Did an Illinois public university owe Retailers' Occupation Tax when it sold its own educational publications to the public?

Plain-English summary

Illinois did not issue a binding ruling, but said the public university's submitted educational publications appeared likely to be sold in furtherance of its governmental function. Under 86 Ill. Adm. Code 130.2055(a), an Illinois governmental body generally incurred Retailers' Occupation Tax when it sold tangible personal property to the public outside the performance of a governmental function.

The Department contrasted governmental-function sales with sales made in furtherance of a business enterprise. It listed taxable examples such as park-district concession stands, fire-district smoke detectors, municipal leaf bags, state-agency merchandise, library books, and school-district books and supplies. After reviewing the university's materials, it said those sales appeared likely governmental, but the treatment would not apply if the materials were sold for a business purpose.

The response did not separately decide the university's requested variations involving resale or jointly produced publications sold by one or multiple entities.

What this means for you

A governmental exemption does not automatically cover sales to the public. Document how the publication sale directly performs the governmental function and whether the activity operates as a business enterprise.

Common questions

Q: Did the Department categorically exempt all university publications?
A: No. It gave no specific answer and used conditional language about the submitted materials.

Q: What was the key distinction?
A: Whether the sale performed the governmental function or furthered a business enterprise.

Citations and references

• 86 Ill. Adm. Code 130.2055(a)
• 2 Ill. Adm. Code 1200.110 and 1200.120

Subject

Exempt Organizations

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-10-0063.pdf

Original ruling text

ST 10-0063-GIL 08/05/2010 EXEMPT ORGANIZATIONS
Governmental units incur Retailers Occupation Tax liability when selling tangible personal
property to the public for use or consumption. The only exception is the sale of an item by a
governmental unit in the performance of its governmental function. See 86 Ill. Adm. Code
130.2055. (This is a GIL.)

August 5, 2010

Dear Xxxxx:
This letter is in response to your letter dated June 3, 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:
This is a request for a General Information Letter pursuant to the provisions of 2 Ill.
Admin. Code 1200.
The University is requesting information from the Illinois
Department of Revenue regarding whether the Illinois Retailers' Occupation Tax applies
to gross receipts of sales to the general public of organization’s own individualized
literature.
The University is among the preeminent public universities of the nation and is a world
leader in research, teaching, and public engagement, distinguished by the breadth of its
programs, broad academic excellence, and internationally renowned faculty.
As part of its programs for education and public service, the University has assembled
various types of printed educational materials on a variety of topics. A selection of
samples from several University departments which produce these publications are
included in this correspondence.
The four Illinois state scientific surveys became part of the University in July 2008
(previously part of the STATE AGENCY). The University formed the ORGANIZATION
to incorporate these surveys.

The publishing process may vary for each specific publication. Some are developed or
written in house by only UNIVERSITY faculty, staff, or students. In some cases, the
publications are a result of a collaborative effort of various researchers from other
educational institutions, and/or other governmental agencies. The manuscripts are
collected, and UNIVERSITY employees produce the final draft to be sent to a
commercial printer for production. The printed copies are shipped to the various
locations/warehouses for each particular department and inventoried. These items
remain on the University premises until distributed and/or sold to [sic] mainly to
education institutions (K-12 schools and colleges and universities), governmental
organizations, and other not-for-profit organizations. Sales to the general public
occasionally occur. These educational materials are produced with no profit margin and
are restricted to cost recoveries. In most cases, the University owns the copyright of
these publications.
The UNIVERSITY Extension is mandated by the Smith-Lever Act of 1914. This Act was
established as a cooperative extension between the U.S. Department of Agriculture and
the land-grant universities, which were authorized by the Federal Morrill Acts of 1862
and 1890. It provided for a system of agricultural extension work through specialists
with the assistance of federal grants and state contributions. The main purpose of this
Act is to inform individuals about current developments in agriculture, home economics,
and related topics. Enclosed are a few pages of the sample “2010 Midwest Small Fruit
and Grape Spray Guide” which is the result of this cooperative endeavor under the
Smith-Lever Act of 1914.
LAW
1)

2)

3)

4)

