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 a signed 'past-use license' agreement -- resolving a dispute over unlicensed access to canned software -- a taxable retail sale, or can it be reclassified as a non-taxable settlement?
The Department's answer supports the software vendor's position: sales of canned computer software are taxable retail sales in Illinois regardless of how the software is delivered (including remote/di…
Does Illinois sales/use tax apply to fees a company pays a vendor for maintenance and support services on open-source database software?
The Department declined to issue a private letter ruling and instead issued this general guidance: if a maintenance agreement's software updates consist solely of open-source software distributed at n…
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…
Does Illinois sales tax apply to locally installed software licenses, and what has to be in the license agreement for the sale to be exempt?
Generally yes. Illinois taxes sales or licenses of canned (prewritten) computer software unless the license agreement meets all five criteria in 86 Ill. Adm. Code 130.1935(a)(1) — including a written …
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 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-…
Is a subscription to a health/fitness coaching app (with SaaS-style content, trackers, and a downloadable app) subject to Illinois sales tax?
No, not on the facts this taxpayer described. The Department ruled that the subscription fees for the taxpayer's Member Services (personalized health content, coaching, and in-app trackers) and Person…
Does Illinois sales tax apply to on-premises enterprise software sold under a license agreement, and how does that differ from cloud-based (SaaS) software?
It depends on the license terms. Illinois generally taxes sales of "canned" (prewritten) computer software as tangible personal property, but a software license is exempt from Retailers' Occupation Ta…
Does Illinois sales tax apply to a self-publishing platform's charge for online book-drafting access and to the printed book it produces?
The Department did not decide the taxpayer's specific facts in a binding way (that's what a GIL is), but it laid out the general framework: true SaaS access that is never downloaded is not subject to …
Is a Managed Services Provider's resale of subscription software licenses (like Microsoft Office 365) and remote tech support to Illinois customers subject to Illinois sales or use tax?
It depends on how the software is delivered and licensed. Cloud-based software that a customer only accesses remotely and never downloads is not taxable. A license of canned (prewritten) software that…
Is a foreign-based company's subscription charge for a cloud-delivered health-coaching app (with a web portal, downloadable App, meal plans, workout videos, and personal coaching) subject to Illinois Retailers' Occupation, Use, or Service Occupation Tax?
The Department did not give a yes-or-no answer. It explained that electronically transferred information/data is not taxable tangible personal property, but canned (prewritten) computer software is ta…
Is a canned (prewritten) computer software license, and the technical support/updates that go with it, subject to Illinois Retailers' Occupation (sales) Tax?
It depends on whether the license meets all five criteria in 86 Ill. Adm. Code 130.1935(a)(1); if it does, neither the software transfer nor later software updates are taxable, but an end user license…
Does an IT company that resells Microsoft Office 365 and other SaaS (software-as-a-service) products to its customers have to charge Illinois sales tax on those sales?
It depends on facts the Department said this particular letter didn't supply: canned (prewritten) software is generally taxable in Illinois regardless of delivery method, but a license meeting all fiv…
Is a company's charge for additional 'report credits' -- which let a wellness provider's customers keep generating nutritional-assessment reports through a software program -- taxable as tangible personal property, or is it a nontaxable license/service, under Illinois sales and use tax law?
The Department could not say either way on the facts given. Computer software is generally taxable tangible personal property in Illinois, but a software license is exempt from Retailers' Occupation T…
Is a yearly subscription fee for using computer software (not owning it) subject to Illinois sales tax?
It depends on how the software is delivered and licensed: cloud-based software that is never downloaded to the customer's computer is not taxable, and a properly-documented software license meeting fi…
Is a software company's canned software, hardware, installation/training services, support, and hosting taxable when sold and delivered to Illinois customers, and when does an out-of-state seller have to start charging Illinois sales/use tax?
Canned (pre-written) computer software and hardware are taxable tangible personal property in Illinois, but custom software is not; separately stated charges for training, installation, telephone assi…
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…
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 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 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. …
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…
Is a company's bundled sale of hardware (sensors, GPS trackers) plus a required software subscription subject to Illinois sales and use tax, and does the software license exclusion or the SaaS exemption apply?
Yes, taxable. The Illinois Department of Revenue could not issue a binding Private Letter Ruling because the request lacked billing detail, but its General Information Letter concludes the company is …
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…
Is a web-based (SaaS) fleet management service, and a free companion app that goes with it, subject to Illinois sales or use tax?
Generally no. Illinois does not tax subscription-based SaaS, so the fleet management service itself is not taxable. A companion app the provider gives customers for free is also not taxable if it's do…
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 20-0030-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…
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 20-0017-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…
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…
Are charges for web-based Cloud Collaboration Service, an add-on Audio Conference Bridging Service, and a bundle of the two subject to the Illinois Telecommunications Excise Tax?
It depends on the product. The Cloud Collaboration (software) service is generally not taxable because it's accessed remotely from the cloud rather than downloaded. The Audio Conference Bridging add-o…
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…
Is sales tax owed on perpetual software license fees and annual maintenance fees for canned (non-custom) software like SAP?
It depends on the license terms. Illinois taxes sales of "canned" (non-custom) software like SAP, including maintenance fees for updates, unless the license agreement meets all five criteria in 86 Ill…
Does Illinois sales tax apply to software delivered by URL that customers can download and duplicate without limit?
Likely no exemption: the Department explained that a software license escapes Illinois Retailers' Occupation Tax only if it meets five specific criteria in 86 Ill. Adm. Code 130.1935(a)(1), and told t…
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 company that sells downloaded software over the internet, with no Illinois office or employees, have to collect Illinois sales/use tax on those sales?
