What resale-certificate documentation must an Illinois-registered seller keep for a drop shipment to an Illinois customer?

Plain-English summary

An Illinois-registered seller making a drop shipment to an Illinois location had to charge tax or document the resale exemption with a valid Certificate of Resale from its purchaser.

The GIL described the purchaser as the out-of-state reseller that ordered the property and directed shipment to its Illinois customer. The registered drop-ship seller obtained the certificate from that purchaser, not the Illinois delivery recipient.

Keeping a valid certificate under 86 Ill. Adm. Code 130.1405 relieved the seller of liability concerning the purchaser's use of the property.

Blanket and percentage certificates

A blanket Certificate of Resale could cover a purchaser when all of that customer's purchases were for resale. Its information should be updated no less often than every three years.

If the purchaser knew that only a stated percentage of purchases would be for resale, the seller could accept a percentage Certificate of Resale for that portion.

The response referred the requester to the certificate regulation but did not separately approve each named home-state, multijurisdiction, or Illinois form.

What this means for you

Registered drop-ship sellers

Obtain the certificate from your direct purchaser and retain it in your files before treating the Illinois delivery as exempt.

Out-of-state resellers

Give the drop-ship supplier valid Illinois resale documentation. Do not assume the end customer's status substitutes for your certificate.

Common questions

Q: Who provides the resale certificate?
A: The seller's purchaser—the reseller directing the drop shipment.

Q: Can one blanket certificate cover ongoing purchases?
A: Yes when all purchases are for resale, with the information updated at least every three years.

Q: Can a certificate cover only a percentage of sales?
A: Yes when it specifies the known resale percentage.

Citations and references

• 86 Ill. Adm. Code 130.225 — Illinois drop-shipment rules.
• 86 Ill. Adm. Code 130.1405 — valid, blanket, and percentage Certificates of Resale.

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-11-0063.pdf

Original ruling text

ST 11-0063-GIL 08/12/2011 SALE FOR RESALE
This letter addresses sales for resale. See 86 Ill. Adm. Code 130.1405. (This is a GIL.)

August 12, 2011

Dear Xxxxx:
This letter is in response to your letter dated June 30, 2011, 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:
We are in the process of auditing customer resale/exemption certificates.
Could you please advice [sic] as to what documentation you require for drop shipments
of sales for resale.
I’m looking for clarification on the following three issues.
1.

What Documentation is accepted – Home State Certificates, Streamlined MultiJurisdiction Certificate, or your state issued certificate.

2.

From whom do you need this documentation – Our customer or the third-party
drop-ship customer within your state?

3.

How long are your state certificates good for?

Thank you for your time and help with this request.

DEPARTMENT’S RESPONSE:
A drop-shipment situation is generally one in which out-of-State purchasers (purchasers) that
are not registered with the State of Illinois and that do not have sufficient nexus with Illinois to require
them to collect Illinois Use Tax make purchases for resale from companies (companies) that are

registered with Illinois and have those companies drop-ship the property to purchasers' customers
(customers) located in Illinois. For general information regarding drop shipments, you may wish to
review the Department’s drop shipment rules at 86 Ill. Adm. Code 130.225, which can be viewed on
the Department’s website. As sellers required to collect Illinois tax, companies must either charge tax
or document exemptions when they make deliveries in Illinois. In order to document the fact that their
sales to purchasers are sales for resale, companies are obligated by Illinois to obtain valid
Certificates of Resale from purchasers.
The resale exemption is applicable when making sales to a purchaser who will in turn sell the
tangible personal property. We refer you to the Department’s regulation at 86 Ill. Adm. Code
130.1405, which describes the requirements for Certificates of Resale and can be found on the
Department’s website. In order for a sale for resale to qualify for an exemption from Retailers’
Occupation Tax, the seller must keep on file a valid Certificate of Resale as set forth in the regulation.
Acceptance of a valid Certificate of Resale relieves the seller of liability with respect to the
purchaser’s use of the property purchased.
A blanket Certificate of Resale can be used to document a sale for resale as long as the
requirements for a valid Certificate of Resale are met. A seller may accept a blanket Certificate of
Resale from a purchaser if all of a particular customer’s purchases are made for resale. The
information on a blanket Certificate of Resale should be updated no less than every three years. See
86 Ill. Adm. Code 130.1405(c)(1).
If a purchaser knows that a certain percentage of all purchases from a given seller will be
made for purposes of resale, a seller may accept a percentage Certificate of Resale specifying that a
certain portion of the sales made by such seller to such purchaser will be made for purposes of
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,

Debra M. Boggess
Associate Counsel
DMB:msk