How did Illinois generally tax records-management charges for storage, shredding, equipment, software, maintenance, delivery, and cancellation?

Plain-English summary

A national records-management company asked IDOR to classify a long matrix of charges for physical storage, shredding, pickups and delivery, equipment, maintenance, digital imaging, hosted software, online storage, research tools, support, data entry, and cancellations. IDOR said it generally does not complete surveys or matrices, so the letter gives category rules rather than a ruling on every charge.

• Pure services: When no tangible personal property is transferred to the customer, Retailers' Occupation, Use, Service Occupation, and Service Use Taxes generally do not apply. Storage, security, and shredding services usually fit this rule, but the provider owes Use Tax on equipment and materials it uses.
• Leases: A conditional sale is taxed on the lessor's receipts. Under a true lease, the lessor is the end user and owes Use Tax on its cost, while rental receipts are not taxed. A lessee may contract to reimburse the lessor, but the amount cannot be passed through as the lessee's tax.
• Maintenance: A maintenance agreement included in the property's selling price is taxable with that sale. A separately sold agreement generally is not taxable to the purchaser, but the service provider owes Use Tax on parts transferred during service.
• Storage and delivery charges: Separately agreed delivery can be excluded from selling price; merely listing it separately on an invoice is not enough. Amounts above actual delivery cost remain taxable. The letter treated fuel surcharges as taxable costs of doing business.
• Software and digital services: Canned software is taxable regardless of delivery medium unless a license satisfies all of Rule 130.1935(a)(1)'s requirements. Custom software may be nontaxable. If a software-maintenance agreement includes taxable canned-software updates and does not separately state them, the entire agreement is taxable.
• Telecommunications and cancellations: Information retrieval or data processing without a transmission charge is not telecommunications-taxable; bundled transmission must be separately stated. Cancellation fees generally are not taxable because they do not involve a retail sale or property transfer.

Common questions

Did IDOR approve every line in the company's matrix? No. It supplied general rules and did not make item-by-item findings.

Are storage and shredding services automatically tax-free? The service charge generally is outside these taxes when no property is transferred, but the provider's own equipment and materials remain subject to Use Tax.

Citations and references

• 35 ILCS 105/3 and 120/2
• 86 Ill. Adm. Code 130.220, 130.2010, 130.2170, and 130.415(d)
• 86 Ill. Adm. Code 140.301(b)(3)
• 86 Ill. Adm. Code 130.1935

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-13-0058.pdf

Original ruling text

ST-13-0058-GIL 10/18/13 SERVICE OCCUPATION TAX
If no tangible personal property is transferred to the customer, then no Illinois Retailers’
Occupation Tax or Service Occupation Tax would apply. See 86 Ill. Adm. Code Parts 130 and

140. (This is a GIL.)
     October 18, 2013

Dear Xxxxx:
This letter is in response to your letter dated September 3, 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:
We are requesting technical assistance on an anonymous basis for a company
(‘Company’) with operations in the state of Illinois. Please find below the
Company description and technical questions regarding the appropriate
application of the state of Illinois sales tax law.
Attached is a list of revenue categories with descriptions for which we are
requesting technical advice as to the category’s taxability. All revenue categories
are separately stated on customer invoices.
Company Description:
1.

The Company is a leading national provider of lifecycle records and
information management solutions. The Company provides document
storage, data protection, digital/electronic document management and
certified destruction. The Company offers digital document management
solutions with the integration of traditional or legacy hard copy storage,
supplying its customers with an integrated platform of services and
information management solutions. The Company does [sic]ngage in the
self-storage business.

Products and Services

2.

The Company offers the following Products and Services to its customers.
Please find attached a Revenue Category Matrix for detail descriptions of
revenue categories for which we are seeking assistance and a description
of the activities. The following is a list of the Company’s Products and
Services:
a.

TPP
i.
ii.
iii.

Sales
Rentals
Maintenance

b.

