility does not qualify for the manufacturing machinery and equipment exemption, because its process of cleaning, cooling, compressing, and purifyin…

Is a bundled IVF specimen-storage offering -- combining a leased robotic system, a nominally-sold storage tank, and subscription database software -- taxable in Illinois?

The Department didn't issue a specific yes/no on this taxpayer's bundled tank/robot/software offering. Instead, it explained the general framework: a software-as-a-service provider is a 'serviceperson…

Can a marketplace facilitator subtract its own currency-exchange, payment-processing, and platform fees from taxable gross receipts, since those fees are charged to marketplace sellers rather than buyers?

No. A marketplace facilitator that has met the $100,000 remittance threshold is treated as the retailer for every sale made over its marketplace, and its taxable gross receipts include all considerati…

Does corrugated plastic field tile used to drain farmland qualify for Illinois's farm machinery and equipment sales tax exemption?

No. Illinois's farm machinery and equipment exemption specifically excludes corrugated plastic pipe and other water-management/drainage products from the definition of exempt 'equipment,' so field til…

Is Illinois's Renewable Energy Charge being repealed at the end of 2025, and does it apply to a solar energy provider's lease/electricity bill?

No, the charge isn't expiring as scheduled -- Public Act 104-0010 extended its repeal date from December 31, 2025 to December 31, 2030, so it remains in effect. The charge is assessed by public utilit…

Our LLC currently files as a partnership and has a large Illinois net loss carryforward -- if we make an S-corp election next year while keeping the same LLC, does that carryforward transfer to the new S corporation?

No. Even though the same LLC continues to exist as a legal matter, converting from a partnership to an S corporation is treated federally as a liquidation of the partnership followed by formation of a…

Will dietary supplements that don't make medicinal claims still be taxed at a reduced rate after Illinois eliminates its 1% state grocery tax on January 1, 2026?

Dietary supplements without a medicinal label claim keep being classified as 'food' (groceries), but the way they're taxed changes on January 1, 2026: the State's 1% grocery tax is eliminated, and ins…

Can a business place vending machines selling vapes and nicotine pouches inside bars, and what Illinois licenses does that require?

Yes, placing vape and nicotine-pouch vending machines in a bar is permitted under Illinois law -- these products can be sold from a machine only if they aren't mixed with non-tobacco items (other than…

Which city's local sales tax applies when a company's headquarters processes an order but the customer picks up the item at a different warehouse in another town?

It depends on where the selling activities actually happen: sales that a company's headquarters receives, processes, prices, and bills are sourced (and local sales tax is owed) to the headquarters cit…

Is an auction software platform that connects sellers with payment processors, but never touches funds itself, a 'marketplace facilitator' under Illinois sales tax law?

The Department didn't confirm or reject this platform's own position that it isn't a marketplace facilitator. It instead explained that Illinois's definition is intentionally broad -- covering INDIREC…

Does an AI chatbot company owe Illinois sales, use, or service occupation tax on its subscription plans and a free, open-source API software development kit?

Cloud-based AI chatbot access that's never downloaded -- used only through a website or app -- is a service, not subject to Retailers' Occupation Tax or Use Tax. But if the company gives subscribers a…

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?

A solar company that installs equipment on a customer's home and sells the generated electricity back under a power purchase agreement is a 'delivering supplier' that must collect and remit the Electr…

Does a solar company that owns and installs rooftop or ground-mounted panels under a power purchase agreement owe sales/excise tax on its monthly electricity payments?

The solar panels themselves, once permanently affixed to a rooftop or ground-mounted, are treated as real property under Illinois's 'intention test' -- so the installer is a construction contractor an…

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?

A person must carry out BOTH activities in the marketplace facilitator definition -- listing or advertising the seller's goods for sale, AND collecting/transmitting payment -- to qualify as a marketpl…

Does an out-of-state buyer get a trade-in credit on an Illinois vehicle purchase, and at what rate is the sale taxed if the buyer's home state doesn't offer Illinois a reciprocal exemption?

Illinois allows a dealer to reduce a motor vehicle's taxable selling price with a like-kind trade-in on a retail sale, but that trade-in credit is NOT available on a private-party (non-dealer) vehicle…

Is a signed 'past-use license' agreement -- resolving a dispute over unlicensed access to canned software -- a taxable retail sale, or can it be reclassified as a non-taxable settlement?

The Department's answer supports the software vendor's position: sales of canned computer software are taxable retail sales in Illinois regardless of how the software is delivered (including remote/di…

Is an out-of-state municipality's tax-exempt certificate enough to avoid Illinois telecommunications tax on a data-center internet connection located in Illinois?

