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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What does Illinois Private Letter Ruling ST 20-0005-PLR conclude about the manufacturing machinery and equipment exemption for a cold-storage food processing facility?
The Illinois Department of Revenue ruled that essentially all of the machinery, equipment, and related property a cold-storage food processing company planned to buy for an expanded refrigerated wareh…
Is the entire selling price of a wheelchair-adaptive van taxed at the general 6.25% rate, or can the modification be taxed separately at the 1% low rate?
It depends on who did the modifying. If a dealer buys a van, converts it for a disabled person, and sells the finished van, the entire selling price is taxed at the general 6.25% (plus local tax) rate…
Does the Illinois Enterprise Zone sales tax exemption on building materials cover the components used to build a privately owned solar farm?
It depends item by item. Illinois exempts 'building materials' permanently incorporated into real estate within an Enterprise Zone from sales/use tax, but only if the purchaser holds an Enterprise Zon…
Does Illinois sales/use tax apply to a web-based (SaaS) fleet management service and the free companion mobile app that goes with it?
No. The Illinois Department of Revenue ruled that a company's web-based (SaaS) fleet management service is a nontaxable service because no software or tangible personal property changes hands -- custo…
How does Illinois sales, use, and service occupation tax apply to open-source software licenses and to paid software subscriptions?
Free open-source software licenses are not subject to Illinois Retailers' Occupation Tax because there's no charge for the software; the company owes no Use Tax either, since it also acquired the soft…
What does Illinois General Information Letter ST 20-0008-GIL conclude about Manufacturing Machinery & Equipment?
Since July 1, 2019, Illinois' manufacturing machinery and equipment sales tax exemption also covers 'production related tangible personal property' -- consumable supplies like drill bits, tooling chem…
When an Illinois retailer sells food and beverages, does it collect both Use Tax and Retailers' Occupation Tax from the customer, and can it reduce what it remits to the State?
Yes. Illinois retailers collect a single combined tax (6.25% state, plus any local Retailers' Occupation Tax) from patrons at the time of sale, and when remitting to the State they reduce the Use Tax …
If a software company can't satisfy Illinois' five-part test for an exempt software license, can it avoid charging sales tax by getting a resale certificate from the distributor instead?
Yes, but the underlying software transaction was taxable. The Department ruled that a software license accepted by the end user clicking 'I agree' -- rather than by a wet-ink or verifiable electronic …
What does Illinois General Information Letter ST 20-0005-GIL conclude about Sale At Retail?
It depends on whether the seller has a contract to permanently affix the home to real estate. If so, the seller acts as a construction contractor and owes Illinois Use Tax on its own cost price of the…
Does a company that arranges events for clients have to charge sales tax on its service fees, and how does gross receipts tax apply to caterers?
Caterers owe Illinois Retailers' Occupation Tax on their entire gross receipts from selling food, with no deduction for overhead costs like linens, dishes, flowers, or delivery. A pure event-planning …
Does Illinois sales/use tax apply to tangible personal property an electric-vehicle maker buys to build pre-production test vehicles?
No, not in this case. The Illinois Department of Revenue ruled that tangible personal property an electric-vehicle manufacturer buys to build pre-production, non-saleable test vehicles used for resear…
What does Illinois General Information Letter ST 20-0002-GIL conclude about Computer Software?
A cloud-based online file storage service that does not transfer any tangible personal property (including computer software) to its customers is generally not subject to Illinois Retailers' Occupatio…
What does Illinois General Information Letter ST 19-0035-GIL conclude about Computer Software?
A software-as-a-service provider is treated as a 'serviceman,' not a retailer. If the provider never transfers any tangible personal property (including software) to the customer, the transaction gene…
Does Illinois' manufacturing machinery and equipment sales tax exemption cover chemical processing aids used to clean, protect, and prepare production equipment before or after a production run?
It depends on how the chemicals are used, but generally yes. Beginning July 1, 2019, Illinois' manufacturing and assembling machinery and equipment exemption was expanded to cover 'production related …
Does Illinois' manufacturing machinery and equipment sales tax exemption cover cleaning chemicals and detergents used to clean production equipment?
It depends on what gets cleaned. Since July 1, 2019, Illinois' manufacturing and assembling machinery and equipment exemption covers 'production related tangible personal property,' so cleaning chemic…
Does Illinois sales tax exemption for Manufacturing Machinery & Equipment cover oxygen used by a brewery in its brewing process?
It depends on how the oxygen is used. The Illinois Department of Revenue explained that, beginning July 1, 2019, the Manufacturing Machinery and Equipment ('MM&E') exemption was expanded to cover 'pro…
If a perpetual software license meets all five requirements of 86 Ill. Adm. Code 130.1935(a)(1), is the transfer treated as a taxable lease/rental, or as a non-taxable license of an intangible?
