Illinois State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Illinois, with full citations and the original source on every page.
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When a car dealer sells vehicles to its own rental affiliate, and the affiliate rents them out short-term (including as loaner cars while the dealer does warranty repairs), does Retailers' Occupation/Use Tax or Automobile Renting Tax apply, and what happens to manufacturer warranty reimbursements?
The dealer's sale of vehicles to its rental affiliate is exempt from Retailers' Occupation Tax and Use Tax because the vehicles will be used for automobile renting. The affiliate's short-term rentals …
Can a university sell meals tax-free to residential students who pay with 'dining dollars' from a mandatory meal plan, at dining locations that are also open to the general public?
Yes. The Department ruled that a university may make tax-free sales of meals to residential students who pay with 'Dining Dollars' purchased as part of a mandatory meal plan, even at dining locations …
What does Illinois require for a drop-shipped sale to be tax-exempt as a sale for resale, and when must a marketplace facilitator collect and remit Illinois sales tax on behalf of marketplace sellers?
For drop shipments, Illinois prefers an active registration or resale number on a Certificate of Resale, but will accept other documentation (including a certificate describing the drop-shipment scena…
Is a company's purchase of another company's business assets, arranged through a private broker rather than through the broker's internet auction, subject to Illinois Retailers' Occupation (sales) Tax, or does it qualify for the occasional sale exemption?
The purchase qualified for Illinois's occasional sale exemption and was not subject to Retailers' Occupation Tax. The Department ruled that because the sale of the seller's business assets was negotia…
Do flights an aircraft owner takes on their own plane, operated under an FAA Part 135 air carrier certificate, count toward the 50% trips-or-miles threshold needed to qualify the aircraft for Illinois's rolling stock exemption?
Yes. If a Part 135 air carrier carries persons or property for hire in interstate commerce, including flights for the aircraft's own owner or lessee under an arm's-length management agreement, that op…
Is a bundled all-inclusive sporting-event ticket (admission plus food and drink for one price) subject to Illinois Retailers' Occupation Tax, or only to local amusement tax?
It depends on proportion, not a fixed rule: if the food and drink bundled into a single ticket price are just incidental to the sporting event (the service), the transaction is treated as a sale of se…
Does a company that sells molded pulp packaging (like protective boxes and cartons) to businesses who use it to package and ship their own products for sale owe Illinois Retailers' Occupation Tax on those packaging sales?
No tax is owed on the container sale itself, if the purchaser gives the seller a Certificate of Resale. Under 86 Ill. Adm. Code 130.2070, sellers of containers, wrapping, and packing materials to purc…
When a business sells a combined ticket for a dinner-and-entertainment event (like a murder mystery dinner), does it owe Illinois Retailers' Occupation Tax on the food, and does that change if the caterer already charged tax on the food it sold to the business?
Caterers and sellers of meals owe Illinois Retailers' Occupation Tax on their full gross receipts from food sales, with no deduction for service or overhead costs. If a business buys catered food and …
Does transferring titled trucks from LLC members to the LLC itself qualify for the flat $15 Vehicle Use Tax rate as a business reorganization, instead of the regular vehicle-value-based tax?
The Department could not say. Based on the limited facts provided, Illinois could not determine whether transferring trucks from individual LLC members to the LLC qualified for the flat $15 Vehicle Us…
After I returned a used vehicle to the dealership and canceled my loan, can the Illinois Department of Revenue force the dealer to file a claim for credit to get back the sales tax I paid, so I can get my money back from the dealer?
No. The Department has no authority to compel a motor vehicle dealer to file a claim for credit for sales tax paid on a returned vehicle. Getting the dealer to file that claim (and to refund you the t…
Is a watercraft purchase from a licensed Illinois dealer exempt from Illinois sales tax if the watercraft itself is exempt from state titling and registration?
