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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Is an online auction listing service a 'marketplace facilitator' in Illinois if the seller processes payment directly?
The Department read the definition broadly and would not adopt the narrow reading the requester proposed. Under 35 ILCS 120/1 and 86 Ill. Adm. Code 131.130(a)(1)(B), a marketplace facilitator both lis…
Can a business buy tangible personal property tax-free from a seller by claiming it is for resale, and what must a valid Certificate of Resale contain?
Yes, but only if the purchaser has an active Illinois registration or resale number and gives the seller a properly completed Certificate of Resale (Form CRT-61 works) containing everything required b…
Does a manufactured (mobile) home dealer owe sales tax or use tax when it sells a home that gets permanently installed on a lot, versus one it just delivers without installing?
It depends on installation. If the dealer permanently incorporates the manufactured home into real estate (wheels, tongue, and hitch removed), the dealer acts as a construction contractor and owes use…
Does paying Chicago's Personal Property Lease Transaction Tax on e-bike and e-scooter rentals exempt a micromobility company from Illinois sales and use tax, both before and after the state's new January 1, 2025 lease tax takes effect?
Through December 31, 2024, Illinois imposes no state sales/use tax on true-lease receipts at all, so a company already paying Chicago's Personal Property Lease Transaction Tax owes no additional state…
Does Illinois charge sales tax on a video game's online subscription, in-game items, and virtual currency?
No. Illinois ruled that a video game publisher's monthly online subscription fees, in-game items (cosmetics, boosts, name changes, expansions), and virtual currency are all exempt from Retailers' Occu…
Starting in 2025, do Illinois retailers have to collect sales tax based on where a customer receives the goods, and do businesses that lease equipment now owe Retailers' Occupation Tax on lease payments?
Yes to both. Effective January 1, 2025, retailers with a physical presence in Illinois must source sales to the Illinois location where the customer takes delivery or possession (not just their own lo…
When is a sale exempt from Illinois sales tax as an interstate-commerce sale or a sale for resale, and who can seek a refund if tax was charged anyway?
A sale is exempt as interstate commerce only if the seller (not the buyer) ships the goods out of Illinois for good, or if a narrow nonresident-vehicle exception applies with proper proof of non-resid…
Does Illinois charge sales or use tax on a video game's in-app purchases, like in-game currency and game extras?
Yes, for the in-app purchases, but not for the free download. Illinois treats a free download of a video game (software downloaded from an out-of-state server) as untaxed, but once a player buys in-ga…
Does Illinois sales tax apply at the full rate or the reduced 1% rate to dental fluoride varnish and similar medical devices sold to professionals?
It depends on how the product is classified. Illinois taxes qualifying drugs, medicines, and medical appliances at a reduced 1% rate, but the Department's GIL did not decide whether this particular fl…
How does Illinois tax the sale of motor vehicles, including trade-ins, private-party sales, and sales to nonresidents?
Illinois taxes most motor vehicle sales under the Retailers' Occupation (sales) Tax or Use Tax, and generally allows a trade-in credit against the taxable price when a like-kind vehicle is traded in. …
Does Illinois charge sales tax on software accessed only through the cloud, like a SaaS subscription or an app membership?
No. Illinois does not tax computer software delivered through a cloud-based system where the software is never downloaded to the customer's device and is only accessed remotely, including software-as-…
Are radiopharmaceuticals and contrast media used for diagnostic or therapeutic purposes taxed at Illinois's reduced 1% drug rate or the general 6.25% rate?
Radiopharmaceuticals and contrast media used for diagnostic purposes have no medicinal qualities and do not qualify for the reduced 1% rate, so they're taxed at the general 6.25% merchandise rate. The…
Does Illinois sales tax or marketplace facilitator law apply to a call-answering/call-center service that takes food orders but never collects payment?
No. The Illinois Department of Revenue concluded that Retailers' Occupation Tax and Use Tax do not apply to sales of service, and that a call-answering service for restaurants does not meet the defini…
Does Illinois sales, use, or service occupation tax apply to a company's domain name registration, web hosting, and creation of emails and SSL certificates?
No. The Illinois Department of Revenue explained that a company's domain name registration, web hosting, and creation of emails and SSL certificates qualify as custom, intangible computer property (no…
Does Illinois sales tax apply to a mandatory service charge or tip added to a restaurant bill?
Mandatory gratuity or service charges that are separately stated on the bill and actually paid over to the service employees as tips (or a substitute for tips) are not subject to Illinois sales tax. B…
Do physician-prescribed graduated compression stockings qualify for Illinois's reduced 1% sales tax rate on medical appliances, instead of the general 6.25% rate?
It appears they may qualify for the reduced 1% rate, because graduated compression stockings differ from ordinary support hose in that their graduated compression aids blood flow where leg vein valves…
Is a mobile app that lets truck drivers buy discounted fuel from partner fuel stops -- without itself selling, holding, or delivering the fuel -- a 'marketplace facilitator' that must collect and remit Illinois sales and use tax?