A transfer of prewritten computer software under a perpetual license is not a taxable lease or rental if the license meets all five conditions in 86 Ill. Adm. Code 130.1935(a)(1)(A)-(E) -- it is treat…
We manufacture custom signs and sell them into Illinois, where we're registered; an independent contractor installs them (attached to a building or a pole set in concrete) and an independent carrier delivers them, with installation and freight separately billed above our cost -- do we charge sales tax or owe use tax, does tax apply to the freight and installation charges, and what happens if we use subcontractors to install?
It depends on whether the sign has 'commercial value' to anyone besides the buyer: a generic sign (for example, one that just reads "real estate" or "insurance" without the customer's name or brand) t…
We're a family farm doing production agriculture and got a Form ST-587 exemption certificate from a local business -- can we use it to buy parts for our semis, tractors, and trailers used on the farm without paying sales tax?
It depends on how the vehicle is used, not on the exemption certificate alone. Illinois exempts machinery and equipment (and their individual replacement parts) from sales tax only when used or leased…
My MLM company charges new distributors a $20 enrollment fee and charges active distributors the same $20 fee annually to renew their status and keep their wholesale discount, support services, and web access -- no physical item is sent in exchange. Is that fee subject to Illinois Retailers' Occupation Tax?
No -- when a membership or enrollment fee doesn't come with any tangible personal property in exchange, it's treated as an intangible and isn't part of the gross receipts subject to Illinois Retailers…
My manufacturing customers buy PPE items like gloves, hardhats, respirators, and disposable clothing from us -- since Illinois expanded the manufacturing machinery exemption on July 1, 2019 to cover 'production related tangible personal property,' can they buy these items exempt using Form ST-587?
Yes, potentially: as of July 1, 2019, Illinois's manufacturing and assembling machinery and equipment exemption was expanded to cover 'production related tangible personal property,' which the Departm…
Our MLM company reformulated its '24K' mental-clarity dietary supplement from a ready-to-drink liquid into a powder that customers mix with water before drinking -- does it still qualify as tax-favored food under Illinois sales tax law?
The Department didn't classify the specific 24K product (no product label was actually enclosed with the request), but it explained the controlling rule: food for human consumption to be eaten off the…
We're a steel-framing manufacturer: we use overhead cranes to take master coil out of storage and load it onto our slitter. Is that loading step part of the production cycle (exempt) or a pre-production activity (taxable) under the manufacturing machinery and equipment exemption?
The Department did NOT answer the specific overhead-crane question. It did not say whether moving master coil from storage onto the slitter counts as a taxable 'pre-production activity' or an exempt u…
My company charged Illinois sales tax on a separately-invoiced, no-markup freight charge for delivering glass by common carrier -- the customer could have picked it up in person but we always deliver instead. Is that freight charge taxable, and can the customer get a refund?
No -- the freight charges here are NOT taxable, because the customer had the option to pick up the glass in person instead of paying for delivery. Under 86 Ill. Adm. Code 130.415 and Kean v. Wal-Mart,…
Our company sells an enhanced communications-platform product to Illinois customers, and separately some businesses offer software as a service or resell conferencing/telecom services -- when is computer software a taxable retail sale versus a non-taxable license, when does SaaS/cloud delivery escape sales tax, and when does audio-conferencing trigger the Telecommunications Excise Tax?
The Department did NOT classify the taxpayer's own PRODUCT -- it first declined to issue the binding Private Letter Ruling the taxpayer requested, citing "the lack of information regarding the product…
Does the Illinois prepaid wireless E911 surcharge apply to recharges sold to Illinois customers when the actual phone being recharged is used abroad by family or friends on a foreign network?
Yes, the surcharge applies. The Illinois Department of Revenue held that the Prepaid Wireless 9-1-1 Surcharge attaches to the retail transaction -- the purchase of the recharge in Illinois -- not to w…
Does an aircraft purchased in Illinois and leased to a foreign commercial airline that flies only between Illinois and a foreign country (never touching another U.S. state) qualify for Illinois's rolling stock sales/use tax exemption?
Yes -- the Department agreed that flights in foreign commerce (Illinois to a foreign country) count as flights in "interstate commerce" for purposes of the rolling stock exemption, so routes limited t…
Does the July 1, 2019 expansion of Illinois's manufacturing machinery and equipment exemption cover propane fuel for forklifts, earplugs, protective gloves, quality-control gloves, and nitrogen used in a steel stamping press die?
The Department did NOT individually confirm or deny each of the taxpayer's five specific items. Instead, it restated the general July 1, 2019 rule -- production-related tangible personal property is e…
I sell and install manufactured product elements for customers -- how do I know whether Illinois taxes it as tangible personal property (sales tax) or as a real estate conversion (use tax on me as a contractor)?
