Were subscriptions to a hosted business-information database and web tools taxable in Illinois?

Plain-English summary

Database access without any transfer of software or other tangible personal property would not create Illinois Retailers' Occupation, Use, Service Occupation, or Service Use Tax under the general rule in this GIL. The company proposed subscriptions to business and financial data, upgraded data packages, hosted decision tools, a hosted credit application, and system-integration web services.

The Department declined a binding PLR because the services were not entirely clear. It explained that electronically transferred information or data was not tangible personal property, while canned software was taxable regardless of transmission method. Custom software could be nontaxable, and a software license meeting every Section 130.1935(a)(1) condition could also fall outside taxable retail sales.

The response did not find that each proposed package and add-on involved only database access. It also warned that taxation of electronically transferred information was under constant review.

What this means for you

Document exactly what reaches the customer: data, downloadable reports, executable code, plug-ins, integrations, or other property. Server hosting alone does not replace a deliverable-by-deliverable analysis under current law.

Common questions

Q: Did the Department approve every hosted tool as nontaxable?
A: No. It gave a conditional database-access rule but declined to classify the offerings individually.

Q: Was electronically delivered canned software treated like data?
A: No. The GIL treated canned software as tangible personal property regardless of delivery method.

Q: Is this 2010 treatment necessarily current?
A: No. The letter expressly noted that the issue was under constant review.

Subject

Miscellaneous

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-10-0121.pdf

Original ruling text

ST 10-0121-GIL 12/22/2010 MISCELLANEOUS
If no tangible personal property is transferred to customers, then no Illinois Retailers'
Occupation Tax, Use Tax, Service Occupation Tax Act, or Service Use Tax liability would be
incurred on the sales to those customers. See 86 Ill. Adm. Code 130.301. (This is a GIL.)

December 22, 2010

Dear Xxxxx:
This letter is in response to your letter dated July 15, 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 COMPANY, we are formally requesting that the Department of
Revenue (the ‘Department’) issue a private letter ruling regarding the applicability of
Illinois retailers’ occupation tax on COMPANY’s new XYZ service offering. No audit or
litigation is currently pending with the Department relating to the taxability of
COMPANY’s new XYZ service offering. To the best of the knowledge of COMPANY
and to the undersigned, the Department has not previously ruled on the same or similar
issue for COMPANY or any predecessor. This request is for COMPANY’s new XYZ
service offering and no taxes have accrued or will accrue prior to the issuance of the
ruling with respect to the transactions, events, or facts contained in the request.
COMPANY and the undersigned request that the Company’s name, location, and
Company specific information relating to its distribution and/or use of the aggregate
materials be redacted from the publicly disseminated version of the private letter ruling.
The following is a summary of facts surrounding our request.
Facts
COMPANY is a STATE corporation registered to do business in the State of Illinois.
COMPANY possesses a retailers' occupation tax permit to collect Illinois retailers'
occupation tax for goods sold. COMPANY’s corporate headquarters and principal
executive offices are located in CITY/STATE. COMPANY is engaged in the business of

providing commercial information about the financial condition of businesses to its
customers located throughout the US and abroad. This information is provided through
COMPANY’s database.
This database enables customers to access select
firmographic and financial information to mitigate credit and supplier risk, increase cash
flow and drive increased profitability.
Information gathering, analysis,
formatting/explanation, and dissemination are conducted at COMPANY locations in
either STATE or STATE2.
Core Service Offerings
For a subscription fee, COMPANY customers will be able to access business
information about potential or existing customers and suppliers through COMPANY’s
XYZ service offering. XYZ is an interactive, customizable web-based application that
will offer users real-time access to COMPANY’s complete and up-to-date global
database of more than 110 million businesses for a subscription fee. XYZ’s core
service offering will allow customers to run searches and create customizable reports
containing summary trade data, basic credit scores, legal filings, and general company
information. For an additional fee, customers will be able to purchase upgraded data
packages and workflow add-ons that provide additional data beyond that included with
the base core service offering. The additional fees relating to the upgraded data
packages will not be separately invoiced if purchased simultaneously with the XYZ core
service offering, but rather included in the total annual subscription fee as a premium
package. This is in contrast to the workflow add-ons which will be separately invoiced
and discussed in further detail below. The customer will have the option of purchasing
the upgraded data packages at a later date, in which case they will receive a separate
invoice for the upgraded data packages. These upgraded data packages will come in
the form of additional data that will be added to customized user reports. These
upgraded data packages will include the following:
Upgraded Data Packages
PACKAGE1
The PACKAGE1 will include access to data in the form of corporate linkage, visual
family tree, and public filing information. Corporate linkage will be additional data in a
generated report that displays other related companies to the subject entity. The visual
family tree will be a summary of the corporate linkage shown in the form of a graphic or
chart. Public filing information will be provided in the form of a summary and history of
public filings and financial statements for the subject entity.
PACKAGE2
The PACKAGE2 will include access to data in the form of monitoring/alerts, credit limit
recommendation, predictive scores, comprehensive credit scores, and fraud scores.
Monitoring/alerts will be additional data which shows key company information that has
changed since the last time the customer has viewed the report. The customer will
have has [sic] the ability to receive email notifications of these changes as part of this
feature. Credit limit recommendation will be additional data displaying COMPANY’s
recommendation of a conservative and aggressive credit limit based on COMPANY’s
scoring methodology. Predictive scores will be additional data measuring a company’s
likelihood for future success. Comprehensive credit scores will be additional data

