Did Illinois approve a seller's export affidavit, and what documents supported exemptions for foreign shipments through freight forwarders or sales for resale?

Plain-English summary

Illinois did not determine that the seller's proposed Statement of Goods for Export was sufficient. The Department said the seller might qualify for either an interstate-commerce exemption or a resale exemption, depending on the actual transaction.

For the delivery exemption, the seller had to be obligated by agreement to deliver property from Illinois to an out-of-state point, actually make that delivery, and not return the property to Illinois. Delivery in Illinois to a freight forwarder for shipment outside the United States could qualify. Section 130.605(f) identified the records needed to support the exemption. By contrast, a buyer's taking possession in Illinois and then immediately removing the property was generally taxable.

For resale, a signed Certificate of Resale had to state the resale purpose and include the parties' names and addresses, item description, authorized signature and date, and a registration or resale number—or a statement that an out-of-state purchaser would sell only to purchasers outside Illinois. A proper certificate with a valid number ended the seller's liability under the rule discussed in the GIL. Missing documentation created a presumption against resale, although other evidence could rebut it.

What this means for you

An internally drafted export affidavit is not a substitute for transaction evidence. Preserve the sales agreement, seller delivery obligation, freight-forwarder and export records, and a complete resale certificate where resale is the claimed basis.

Common questions

Q: Did the Department approve the proposed export form?
A: No. It declined the requested determination.

Q: Can delivery to an Illinois freight forwarder qualify?
A: Yes, when the forwarder ships the property outside the United States and it is not returned.

Q: Is the export exemption the same as the resale exemption?
A: No. They are separate grounds with different factual and documentation requirements.

Citations and references

• 86 Ill. Adm. Code 130.605(a)(2), (d), (f), and (g)
• 86 Ill. Adm. Code 130.1405
• 86 Ill. Adm. Code 130.101 and 150.101
• Rock Island Tobacco & Specialty Co. v. Illinois Department of Revenue, 87 Ill. App. 3d 476 (3d Dist. 1980)
• 2 Ill. Adm. Code 1200.110 and 1200.120

Subject

Use Tax

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-10-0060.pdf

Original ruling text

ST 10-0060-GIL 08/03/2010 USE TAX
This letter discusses the Interstate Commerce exemption. See 86 Ill. Adm. Code 130.605.
(This is a GIL.)

August 3, 2010

Dear Xxxxx:
This letter is in response to your letter dated June 4, 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:
On behalf of our client, hereafter referred to as ‘The Company’, we are submitting this
correspondence to seek guidance regarding acceptable documentation to support
product sales of tangible personal property to out-of-state customers. These product
sales are intended for resale and are destined for export and first use outside the state
of Illinois.
Facts
The Company, whose corporate headquarters and sales offices are located in New
York, sells tangible personal property on a wholesale basis to retailers, E-tailers and
other distributors, both in the United States and internationally. The Company’s product
sales are made only to other resellers and not to end-user consumers, and are
supported by properly executed resale certificates. All sales orders are received,
approved and processed at The Company’s New York sales office.
Product sales to customers located outside of the United States often require the
assistance of a freight forwarder. A freight forwarder, forwarder, or forwarding agent is
a company that organizes shipments for individuals or other companies and may also
act as a carrier. A forwarder is often not active as a carrier and acts only as an agent, in
other words as a third-party (non-asset-based) logistics provider that dispatches

shipments via asset-based carriers and that books or otherwise arranges space for
these shipments.
Freight forwarders typically arrange cargo movement to an international destination.
Also referred to as international freight forwarders, they have the expertise that allows
them to prepare and process the documentation and perform related activities
pertaining to international shipments. Some of the typical information reviewed by a
freight forwarder is the seller’s invoice, shipper’s export declaration, bill of lading or
other documents required by the carrier or country of export, import or transshipment.
Once the product for resale is coordinated by the freight forwarder, the container is
exported to the foreign country where the non-resident reseller will resell the
merchandise to retailers.
Discussion
The sale and export of resale products to a foreign country is not subject to tax in
Illinois. In an effort to document these transactions, The Company has prepared a
Statement of Goods for Export form that it will provide to its foreign resellers to sign and
return. The form will be used as an affidavit or a formal sworn statement of fact
confirming the intent of the parties regarding the export transaction. Once the
Statement of Goods for Export is signed and returned by the foreign reseller, this
document will be retained by The Company and made available to the Illinois
Department of Revenue upon request.
Illinois Tax Law
Illinois Reg. 86ILAC130.605(g) states in pertinent part,
Retailers who ship property to freight forwarders who take possession of
the property in Illinois and ship the property to foreign countries, not to be
returned to the United States, are making exempt sales in foreign
commerce and do not incur Retailers' Occupation Tax liability on the gross
receipts from those sales.
Request:
We respectfully request that the Illinois Department of Revenue review the enclosed
Statement of Goods for Export form and determine if the form provides satisfactory
documentation in support of a non-taxable foreign export sale transaction.
We look forward to your response. If you have any questions, please call me.