The Department could not tell this taxpayer whether its specific 'PRODUCT' counts as real property or tangible personal property for Illinois sales/use tax purposes -- the facts submitted (a manual an…
Can a conservation nonprofit sell excess animals from its preserve tax-free as an 'occasional sale,' even if it has to do this every year?
This specific batch of sales qualified as an exempt isolated/occasional sale, but IDOR explicitly declined to promise the same exemption for future sales -- because the organization must regularly and…
Do the turbines, pipes, tanks, and other equipment used to build a power plant qualify for Illinois's Enterprise Zone sales tax exemption on building materials?
Yes -- essentially the entire described equipment package for the power plant qualifies as exempt Enterprise Zone building materials, because it will be permanently affixed to the real estate. The onl…
The company I pay for email marketing services says it must charge me Illinois sales tax, but they don't sell or license me any software -- is that right?
The Department did not resolve this taxpayer's specific dispute with his email-service provider -- it only restated the general rules for how Illinois taxes software and software-adjacent services, si…
We're an out-of-state seller of subscription training software and downloadable video-conferencing software -- does Illinois sales tax apply to either product?
The Department did not rule on either specific product. It only laid out the general framework for post-Wayfair economic nexus and for taxing canned vs. custom computer software and licenses -- it nev…
My tax-prep software vendor charges sales tax on the annual license, which I accept, but also on a separate 'REP access' fee each time I use an add-on module for a client -- is that REP fee taxable?
The Department could not answer this taxpayer's actual question -- it said it was unable to determine, on the facts given, whether the per-use REP access fee is a charge for computer software or is pr…
What does Illinois General Information Letter ST 19-0005-GIL conclude about Nexus?
The Department declined to fill out a multistate nexus survey, saying nexus is too fact-specific for a General Information Letter -- but it laid out the general framework: remote sellers with no physi…
What does Illinois General Information Letter ST 19-0004-GIL conclude about Food?
The high (general merchandise) rate applies. Illinois taxes food 'prepared for immediate consumption' -- food a retailer makes ready to eat without substantial delay -- at the high rate, not the low g…
Does pallet racking, a conveyor system, or forklifts qualify for Illinois's Enterprise Zone building materials sales tax exemption?
Picking carts, a floor scrubber, cherry pickers, and reach trucks do NOT qualify for Illinois's Enterprise Zone building materials exemption, because they are mobile equipment, not items permanently a…
Does Illinois charge sales tax on digital art files that customers download electronically?
No. Illinois Retailers' Occupation Tax and Use Tax (the state's 'sales tax') apply only to sales of tangible personal property, so a home-based designer's digital art files sold and downloaded electro…
Does an older, non-current comic book issue lose Illinois's sales-tax-free 'newsprint and ink' exemption just because it's not the newest issue?
No. As long as the comic book title is currently published at least twice a year and this particular issue is sold at or below cover price, it stays exempt from Illinois Retailers' Occupation Tax as '…
Do charitable organizations owe Illinois sales tax when they sell snacks to the students they serve?
It appears yes, taxable. The organization hoped its snack sales to students would qualify for the nonprofit noncompetitive-sales exemption, but IDOR found the students' dominant motive was buying food…
What does Illinois Private Letter Ruling ST 18-0013-PLR conclude about Automobile Renting Tax?
The Department ruled that a company leasing used vehicles through a mobile app on a 45-day, monthly-renewing term is a 'rentor' subject to Illinois Automobile Renting Occupation and Use Tax (5% of gro…
Is shipping tax-free in Illinois if it's listed as a separate line item from the price of the item?
No. Under Illinois GIL ST 18-0044-GIL, listing shipping and processing fees as separate line items does not by itself make them tax-exempt. They're taxable as part of the retailer's gross receipts unl…
Can an airplane used for precision-agriculture crop imagery qualify for Illinois's farm machinery and equipment sales tax exemption?
It depends on how the aircraft is actually used. Illinois's farm machinery and equipment exemption can cover an aircraft IF it is used primarily for a qualifying production-agriculture activity, such …
If our out-of-state company has no offices in Illinois but has one remote employee working from home in Chicago in customer service, do we have to register and collect Illinois sales tax?
Yes. Illinois told this company that having even one employee working in Chicago -- even in customer service with no sales duties -- gives it physical presence in Illinois, which satisfies the Commerc…
Are fuel trailers sold for farm use exempt from Illinois sales tax, and does sales tax apply to a GPS subscription on leased farm equipment?