showing details supporting predictive scores. Fraud scores will be additional data which
assesses the likelihood that the company making a request for credit is fraudulent.
PACKAGE3
The PACKAGE3 will include COMPANY ***, and detailed payment data. COMPANY ***
will be additional data which will provide the weighted average of past trade payments.
Detailed payment data will provide historical payment data including the number of
delinquent payments and average high credit. This will be displayed as a section of a
generated report displaying trade data by industry and time period reported.
PACKAGE4
This will be additional data within XYZ that will enable a customer to view data from
participating financial institutions on small business lending performance across the
banking, credit card, and leasing industries. PACKAGE4 will combine the financial
performance data with COMPANY’s trade data to create decision-ready insight that can
be used across the customer lifecycle for targeting, underwriting, and portfolio
management/marketing. PACKAGE4 will be available to customers who participate in
the PACKAGE4 program and purchase the PACKAGE3.
PACKAGE5
Customers will be allocated an amount of data that they will be able to access for
international entities as part of the XYZ core service offering. Once the allocated
amount of PACKAGE5 has been exceeded, customers will be charged an additional fee
for access to that data.
PACKAGE6
The PACKAGE6 will allow customers to generate reports with a mix of the above data
service options and will allow an unlimited quantity of inquiries into the XYZ system.
Workflow Add-ons
In addition to upgraded data packages, users will be able to add to their XYZ service
offering by purchasing workflow add-ons for an additional fee. Workflow add-ons will be
separately invoiced from the XYZ core service offering and upgraded data packages.
Workflow add-ons will include the following:
TOOL1
This will be a customizable web-based tool within XYZ that will enable a customer to
establish rules and approval limits to automate credit decisions. The TOOL1 will allow
companies to make immediate credit decisions on new customers. It will provide
access to Equifax bureau and will have the ability to input trade and bank references.
The TOOL1 will be hosted on the XYZ servers (customer will not receive software to
install). The tool will be sold as an optional add-on to someone purchasing XYZ.
TOOL2

This will be an automated feature that will manage the risk of a customer’s entire
customer base by blending the customer’s credit policy, the customer’s accounts
receivable data, and the latest and most complete COMPANY business information. A
user will be able to load in a set of accounts and rules to trigger labeling for existing
accounts (i.e., a credit indicator drops below a certain level the account gets flagged for
review). The TOOL2 will be hosted on the XYZ servers (customer will not receive
software to install). The tool will be sold as an optional add-on to someone purchasing
XYZ.
TOOL3
The TOOL3 will be an on-demand tool to help manage overall risk exposure. The tool
will enable a user to load in invoice level trade details. The TOOL3 will then provide
workflow information related to collection activities. The TOOL3 will be hosted on a 3rd
party server (customer will not receive software to install). The tool will be sold as an
optional add-on to someone purchasing XYZ.
APPLICATION1
The APPLICATION1 will allow the user to create customizable credit application to meet
their business needs. The application will be displayed on the internet through
COMPANY’s servers. The data entered into the application will then be fed into XYZ for
the user to act on. XYZ will provide internal automatic alerts when an application is
submitted. The APPLICATION1 will be sold as an optional add-on to someone
purchasing XYZ.
Web Services
This will be a web-based tool within XYZ that will allow for data, decisions, or other
account information to be passed back and forth between COMPANY and customer
systems. Web Services will allow for the integration of the TOOL1 and TOOL2. Web
Services will be hosted on the XYZ servers (customer will not receive software to
install). The tool will be sold as an optional add-on to someone purchasing XYZ core
service offering.
Statement of Authorities
The Illinois Administrative Code states, ‘Information or data that is downloaded
electronically, such as downloaded books, musical recordings, newspapers or
magazines, does not constitute the transfer of tangible personal property. These types
of transactions represent the transfer of intangibles and are thus not subject to Retailers'
Occupation and Use Tax. However, downloads of canned software, as defined more
fully in Section 130.1935 of this Part, are subject to Retailers' Occupation and Use
Tax.’1
Further, Illinois Private Letter Ruling ST 04-0013-PLR states that, if a taxpayer provides
electronic business and financial information through a database accessed via the
internet and no software or other tangible personal property is transferred to its
customers, then no retailers’ occupation tax, use tax, service occupation tax, or service
use tax liability would be incurred on the downloads of database information.2