The Department could not say, on a GIL, without seeing the actual contracts between the app company and the fuel stops -- it explained the Retailers' Occupation Tax and marketplace-facilitator framewo…
How does Illinois tax the sale of motor vehicles, including trade-ins, private-party sales, and sales to nonresidents such as Florida residents?
Illinois taxes retail motor vehicle sales under the Retailers' Occupation (sales) Tax/Use Tax and generally allows a trade-in credit for a like-kind vehicle traded in (with no $10,000 cap for sales on…
Does an online reseller have to charge and collect Illinois sales tax on a "buyer's premium" it adds on top of the sale price of each item?
Yes. A buyer's premium is part of the seller's taxable gross receipts / selling price under the Retailers' Occupation Tax, because no deduction from gross receipts is allowed for the seller's costs of…
Does a company that runs a service-matching marketplace app owe Retailers' Occupation Tax, Use Tax, or Service Occupation Tax on the small kits of branded items (placards, stickers, etc.) it gives to the service providers who sign up on its platform?
Only Use Tax, and only on the Department's cost price of those items. The Department ruled the marketplace-facilitation fees are for a non-taxable service, and because the company gives away only a sm…
Is a company's sale of software "credits," which let a customer generate additional reports from previously purchased hardware/software, a taxable sale of tangible personal property or a non-taxable intangible under Illinois sales tax law?
It depends on how the software is delivered and licensed. Illinois treats "canned" (prewritten) computer software as taxable tangible personal property, while custom software written to a customer's s…
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 …
Is a nonprofit's sale of digital exams, assessments, and study materials to schools, professional associations, and individual students/examinees subject to Illinois sales tax?
No. The Department found these digital assessments, licensing exams, and study materials are non-taxable personal/professional services (not tangible personal property or taxable digital goods), so sa…
In a true operating lease of a utility trailer registered in Illinois, is sales/use tax based on the price the lessor paid the dealer, or on the total lease payments the lessor expects to collect from the lessee?
Illinois bases the tax on the price the lessor paid the dealer, not on the total lease payments. Under a true lease, the lessor is treated as the end user of the trailer and owes Use Tax only on its o…
Does a company that sells software as a service (SaaS), digital goods, and in-game purchases have to collect Illinois Retailers' Occupation Tax, Use Tax, or Service Occupation Tax?
Generally no. A provider of software as a service (SaaS) is acting as a "serviceman," and if it does not transfer any tangible personal property to the customer, the transaction generally is not subje…
Are invoices for a licensed software subscription's continued maintenance/access, and for additional software users, subject to Illinois Retailers' Occupation (sales) Tax?
It depends on the facts, which the Department could not resolve in a GIL. Generally, canned (prewritten) software is taxable, but a software license that meets all five criteria in 86 Ill. Adm. Code 1…
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…
What Illinois sales tax rate applies to home-baked goods (like flour-based baked goods vs. fudge or no-bake cookies) sold for pickup, delivery, or shipping, and does the rate change when selling at farmers' markets or other venues?
It depends on whether the item is "food," "candy," or a "soft drink" under 86 Ill. Adm. Code 130.310 -- not on the sales venue. Food for human consumption to be eaten off-premises (not prepared for im…
When a customer returns merchandise, how should an Illinois retailer report the refunded sales tax on Form ST-1/ST-2, and can the amended return show a negative number?
The retailer must refund the sales tax it collected to the customer and may then deduct the corresponding gross receipts on the return for the period the refund was made. But sellers cannot file a ret…
Does an outdoor walking tour company owe Illinois sales/use tax when its tour price includes stops for food and drinks at third-party restaurants and bars?
It depends on whether tangible personal property (food or drinks) is transferred as part of the sale. A walking tour by itself, with no food or drink included, is a nontaxable service. But if the tour…
When a finance company buys heavy trucks and trailers from a dealership to lease to customers under a TRAC (terminal rent adjustment clause) lease, does the dealership charge sales tax on that purchase, and who owes tax on the lease payments?
The dealership owes Retailers' Occupation Tax on its sale of the truck or trailer to the leasing company. If the arrangement is a true lease (no guaranteed/nominal buyout), the lessor is treated as th…
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 Illinois Retailers' Occupation (sales) Tax apply to farm machinery and equipment bought for use in production agriculture or federal/state agricultural programs?
No. Illinois Retailers' Occupation Tax does not apply to farm machinery and equipment that is used or leased for use primarily (over 50% of the time) in production agriculture or in state or federal a…
Does Illinois charge the low 1% food tax rate on fresh culinary herb plants sold in grocery stores, or the regular 6.25% rate?
The low rate. Illinois ruled that fresh culinary herb plants (like basil or parsley sold in a pot of dirt or bare-root in a bag of water) sold in a grocery store's produce section for human consumptio…
Does Illinois' farm machinery and equipment sales tax exemption cover corrugated plastic drainage pipe and other water management products used in production agriculture?
No. The Illinois Department of Revenue concluded that corrugated plastic pipe and other water management/drainage products, even when used primarily in production agriculture, are "drainage facilities…
Does a grocery store charge the high or low Illinois sales tax rate on individually sold rolls and cookies, and on prepackaged cold prepared food, when the store also has a separate dining area?