It depends for the fuel trailers: they qualify for Illinois's farm machinery and equipment exemption only if used primarily in production agriculture, not if used mainly for transportation or other no…
Do livestock shade systems (permanent or mobile) qualify for Illinois's farm machinery and equipment sales-tax exemption?
No. The Illinois Department of Revenue said both the permanent and the mobile livestock shade systems are treated as improvements to real estate, like fences or barns, not as exempt 'farm machinery an…
After a car is bought back by the manufacturer under Illinois's lemon law, how does the consumer get the Illinois sales tax on it refunded?
The consumer generally can't get it directly -- only the dealer/retailer that actually remitted the sales tax to the Illinois Department of Revenue can file a claim for credit, and only after first re…
Can the Illinois Department of Revenue excuse a retailer from sales tax it should have collected because its systems weren't ready, or only waive the penalties?
The Department cannot abate (excuse) sales tax that was required to be collected and remitted, including for a retailer whose systems weren't ready by its economic-nexus start date -- but it can grant…
When a business sells the same product both at retail and bundled into a service (like a science kit included in a camp sign-up fee), how does it figure Illinois sales tax on the bundled item?
It depends on which of four Service Occupation Tax methods applies -- separately stated selling price, 50% of the entire bill, cost price (if a registered de minimis serviceman), or Use Tax on cost pr…
When a company sells custom signs into Illinois and has them installed by an independent contractor, does it charge sales tax, or does the customer owe use tax -- and what about the freight and installation charges?
It depends on the sign. A sign with 'commercial value' to more than just that buyer (e.g., a generic 'insurance' or 'hamburgers' sign) is taxable retail sale under Retailers' Occupation Tax, including…
Does equipment installed during a building expansion — like a hand-washing/sanitizing station, cabinetry and workstations, and internal wall systems — qualify for the Illinois Enterprise Zone building materials sales-tax exemption?
It depends on whether the items are permanently affixed to the real estate, but based on the limited facts described, the Department said it appears the specific items described (a hygiene/sanitizing …
Do vitamins and dietary supplements qualify for Illinois's low 1% sales tax rate, or do they get taxed at the general 6.25% rate?
It depends on the label. Vitamins and dietary supplements are generally treated as 'food' and taxed at the low 1% state rate (plus local taxes) under 86 Ill. Adm. Code 130.310 -- unless they purport o…
Is aircraft repair and maintenance work performed by a Class IV FAR Part 145 facility still exempt from Illinois sales tax under 35 ILCS 105/3-5(35), regardless of the aircraft's weight class?
No longer exempt for anyone. The Department did not reach the taxpayer's specific question about aircraft weight class, because the exemption itself sunset on December 31, 2014 by operation of law und…
How does Illinois sales/use tax apply to a software license/maintenance agreement, including annual licensing fees and charges for updates or maintenance?
It depends on whether the software is 'canned' or 'custom' and how the agreement is structured. Canned (pre-written) computer software is generally taxable as a retail sale, but a software license esc…
Does Illinois approve or confirm the accuracy of another state's chart summarizing motor-vehicle sales/use tax rates and rules across states?
Not exactly. The Department said it cannot formally approve publications other than its own, but noted the submitted chart 'generally appears to be correct,' and it then supplied additional guidance o…
Does Illinois tax a manufacturer's flavored malt beverage (FMB) products as beer, and at what excise tax rate?
Yes. In PLR ST 18-0012-PLR, the Illinois Department of Revenue ruled that the taxpayer's flavored malt beverage products are "beer" under the Liquor Control Act of 1934 and are taxed at the beer excis…
What does Illinois Private Letter Ruling ST 18-0010-PLR conclude about Computer Software?
Yes -- a signed Order Form that incorporates a separate Terms & Conditions Agreement by reference can satisfy the written-signature requirement of 86 Ill. Adm. Code 130.1935(a)(1)(A), as long as the O…
Does Illinois Retailers' Occupation (sales) Tax apply to the sale of cryptocurrency 'utility tokens' that represent ownership of mining hardware?
No. The Illinois Department of Revenue ruled that the utility tokens described (smart contracts representing fractional ownership of crypto-mining hardware) are intangible personal property, and sales…
If my business sells, installs, and repairs garage doors in Illinois, do I owe sales tax, use tax, or both on the materials and labor involved?
It depends on whether you're acting as a construction contractor or a retailer. The Department didn't rule on the taxpayer's five specific numbered scenarios one-by-one; instead it explained the gener…
Can a nonprofit school with an Illinois sales-tax E-number sell household goods to its members for fundraising without collecting and remitting Retailers' Occupation Tax?
Not clearly, on the facts described. The Department explained that E-number holders may sell to members tax-free only when the sales are 'primarily for the purposes of the selling organization,' but i…
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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.