Were fees for cashing payroll, government, or tax-refund checks subject to Illinois sales or service tax?

Plain-English summary

A business asked whether its fees for cashing payroll, government, and tax-refund checks were taxable. The customer presented a check and received cash equal to its face amount minus the fee; the transaction involved no tangible personal property.

IDOR said the fee was not subject to Illinois Retailers' Occupation, Use, Service Occupation, or Service Use Tax under those facts. Sales of service are outside the retail taxes, and service taxes arise only when tangible personal property is transferred incident to the service.

Common questions

Did the type of check change the answer? The GIL grouped payroll, government, and tax-refund checks under the same no-property facts.

What fact controlled? No tangible personal property was transferred to the customer.

Citations and references

• 86 Ill. Adm. Code 130.101 and 150.101
• 86 Ill. Adm. Code 140.101 through 140.109

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0039.pdf

Original ruling text

ST 13-0039-GIL 08/23/2013 SERVICE OCCUPATION TAX
The Service Occupation Tax is a tax imposed upon servicemen engaged in the business of making sales of
service in this State, based on the tangible personal property transferred incident to sales of service. See 86 Ill.
Adm. Code Part 140. (This is a GIL.)

August 23, 2013

Dear Xxxxx:
This letter is in response to your letter dated June 24, 2013, 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:
ABC is requesting a written opinion on the sales taxability of check cashing fees. This would
include third party checks for payroll, government checks, or tax refund checks. In an example,
a customer would present this type of check to a cashier, and cashier would then give cash back
to customer based on the face value of the check, less the fee for cashing the check. Transaction
would not involve any tangible personal property.
Thank you for your assistance.

DEPARTMENT’S RESPONSE:
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. If the purchases occur in Illinois, the purchasers
must pay the Use Tax to the retailer at the time of purchase. The retailers are then allowed to retain the amount
of Use Tax paid to reimburse themselves for their Retailers' Occupation Tax liability paid on those sales.
Illinois Retailers' Occupation and Use Taxes do not apply to sales of service. Sales of service will be
subject to either Service Occupation Tax liability or Use Tax liability if tangible personal property is transferred

incident to the sale of service. For your general information see 86 Ill. Adm. Code 140.101 through 140.109
regarding sales of service and Service Occupation Tax. If no tangible personal property is transferred incident
to a sale of service, Service Occupation Tax liability or Use Tax liability do not apply.
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: