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 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…
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…
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…
Does a company create Illinois Use Tax nexus just by being acquired by an Illinois-based parent company?
The Department did not decide whether the acquisition itself created nexus because the letter lacked enough detail, but it explained that if the two companies are separate legal entities, each determi…
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…
What does Illinois General Information Letter ST 20-0010-GIL conclude about Aircraft Use Tax?
It depends on the FAA airworthiness certificate. Illinois' Aircraft Use Tax Law taxes a non-retailer transfer of an 'aircraft,' but an aircraft kit does not count as an aircraft until the FAA issues a…
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 20-0017-GIL say about sales tax nexus, marketplace facilitators, and related topics?
This isn't a ruling for a specific taxpayer -- it's Illinois's reply to an outside organization's annual multistate tax survey. The Department declined to fill out the survey format (nexus questions a…
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 20-0006-GIL conclude about Leasing?
Lessors who lease tangible personal property, like portable buildings or motor vehicles, into Illinois under a 'true lease' owe Illinois Use Tax up-front on their own cost price of the property -- the…
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 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…
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…
I rent and sell heavy construction equipment and am setting up to do business in Illinois -- do I charge sales tax or use tax on equipment rentals, and is it calculated on the equipment's value or on the rental charge?
Under a true lease (other than autos leased for a year or less), the lessor -- not the lessee -- is treated as the end user of the equipment, and owes Use Tax on its own cost to acquire the equipment,…
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…
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 Illinois Private Vehicle Use Tax apply when a nominee trust holding a motor vehicle is terminated and the vehicle passes to the trust's beneficiary?
Yes. When a nominee trust holding a motor vehicle terminates and the vehicle's ownership passes to the trust's beneficiary, Illinois treats that as a taxable 'transfer,' and the beneficiary owes the P…
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…
If a marketplace seller sells exclusively through a registered Illinois marketplace facilitator, does that seller still need to register for an Illinois sales tax permit and file returns, or can it cancel an existing registration?
The Department did NOT answer either question. A sales tax consulting firm asked whether marketplace sellers who sell exclusively through registered marketplace facilitators must still register and fi…
I bought a vehicle directly from the federal government (GSA) at auction -- do I file Form RUT-50 or RUT-25, and do I owe use tax at all?
File Form RUT-50 -- even though the sale itself, because it was made by the federal government, is exempt from Retailers' Occupation Tax (and so there's no corresponding regular Use Tax on it), you st…
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…
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…
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 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…
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…
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…
If I sell modular homes bought from out-of-state factories and have contractors permanently install them, do I owe Illinois sales/use tax, and do I need to file monthly sales tax returns?
It depends on whether you're contractually obligated to permanently affix the home to real estate. If you are, you're acting as a construction contractor and you owe Use Tax on your cost price of the …
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 …
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…
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 manufacturer's 'agency agreement' with the Illinois Department of Revenue cover a local distributor's sales of product samples, and what sales-tax rate applies to those samples?
If the manufacturer (here, a nutrition-products company) has an 'agency agreement' with the Department under 86 Ill. Adm. Code 130.550, it must collect and remit Retailers' Occupation Tax on the distr…
Does a 5-month operating lease of household goods, where the customer can later continue leasing, return the goods, or buy them at fair market value, qualify as a taxable 'rental purchase agreement' under Illinois's Rental Purchase Agreement Occupation and Use Tax, and is that tax ever subject to local rates?
No, not on the facts described — because the initial lease term was 5 months (more than 4 months), the Department said the agreement does NOT qualify as a 'rental purchase agreement' under 35 ILCS 180…
What does Illinois General Information Letter ST 18-0018-GIL conclude about Service Occupation Tax?
The Department declined to issue the requested Private Letter Ruling because the facts provided were too limited, and instead issued this General Information Letter explaining, in general terms, how R…
What does Illinois General Information Letter ST 18-0015-GIL conclude about Nexus?
The Department explained the general nexus rules but did not confirm the taxpayer's specific conclusion: whether this out-of-state distributor must collect Illinois Use Tax depends on nexus, and separ…
What does Illinois General Information Letter ST 18-0012-GIL conclude about Rental Purchase Agreement Tax?
The Department did not give a definitive yes-or-no answer; it stated only its general opinion that items taxed at the 1% state sales tax rate (such as the durable medical equipment described by the re…
What does Illinois General Information Letter ST 18-0010-GIL conclude about Service Occupation Tax?
The Department did not give a yes/no answer on collecting sales tax on 'sublet' auto repair parts and labor; instead this GIL explains the general Service Occupation Tax framework for multi-service (s…
What does Illinois General Information Letter ST 18-0008-GIL conclude about Motor Vehicles?
