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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Can an unlicensed motor fuel distributor sell fuel tax-free to the federal government while its Illinois distributor license is still pending?
No. Illinois only allows tax-free motor fuel sales to the federal government or its instrumentalities when the seller is a licensed distributor at the time of the sale. See 35 ILCS 505/6 and 86 Ill. A…
Is natural gasoline excluded from the definition of taxable 'gasoline' under the Illinois Motor Fuel Tax Law?
No. The Illinois Department of Revenue concluded that natural gasoline is included in the statutory definition of 'gasoline' under 35 ILCS 505/5, so licensed distributors must report it on their month…
Can an auto dealership claim the Illinois Use Tax interim-use exemption for vehicles it titles to a captive finance company and uses as service loaners?
The Department did not rule on whether this dealership's loaner vehicles qualify for the Use Tax interim-use exemption. It declined to issue a Private Letter Ruling because the matter was already befo…
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 20-0031-GIL conclude about Nexus?
It depends on which sales count. Illinois's GIL explains that under 'Wayfair nexus,' a remote retailer must collect Illinois Use Tax once its cumulative gross receipts from Illinois sales hit $100,000…
What does Illinois Private Letter Ruling ST 20-0007-PLR conclude about Motor Fuel Tax?
Yes. The Department ruled that a licensed Illinois motor fuel distributor can sell dyed diesel fuel tax-free to an unlicensed out-of-state fuel exchange platform's customers, as long as the fuel is fo…
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…
If I rent out my property through a third-party booking platform, am I responsible for Hotel Operators' Occupation Tax if the platform fails to remit it?
Generally yes: the Hotel Operators' Occupation Tax obligation belongs to the owner/host of the rented accommodations, not the third-party booking platform, unless that platform has a separate agreemen…
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…
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…
If a taxpayer's federal net operating loss deduction is limited because of an IRC Section 965(n) election (related to the repatriation transition tax), can the taxpayer still subtract that disallowed federal deduction amount on its Illinois return?
No. The Department ruled that the Illinois Income Tax Act does not provide any subtraction modification for the 'deferred amount' that a Section 965(n) election prevents from being deducted federally.…
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…
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…
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 a Nevada trust set up by an Illinois decedent's family member have to file an Illinois fiduciary income tax return (IL-1041), even though the trust was created and is administered in Nevada?
It depends on facts the Department said were unclear from the taxpayer's letter. A trust is an Illinois resident trust — and must file an IL-1041 — if it was either (1) created by the will of a decede…
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…
Does a company that leases land under triple net leases, where tenants happen to store vehicles on it, owe Illinois Parking Excise Tax on the rent it collects?
No. The Illinois Department of Revenue ruled that a company leasing land to tenants under triple net leases -- even when the tenants use it to store vehicles -- does not owe Parking Excise Tax on the …
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…
If I have a pre-existing tax deficiency, will Illinois apply my overpayment credit to that old deficiency first instead of letting me credit it to a current or future liability?
Yes. The Department confirmed that if a taxpayer with a pre-existing liability files a return asking to credit an overpayment toward a future liability, the Department will first apply the overpayment…
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…
Can partners in a partnership divide up Illinois's River Edge Historic Preservation Credit however they agree, instead of strictly according to their partnership ownership percentages?
Yes, within limits. The Department ruled that under 35 ILCS 5/221(d), partners may allocate the River Edge Historic Preservation Credit pursuant to an executed agreement documenting an alternative dis…
If a partnership or LLC receives Illinois Historic Preservation Tax Credits, can the partners divide up those credits by agreement instead of strictly by their partnership interests?
Yes. The Illinois Department of Revenue ruled that under the Historic Preservation Tax Credit Act, a partnership (here, an investment fund structured as an LLC taxed as a partnership) may allocate its…
Does an Illinois trucking company have to withhold Illinois income tax on wages paid to an out-of-state driver who is dispatched from Illinois but drives interstate routes that originate and end near his home in another state?
It depends, and the Department did not give a final yes-or-no answer for this driver. The Department explained that Illinois withholding is not required if the driver's work qualifies for a federal ex…
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 …
Does Illinois tax the transportation and delivery charges that trucking companies charge when they sell and deliver rock, sand, or gravel from a quarry to a customer?
Yes, in most cases. Illinois treats trucking companies that sell and deliver rock, sand, or gravel from a quarry as retailers subject to Retailers' Occupation Tax, and under the 'inseparable link' rul…
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…
What does Illinois General Information Letter ST 20-0004-GIL conclude about Exempt Organizations?
An educational institution that trains optometrists does not owe Retailers' Occupation Tax or Service Occupation Tax on prescription eyeglasses and contact lenses it transfers to patients as part of i…
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…
When an Illinois resident pays alimony and earns income taxed by another state that won't let her deduct the alimony against that nonresident income, does the alimony still reduce her Illinois credit for taxes paid to that other state?
Yes. The Department ruled that because Article 3 of the Illinois Income Tax Act would let a nonresident allocate 100% of an alimony deduction to Illinois, the alimony deduction must be allocated to th…
Is a U.S. REIT that is more than 50%-owned by publicly traded foreign REIT-type entities a 'captive REIT' under Illinois law, requiring it to add back its federal dividends-paid deduction?
No. The Illinois Department of Revenue ruled that the taxpayer, a U.S. REIT more than 50%-owned (directly and constructively) by a Dutch REIT-type entity whose Class A shares are staple-traded on fore…
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…
Can a company exclude the sale proceeds of its inventory from the Illinois sales-factor when it sells off an entire division, using Illinois's alternative apportionment petition process?
No, not on the facts presented here. The Department agreed that the accounts-receivable and fixed-asset portions of the sale qualified for the 'occasional sale' exclusion from the sales factor, but it…
Can a taxpayer exclude the inventory portion of proceeds from selling an entire business division out of its Illinois sales apportionment factor?
No, not on the facts presented here. The Department denied the taxpayer's petition for alternative apportionment. It agreed that the accounts-receivable and fixed-asset portions of the division sale q…
Can a taxpayer get permission to use an alternative apportionment method (separate accounting) to exclude a non-unitary investment entity from its Illinois sales factor?
Not through this request. The Department denied the petition outright because it was not timely filed under 86 Ill. Adm. Code 100.3390(e)(1) — it needed to have been submitted at least 120 days before…
Does Illinois's new Parking Excise Tax apply to parking spaces at self-storage facilities, and is it in addition to local parking taxes?
The Illinois Department of Revenue pointed the taxpayer to its then-proposed Parking Excise Tax Act rules (86 Ill. Adm. Code 195), noting that storage units are specifically addressed in proposed Sect…
Can a taxpayer get permission to use an alternative apportionment method (based on trading volume by exchange location) instead of the statutory sales-factor sourcing rules?
Not on this record. The Illinois Department of Revenue denied the petition because the taxpayer never first calculated its apportionment under the standard statutory method (sourcing dealer income to …
What does Illinois Private Letter Ruling IT 19-0004-PLR conclude about (Alternative Apportionment) Alternative Method of Apportionment?
IDOR ruled that this taxpayer could not use Illinois's standard sales-factor apportionment for its earn-out and installment-sale income -- because excluding those receipts under the occasional-sale ru…
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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.