Could trailer buyers recover Illinois Use Tax after the seller was later assessed tax by another state?

Plain-English summary

The Illinois trailer buyers could not obtain a credit merely because the seller was later assessed sales tax by another state. When the buyers registered the trailers in Illinois, Illinois Use Tax was properly due because registration was a taxable use in the State.

Illinois allowed a credit only to the extent tax properly due to another state had already been paid when the taxpayer paid Illinois Use Tax. If no other-state tax had been paid at that time, the GIL says there was no statutory basis for an Illinois credit or refund.

Even when other-state tax had already been properly paid, the credit applied only to tax, not interest or penalties. A refund claim also required proof that the Illinois payment resulted from a mistake of fact or law, and only the person who actually remitted the Illinois tax—the customer in this case—could claim it.

What this means for you

Before paying Illinois Use Tax on property acquired elsewhere, document any tax already properly due and paid to another state. Identify the actual Illinois remitter and preserve proof of payment; a seller generally cannot claim a customer's refund.

Common questions

Q: Did a later other-state assessment create an Illinois refund right?
A: No, because the other-state tax had not already been paid when Illinois Use Tax was paid.

Q: Could the credit cover another state's penalties or interest?
A: No. The GIL limited it to tax.

Q: Who could claim any available Illinois refund?
A: Only the person who remitted the Illinois tax, identified here as the customer.

Subject

Claims For Credit

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-10-0128.pdf

Original ruling text

ST 10-0128-GIL 12/27/2010 CLAIMS FOR CREDIT
Illinois allows a credit against Illinois Use Tax liability for tax that has been properly paid to
another State. See 86 Ill. Adm. Code 150.310(a)(3). (This is a GIL.)

December 27, 2010

Dear Xxxxx:
This letter is in response to your letter dated January 14, 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:
I represent COMPANY, a STATE Corporation. The business sells campers, trailers,
and vehicle accessories. A number of the trailers that were sold were purchased by
Illinois residents; my client did not collect sales tax on these transactions, and the Illinois
residents paid the tax on these trailers when they were registered in the State of Illinois.
The STATE Department of Revenue is conducting an audit of my client for the years
2004 through 2007, and has advised that my client was required to collect STATE sales
tax on these sales. Please contact me to explain the process for requesting a refund of
these vehicle sales/use taxes, so that my client can forward these proceeds to the
STATE Department of Revenue. Thank you for your assistance in this matter.

DEPARTMENT’S RESPONSE:
Please be advised that when a person registers or titles a vehicle in Illinois, Illinois Use Tax is
due. The Use Tax is imposed on the privilege of using in this State tangible personal property
purchased anywhere at retail from a retailer, 35 ILCS 105/3. By registering a trailer in Illinois, a
person exercises a power over it in Illinois that constitutes a “use” under the provisions of the Use Tax
Act, 35 ILCS 105/1 et seq., and Illinois Use Tax is properly due.

Illinois allows a credit to taxpayers against their Illinois Use Tax liability when they have
already paid sales tax on tangible personal property that was properly due to another State. This
credit is only allowed for tax and cannot apply to any interest or penalty paid to another State.
“To prevent actual or likely multistate taxation, the tax imposed by this Act does not
apply to the use of tangible personal property in this State under the following circumstances:
.....
.....
(d) The use, in this State, of tangible personal property that is acquired outside
this State and caused to be brought into this State by a person who has already paid a
tax in another State in respect to the sale, purchase, or use of that property, to the
extent of the amount of the tax properly due and paid in the other State.” (35 ILCS
105/3-55(d), emphasis added)
If, however, no tax has been paid to another State at the time a person pays Use Tax to
Illinois, there is no statutory basis for a credit or refund of Illinois Use Tax.
If tax was properly due and had already been paid to another state at the time a person paid
Use Tax to Illinois, a claim for credit or refund is available when the person shows that he paid tax to
the Department as a result of a mistake of fact or law. Even in that case, though, only the remitter of
the tax erroneously paid to the Department would be authorized to obtain a credit or refund (your
customer in this case). See 86 Ill. Adm. Code 150.1401(a).
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.
Sincerely,

Samuel J. Moore
Associate Counsel

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