Was a mandatory convenience fee for buying a show-and-meal ticket online included in Illinois taxable gross receipts?

Plain-English summary

The mandatory convenience fee for buying the show-and-meal ticket online was part of taxable gross receipts. The online purchaser could not avoid the fee, creating an inseparable link between the ticket sale and the charge.

The seller imposed the fee itself, stated it separately, and said it recovered online-ticket-service costs. Illinois treated those service and overhead costs as costs of doing business that could not be deducted from gross receipts.

The Department relied by analogy on Nancy Kean v. Wal-Mart Stores, Inc., where shipping cost tied to an online purchase formed part of the taxable selling price.

What this means for you

Separately stating a fee does not make it nontaxable. Determine whether the customer can complete the selected transaction without paying the charge and whether the fee is inseparably tied to the taxable sale.

Common questions

Q: Did labeling the charge a convenience fee exclude it?
A: No. Its mandatory connection to the online ticket purchase controlled.

Q: Did recovering service costs make the fee deductible?
A: No. The GIL treated service and overhead costs as part of gross receipts.

Citations and references

• 86 Ill. Adm. Code 130.410
• 86 Ill. Adm. Code 130.101 and 150.101
• Nancy Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 919 N.E.2d 926 (2009)

Subject

Gross Receipts

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0014.pdf

Original ruling text

ST 10-0014-GIL 03/02/2010 GROSS RECEIPTS
Illinois Retailers' Occupation Tax is imposed upon gross receipts from the sale of tangible
personal property to end-users and no deductions shall be taken by a taxpayer from gross
receipts on account of the cost of the property sold, the cost of materials used, labor costs, or
any other expense whatsoever. See 86 Ill. Adm. Code 130.410. (This is a GIL.)

March 2, 2010

Dear Xxxxx:
This letter is in response to your letter dated July 22, 2009, 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:
Please accept this letter as an informal request for general written advice. We are
requesting a ruling as to the application of Illinois Retailer’s [sic] Occupation Tax on a
convenience fee charge for online ticket sales.
PROPOSED FACTS
Our Client, Company T provides a live entertainment show (‘Show’) and serves food
and beverages (‘Food’) to its customers. Company T sells tickets to gain access to the
Show. The price of the ticket also includes Food. Company T lists the price of the
Show and Food on the ticket separately. Tickets can be purchased either at Company
T’s location or on Company T’s website. Company T charges a convenience fee for
online ticket sales at Company T’s website. The fee is charged by Company T and not
a third party credit card company. The fee is related to both the show portion and meal
portion of the ticket. The fee is also a separately stated charge on the ticket. The fee is
intended to help Company T recover the service costs associated with providing online
ticket sales to customers. Company T currently collects and remits sales tax on sales of
tickets to the Illinois Department of Revenue.
REQUEST FOR RULING

Based on the proposed facts, we respectfully request a response to the following
question:
•

What is the taxability of the convenience fee charge for online ticket sales?
*

*

*

We understand that an anonymous ruling may not be binding on the State until all the
parties are disclosed. However, we look to you for guidance on this important issue.
Since time is of the essence, we would greatly appreciate your response as soon as
possible. To expedite receipt of your response, please fax a copy to me. If you have
any questions or require additional information, please feel free to contact me.

DEPARTMENT’S RESPONSE:
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property at retail to purchasers for use or consumption. See
86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this State, any
kind of tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as "sales" tax in Illinois.
Illinois Retailers' Occupation Tax (sales tax) is imposed upon gross receipts from the sale of
tangible personal property to end-users and gross receipts is defined to mean all the consideration
received by sellers valued in money whether received in money or otherwise, but not including the
value of or credits given for like kind traded-in property.
In computing Retailers' Occupation Tax liability, no deductions shall be made by a taxpayer
from gross receipts or selling prices on account of the cost of property sold, the cost of materials
used, labor or service costs, idle time charges, incoming freight or transportation costs, overhead
costs, processing charges, clerk hire or salesmen's commissions, interest paid by the seller, or any
other expenses whatsoever. Costs of doing business are an element of the retailer's gross receipts
subject to tax even if separately stated on the bill to the customer. See 86 Ill. Adm. Code 130.410.
Generally, fees, charges and surcharges, for example, convenience fees are costs of doing
business subject to the tax. It appears that if someone purchases a ticket to the Show online, the
purchaser cannot escape the convenience fee which, in essence, becomes part of the selling price of
the ticket. The online purchaser does not have the option of whether or not to pay this convenience
fee charge. As such, an inseparable link exists between the purchase online of a ticket to the Show
and the convenience fee charge, a link that does not exist but for the purchase online. See Nancy
Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 919 N.E.2d 926 (2009) (The cost of shipping was part
of the selling price for the goods purchased at Wal-Mart’s internet store and, thus, subject to sales
tax.)
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,

Debra M. Boggess
Associate Counsel, Sales and Excise Taxes
DMB:msk