The low sales tax rate applies to individually sold rolls and cookies, and to prepackaged cold prepared food, as long as they aren't sold for consumption in the store's dining area. Because the store'…
Does Illinois tax single-use catheters and rented catheter-driving equipment (laser/electrical signal generators) sold by a medical device company to hospitals at the 1% low medical-appliance rate, or the 6.25% general rate, and how are the equipment rentals and hospital sales taxed?
The catheters and rented signal/laser-generating equipment described do not qualify as low-rate (1%) medical appliances because they don't directly substitute for a malfunctioning body part, so they'r…
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 a federal construction contractor owe Illinois Use Tax on materials and equipment it buys to fulfill federal government contracts?
Generally yes. The Department explained that a government contractor who buys items to fulfill a contract with a governmental unit is using those items and owes Illinois Use Tax, even if ownership of …
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 …
Is a bio-absorbable steroid-releasing sinus implant, sold bundled with or separate from its delivery system, taxed at Illinois' 1% low rate as a medical appliance?
It depends on the product. The Department could not determine, from the limited facts given, whether the bundled sinus implant qualifies for Illinois' lower 1% sales tax rate as a 'medical appliance' …
What does Illinois General Information Letter ST 20-0032-GIL conclude about Computer Software?
Generally, no. A software-as-a-service provider is treated as a 'serviceman,' and if it does not transfer any tangible personal property (including computer software) to the customer, the charges are …
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 …
Can an electrical contractor buy small hand tools tax-free because it is working on a project covered by the manufacturing machinery and equipment exemption?
No. The manufacturing machinery and equipment exemption only covers hand tools and other production related property that a manufacturer itself uses or consumes inside its manufacturing facility. A co…
What does Illinois General Information Letter ST 20-0026-GIL conclude about Construction Contractors?
Construction contractors who permanently affix tangible personal property (like cleanroom walls, doors, flooring, or filtration systems) to real property are treated as the 'end user' of that property…
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…
Does a not-for-profit college that trains optometrists owe Illinois sales or service occupation tax on the prescription eyewear it provides to patients as part of student training?
No. The Illinois Department of Revenue ruled that the college does not owe Retailers' Occupation Tax or Service Occupation Tax on prescription eyeglasses and contact lenses transferred to patients as …
What does Illinois General Information Letter ST 20-0030-GIL conclude about Computer Software?
It depends on what is actually transferred to the customer. Illinois taxes sales of tangible personal property, and 'canned' (pre-written) computer software counts as tangible personal property, so se…
Does an out-of-state seller owe Illinois sales tax on a sale that is drop-shipped to an Illinois customer if the out-of-state buyer never gave a resale certificate?
Yes, generally. Under Illinois rules, a drop-shipped sale can qualify as a tax-exempt sale for resale, but only if the out-of-state buyer gives the seller a valid Certificate of Resale (or other adequ…
What does Illinois General Information Letter ST 20-0022-GIL conclude about Construction Contractors?
Construction contractors in Illinois are treated as end users, not retailers: they owe Use Tax on their cost price of materials permanently incorporated into real property (like an installed gas stati…
What does Illinois General Information Letter ST 20-0021-GIL conclude about Enterprise Zones?
Sales of tangible personal property used or consumed in operating a pollution control facility are exempt from Illinois Retailers' Occupation Tax (and therefore Use Tax) only if the facility is locate…
Does an Illinois retailer still owe Retailers' Occupation Tax on petroleum product sales to a purchaser that is exempt from use tax under federal law?
Yes, the exemption still applies. Illinois confirmed that receipts from selling petroleum products (motor fuels) to a purchaser that is exempt from use tax by operation of federal law -- here, a compa…
Is computer software subject to Illinois sales and use tax, and how does that apply to software licenses, leases, and services like death-record and address searches?
Generally yes: 'canned' (prewritten) computer software is taxable tangible personal property in Illinois, while custom-written software generally is not. A software license escapes tax only if it meet…
What does Illinois General Information Letter ST 20-0023-GIL conclude about Nexus?
It depends on whether the out-of-state company has a physical presence in Illinois, meets the Wayfair economic-nexus thresholds ($100,000 in sales or 200+ transactions to Illinois customers), or (star…
How is Illinois sales tax calculated on food and dietary products made from industrial hemp extract, like balms and tincture drops?
It depends on how the product is used and labeled. Illinois taxes hemp-extract items intended for internal human consumption (like tincture drops taken under the tongue) as food at the low 1% rate und…
What does Illinois General Information Letter ST 20-0014-GIL conclude about Construction Contractors?
When a construction contractor permanently affixes tangible personal property to real property, Illinois treats the contractor as the 'end user' of that property, meaning the contractor owes Use Tax (…
What does Illinois General Information Letter ST 20-0018-GIL conclude about Miscellaneous?
This isn't taxpayer guidance in the usual sense -- it's the Illinois Department of Revenue's reply to a publisher's annual 50-state tax survey. The Department declined to fill out the questionnaire it…
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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.