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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Does Illinois use tax apply to inventory given away for free, can tax paid to another state be credited, and does marketplace-held inventory create nexus?
Three answers. First, when a donor possesses or can control tangible personal property in Illinois and gives it away for free, the donor has 'used' the property in Illinois and owes Use Tax on its cos…
Did Illinois eliminate the 200-transaction economic nexus threshold for remote retailers, and how does the $100,000 threshold work?
Yes. Beginning January 1, 2026, Illinois dropped the 200-separate-transactions test for remote retailers; only the $100,000 cumulative gross receipts threshold, measured on a rolling 12-month lookback…
Who owes Illinois tax on the parts used in a free "goodwill" vehicle repair that a manufacturer directs its dealer to perform?
It depends on who initiates the free repair. If a dealer does a goodwill repair entirely on its own, the dealer owes Use Tax on its own cost for the parts. But if a manufacturer directs the repair and…
How much is Illinois's Sustainable Aviation Fuel Purchase Credit worth, and are there any caps or carry-forward limits on using it?
Yes, there are caps, but only on soybean oil-derived fuel. From July 1, 2023 through December 31, 2032, an air common carrier earns a $1.50-per-gallon Sustainable Aviation Fuel Purchase Credit (SAFPC)…
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…
What did Illinois tell a commercial vehicle-tax-guide publisher in response to its 2026 annual survey about how the state taxes vehicle sales, leases, and out-of-state deliveries?
This isn't taxpayer guidance -- it's the Department's reply to a commercial publisher's annual survey updating a vehicle-tax reference guide. The Department refused to bless or correct the publisher's…
Is a solar-panel construction contractor exempt from Illinois Use Tax on materials when its contract is with a third-party owner instead of directly with the tax-exempt school district that will host the panels?
No. Because the contract is with a third-party PPA company that will own the solar panels, not with the tax-exempt school district itself, the construction contractor cannot buy the materials tax-free…
Does an Illinois auto body shop owe sales/use tax on shop supplies like sandpaper and masking tape, or can it charge customers tax-free for them as a resale?
Auto repairmen and body shops owe Illinois Use Tax on consumable supplies (sandpaper, masking tape, paint thinner, etc.) that are used up in the shop and never physically leave with the customer's car…
Are a travel-marketing company's magazines, direct-mail flyers, and membership fees subject to Illinois sales and use tax?
The Department declined to rule on the specific facts and instead gave general guidance: periodicals published at least twice a year in newsprint-and-ink form (like the company's bimonthly travel maga…
Does Illinois sales tax apply to a membership fee that gives customers access to exclusive dining events and third-party restaurant perks, but no tangible goods?
No. Illinois treats membership fees as intangibles, so they are not subject to Retailers' Occupation Tax or Use Tax when the membership itself transfers no tangible personal property. But if a members…
Can an Illinois retailer legally advertise that customers 'pay no sales tax' on their purchase?
No. Illinois law makes it a Class A misdemeanor for a retailer to advertise, or otherwise tell customers, that it will absorb the tax or that tax will not be added to the selling price -- this letter …
If a seller passes on the cost of a federal tariff to a buyer in Illinois, is that tariff amount subject to sales or use tax?
Yes, if the seller is the importer of record (consignee) who paid the tariff and passes that cost on to the customer, the tariff becomes part of the selling price and must be included in gross receipt…
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…
Since Illinois started taxing lease receipts on January 1, 2025, does a company that rents tower cranes owe tax on the crane rental itself, on the assist cranes and labor used to erect and dismantle it, on a separate maintenance agreement, and on freight charges?
The bare rental of the tower crane itself is taxable under Illinois's new lease-receipts tax, effective January 1, 2025. But the Department did not directly confirm or deny the taxpayer's specific lin…
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…
If a company pays a federal tariff on imported materials and passes that cost on to a customer, does Illinois sales or use tax apply to the tariff amount?
It depends on who is legally responsible for the tariff. If the seller is the importer of record and passes the tariff cost on to the customer as part of the price, the tariff is part of the gross rec…
Now that Illinois taxes leases of tangible personal property as retail sales starting January 1, 2025, how do exemptions for construction contractors, exempt organizations, and resale purchases apply to a company that both rents and sells equipment and materials?
