Which separately stated charges could be excluded from Illinois automobile-rental gross receipts?

Plain-English summary

The Department did not give an item-by-item answer for airport fees, equipment, driver charges, mileage, surcharges, fuel options, waivers, insurance, and other rental-car charges without reviewing the contracts. It instead provided general gross-receipts rules.

Under the 2011 law described, automobile rentals for one year or less were subject to Automobile Renting Occupation and Use Tax on all consideration received as rental price. A lease with a minimum term greater than 365 days was outside that Act.

Separately stated refueling charges and separately stated insurance charges were excluded from gross receipts. More generally, a separately stated charge was excluded only if it fit an authorized regulatory deduction.

An immediate customer discount reduced gross receipts. A later refund to an agent or tour operator was a nondeductible cost of doing business. A future-rental credit reduced receipts only when used. An immediate refund to a dissatisfied renter could produce a “no rental,” while a refund made after tax was paid required the rentor to file a claim for credit.

What this means for you

Map each charge to the current regulation and the rental contract instead of assuming that separate statement alone makes it nontaxable. Preserve records showing the nature and timing of discounts, credits, refunds, refueling, and insurance charges.

Common questions

Q: Were separately stated refueling charges included in gross receipts?
A: No under the rule described.

Q: Were separately stated insurance charges included?
A: No under the rule described.

Q: Did the GIL decide whether GPS, child-seat, airport, or additional-driver fees were taxable?
A: No. It expressly qualified the response because it had not reviewed the contracts.

Subject

Automobile Renting Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0001.pdf

Original ruling text

ST 11-0001-GIL 01/07/2011 AUTOMOBILE RENTING TAX
Persons who are engaged in the business of renting automobiles in Illinois under rental terms
of one year or less are subject to the Automobile Renting Occupation and Use Tax set forth at
35 ILCS 155/1 et seq. See 86 Ill. Adm. Code 180.101. (This is a GIL.)

January 7, 2011

Dear Xxxxx:
This letter is in response to your letter dated June 24, 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 several clients who provide rental car services within your taxing jurisdiction.
The following is a list of charges that may be included on the rental car billing. If any of
the below items is included it would be separately stated on the billing. So that I may be
certain that my clients are correctly taxing their customers, I ask that the State indicate
the taxability of the following items.
1.

Airport concession fees and facilities fees that are pasted [sic] on to the
customer.

3.

A fee charged for returning the vehicle to a city other than the renting city. Also
know [sic] as a Drop Charge.

4.

Charge for child seat.

5.

Charge for ski rack.

6.

Charge for in car navigational (GPS) system.

7.

Charge for an additional driver.

8.

Charge for drivers 24 years or younger.

9.

Charge for exceeded mileage.

10.

Up charge for nonstandard vehicles, ie; minivans, convertibles.

11.

Charge for in car satellite radio.

12.

Frequent Flyer Surcharge – excise taxes paid on customer awarded frequent
flyer miles that are passed onto [sic] customer.

13.

Fuel and Service Charge – Company will refill the tank and charge the customer
for the fuel required to fill the tank and for the service of refilling the tank.

14.

Fuel Purchase Option – Purchase of the gas that is in the tank at the start of the
rental. Customers do not need to refill the tank prior to return, regardless of tank
level.

15.

Loss Damage Waiver – Optional service that relieves the customer of all financial
responsibility for the loss of or damage to the rental car provided the car is used
in accordance with the rental agreement terms and conditions.

16.

Energy surcharges.

17.

Liability Insurance Supplement – Optional protection that provides additional
liability protection for the Customer, Authorized Operator(s), or Additional
Authorized Operator(s) if an accident occurs. Includes un/under insured motorist
coverage.

18.

Personal Accident Insurance and Personal Effects Coverage – Provides
coverage to the renter and passengers in case of accidental death and/or
accidental medical expenses during the rental period. Provides for loss of or
damage for most types of personal belongings owned and carried by the renter
during the rental.

19.

Premium Emergency Roadside Service – Covers costs for services required to
remedy the following customer induced problems: Keys Locked in the Car – Lost
Key Service – Left Lights On / Dead Battery – Out of Gas Service (includes
delivery of 2 to 3 gallons of gasoline) – Spare Tire Mounting Service - $1,000
Travel Interruption Cost Reimbursements.

20.

Vehicle licensing fees passed onto [sic] customer.

22.

$ per day or rental tax surcharges.

23.

Discounts for promo coupons.

Thank you for your time and cooperation.

DEPARTMENT’S RESPONSE:

Please note that the Department cannot give a definitive ruling in the context of a General
Information Letter. Furthermore, without reviewing the rental contracts, the Department’s response
must be qualified.
Persons who are engaged in the business of renting automobiles in Illinois under rental terms
of one year or less are subject to the Automobile Renting Occupation and Use Tax. 35 ILCS 155/1 et
seq. See 86 Ill. Adm. Code 180.101. This tax is imposed at the rate of 5% of the gross receipts from
such business. "Gross receipts" from the renting of tangible personal property or "rent," means all
consideration received by a rentor as the rental price for the rental of automobiles under lease terms
of one year or less. See also, 86 Ill. Adm. Code 180.120 and 180.125. Certain separately stated
charges, though, are not subject to tax and are listed in Section 180.125 of the Department’s
regulations. Note, however, leases are not subject to liability under the Automobile Renting
Occupation and Use Tax Act if the minimum lease term is for a period greater than one year (greater
than 365 days). See 86 Ill. Adm. Code 180.101.
It appears many of the items involve charges for the use of the vehicle or tangible personal
property used by the lessee in connection with the rental of a vehicle. "Gross receipts" from the
renting of tangible personal property means all consideration received for the rental of automobiles.
86 Ill. Adm. Code 180.120. Refueling charges are not included in gross receipts if they are separately
stated on the bill or invoice. 86 Ill. Adm. Code 180.125(a)(4). Insurance charges are not included in
gross receipts if separately stated on the bill or invoice. 86 Ill. Adm. Code 180.125(a)(3). In general.
if a charge falls within one of the authorized deductions provided in Section 180.125 it is not included
within gross receipts if the charge is separately stated on the bill or invoice.
Please note, discounts, as a general proposition, are not subject to the tax. This is so because
a "discount" results in no gross rental receipts. That is, when a customer is given 10% off the rental
price of an automobile, the amount of the 10% discount results in a 10% reduction in gross rental
receipts and is, therefore, not subject to tax. Consequently, a discount given to a customer at the time
of rental does not become included in gross receipts. However, where some sort of refund is given to
an agent or a tour operator subsequent to a rental, no discount has been given. These refunds to
agents or tour operators subsequent to rental constitute costs of doing business which are never
deductible from gross receipts. See 86 Ill. Adm. Code 180.120(c). Where a rentee has been given a
credit for future rentals because that rentee has not been satisfied with service, that credit is not
deductible from gross receipts. However, when the rentee uses that credit at a subsequent rental,
the gross receipts from that subsequent rental would be reduced by the amount of the credit used by
the rentee. Where an immediate refund of the rental price is given to a rentee dissatisfied with the
rentor’s service, this situation constitutes a “no rental” situation and the money refunded would not be
included in gross rental receipts. However, where a refund is given to a dis-satisfied rentee after the
tax on the transaction has been paid to the Department, the rentor must file a claim for credit with the
Department.
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,

Richard S. Wolters
Associate Counsel

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