The Illinois Retailers' Occupation Tax 35 ILCS 120/2 imposes tax upon persons
engaged in the business of selling at retail tangible personal property for use or
consumption unless it is classified as a Nontaxable Transaction per the
Department’s Regulation 86 Part Ill Admin. Code Section 130.120.
The Illinois Use Tax 35 ILCS 105/3-65 states that if the seller of tangible personal
property for use would not be taxable under the Retailers' Occupation Tax
despite the sale occurring in Illinois, then the tax imposed does not apply to the
use of tangible personal property in Illinois.
The Department’s Regulation 86 Ill Admin. Code Section 130.2105(a)(4) states
that ‘sales by exclusively religious, charitable, or educational organizations of
books or other items containing such organizations’ own individualized literature
which cannot be bought from persons who are engaged in business are not
subject to the Retailers' Occupation Tax even if such sales are made to the
public because such sales are not competitive with retailers.’
PLR ST 97-0014, June 3, 1997. Organization sold items produced by
organization. The materials were their own individualized literature, and not
literature purchased from other for profit sources. Most of organizations’ [sic]
materials are sold only by organization and not by any bookstore. The materials
are ‘not sold or offered for sale by persons organized for profit’ 35 ILCS 120/1
and ‘cannot be bought from persons who are engaged in business.’ Admin.
Code Title 86, 130.2105. It was concluded that the taxpayer was exempt from
the Retailers' Occupation Tax under 35 ILCS 120/1 et seq. and the Use Tax
under 35 ILCS 105/3-65 et seq. to the extent of these sales. The organization’s
sales of its own individualized materials are not sales that are competitive with
retailers.

TAXPAYER’S POSITION
Sale of University’s own individualized literature is not subject to sales or use tax
when not available for resale. The University believes sales of the University’s own
individualized literature is exempt from sales or use tax on sales to the general public
and that these sales are not in competition with retailers. These selected samples are
representative of what the University would consider its own literature.
RULING REQUESTED
The University requests confirmation that the Illinois Retailers' Occupation Tax or Use
Tax does not apply to the sales of the University’s own individualized literature (no other
entities are involved) to the general public in cases where the University is the only
seller and the items are not competitive and not sold for resale.
Also, the University requests a ruling to determine if the Illinois Retailers' Occupation
Tax or Use Tax applies to sales of the University’s own individualized literature to the
general public when the same item is sold by the University for resale (exempt if obtain
buyer’s resale exemption number).
In addition, the University requests a ruling to determine if the Illinois Retailers'
Occupation Tax or Use Tax applies to sales of a joint publication, where the University
works in collaboration with other universities or governmental units to create a joint
publication and sales are only available from the University.
Lastly, the University requests a ruling to determine if the Illinois Retailers' Occupation
Tax or Use Tax applies to sales of a joint publication, where the University works in
collaboration with other universities or governmental units to create a joint publication
and sales are available from more than one entity associated with the creation of the
publication.
Please contact me if you have any questions or require additional information.
Thank you for your assistance in this matter.

DEPARTMENT’S RESPONSE:
Although we cannot give you a specific answer in the form of a General Information Letter, we
hope you find the following helpful. Our records indicate that the UNIVERSITY was granted a
governmental exemption from sales and use taxes. Section 130.2055(a) of the Code, however,
provides that “the State of Illinois or any local governments in Illinois, or any agency or instrumentality
of any such government body, incurs Retailers' Occupation Tax liability when it engages in the selling
of tangible personal property at retail to the public other than in the performance of a governmental
function.” 86 Ill. Adm. Code 130.2055(a). The reason for this rule is to ensure that governmental units
do not have a competitive advantage when selling items that are also sold by Illinois retailers.
An example of sales that may be made by a governmental body to the public that involves the
performance of a governmental function is the sale of motor vehicle license plates by the State of
Illinois. Where a governmental unit makes sales that are not in the direct performance of its
governmental function, the sales are taxable. Examples of taxable sales by governmental units
include the operation of concession stands by park districts, sales of smoke detectors by fire

protection districts, sales of leaf bags by municipalities, sales of T-shirts, caps and mugs by State
agencies, sales of books by libraries, and sales of books and supplies by school districts to students.
Accordingly, if the tangible personal property you are selling is in the performance of your
governmental function, then you would not incur Retailers' Occupation Tax liability. In contrast,
however, if the sale of that tangible personal property is in furtherance of a business enterprise, then
you would incur Retailers’ Occupation Tax liability. After a review of the materials you provided with
your letter, it appears that the sale of these materials would likely be in furtherance of your
governmental function. This exemption would not apply, though, if the sale of these materials were
for a business purpose.
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
DMB:msk