No. Buying a watercraft at retail from an Illinois dealer is subject to Illinois Retailers' Occupation Tax/Use Tax (commonly called sales tax) regardless of whether the watercraft is exempt from Illin…
Does a personal chef who prepares and delivers custom meals for private clients qualify for a special 'de minimis serviceman' exemption from Illinois Retailers' Occupation (sales) Tax, since the chef already pays sales tax on the raw ingredients?
No special exemption applies. The Department explained that custom-made items substantially similar to stock or standard items (like tailor-made clothing) remain subject to Retailers' Occupation Tax, …
When an online retailer opens a large in-state fulfillment center and headquarters, is it required to collect that city's local (home-rule) Retailers' Occupation Tax on its Illinois internet sales, instead of just the state use tax?
Yes, for sales tied to that facility. The Department ruled that once the company opens its headquarters and fulfillment center in the city, it is engaged in three or more of the five 'primary selling …
Does a capital financing lease of qualified data center equipment, treated as a conditional sale, qualify for Illinois' sales-tax data center exemption, and does the answer change depending on when the data center itself became qualified?
Illinois could not give a specific ruling in a GIL, but explained that a capital financing lease treated as a conditional sale is taxed like a sale (full Retailers' Occupation Tax on the payment strea…
Does an Illinois online classified-ads website have to collect Retailers' Occupation (sales) Tax on sales of digital 'credit packs' that customers use to publish, highlight, or promote listings?
No. The Department ruled that because purchasers of the digital credit packs receive no tangible personal property -- no inventory is shipped and nothing physical changes hands -- the sales are not su…
Does a large membrane (fabric/steel-truss) structure built onto a factory in an Illinois enterprise zone qualify for the Enterprise Zone building materials exemption from Retailers' Occupation Tax?
Yes. The Department ruled that the membrane structure -- a steel-truss, fabric-clad building anchored into a poured concrete foundation and equipped with fire suppression, electrical, and utility infr…
Does selling corn oil as an off-road-use-only performance fuel for tractor pulls require a Motor Fuel Tax license, and is it subject to motor fuel tax?
It depends on whether the corn oil is blended with diesel or another fuel. Plain corn oil resold as-is is not "motor fuel" and isn't subject to the Motor Fuel Tax Law. But if it is blended with diesel…
When a peer-to-peer car-sharing platform lets private "Hosts" rent out their own vehicles to "Guests," who owes Illinois's Automobile Renting Tax -- the platform or the Host -- and does that change once the platform's rental volume crosses certain thresholds?
The platform (the "Car Rental Facilitation Company") is treated as a marketplace facilitator under the Automobile Renting Occupation and Use Tax Act, the same way an online marketplace is a marketplac…
Does an out-of-state company that has an Illinois employee and buys personalized debit/prepaid cards from printers owe Illinois Retailers' Occupation, Use, or Service Occupation Tax on those cards, depending on where the printer ships them and whether they are resold, given away, or destroyed unfinished?
It depends on where the printer ships the finished cards. Because the company has an Illinois employee, it is an out-of-state "serviceman maintaining a place of business" in Illinois, and the Departme…
Does an outsourced veterinary pharmacy business owe Service Occupation Tax or Retailers' Occupation Tax on the products it supplies through participating veterinary hospitals to pet owners, and who is responsible for remitting that tax?
The Department could not give a definitive answer because the facts were unclear, but it explained the framework: if the pharmacy company sells to veterinary hospitals at wholesale and the hospitals r…
Does a company that dehydrates, powders, and encapsulates a customer's own product into vitamin capsules owe Service Occupation Tax, and if so, how is the tax base calculated?
Yes. The Department concluded the company is acting as a "serviceman" under the Service Occupation Tax Act and owes tax on the tangible personal property (the capsules and packaging) transferred incid…
Is software that guides an entire steel-building fabrication process from design through production — replacing printed blueprints — exempt from Illinois sales and use tax as 'software used to operate exempt manufacturing machinery and equipment'?
The Department did not decide whether this particular fabrication-guidance software qualifies, because a GIL cannot make a taxability determination on specific facts. Instead, it laid out the framewor…
Does an Illinois school lose its sales-tax exemption on cafeteria meals if it outsources cafeteria operations to an outside food service company instead of using its own employees?