Since January 1, 2025, a lessor's gross receipts from leasing tangible personal property in Illinois are subject to State and local Retailers' Occupation Tax, replacing the old system where the lessor…
Does a small out-of-state online retailer that sells below Illinois's $100,000/200-transaction threshold still have to register and collect Illinois sales tax, and can Illinois simplify its local-tax remittance rules for remote sellers?
Illinois Retailers' Occupation Tax applies to remote retailers once they hit $100,000 in Illinois sales or 200 separate transactions with Illinois purchasers under 86 Ill. Adm. Code 131, and there is …
Under Illinois's 2025 lease-tax overhaul, does a party-entertainment company that rents out equipment along with an on-site supervisor owe retailers' occupation tax on the whole package, and how is that tax sourced?
Generally yes. Effective January 1, 2025, Illinois taxes leases of tangible personal property as retail sales (Article 75 of Public Act 103-592), and the Department explained that renting out equipmen…
How is sales/use tax handled when a mobile home park owner buys, installs, and resells manufactured homes located in the park?
The park owner's purchase of the manufactured home from the manufacturer is a tax-free sale for resale. The park owner then owes tax on the first sale of that home to a purchaser (reported and paid on…
Does a dumpster rental business have to charge Illinois sales tax on the rental, delivery, and waste-removal charges, or is it a nontaxable sale of service?
It depends on how the dumpster's cost compares to the total bill. Renting out a dumpster is a lease of tangible personal property, and effective January 1, 2025, leases transferred as an incident of a…
Does a manufactured (mobile) home dealer owe sales tax or use tax when it sells a home that gets permanently installed on a lot, versus one it just delivers without installing?
It depends on installation. If the dealer permanently incorporates the manufactured home into real estate (wheels, tongue, and hitch removed), the dealer acts as a construction contractor and owes use…
Does paying Chicago's Personal Property Lease Transaction Tax on e-bike and e-scooter rentals exempt a micromobility company from Illinois sales and use tax, both before and after the state's new January 1, 2025 lease tax takes effect?
Through December 31, 2024, Illinois imposes no state sales/use tax on true-lease receipts at all, so a company already paying Chicago's Personal Property Lease Transaction Tax owes no additional state…
Starting in 2025, do Illinois retailers have to collect sales tax based on where a customer receives the goods, and do businesses that lease equipment now owe Retailers' Occupation Tax on lease payments?
Yes to both. Effective January 1, 2025, retailers with a physical presence in Illinois must source sales to the Illinois location where the customer takes delivery or possession (not just their own lo…
Can a payment processor's fees, or the retailer's own credit card fees, be excluded from gross receipts subject to Illinois Retailers' Occupation Tax?
No. Illinois treats processing charges, credit card fees, and other costs of doing business as part of a retailer's taxable gross receipts, even if they are separately stated on the customer's bill. U…
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…
How does Illinois tax the sale of motor vehicles, including trade-ins, private-party sales, and sales to nonresidents?
Illinois taxes most motor vehicle sales under the Retailers' Occupation (sales) Tax or Use Tax, and generally allows a trade-in credit against the taxable price when a like-kind vehicle is traded in. …
How does Illinois tax a construction contractor who also manufactures the modular components it installs into a building?
The contractor owes Illinois Use Tax as the end user of the materials, and when the contractor is also the manufacturer of the modular components it installs, the tax base is only what it paid for the…
If an out-of-state vendor already charged sales tax on equipment shipped to Illinois, does the buyer still owe Illinois Use Tax on it?
Usually not in full. To prevent double taxation, Illinois gives a credit for tax already properly paid to another state on the same purchase: if that other-state tax was at a rate of 6.25% or greater,…
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…
Does a construction contractor owe Illinois Use Tax or Retailers' Occupation Tax on materials, like solar panels, that get permanently installed into real estate?
Construction contractors are treated as end users of the materials they permanently affix to real estate, so they owe Use Tax on the cost price of those materials rather than collecting sales tax from…
Does Illinois sales tax apply to a photographer's digital photo files and an optional custom-made photo album sold along with them?
Electronically delivering digital photo files by themselves is generally not subject to Illinois Retailers' Occupation or Use Tax, because transferring data electronically isn't a transfer of tangible…
Once an out-of-state remote retailer drops below Illinois's $100,000/200-transaction economic nexus thresholds and stops collecting tax, does that trailing nexus obligation ever come back, and how often must the retailer check?