In the alternative, the Illinois Administrative Code states the following regarding
computer software, ‘Computer software means all types of software including
operational, applicational, utilities, compilers, templates, shells and all other forms.
Canned software is considered to be tangible personal property regardless of the form
in which it is transferred or transmitted, including tape, disc, card, electronic means or
other media. The sale at retail, or transfer, of canned software intended for general or
repeated use is taxable, including the transfer by a retailer of software which is subject
to manufacturer licenses restricting the use or reproduction of the software. A license of
software is not a taxable retail sale if:
A)
B)
C)

D)

E)

it is evidenced by a written agreement signed by the licensor and the customer;
it restricts the customer’s duplication and use of the software;
it prohibits the customer from licensing, sublicensing or transferring the software
to a third party (except to a related party) without the permission and continued
control of the licensor;
the licensor has a policy of providing another copy at minimal or no charge if the
customer loses or damages the software, or of permitting the licensee to make
and keep an archival copy, and such policy is either stated in the license
agreement, supported by the licensor’s books and records, or supported by a
notarized statement made under penalties of perjury by the licensor; and
the customer must destroy or return all copies of the software to the licensor at
the end of the license period. This provision is deemed to be met, in the case of
a perpetual license, without being set forth in the license agreement.’3

COMPANY believes that there are no authorities contrary to the above statutes,
regulations and administrative decisions.
Ruling Requested
Please respond to the following questions:
1.

Will COMPANY’s XYZ core service offering and upgraded data packages be
considered electronic information services and therefore exempt from Illinois
retailers’ occupation tax, will they be considered a non-taxable license of
software and therefore not subject to Illinois retailers’ occupation tax, or will they
be considered canned software and therefore subject to Illinois retailers’
occupation tax?

2.

Will COMPANY’s TOOL1, which will be an add-on to XYZ’s core service offering,
be considered electronic information services and therefore exempt from Illinois
retailers’ occupation tax, will it be considered a non-taxable license of software
and therefore not subject to Illinois retailers’ occupation tax, or will it be
considered canned software and therefore subject to Illinois retailers’ occupation
tax?

3.

Will COMPANY’s TOOL2, which will be an add-on to XYZ’s core service offering,
be considered electronic information services and therefore exempt from Illinois
retailers’ occupation tax, will it be considered a non-taxable license of software
and therefore not subject to Illinois retailers’ occupation tax, or will it be
considered canned software and therefore subject to Illinois retailers’ occupation
tax?

4.

Will COMPANY’s TOOL3, which will be an add-on to XYZ’s core service offering,
be considered electronic information services and therefore exempt from Illinois
retailers’ occupation tax, will it be considered a non-taxable license of software
and therefore not subject to Illinois retailers’ occupation tax, or will it be
considered canned software and therefore subject to Illinois retailers’ occupation
tax?

5.

Will COMPANY’s PACKAGE4, which will be an add-on to XYZ’s core service
offering when purchased with the PACKAGE3, be considered electronic
information services and therefore exempt from Illinois retailers’ occupation tax,
will it be considered a non-taxable license of software and therefore not subject
to Illinois retailers’ occupation tax, or will it be considered canned software and
therefore subject to Illinois retailers’ occupation tax?

6.

