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 software sold with a click-through license taxable in Illinois, and does it matter whether the software is downloaded or purely cloud-based?
It depends on delivery and license terms: software delivered purely through the cloud with nothing downloaded is generally not taxable (it's a nontaxable service), but software that includes any local…
Is a bundled IVF specimen-storage offering -- combining a leased robotic system, a nominally-sold storage tank, and subscription database software -- taxable in Illinois?
The Department didn't issue a specific yes/no on this taxpayer's bundled tank/robot/software offering. Instead, it explained the general framework: a software-as-a-service provider is a 'serviceperson…
Does an AI chatbot company owe Illinois sales, use, or service occupation tax on its subscription plans and a free, open-source API software development kit?
Cloud-based AI chatbot access that's never downloaded -- used only through a website or app -- is a service, not subject to Retailers' Occupation Tax or Use Tax. But if the company gives subscribers a…
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 an AI chatbot company owe Illinois sales, use, or service occupation tax on its subscription plans and a free, open-source API software development kit?
This letter was later SUPERSEDED by ST 25-0057-GIL, which reissued essentially the same analysis for the same taxpayer with only a minor wording correction (no substantive change): cloud-based AI chat…
Does Illinois sales/use tax apply to a SaaS company's paid subscription fees and its free downloadable mobile app?
No sales tax applies to the SaaS subscription fees themselves, because Illinois does not tax software accessed only remotely through the cloud and never downloaded. The free mobile app is a separate q…
Does an out-of-state company that sells cloud-based software and app subscriptions to an Illinois client owe Illinois Service Use Tax or sales tax on those subscription charges?
It depends on what is actually transferred. Illinois does not tax software-as-a-service subscriptions where nothing is downloaded and access is purely cloud-based -- but an out-of-state "serviceman" t…
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-…
We provide cloud-based data-processing services that translate and relay medical lab test results to physician practices and patients (some of whom can also download free mobile apps), and we've recently crossed Illinois's $100,000 economic-nexus threshold -- do any of our fees trigger Illinois Retailers' Occupation Tax, Use Tax, Service Occupation Tax, Service Use Tax, or the Telecommunications Excise Tax, and do we have to register and collect?
No on all counts, on these specific facts. The Department ruled the company's Monthly Data Processing Fees and Initial Setup Fees are not taxable because the company acts as a "serviceman" providing t…
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, service occupation tax, or telecommunications excise tax apply to cloud-based practice-management software sold to healthcare providers?
The Department did not issue a yes/no ruling on this taxpayer's specific facts (that requires a binding Private Letter Ruling), but it confirmed the general framework: canned computer software is taxa…
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 …
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…
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…
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…
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 an out-of-state digital advertising company owe Illinois Use Tax or Service Occupation Tax on payments it receives from Illinois-based customers for serving mobile ads that lead to app installs?
It depends on whether tangible personal property (including taxable computer software) actually changes hands. The Department explained that Illinois does not treat viewing, downloading, or streaming …
Does a SaaS company owe Illinois sales, use, or service occupation tax on a free connector applet and on subscription fees for its cloud-based service?
No. The Department ruled the company owes no Illinois Use Tax on the free applet it lets customers download from out-of-state servers, and no Retailers' Occupation Tax, Use Tax, or Service Occupation …
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. …
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 20-0018-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…
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 20-0002-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…
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…
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…
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…
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…
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 a mobile app subscription and bundled distributor services sold by a multi-level-marketing company?
It depends on what is actually transferred: if the mobile app, dashboard, and personal-website bundle involve no transfer of tangible personal property (e.g., cloud-based access with nothing downloade…
Does Illinois Retailers' Occupation Tax or Use Tax apply to a company's various cloud-based (SaaS) software products -- tax-preparation, bookkeeping, self-employed finance, professional tax-prep, and payroll offerings -- including their related free mobile apps, desktop conversion tools, and occasional downloadable components?
The core SaaS access to each of the five product lines is not taxable because it is delivered purely through the cloud with no software downloaded to the user's device. However, whenever the company D…
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…
Does providing cloud-based software (like software as a service, an API, or a remote access agent) trigger Illinois Retailers' Occupation, Use, or Service Occupation Tax, and can an Illinois-based automated call-center service create sales tax nexus for its out-of-state clients?
A provider of software as a service acts as a serviceman: if nothing tangible is transferred to the customer, the service generally is not subject to Retailers' Occupation, Use, Service Occupation, or…
Was an annual software service plan taxable in Illinois, and how were maintenance, bug fixes, and software updates treated?
IDOR could not determine the invoice's product or service and said the questioned $107.99 did not appear to be the tax charge. A maintenance agreement included in software's selling price was taxable;…
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…
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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.