Yes, it can come back, and the retailer must keep checking every quarter. Once a remote retailer stops being required to remit Illinois state and local retailers' occupation tax, it must re-test its t…
When a jewelry retailer lets a customer trade in old jewelry toward a new purchase, can the retailer exclude the value of that trade-in from the "gross receipts" it owes Illinois sales tax on?
Yes, but only if the traded-in item is of "like kind and character" as the item being sold -- for example, a customer trading in a ring toward a bracelet purchase. When that test is met, the value of …
Can a pastor use his church's tax-exempt (E-number) status to buy furniture for himself, tax-free, for the parsonage he lives in?
Yes, if it's done correctly: the purchase must be paid for with the church's own funds or a credit card billed directly to the church (not the pastor personally), the retailer must be given a copy of …
Do gates permanently set in concrete at a construction site inside an Illinois enterprise zone qualify for the enterprise zone building materials sales tax exemption?
It depends on whether the gates are permanently affixed to the real estate -- the Department's GIL says the items 'may qualify' if they are permanently incorporated into the realty (applying the same …
Is the ink and solvent a steel-framing manufacturer mixes and applies inline to identify and trace parts during roll forming exempt from Illinois sales/use tax as manufacturing machinery and equipment, or as production related tangible personal property?
The Department did not say yes or no for this taxpayer's specific ink and solvent -- as a GIL, it only explained the manufacturing machinery and equipment (MM&E) exemption framework under 35 ILCS 120/…
Is a mobile app that lets truck drivers buy discounted fuel from partner fuel stops -- without itself selling, holding, or delivering the fuel -- a 'marketplace facilitator' that must collect and remit Illinois sales and use tax?
The Department could not say, on a GIL, without seeing the actual contracts between the app company and the fuel stops -- it explained the Retailers' Occupation Tax and marketplace-facilitator framewo…
How does Illinois tax the sale of motor vehicles, including trade-ins, private-party sales, and sales to nonresidents such as Florida residents?
Illinois taxes retail motor vehicle sales under the Retailers' Occupation (sales) Tax/Use Tax and generally allows a trade-in credit for a like-kind vehicle traded in (with no $10,000 cap for sales on…
Does an out-of-state company that mails lab test kits to Illinois customers and analyzes the returned samples owe Illinois Use Tax, or is the whole transaction an untaxed service?
Yes, Use Tax generally applies: when a company ships tangible personal property (here, at-home sample-collection kits) that it purchased outside Illinois to Illinois customers for their use, the compa…
Can a construction contractor that can't tell at the time of purchase whether materials will be installed into real estate or sold over the counter buy everything tax-free from its supplier and self-report a flat percentage of tax later?
Only partly. Under 86 Ill. Adm. Code 130.2075(b), a contractor who genuinely can't tell at purchase whether materials will be installed into real estate or sold at retail may certify to its supplier t…
If a company manufactures signs, hires a third party to install them, and bills its dealers for the supply, freight, and installation, does it owe Illinois Retailers' Occupation (sales) Tax, Use Tax, or Service Occupation Tax on the sign -- and does the answer change once the sign is bolted to a concrete foundation?
It depends on whether the sign has "commercial value" to buyers generally and whether it becomes permanently affixed to real estate. A sign with commercial value (e.g., one reading generic words like …
Does a company that runs a service-matching marketplace app owe Retailers' Occupation Tax, Use Tax, or Service Occupation Tax on the small kits of branded items (placards, stickers, etc.) it gives to the service providers who sign up on its platform?
Only Use Tax, and only on the Department's cost price of those items. The Department ruled the marketplace-facilitation fees are for a non-taxable service, and because the company gives away only a sm…
Does Illinois sales/use tax exemption for aircraft maintenance parts still require the seller or repairer to hold an FAA Air Agency Certificate and operate a Part 145 repair station?
No, not after January 1, 2024. Public Act 103-0009 removes the FAA Air Agency Certificate, Class IV Rating, and Part 145 operations requirements from the Illinois aircraft-parts exemption (35 ILCS 120…
If a car dealer sells vehicles to its own affiliate, and the affiliate rents those vehicles to the dealer's service customers as loaners, how does Illinois's Automobile Renting Tax apply, and is the sale from dealer to affiliate itself taxable?