Will COMPANY’s APPLICATION1, which will be an add-on to XYZ’s core service
offering, be considered electronic information services and therefore exempt from
Illinois retailers’ occupation tax, will it be considered a non-taxable license of
software and therefore not subject to Illinois retailers’ occupation tax, or will it be
considered canned software and therefore subject to Illinois retailers’ occupation
tax?

7.

Will COMPANY’s Web Services, which will be an add-on to XYZ’s core service
offering, be considered electronic information services and therefore exempt from
Illinois retailers’ occupation tax, will it be considered a non-taxable license of
software and therefore not subject to Illinois retailers’ occupation tax, or will it be
considered canned software and therefore subject to Illinois retailers’ occupation
tax?

COMPANY’s Interpretation of the Law
Question 1
COMPANY believes the XYZ core service offering and upgraded data packages will be
considered electronic information services and therefore not subject to Illinois retailers’
occupation tax.4 The XYZ core service offering and upgraded data packages will
provide business and financial information through a database accessed through the
internet. The XYZ core service offering and upgraded data packages will not fall within
the Illinois Administrative Code’s definition of canned software.5 COMPANY does not
believe that software or other tangible personal property will be transferred to
COMPANY’s customers as part of the XYZ core service offering or upgraded data
packages. Due to the fact that Illinois does not impose retailers’ occupation tax on
electronic business and financial information accessed through a database on the
internet and the XYZ core service offering and upgraded data packages will not fall
within the definition of canned software, COMPANY believes these offerings will not be
subject to Illinois retailers’ occupation tax.6
Question 2
COMPANY believes the TOOL1, which will be an add-on to XYZ’s core service offering,
will be considered an electronic information service and therefore not subject to Illinois
retailers’ occupation tax.7 The TOOL1 will not fall within the Illinois Administrative
Code’s definition of canned software.8 The TOOL1 will be a web-based add-on within

XYZ that will enable a customer to present rules and approval limits to automate credit
decisions. The TOOL1 will remain on COMPANY’s server and will not be transferred to
customers’ computers. Based on the above, COMPANY believes the TOOL1 will be
considered an electronic information service and therefore not subject to Illinois
retailers’ occupation tax.9
Question 3
COMPANY believes the TOOL2, which will be an add-on to XYZ’s core service offering,
will be considered an electronic information service and therefore not subject to Illinois
retailers’ occupation tax.10 The TOOL2 will not fall within the Illinois Administrative
Code’s definition of canned software.11 The TOOL2 will be a web-based add-on within
XYZ that will manage the risk of a customer’s accounts receivable data, and the latest
and most complete COMPANY business information. Customers will load in a set of
accounts and rules to trigger labeling for existing accounts. The TOOL2 will remain on
COMPANY’s server and will not be transferred to customers’ computers. Based on the
above, COMPANY believes the TOOL2 will be considered an electronic information
service and therefore not subject to Illinois retailers’ occupation tax.12
Question 4
COMPANY believes the TOOL3, which will be an add-on to XYZ’s core service offering,
will be considered an electronic information service and therefore not subject to Illinois
retailers’ occupation tax.13 The TOOL3 will not fall within the Illinois Administrative
Code’s definition of canned software.14 The TOOL3 will be a web-based add-on within
XYZ that will enable a customer to load in invoice level trade details. The TOOL3 will
then provide workflow information related to collection activities. The TOOL3 will not be
transferred to customers’ computers. Based on the above, COMPANY believes the
TOOL3 will be considered an electronic information service and therefore not subject to
Illinois retailers’ occupation tax.15
Question 5
COMPANY believes PACKAGE4, which will be additional data within XYZ when
purchased with the PACKAGE3, will be considered an electronic information service
and therefore not subject to Illinois retailers’ occupation tax.16 PACKAGE4 will not fall
within the Illinois Administrative Code’s definition of canned software.17 PACKAGE4 will
combine the financial performance data with COMPANY’s trade data to create decisionready insight. PACKAGE4 will remain on COMPANY’s server and will not be
transferred to customers’ computers. Based on the above, COMPANY believes that
PACKAGE4 will be considered an electronic information service and therefore not
subject to Illinois retailers’ occupation tax.18
Question 6
COMPANY believes the APPLICATION1, which will be an add-on to XYZ’s core service
offering, will be considered an electronic information service and therefore not subject to
Illinois retailers’ occupation tax.19 The APPLICATION1 will not fall within the Illinois
Administrative Code’s definition of canned software.20 The APPLICATION1 will be a
web-based add-on within XYZ that will enable customers to create customizable credit
applications to meet their business needs. The data entered into the application will
then be fed into XYZ for the customer to act on. The TOOL3 will remain on