DEPARTMENT’S RESPONSE:
We cannot provide you with the determination you seek in the context of a General Information
Letter. Your client may be able to claim the interstate commerce exemption or resale exemption,
depending on the actual transaction.
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. The tax is
measured by the seller’s gross receipts from such sales made in the course of such business. 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. Mere possession in Illinois is considered a use. Consequently, if the purchase
occurs in Illinois, the purchaser must pay the Use Tax to the retailer. Please note that a sale is
taxable even though a purchaser that receives physical possession of the property in this State
immediately transports the property out of this State for use outside the State. See 86 Ill. Adm. Code
130.605(a)(2). The State of Illinois has no specific exemption for purchases by foreign or domestic
travelers if the property is delivered and used in Illinois. Section 130.605 identifies a number of
exceptions to this rule.
Section 130.605(d) states that the gross receipts from such sales are not subject to tax when a
sale is conducted in which the seller is obligated, under the terms of an agreement with the
purchaser, to make delivery of the property from a point in this State to a point outside this State, not
to be returned to this State, provided that such delivery is actually made. Such sales are considered
to be sales in interstate commerce and are exempt from Illinois and local Retailers' Occupation Tax.
The exemption also would apply when a seller makes delivery in Illinois to a freight forwarder who
handles the arrangements for the property to be delivered outside the United States, not to be
returned to the United States. Section 130.605(g). Section 130.605(f) identifies the type of
documents a seller must retain in his or her records to support an exemption.
You indicate in your letter that the Company only makes product sales to other resellers and
the sales are supported by properly executed resale certificates. A Certificate of Resale must be
signed by the purchaser and state that the property purchased by him is purchased for purposes of
resale. See 86 Ill. Adm. Code 130.1405. In addition to the statement that the property is being
purchased for resale, a Certificate of Resale must contain:
1)
2)
3)
4)
5)

The seller's name and address;
The purchaser's name and address;
A description of the items being purchased for resale;
Purchaser's signature, or the signature of an authorized employee or agent of the
purchaser, and date of signing; and
Registration Number, Resale Number, or a statement that the purchaser is an
out-of-State purchaser who will sell only to purchasers located outside the State
of Illinois.

The obligations of a seller with respect to accepting a Certificate of Resale were addressed in
Rock Island Tobacco and Specialty Company v. Illinois Department of Revenue, 87 Ill.App.3d 476,
409 N.E.2d 136, 42 Ill. Dec. 641 (3rd Dist. 1980). The Rock Island court held that when a retailer
obtains a proper Certificate of Resale that contains a registration or resale number that is valid on the
date it is given, the retailer’s liability is at an end. If the purchaser uses that item himself or herself
(i.e., it was not purchased for resale), the Department will proceed against the purchaser, not the
retailer, provided the above stated conditions are met. The purchaser’s registration or reseller
number can be verified at the Department’s website by clicking on the “Tax registration inquiry” box.
Failure to present an active registration number or resale number and a certification to the
seller that a sale is for resale creates a presumption that a sale is not for resale. This presumption
may be rebutted by other evidence that all of the seller’s sales are sales for resale or that a particular
sale is a sale for resale. For example, other evidence that might be used to document a sale for
resale, when a registration number or resale number and certification to the seller are not provided,
could include an invoice from the purchaser to his customer showing that the item was actually
resold, along with a statement from the purchaser explaining why it had not obtained a resale number
and certifying that the purchase was a purchase for resale in Illinois. The risk run by a retailer in

accepting such other documentation and the risk run by purchasers in providing such other
documentation is that an Illinois auditor is more likely to require that more information be provided as
evidence that the particular sale was, in fact, a sale for resale.
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