No. Illinois's telecommunications-tax exemption for 'sales at retail' is limited to the federal government, the State government, and Illinois state universities -- it does NOT extend to local governm…

Is a telephone cooperative's dark fiber lease subject to Illinois's Telecommunications Excise Tax or sales tax, and is its wholesale local loop service exempt?

Dark fiber (unlit fiber optic cable carrying no signal) is NOT subject to the Telecommunications Excise Tax, because it doesn't transmit any information. Buried dark fiber cable is treated as real pro…

Can a donor make their Illinois Gives Tax Credit contribution as a qualified charitable distribution (QCD) directly from their IRA?

Yes. A qualified charitable distribution sent directly from an IRA to a qualified community foundation's endowment fund satisfies the Illinois Gives Tax Credit Act's requirement that the contribution …

Our investment partnership has an Illinois-resident majority partner and a nonresident minority partner -- for the pass-through entity tax, is only the resident partner's share of our portfolio income allocable to Illinois?

Not quite the test the Department applied. Rather than confirming a partner-by-partner residency split, the Department pointed to a partnership-level rule: for an investment partnership's PTE tax, non…

Does a lessor that already paid use tax on equipment cost under a pre-2025 operating lease now also owe the new lease tax on payments received after January 1, 2025?

Yes. Even though the lessor already paid Use Tax on the equipment's cost under the pre-2025 rules, receipts collected on or after January 1, 2025 from an existing operating lease are now separately su…

Illinois decoupled from federal bonus depreciation, so we get an offsetting state subtraction each year instead -- but if we can't use the full subtraction amount in one year, can we carry the unused part forward?

Not as its own item -- Illinois's bonus-depreciation subtraction under 35 ILCS 5/203(b)(2)(T) has no standalone carryforward provision, so an amount you can't absorb in the year it arises is simply lo…

Does an AI chatbot company owe Illinois sales, use, or service occupation tax on its subscription plans and a free, open-source API software development kit?

This letter was later SUPERSEDED by ST 25-0057-GIL, which reissued essentially the same analysis for the same taxpayer with only a minor wording correction (no substantive change): cloud-based AI chat…

Is a home-security company's equipment-installation fee subject to Illinois sales tax, and does the 2025 lease-tax law change the answer?

Yes for the installation fee, but only under the Service Occupation Tax, not the Retailers' Occupation Tax. The Illinois Department of Revenue ruled that a security-monitoring company's leased alarm e…

Is a dietary supplement powder sold in stick packs or sachets, mixed with water, taxed as food at Illinois's reduced rate?

Yes, based on the product labels reviewed, these dietary supplement powders qualify as 'food' taxed at the reduced 1% rate rather than the standard 6.25% rate -- they don't make medicinal claims (so t…

How much is Illinois's Sustainable Aviation Fuel Purchase Credit worth, and are there any caps or carry-forward limits on using it?

Yes, there are caps, but only on soybean oil-derived fuel. From July 1, 2023 through December 31, 2032, an air common carrier earns a $1.50-per-gallon Sustainable Aviation Fuel Purchase Credit (SAFPC)…

As successor trustee, I want to move our family trust's situs out of Illinois since all its assets and most beneficiaries are now elsewhere -- will that end the trust's Illinois residency and stop the double taxation with our other state?

Not necessarily, at least not yet. Illinois taxes a trust as a resident if it's a testamentary trust of a decedent domiciled in Illinois, or an irrevocable trust whose grantor was domiciled in Illinoi…

What did Illinois tell a commercial tax-guide publisher, in response to its annual multistate survey, about how the state's sales and use tax applies to marketplace-facilitator fees, digital products, information services, and similar hot topics?

Do a medical device company's bone growth stimulation devices qualify for Illinois's 1% reduced sales tax rate as 'medical appliances,' or are they taxed at the general 6.25% rate?

No -- the Department ruled that the taxpayer's bone growth stimulation devices (marketed as combined magnetic field and low-intensity pulsed ultrasound devices) do not qualify as 'medical appliances' …

Are food, medicines, drugs, and medical appliances exempt from Illinois sales tax, or are they taxed at a special rate?

Qualifying food, prescription and non-prescription medicines, drugs, and medical appliances for human use are NOT exempt from Illinois sales tax -- they are taxed at a reduced state rate of 1% (plus a…

Does Illinois sales/use tax apply to a SaaS company's paid subscription fees and its free downloadable mobile app?

No sales tax applies to the SaaS subscription fees themselves, because Illinois does not tax software accessed only remotely through the cloud and never downloaded. The free mobile app is a separate q…