IL ST 10-0011-GIL Illinois Retailers' Occupation (Sales & Use) Tax 2010-02-26

Was the state-funded Energy Star appliance rebate included in the retailer's taxable gross receipts?

Short answer: Yes. Because the retailer received reimbursement for the point-of-sale markdown, the rebate remained part of taxable gross receipts. In the requester's $1,000 refrigerator example with a $150 rebate, the rule treated the full $1,000 consideration—not only the customer's $850 payment—as taxable. An unreimbursed retailer discount would instead reduce gross receipts.

Apply this to your situation

This page answers the general question as of 2010. Ezel answers yours, under current Illinois tax law, with citations.

Disclaimer: This is an official 2010 Illinois Department of Revenue General Information Letter about the specific reimbursed appliance-rebate program described in the source. A GIL is NOT a statement of Department policy and is NOT binding on the Department. Reimbursement, discount funding, invoice treatment, program terms, local taxes, and current law can change the result.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The state-funded appliance rebate was part of the retailer's taxable gross receipts because the retailer received reimbursement for the customer's markdown.

The requester described a $1,000 refrigerator sold with a 15% point-of-sale rebate. The customer paid $850, and the program reimbursed the retailer $150. Under Section 130.2125, the reimbursed $150 remained consideration received by the seller, making the full $1,000 taxable.

An unreimbursed discount was different: only the reduced amount actually received by the seller entered gross receipts.

What this means for you

Trace who funds the discount. A customer markdown does not reduce the sales-tax base when a government, manufacturer, or other party reimburses the retailer.

Common questions

Q: Was tax based only on the customer's $850 payment?
A: No. The reimbursement brought taxable gross receipts to $1,000 in the example.

Q: What if the retailer received no rebate reimbursement?
A: Only the discounted amount received would be taxable under the cited rule.

Citations and references

86 Ill. Adm. Code 130.401
86 Ill. Adm. Code 130.2125
2 Ill. Adm. Code 1200.110 and 1200.120

Subject

Gross Receipts

Source

Original ruling text

ST 10-0011-GIL 02/26/2010 GROSS RECEIPTS
If a seller receives a reimbursement or rebate for a discount, the amount of that reimbursement
or rebate is considered part of the gross receipts received by the seller and is subject to
Retailers' Occupation Tax. If a seller provides a discount to a purchaser and does not receive
a reimbursement or rebate for that discount, only the (discounted) amount received by the
seller is taxable. See 86 Ill. Adm. Code 130.2125. (This is a GIL.)

February 26, 2010

Dear Xxxxx:
This letter is in response to your letter dated January 19, 2010, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
COMPANY and its affiliates respectfully requests formal guidance regarding the
taxability of the Energy Star Appliance Rebate Program discussed below.
Facts
Illinois has a total of $12.379 million that will be available in rebates to Illinois residents
purchasing new energy efficient appliances. This program is being funded by Illinois’
share of the $300 million made available as part of the American Recovery and
Reinvestment Act of 2009. The Illinois program is being operated by the Illinois
Department of Commerce and Economic Opportunity, Bureau of Energy and Recycling
(‘DCEO’).
In order to coincide with Earth Day, the DCEO will offer an appliance rebate program
that will take place between April 16 and April 25, 2010. The program will provide
rebates on sales of clothes washers, dishwashers, refrigerators, freezers, and room air
conditioners through the retail channel as a 15% point-of-sale markdown at each
participating retailer. Retailers will collect specific program data (customer zip codes,

product models sold, total incentives paid) and submit the information as a company for
reimbursement from the State on a monthly basis.
Issue
Should COMPANY charge sales tax on in-store sales of Energy Star qualified
appliances based on the gross (sales prices of the appliance) or net (sales price of the
appliance less the applicable rebate) transaction amount?
For example, the Illinois program will provide for a 15% point-of-sale markdown on
sales of Energy Star qualified refrigerators. Upon the sale of a qualifying refrigerator,
with a retail price of $1,000, should COMPANY charge sales tax based upon the $1,000
retail price, or on the $850 net price ($1,000 retail price less the $150 Energy Star
markdown (rebate))?
Thank you for your time and consideration with respect to this issue. Please contact me
if you have any questions or need any additional information.

DEPARTMENT’S RESPONSE:
Gross receipts subject to Retailers' Occupation Tax are defined as all the consideration
actually received by the seller, except traded-in tangible personal property. See 86 Ill. Adm. Code
130.401. If a seller receives a reimbursement or rebate for a discount, the amount of that
reimbursement or rebate is considered part of the gross receipts received by the seller. This amount
is fully taxable. See 86 Ill. Adm. Code 130.2125. If a seller provides a discount to a purchaser and
does not receive a reimbursement or rebate for that discount, only the (discounted) amount received
by the seller is taxable. See 86 Ill. Adm. Code 130.2125.
The Illinois Energy Efficient Appliance Rebate Program will be administered and managed by
Midwest Energy Efficiency Alliance on behalf of the State of Illinois Department of Commerce and
Economic Opportunity. The rebates that retailers receive under the program from Midwest Energy
Efficiency Alliance are considered part of the gross receipts received by the retailer and are fully
taxable. See 86 Ill. Adm. Code 130.2125.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk

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