Could an Illinois township buy diesel for off-road equipment free of sales tax and Motor Fuel Tax, and what documentation did it need?

Plain-English summary

An Illinois township bought diesel from a local gas station for off-road equipment such as a backhoe and loader. It asked what certificates were needed for tax-free fuel purchases, including purchases through a fleet card.

IDOR separated sales tax from Motor Fuel Tax. A sale to a governmental body was exempt from Retailers' Occupation Tax only when the governmental body had an active Illinois exemption identification number, commonly called an E number. Based on the limited fleet-card information supplied, IDOR believed the requested sales-tax documentation was a copy of the township's E number.

The Motor Fuel Tax result was different. Local governments generally were not exempt, except in limited cases involving operation of a public transportation system. The 2012 dyed-diesel program allowed tax-free purchases of dyed diesel for nonhighway use. When dyed fuel was impracticable and clear diesel was purchased tax-paid for off-road use, a purchaser could apply for reimbursement if the claim fit Section 13 of the Motor Fuel Tax Law and the Department's refund regulations.

IDOR cautioned that fleet cards could complicate exempt purchases because tax was included in the pump price, especially when the card issuer was not the fuel seller, and the Department did not know how this particular card system operated.

Common questions

Was township status alone enough for the sales-tax exemption? No. The governmental body needed an active E number issued by IDOR.

Was the township automatically exempt from Motor Fuel Tax? No. The GIL said local governments generally were not exempt, apart from limited public-transportation cases.

How could the township avoid Motor Fuel Tax on off-road diesel? It could buy dyed diesel tax-free for nonhighway use.

What if it bought tax-paid clear diesel for off-road use? It could apply for a refund when the use and documentation met Section 13 and 86 Ill. Adm. Code 500.235.

Citations and references

• 86 Ill. Adm. Code 130.101, 130.2007, 130.2080, and 150.101
• 35 ILCS 505/6, 505/6a, and 505/13
• 86 Ill. Adm. Code 500.235 and 500.265

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2012/st-12-0032.pdf

Original ruling text

ST 12-0032-GIL 07/18/2012 MOTOR FUEL TAX
This letter discusses sales of motor fuel to an exempt organization. See 86 Ill. Adm.
Code 500.235 and 500.265. (This is a GIL.)
July 18, 2012
Dear:
This letter is in response to your letter received in this office on September 20, 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:
Taxpayer needs a ruling on their exempt status on motor fuel and sales tax.
Taxpayer is applying for a credit card and they want to know what certificates they need
to provide to the station for tax free fuel (if any exemption).
TOWNSHIP gets fuel (diesel) from their local gas station for their off road equipment
(backhoe, loader, etc.). Attached is the form they were filling out for the credit card.
They have been paying tax but they don’t think they should be.

DEPARTMENT’S RESPONSE:
SALES TAX
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail 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.
When motor fuel is sold to purchasers for use or consumption and not for resale, a retail sale occurs.
Sellers incur Retailers’ Occupation Tax liability on such sales, absent a properly documented
exemption. Sales made to a governmental body (Federal, State, local or foreign) are exempt from the
Retailers' Occupation Tax. Such sales are not exempt from the Retailers' Occupation Tax unless a
governmental body has an active exemption identification number (“E” number) issued by the
Department. See 86 Ill. Adm. Code 130.2080 and 130.2007.

ST 12-0032-GIL
July 18, 2012
Page 2
MOTOR FUEL TAX
The Motor Fuel Tax is imposed on the privilege of operating motor vehicles on public highways and
recreational watercraft on waterways in Illinois. It is paid by distributors and suppliers, who collect the
tax from their customers. Motor Fuel Tax is due when motor fuel is purchased. Generally, units of
local government are not exempt from taxes imposed under the Motor fuel Tax law, except in limited
cases (operation of a public transportation system). 35 ILCS 505/6 & 6a.
Other than distributors or suppliers, persons, including local governments, who lose motor fuel
through any cause or use motor fuel upon which the Motor Fuel Tax has been paid for any purpose
other than operating a motor vehicle upon the public highways or waters, may file a claim with the
Department. See 86 Ill. Adm. Code 500.235. Distributors and suppliers also may file claims for
credit. See 86 Ill. Adm. Code 500.265.
Beginning January 1, 2000, the State of Illinois implemented a dyed diesel fuel program. This
program provides for tax-free purchases of dyed diesel fuel. Any special fuel sold or used for nonhighway purposes must be dyed. Since the dyed diesel fuel is purchased tax-free, there is no need
to apply for reimbursement of the tax. In some situations, it is not practicable for dyed diesel fuel to
be used for off-road purposes. In that case, clear (undyed) diesel fuel may be purchased tax-paid for
off-road use, but the purchaser must apply to the Department for a refund of the tax. Section 13 of
the Motor Fuel Tax Law sets forth the situations in which the tax paid for clear diesel fuel may be
reimbursed. The Department’s regulations at 86 Ill. Adm. Code 500.235 explains how claims for credit
or refund may be made.
It appears that the application attached to your letter is for a fleet card for the purchase of motor fuel.
The use of fleet cards can sometimes complicate transactions for the exempt purchase of motor fuel,
since tax is included in the pump price. This is especially so if the card issuer is not also the seller of
motor fuel. We do not have information regarding how this fleet card system operates but believe
that the documentation they are requesting regarding the sales tax is a copy of the township’s “E”
number.
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