No. The Department confirmed that a school's cafeteria sales remain exempt from Retailers' Occupation Tax under 86 Ill. Adm. Code 130.2005(b)(4)(A) even when an outside food service company operates t…
Does a software vendor's perpetual and term software license agreements qualify for Illinois' exemption from Retailers' Occupation Tax and Use Tax as a non-taxable software license rather than a taxable retail sale?
The Department did not rule on the specific licenses because it no longer issues private letter rulings on whether a particular canned-software license meets the exemption test — it considers 86 Ill. …
Does a permanently anchored racking system installed in a building qualify for Illinois's Enterprise Zone building materials sales tax exemption?
It depends on whether the racking has actually become part of the real estate. The Department explained that the Enterprise Zone building materials exemption only covers building materials incorporate…
Does an Illinois business have to pay tax on the training manuals it hands out at a paid customer seminar, and how is that tax calculated?
Yes. Because labor is not taxable but the training manuals handed out at the seminar are tangible personal property, the company (acting as a "serviceman") owes Service Occupation Tax or Use Tax on th…
Does capital equipment being installed as part of a facility expansion in an Illinois enterprise zone qualify for the Enterprise Zone building materials sales tax exemption?
Mostly yes. The Department ruled that the listed capital equipment items -- including a wastewater system, steam boiler, air compressors, rail systems, a tunnel washer, dryer system, and ironer line -…
Does an out-of-state online retailer owe Illinois Retailers' Occupation Tax (ROT) or Use Tax on sales fulfilled from its subsidiary's Illinois stores or from unrelated third-party inventory in Illinois?
Use Tax, not ROT. The Department concluded that when an out-of-state internet retailer's Illinois sales are fulfilled from inventory owned and possessed by its subsidiary's stores or by unrelated thir…
If a company bundles hardware and a required software subscription into one price and doesn't separately state what part of the charge is for the tangible property, how is Illinois Service Occupation Tax calculated?
Illinois ruled that because the company's hardware (sensors, trackers, monitors, tokens) and its software/firmware are sold together for one bundled price with no separate charge for the tangible pers…
If an Indiana resident buys a car in Illinois and trades in another vehicle, does Illinois tax apply, and does the $10,000 trade-in credit cap still apply?
Yes to both. Illinois Retailers' Occupation Tax and Use Tax apply to a first division motor vehicle sold to an Indiana resident who takes delivery in Illinois but will register the vehicle in Indiana,…
When a dealer sells a motor vehicle with a trade-in, can the buyer and dealer lower the sale price and the trade-in value by equal amounts to get around the $10,000 cap on the tax-free trade-in credit?
The Department did not say the practice is flatly illegal, but it warned that selling price and trade-in value have to reflect real, objective values — if a dealer's reported numbers deviate from what…
Is an out-of-state online retailer a 'marketplace facilitator' under Illinois law if it processes payment for third-party sellers' goods but never names those sellers on its website?
No. The Illinois Department of Revenue concluded that a retailer is not a marketplace facilitator if it never identifies the third-party sellers to purchasers on its website (the marketplace) — even t…
How does Illinois sales/use tax apply to a company that leases equipment (like traffic control trailers) to customers, when the equipment is bought and shipped from state to state?
Under Illinois's 2021-era rules, a lessor renting equipment under a true lease does not charge sales tax on the rental payments. Instead, the lessor itself owes Use Tax on its own cost price of the eq…
If a company buys equipment from an Illinois vendor and has a freight forwarder pick it up in Illinois and ship it to the company's own warehouse in a foreign country, is that sale exempt from Illinois Retailers' Occupation Tax as interstate/foreign commerce?
It depends on the facts, and the Department could not decide this specific case in a GIL. Illinois Retailers' Occupation Tax generally does not apply when a seller ships goods by carrier or mail, unde…
How should a wedding photographer/videographer in Illinois charge sales tax on custom photo albums and video packages sold to clients?