Storage
i.
Physical Storage
ii.
Physical Storage – Specialty
iii.
Perm-Out of Customer Accounts

c.

Warehouse Services
i.
Account Maintenance Fees – AMF Document Storage
ii.
Account Maintenance Fees – AMF Vault Storage
iii.
Access/Re-file Fees
iv.
Pick Up and Delivery Fees
v.
Weekend Pick Up and Delivery Fees
vi.
Minimum Pick Up and Delivery Fees
vii.
Minimum Storage Billing Fees
viii. Emergency Service – Rush or Expedite Fees
ix.
Fuel Surcharge
x.
Access Viewing Room use
xi.
Release of Information (ROI) – Physical Delivery Method
xii.
Release of Information (ROI) – Electronic Delivery
Method
xiii. Standard Shredding/Destruction
xiv.
Certified Shredding/Destruction

d.

Digital Services
i.
Digital Imaging, Scanning and Conversion
ii.
Account Maintenance Fees – AMF Imaging
iii.
License Fees for Online Access to Virtual Warehouse
iv.
License Fees for Workflow Automation Software
v.
Hosting Fees for Virtual Warehouse Software
vi.
Online Information Service/Research Tool
vii.
License fee for Online Research Tool
viii. Electronic Back-up Services
ix.
Online Data Storage Fees

e.

Personnel Services
i.
Online Support Help Desk

ii.
iii.
iv.
f.

Fees for Digital Upload of Client Records or Files
Electronically
Service Fees for Data Entry/Indexing
Virtual Warehouse Set-up and Configuration

Cancellation Charges

We appreciate your assistance with these technical questions. If you have any
questions or require any additional information please contact me via email or by
phone at (XXX) XXX-XXXX.
Your attachment asks whether the following items are taxable or tax exempt and reads, in
part, as follows:
Item Revenue Category

Description of Revenue Category

1

TPP

Sale, Rental, or Maintenance of
Tangible Personal Property

Sales

Sale of supplies to customers to store materials
including but not limited to: boxes, folders,
containers, tapes, CD, encrypted hard drives, etc.

Rentals

Rentals of containers, computer scanners, and
other computer hardware.

Maintenance

Maintenance contracts for equipment rentals of
computer scanners and other computer hardware.

Storage

Fees for Physical Storage of TPP

Physical Storage

Physical storage of customer materials which
include documents, books, manuscripts, and
electronic data stored on a physical media such as
tape or CD, within a controlled environment with
limited direct access by the customer.

Physical Storage Specialty

Physical storage of customer materials including:
Art, Antiques, Artifacts, Wine, and Spirits within
a secure climate controlled facility with limited
direct access by the customer.

Perm-Out of Customer
Accounts

Fee charged for cancellation of a customer’s
physical storage contract

Warehouse Services

Fees for Additional Services Provided by

2

3

Company to its Customers
Account Maintenance
Fees (“AMF’): AMF
Document Storage

AMF Document Storage are recurring account
maintenance fees for document storage-Adminiistrative Fee

Account Maintenance
Fees (“AMF’): AMF
Vault Storage

AMF Vault Storage are recurring account maintenance fees charged for large storage rooms are
only accessed by Company personnel and not by
the customers directly.- Administration Fee

Access/Re-file Fees

Service to retrieve and/or replace customer
materials are separately stated and consist of
charges for accessing and refilling storage
containers.

Pick Up and Delivery
Fees

Service to pick up and/or deliver customer
materials to and from customer locations are
separately stated as pick up and delivery.

Weekend Pick Up and
Delivery Fees

Weekend service to pick up and/or deliver
customer materials to and from customer
locations are separately stated as pick up and
delivery.

Minimum Pick Up and
Delivery Fees

Fee for service to pick up and/or deliver
customer materials to and from customer
locations are separately stated as pick up and
delivery.