It depends on whether the seller has nexus with Illinois. Under the Quill two-prong test, a retailer must have physical presence in Illinois (such as an office, agent, representative, or repetitive de…
Were prepaid software-license fees and related monthly license and support fees exempt from Illinois Retailers' Occupation Tax?
Yes. IDOR reviewed the company's license agreements and found that they met all five requirements for a nontaxable software license under 86 Ill. Adm. Code 130.1935(a)(1). Because the license fees wer…
How did Illinois tax bundled computer hardware, canned software, maintenance, labor, updates, and delivery charges?
Canned software was generally taxable regardless of delivery method; qualifying licenses and custom software could be nontaxable. A maintenance bundle with unseparated canned-software upgrades was ful…
Was an annual software license and support fee subject to Illinois sales tax, and could the customer obtain a refund?
The license was nontaxable only if its signed written terms met all five conditions in 86 Ill. Adm. Code 130.1935(a)(1). Otherwise the canned-software license was taxable, and bundled support was taxa…
Did two automation-software licenses qualify as nontaxable Illinois licenses, and how were maintenance and updates treated?
IDOR declined to classify the two agreements. Canned software was taxable unless a license met all five regulatory conditions. Separately sold optional maintenance was generally nontaxable when sold, …
Could canned software be licensed tax-free in Illinois, and how was custom software treated?
Yes, as a general rule. A canned-software license and its later updates were not taxable when the license met all five conditions in Section 130.1935(a)(1). Separately, qualifying custom software prep…
Did IDOR determine that a reseller's software license met Illinois's five conditions for nontaxable treatment?
No specific determination was made. IDOR said a canned-software license was nontaxable only if all five conditions were met, including a ban on third-party transfer without the licensor's permission a…
Were electronic textbooks sold or rented entirely online subject to Illinois sales or service tax?
No. IDOR treated the viewing or downloading of books and similar text over the Internet as an intangible transfer, not tangible personal property. An electronically downloaded book was outside Retaile…
When is Illinois sales tax due on computer software licenses and software maintenance agreements?
Canned (prewritten) computer software is taxable tangible personal property in Illinois, whatever the medium; genuinely custom software may not be. A software license is not a taxable retail sale if t…
Was a claimed Illinois software-license exemption valid based only on the limited documents submitted?
Unresolved. Canned software was generally taxable regardless of delivery method, but a license could be nontaxable only if every requirement in 86 Ill. Adm. Code 130.1935(a)(1) was met, including a si…
Can an Illinois software reseller treat canned-software sales as exempt when the publisher, rather than the reseller, signs the license with the customer?
Yes, potentially. The reseller did not have to be the licensor. If the signed license between the software publisher and the customer met all five requirements in 86 Ill. Adm. Code 130.1935(a)(1), the…
Did checking an online box create the signed software-license agreement needed for Illinois's canned-software license exemption?
No. In this 2013 GIL, IDOR said checking a box to accept online license terms was not a written agreement signed by both licensor and customer. Canned software and updates generally were taxable unles…
Did Illinois sales tax apply to application-monitoring and consulting services delivered without tangible property?
Pure professional or consulting services without a transfer of tangible personal property did not create Service Occupation Tax or Use Tax liability. Electronically transferred information or data was…
Were a college's iPhone apps sold through Apple's App Store taxable canned software or sales for resale?
IDOR said the apps appeared to be taxable canned computer software, even though delivered electronically, and the college's transfers to Apple appeared to be sales for resale because Apple sold the ap…
Was proprietary software licensed for integration into a customer's product exempt from Illinois sales tax merely because it was not stand-alone and would be sublicensed?
Not automatically. Software that was not custom remained taxable canned software even when it was not stand-alone or was delivered electronically. A license avoided Retailers' Occupation Tax only if i…
Was a supplier's charge for a website taxable in Illinois when the work was delivered electronically?
The GIL did not classify the particular website invoice. It explained that electronically transferred information or data was not tangible personal property, and a service without a property transfer …
Was a remotely hosted email-marketing platform taxable as canned software or nontaxable as an online service in Illinois?
IDOR did not decide whether this hosted platform was taxable. It said application-service-provider, hosted-software, and web-based-software treatment should be resolved through formal rulemaking rathe…
Did an out-of-state inventory-software company have Illinois nexus when warehouses used its program and it earned a per-pallet spread?
Unresolved. Illinois declined to make a nexus determination in a GIL or PLR, saying those facts are often best gathered by an auditor. It explained that canned software was generally taxable regardles…
Are fees for internet access to healthcare recall information, location databases, and unique database prefixes subject to Illinois sales or use tax?
Illinois declined the requested PLR because its regulations addressed the issue, then stated the general rules. Information or data transferred or downloaded electronically was not tangible personal p…
Is a subscription to an educational website with videos, study guides, practice questions, and no software download taxable in Illinois?
The GIL did not expressly classify the educational subscription. It stated that electronically transferred or downloaded information and data were not tangible personal property, while canned software…
How did Illinois distinguish taxable canned software from custom software, qualifying licenses, and related support or training services?
Illinois gave general rules rather than a separate conclusion for every service described. Canned software was taxable tangible personal property regardless of electronic delivery. Custom software pre…
Is electronic access to Illinois county title records, delivered entirely online to an out-of-state customer, subject to Illinois sales tax?
The GIL did not issue a definitive transaction ruling, but said electronically transferred or downloaded information and data were not tangible personal property. Based on the limited facts, if the co…
How did Illinois tax canned software, custom software, exempt software licenses, and maintenance agreements under ST 11-0042-GIL?
Canned software was taxable regardless of delivery method, while custom software prepared to special order might not be taxable. A canned-software license avoided Retailers' Occupation Tax only if 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.