The dealer's sale of vehicles to its affiliate is exempt from Retailers' Occupation Tax and Use Tax because the vehicles will be used exclusively for automobile renting (35 ILCS 120/2-5(5); 35 ILCS 10…
How should a construction contractor that also sells tangible personal property over-the-counter (a 'combination' or 'dual-purpose' contractor) handle Illinois sales and use tax on the materials it buys and the ST-1 return it files?
A construction contractor is treated as the end user of materials it permanently affixes to real property, so it owes Use Tax on the cost price of those materials -- but if it gave its supplier a resa…
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…
A small van-rental business collects Illinois's Automobile Renting Tax from its customers, but the dealers it buys vehicles from won't honor a sales-tax exemption on those purchases -- is the business actually exempt from Retailers' Occupation Tax and Use Tax when it buys vehicles for its rental fleet?
Yes, generally: the Retailers' Occupation Tax Act and Use Tax Act exempt the sale of a motor vehicle that will be used for automobile renting as defined in the Automobile Renting Occupation and Use Ta…
Does an out-of-state vehicle seller create Illinois nexus just because it hires a third-party company to calibrate equipment at customers' locations in Illinois after delivery?
The Department wouldn't say definitively -- nexus is too fact-specific for a GIL -- but it explained that an out-of-state retailer with an ongoing physical presence in Illinois (including through an a…
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…
Are the Illinois sales/use tax rules on titling and registering vehicles, watercraft, and aircraft (as summarized in a national Title and Registration Textbook) still accurate, and what should be updated for 2023?
The Department would not formally approve or endorse a third-party publication's summary, but it reviewed the submitted text and proposed specific corrections and additions -- most notably to reflect …
How long does the Illinois Department of Revenue have to assess additional Retailers' Occupation Tax (sales tax) or Use Tax after a return is filed, and is there a special 6-year rule like the one for income tax understatements?
Generally 3 to 3.5 years from when the taxable gross receipts were received under the Retailers' Occupation Tax Act (extended to as much as 3 years after a filed amended return), and 6 to 6.5 years un…
When a car dealer sells vehicles to its own rental affiliate, and the affiliate rents them out short-term (including as loaner cars while the dealer does warranty repairs), does Retailers' Occupation/Use Tax or Automobile Renting Tax apply, and what happens to manufacturer warranty reimbursements?
The dealer's sale of vehicles to its rental affiliate is exempt from Retailers' Occupation Tax and Use Tax because the vehicles will be used for automobile renting. The affiliate's short-term rentals …
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…
What does Illinois require for a drop-shipped sale to be tax-exempt as a sale for resale, and when must a marketplace facilitator collect and remit Illinois sales tax on behalf of marketplace sellers?
For drop shipments, Illinois prefers an active registration or resale number on a Certificate of Resale, but will accept other documentation (including a certificate describing the drop-shipment scena…
Does a not-for-profit organization owe Illinois sales tax or use tax on food it buys and serves at fundraisers, member dinners, or donation-based events?
It depends on whether the food is sold, donated-for, or given away free, and whether the organization holds an Illinois exemption ('E') number. If the organization pays Illinois use tax on the food wh…
Is a company's purchase of another company's business assets, arranged through a private broker rather than through the broker's internet auction, subject to Illinois Retailers' Occupation (sales) Tax, or does it qualify for the occasional sale exemption?
The purchase qualified for Illinois's occasional sale exemption and was not subject to Retailers' Occupation Tax. The Department ruled that because the sale of the seller's business assets was negotia…
In a true operating lease of a utility trailer registered in Illinois, is sales/use tax based on the price the lessor paid the dealer, or on the total lease payments the lessor expects to collect from the lessee?
Illinois bases the tax on the price the lessor paid the dealer, not on the total lease payments. Under a true lease, the lessor is treated as the end user of the trailer and owes Use Tax only on its o…
Do flights an aircraft owner takes on their own plane, operated under an FAA Part 135 air carrier certificate, count toward the 50% trips-or-miles threshold needed to qualify the aircraft for Illinois's rolling stock exemption?
Yes. If a Part 135 air carrier carries persons or property for hire in interstate commerce, including flights for the aircraft's own owner or lessee under an arm's-length management agreement, that op…
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…
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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.