Photographers and videographers who sell physical products (like custom albums or USB drives) incident to their services are generally servicemen subject to Service Occupation Tax, not Retailers' Occu…
Is a kombucha-based beverage with added fruit juice and no more than 5% juice content taxed as a 'soft drink' at Illinois's 6.25% sales tax rate?
Likely yes. Based on the ingredient information provided, the Illinois Department of Revenue concluded that the kombucha beverages described (containing kombucha culture, tea, and added fruit juice us…
When a drop-shipped sale touches Illinois, whose sales count toward Illinois's $100,000/200-transaction economic nexus threshold for remote retailers?
It depends on who is selling at retail into Illinois. A sale for resale (the wholesale leg of a drop shipment) does not count toward either party's Illinois economic nexus threshold, but the retail sa…
When does a marketplace facilitator have to register and collect Illinois state and local sales tax on behalf of its marketplace sellers?
Once a marketplace facilitator's and its sellers' combined Illinois sales hit $100,000 or 200 separate transactions in a year, the facilitator (not the individual sellers) must register with the Illin…
Does Illinois Rental Purchase Agreement Occupation and Use Tax, Use Tax, or Retailers' Occupation Tax apply to an out-of-state company's subscription-based "try before you buy" merchandise service?
It depends on the arrangement. Illinois taxes subscription-style rent-to-try programs under the Rental Purchase Agreement Occupation and Use Tax (6.25% of subscription receipts) rather than sales tax,…
Does an equipment-leasing company owe Illinois Retailers' Occupation Tax when it transfers its leased equipment to an affiliated company as part of a corporate reorganization?
No. Because the leasing company does not habitually sell equipment at retail (its occasional equipment sales were only about 1.5% of revenue) and is not otherwise holding itself out as a retailer, its…
Are the explosives, blasting agents, and detonator equipment a quarrying/mining company sells or uses exempt from Illinois sales and use tax as manufacturing machinery and equipment?
Yes, generally. Illinois' manufacturing machinery and equipment exemption specifically covers blasting agents, high explosives, detonators, lead-in line, and blasting machines used in the extractive p…
Does the $10,000 cap on the trade-in credit for First Division motor vehicles under Illinois' 2020 trade-in law apply to boats?
No. The $10,000 cap on the trade-in credit for First Division motor vehicles does not apply to boats, because boats are regulated as "vessels" under the Boat Registration and Safety Act, not as "motor…
Is kombucha taxed as a "soft drink" under Illinois sales tax law, or as ordinary (lower-taxed) food?
Based on the ingredients described, no — the Illinois Department of Revenue concluded that this particular kombucha product line (25 flavors made from kombucha culture, black tea, green tea, kiwi juic…
Does Illinois sales tax apply to a records-management company's document storage, shredding, scanning, software, and related service fees?
Generally, no. The Department confirmed that if a transaction does not involve transferring tangible personal property to the customer, no Retailers' Occupation Tax, Use Tax, Service Occupation Tax, o…
If an Illinois business buys goods from an out-of-state supplier and has them shipped to customers or locations both inside and outside Illinois, who owes Illinois sales or use tax?
It depends on where the property physically is when the sale happens. If the goods are delivered to a purchaser in Illinois, the sale is taxable there even if the buyer immediately takes the goods out…
Does licensing software to customers through an end user license agreement (EULA) count as an exempt software license, or is it a taxable retail sale, under Illinois sales tax rules?
It can be exempt. Illinois treats a software license as a non-taxable exempt license — not a taxable retail sale of tangible personal property — if the EULA is signed (including by valid electronic si…
If a boat (or other item) is located in Illinois and handed over to an out-of-state buyer here, does the Illinois dealer have to collect and remit Illinois sales tax, even though the buyer immediately takes it out of state?
Yes, tax applies. When an Illinois boat dealer sells a boat that is in Illinois at closing and the out-of-state buyer takes physical possession of it here, the sale is taxable in Illinois, even if the…
Does an Illinois retailer have to charge sales tax when selling collectible paper currency, coins, or bullion?