The Department declined to formally approve an outside survey chart on motor vehicle taxation, but confirmed the chart's general accuracy and explained Illinois' rules: trade-in credits reduce the tax…
What does Illinois General Information Letter ST 18-0007-GIL conclude about Sale For Resale?
The Department declined to endorse or complete a private trade-group survey on drop shipments, but pointed to its own rules: an Illinois seller documents a drop-shipment sale for resale with a valid C…
Does an out-of-state contractor owe Illinois sales or use tax on installing, maintaining, and supplying car wash equipment in Illinois?
A construction contractor who permanently affixes tangible personal property (like installed equipment, electrical, or plumbing materials) to real property is the end user of that property and owes Il…
What does Illinois General Information Letter ST 18-0005-GIL conclude about Nexus?
The Department declined to complete the requester's nexus survey because nexus determinations are too fact-specific for a General Information Letter, but it gave general background on Illinois Retaile…
What does Illinois General Information Letter ST 18-0004-GIL conclude about Motor Vehicles?
The Department declined to verify the accuracy of a private legal publisher's compiled data (that's not what a GIL does), but as a courtesy it flagged that a listed 'local taxes' rate of 7.50% was out…
Does a casual seller — an individual selling personal property, a company selling small items at auction, or an auction seller — owe Illinois sales or use tax on the transaction?
It depends on whether the seller is regularly in the business of selling that type of property. Illinois does not impose Retailers' Occupation Tax (and the buyer owes no matching Use Tax) on an isolat…
Does the manufacturing machinery and equipment sales/use tax exemption cover equipment, like cleanrooms, that starts out in research and development before being used in production?
It depends, and the Department declined to give a firm yes or no here. Machinery and equipment (including the taxpayer's cleanrooms) can qualify for Illinois's manufacturing machinery and equipment ex…
Do the materials a company buys to build a natural gas-fired power generation facility qualify for Illinois's Enterprise Zone building materials sales tax exemption?
Yes. The Illinois Department of Revenue ruled that the company's materials -- from turbines and boilers to buildings, piping, and structural steel -- qualify as "building materials to be incorporated …
Are fees for a paid membership add-on (offering delivery perks and item discounts) subject to Illinois Retailers' Occupation Tax, Use Tax, Service Occupation Tax, or Service Use Tax?
No. The Department ruled that because the membership itself does not transfer any tangible personal property to the customer, the fees for the paid add-on membership -- and for its free one-month tria…
Does butane-blending equipment that a pipeline/tank-storage company installs just before its truck loading rack qualify for Illinois's manufacturing machinery and equipment sales tax exemption?
It depends on where each piece of equipment sits relative to the production cycle. The Illinois Department of Revenue ruled that equipment used to sample, test, measure, and inject butane into the gas…
If I separately state equipment rental or lease charges from VoIP service charges on the bill, do I still owe Illinois Telecommunications Excise Tax on the equipment charges?
No, equipment rental or lease charges are excluded from the Illinois Telecommunications Excise Tax as long as they are disaggregated and separately stated from the telecommunications service charges i…
Does Illinois sales/use tax apply to computer software, including software as a service (SaaS)?
It depends on how the software is delivered: Illinois generally taxes sales of "canned" (prewritten) computer software as tangible personal property, but custom software and software-as-a-service arra…
Does an out-of-state online seller of snack bars owe Illinois sales or use tax, and at what rate, if its products are stocked in an Illinois warehouse?
It depends: the Department declined to give a binding nexus determination and instead explained the general rules. An out-of-state seller has no Illinois collection duty unless it has physical presenc…
Is machinery and equipment used primarily to harvest hay for sale exempt from Illinois Retailers' Occupation Tax and Use Tax as farm machinery and equipment?
Yes. Under 86 Ill. Adm. Code 130.305, machinery and equipment (new or used) that is used or leased primarily in production agriculture is exempt from Illinois Retailers' Occupation Tax and Use Tax, an…
Where did Illinois source local retailers' occupation tax for an industrial supplier's branch, remote-order, online, and affiliate sales?
Over-the-counter branch sales were sourced to the ordering branch. Specified phone, fax, email, eProcurement, special-branch, and affiliate sales were sourced to the Illinois headquarters after primar…
If I lease a motor vehicle under a true lease and then buy it before the lease ends, do I get credit against the purchase tax for the sales/use tax already paid on my lease payments?
No. Under a true lease, the lessor (not the lessee) owes Use Tax on its cost price of the vehicle, and lease receipts themselves are not taxed. When a lessee later buys the leased vehicle before the l…
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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.