Does an Illinois seller avoid tax when an out-of-state buyer or its representative picks up goods in Illinois for immediate removal, or when the buyer claims resale?

Plain-English summary

An out-of-state buyer's pickup in Illinois did not become an exempt interstate sale merely because the goods were immediately removed from Illinois. The Department said mere possession in Illinois was a use, and a sale remained taxable when the purchaser received physical possession in Illinois and then transported the property out of state.

The interstate-commerce exemption described in 86 Ill. Adm. Code 130.605(d) required the seller to be obligated by agreement to deliver the property from Illinois to an out-of-state point, with actual delivery made and no return to Illinois. Neither example qualified because the purchaser or its agent or representative received the goods in Illinois.

A separate resale exemption could still apply if the purchaser would resell the property and the seller documented the exemption. A proper Certificate of Resale was prima facie proof and had to include the seller and purchaser information, item description, authorized signature and date, and the required registration, resale, or out-of-state certification information. The GIL said a proper certificate with a valid number ended the seller's liability; without one, the sale was presumed not to be for resale, although other evidence could rebut that presumption.

What this means for you

Do not rely on the buyer's promise to leave Illinois. Keep evidence of seller-arranged out-of-state delivery or a complete, valid resale certificate that matches the transaction.

Common questions

Q: Is a sale exempt when the buyer picks up goods in Illinois and immediately drives them out of state?
A: No, not under the interstate-delivery rule described in the GIL.

Q: What if the buyer is purchasing the goods for resale?
A: The resale exemption can apply, but the seller should obtain the documentation required by 86 Ill. Adm. Code 130.1405.

Q: What happens if the seller lacks a valid resale number and certification?
A: The sale is presumed not to be for resale, though the GIL said other evidence may rebut that presumption.

Citations and references

• 35 ILCS 105/3; 86 Ill. Adm. Code 150.101 and 150.130
• 86 Ill. Adm. Code 130.201, 130.210, and 130.225
• 86 Ill. Adm. Code 130.605(a)(2) and (d)
• 86 Ill. Adm. Code 130.1405
• 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

Sale For Resale

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-10-0064.pdf

Original ruling text

ST 10-0064-GIL 08/05/2010 SALE FOR RESALE
This letter addresses sales for resale. See 86 Ill. Adm. Code 130.1405. (This is a GIL.)

August 5, 2010

Dear Xxxxx:
This letter is in response to your letter received in this office on June 28, 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:
As a tax professional, I have run across the following circumstances from time to time.
My goal is to determine if I should charge sales tax to our customers in the following
examples, but it is difficult to find legislation regarding the below circumstances.
I would be very grateful if you could take the time to review these below examples and
point me to the correct legislation or offer advice to determine if sales tax applies to
these circumstances.

Facts:
1.

Our manufacturing plant is located and registered in the state.

2.

LLC (our sales company) has a sales tax registration with the state.

3.

Company ‘A’ does not have a sales tax registration and is located outside of the
state.

4.

Company ‘B’ is registered in the state for sales tax purposes.

Example #1:

Circumstances: Our manufacturing company sells to LLC. LLC resells to company ‘A’.
Company ‘A’ drives to our manufacturing plant to pick up the order (in their own trucks).
The order is immediately transported outside of the state (for use or for resale).
Question: Is LLC required to collect sales tax from company ‘A’ and remit the tax to the
state?
Example #2:
Circumstances: Our manufacturing company sells to LLC. LLC resells to company ‘A’.
Company ‘B’ drives to our manufacturing plant to pick up the order (in company ‘B’s
truck). The order is consumed or resold within the state.
Question: Is LLC required to collect sales tax from company ‘A’ and remit the tax to the
state?
Thank you in advance for your time.

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 to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. The tax is measured by the seller's gross receipts from retail sales made in the
course of such business. "Gross receipts" means the total selling price or the amount of such sales.
The retailer must pay Retailers' Occupation Tax to the Department based upon its gross receipts, or
actual amount received, from the sale of the tangible personal property.
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 35 ILCS 105/3; 86 Ill.
Adm. Code 150.101. These taxes comprise what is commonly known as "sales" tax in Illinois. If the
purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of
purchase. The retailers are then allowed to retain the amount of Use Tax paid to reimburse
themselves for their Retailers' Occupation Tax liability incurred on those sales. If the retailer does not
collect the Use Tax from the purchaser for remittance to the Department, the purchaser is responsible
for remitting the Use Tax directly to the Department. See 86 Ill. Adm. Code 150.130.
When a person purchases an item of tangible personal property with the intention of reselling it
to a purchaser for use or consumption, that person engages in conduct equivalent to holding himself
out as a retailer. This makes the initial purchase a purchase for resale, and the subsequent sale is a
taxable sale at retail subject to Illinois Retailers' Occupation and Use Tax liabilities. See 86 Ill. Adm.
Code 130.201 and 130.210. Mere possession in Illinois is considered a use. Consequently, if the
retail 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 if the property is
delivered and used in Illinois.
Sales of property originating in Illinois are specifically addressed at 86 Ill. Adm. Code 130.605.
Subpart (d) of this regulation 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. See 86 Ill. Adm. Code
130.605(d). Such sales are considered to be sales in interstate commerce and are exempt from
Illinois and local Retailers' Occupation Tax. For example, the exemption 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. Based upon the
information you provided, none of the purchases would qualify for this exemption since they were all
received by the purchaser, its agent or representative in this State.
You may want to review the Department’s regulations regarding Drop Shipments. See 86 Ill.
Adm. Code 130.225. A drop-shipment situation is normally one in which out-of-State purchaser
makes a purchase for resale from a company which is registered with Illinois and has that company
drop-ship the property to purchaser’s customer located in Illinois.
When an Illinois retailer sells tangible personal property and delivers it in Illinois, sales tax is
due unless an exemption can be documented. The resale exemption is applicable when making
sales to a purchaser who will in turn sell the tangible personal property. For general information
regarding resale certificates, the Department’s regulation for resale certificates, “Seller's
Responsibility to Obtain Certificates of Resale and Requirements for Certificates of Resale,” is found
at 86 Ill. Adm. Code 130.1405. If an electronic resale certificate is kept, it should contain all of the
information required under 86 Ill. Adm. Code 130.1405.
A Certificate of Resale is a statement signed by the purchaser that the property purchased by
him is purchased for purposes of resale. Provided that this statement is correct, the Department will
accept Certificates of Resale as prima facie proof that sales covered thereby were made for resale.
In addition to the statement, 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;
Registration Number, Resale Number, or Certification of Resale to out-of-State
Purchaser.

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 companies in
accepting such a certification and the risk run by purchasers in providing such a certification is that an

Illinois auditor is more likely to go behind a certificate of resale that does not contain a signature and
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