No, generally not. The sale of legal tender, currency, medallions, or gold or silver coinage issued by Illinois, the U.S. government, or a foreign government, and bullion, is exempt from Illinois Reta…
Does an out-of-state furniture retailer with no Illinois office have to collect Illinois Retailers' Occupation Tax as a remote retailer, or just remit Use Tax?
It depends on sales volume. A remote retailer with no Illinois office or warehouse must collect and remit the full local Retailers' Occupation Tax (destination-based, so it can be 10.25% in Chicago) o…
Does a nonprofit's isolated-or-occasional-sale exemption still apply when it sells through a marketplace facilitator like an online platform?
No. Once a sale is made through a marketplace, Illinois no longer treats it as an isolated or occasional sale, so the exemption from Retailers' Occupation Tax does not apply to that sale, regardless o…
Are the chemicals a metal-plating and passivation business uses to clean, plate, coat, and treat customers' parts exempt from Illinois sales and use tax as manufacturing chemicals?
It depends on the chemical's role. Chemicals that directly and immediately change the customer's parts (cleaning, plating, chromate coating, sealing, passivation acids) can qualify for Illinois's manu…
What form or information does a manufacturer need to document a Certificate of Resale in Illinois, and can a Multijurisdictional exemption form be used instead of the state's own forms?
Yes, a Multistate Tax Commission Uniform Sales & Use Tax Exemption/Resale Certificate can serve as a valid Certificate of Resale as long as it contains everything 86 Ill. Adm. Code 130.1405 requires: …
Does Illinois Service Occupation Tax or Use Tax apply when a company sells two-component spray-on bedliner products to franchisees/dealers who apply them to customers' trucks?
The franchisees and dealers who buy the bedliner components and spray them onto customers' trucks are acting as 'servicemen' under the Service Occupation Tax Act, so they can buy the components from t…
Does Illinois Retailers' Occupation Tax apply when a leased rail car or truck is destroyed and the lessee pays the stipulated loss value and takes title?
Generally no. When a true-lease lessor who is not otherwise in the business of selling like-kind property has leased equipment destroyed, the lessee's payment of the stipulated loss value and the less…
Can a cash-basis Illinois used motor vehicle dealer that prepays a customer's sales tax get a credit or refund when the customer defaults on the financing?
Yes, but only in a limited way. Illinois denied the dealer's request for a full refund of prepaid tax on defaulted accounts, but ruled that because the dealer can actually claim a federal bad-debt ded…
How does Illinois source local Service Occupation Tax and Retailers' Occupation Tax when a company uses production managers and a network of outside suppliers to fulfill custom orders?
Local Service Occupation Tax and Retailers' Occupation Tax are sourced to the location where the company's own selling activities occur (here, its production managers), not to the location of an outsi…
Does Illinois sales tax apply to lease payments or fees charged to a lessee, such as a vehicle lease disposition fee?
No, not under Illinois law. Illinois taxes the lessor's cost of the leased property (as a Use Tax on the lessor as end user), not the lease payments or fees charged to the lessee. Illinois imposes no …
What does Illinois General Information Letter ST 20-0029-GIL conclude about Nexus?
It depends on the retailer's contacts with Illinois. A retailer with physical presence in Illinois (even 'more than the slightest') must collect Use Tax, and since October 1, 2018, an out-of-state ret…
What does Illinois General Information Letter ST 20-0028-GIL conclude about Construction Contractors?
Construction contractors in Illinois are treated as end users, not resellers, of the tangible personal property they buy to permanently incorporate into real estate, so they owe Use Tax on their cost …
If a customer refuses to pay the sales tax an aircraft repair station charged, does the repair station still have to remit that tax to Illinois?
Generally yes, a retailer must remit sales tax to Illinois even if a customer refuses to pay it. But here, Public Act 101-629 retroactively revived the Section 2-5(40) exemption for aircraft parts, eq…
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These are official tax letter rulings and advisory opinions issued by Illinois's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.