COMPANY’s server and will not be transferred to customers’ computers. Based on the
above, COMPANY believes the APPLICATION1 will be considered an electronic
information service and therefore not subject to Illinois retailers’ occupation tax.21
Question 7
COMPANY believes Web Services, which will be an add-on to XYZ’s core service
offering, will be considered an electronic information service and therefore not subject to
Illinois retailers’ occupation tax.22 Web Services will not fall within the Illinois
Administrative Code’s definition of canned software.23 Web Services will be a webbased tool within XYZ that will allow for data, decisions, or other account information to
be passed back and forth between COMPANY and customer systems. Web Services
will allow for the integration of the TOOL1 and TOOL3 Web Services will remain on
COMPANY’s server and will not be transferred to customers’ computers. Based on the
above, COMPANY believes Web Services will be considered an electronic information
service and therefore not subject to Illinois retailers’ occupation tax.24
Thank you in advance for your cooperation and consideration of this request. Should
you or your staff have any questions or concerns, please do not hesitate to contact
myself.

DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization” provides that
“[w]hether to issue a private letter ruling in response to a letter ruling request is within the discretion of
the Department. The Department will respond to all requests for private letter rulings either by
issuance of a ruling or by a letter explaining that the request for ruling will not be honored.” 2 Ill. Adm.
Code 1200.110(a)(4). The Department declines to issue a Private Letter Ruling because the nature
of the services provided by the Company is not entirely clear. Although we are not providing you with
a Private Letter Ruling, we hope the following general information will be of assistance.
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. 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 and Use Taxes do not apply to sales of service that do not involve
the transfer of tangible personal property to customers. However, if tangible personal property is
transferred incident to sales of service, this will result in either Service Occupation Tax liability or Use
Tax liability for the servicemen depending upon his activities. For your general information, see 86 Ill.
Adm. Code 140.101 through 140.109 regarding sales of service and Service Occupation Tax.
Services that involve the transfer of tangible personal property (such as, for example, written reports,
other tangible media and training manuals) incident to a sale of service may be subject to either
Service Occupation Tax liability or Use Tax liability.
Information or data that is electronically transferred or downloaded is not considered the
transfer of tangible personal property in this State. See 86 Ill. Adm. Code 130.2105(a)(3). However,
canned computer software is considered taxable tangible personal property regardless of the form in
which it is transferred or transmitted, including tape, disc, card, electronic means or other media. See
86 Ill. Adm. Code 130.1935.

If the computer software consists of custom computer programs, then the sales of such
software may not be taxable retail sales. See Section 130.1935(c). Custom computer programs or
software are prepared to the special order of the customer. The selection of pre-written or canned
programs assembled by vendors into software packages does not constitute custom software unless
real and substantial changes are made to the programs or creation of program interfacing logic. See
Section 130.1935(c)(3).
If transactions for the licensing of computer software meet all of the criteria provided in Section
130.1935(a)(1), neither the transfer of the software or the subsequent software updates will be
subject to Retailers’ Occupation Tax.
If a company provides access to a database of information and does not transfer any software
or other tangible personal property to its customers, the company would not incur Illinois Retailers'
Occupation Tax, Use Tax, Service Occupation Tax, or Service Use Tax liability. Please note that the
issue is under constant review in Illinois and other states and the taxability of information or data that
is electronically transferred or downloaded may change.
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
1

86 Ill. Adm. Code 130.2105.
Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004).
3
86 Ill. Adm. Code 130.1935.
4
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
5
86 Ill. Adm. Code 130.1935
6
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
7
Id.
8
86 Ill. Adm. Code 130.1935
9
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
10
Id.
11
86 Ill. Adm. Code 130.1935
12
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
13
Id.
14
86 Ill. Adm. Code 130.1935
15
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
16
Id.
17
86 Ill. Adm. Code 130.1935.
18
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
19
Id.
20
86 Ill. Adm. Code 130.1935.
21
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
22
Id.
23
86 Ill. Adm. Code 130.1935.
24
86 Ill. Adm. Code 130.2105 and Illinois Private Letter Ruling ST 04-0013-PLR, (10/27/2004)
2