Minimum Storage
Billing Fees

Fees charged at 75% of the client’s stated
allocation projected inventory balance.

Emergency Service Rush or Expedite Fees

Emergency or Rush service to pickup and/or
deliver customer materials to and from customer
locations are separately stated and consist of
charges for pickup and delivery on a rush or
expedited basis.

Fuel Surcharge

Fees to pass on incremental increases in the price
of fuel used in the pick up and delivery of
customer materials.

Access Viewing
Room Use

Fees for use of a room for review of customer
material.

4

Release of Information
Services (ROI) –
Physical Delivery
Method

Fees for the retrieval, duplication and delivery of
certain medical information to a third-party other
than the customer. This sensitive medical information is required by most states to be handled
and delivered in a secure manner. The Company
may deliver these records to the third-party via
physical delivery.

Release of Information
Services (ROI) Electronic Delivery
Method

Fees for the retrieval, duplication and delivery of
certain medical information to a third-party other
than the customer. This sensitive medical
information is required by most states to be
handled and delivered in a secure manner. The
Company may deliver these records to the thirdparty via digital delivery electronically via the
internet.

Standard Shredding/
Destruction

Bonded driver picks up materials to be destroyed
and returns the items to the Company owned
secure warehouse. Company processes and
destroys the materials by placing in a machine for
destruction, treating them with chemicals and
dissolving or pulverizing to a heavy liquid mass.

Certified Shredding/
Destruction

Bonded driver picks up materials to be destroyed
and returns the items to the Company owned
secure warehouse. These materials are then
combined with others and transported to a
third-party vendor for destruction. The company
in return receives a Certificate of Destruction
upon the destruction of all materials.

Digital Services

Electronic document management,
scanning, and storage solutions.
Services are billed on a per occurrence
or monthly basis.

Digital Imaging/
Scanning/Conversion

Conversion of customer materials to digital images by means of digital scanning.

Account Maintenance
Fees – AMF Imaging

Recurring account maintenance fees for
customers with monthly imaging/scanning
accounts. – Administration Fee.

License Fees For

License fees charged on a per user basis to

5

Online Access to
Virtual Warehouse

access digital images stored in customer’s
virtual warehouse

License Fees for
Workflow Automation
Software

License fees charged on a per user basis to
access and utilize the Workflow Automation Software which permits a customer to
scan a document and track its movement
through various departments. For example,
in the case of an invoice in Accounts Payable: (1)
customer receives an invoice, the invoice is
scanned, (2) it is then electronically routed to the
applicable department(s) for approval, (3) once
approved the invoice is electronically routed back
to accounts payable to be approved for payment.

Hosting Fees for
Virtual Warehouse
Software

Fees to customer for hosting Virtual Warehouse
Software on the cloud which is used for Work
Flow Automation and Online Record Storage

Online Research Tool

• Regulatory Rules
  and Regulation
  Directory

Fees charged on a per user basis to access an online repository of document retention and
destruction guidelines by State and by discipline.

Electronic Back-Up
Services

Fees charges for 24/7 electronic back-up services.
Customer data is backed up via the internet and is
stored on a remote server for emergency data
recovery needs. Company uses a third-party
vendor to perform this service.

Online Data Storage
Fees

Fees for online record storage which are based on
the amount of virtual warehouse storage the
customer requires. This service is based upon an
outsourced, cloud-based platform and web-based
on-demand software. Fees are charged on the
amount of storage purchased.

Professional
Services

Professional Services provided by Company
staff as Support, Design or
Configuration Services to customers

Online Support
Help Desk

Customer telephone help desk to address issues
users may have with online services.

Fees for Digital
Upload of Client

Upload fee is charged when a customer types
data or exports data to a file which is provided

6.

Records or Files
Electronically

to Company for ‘upload’ to the digital
warehouse.

Data Entry/
Indexing

Fees for services related to data entry and the
indexing of information previously scanned to
allow for future search or query abilities.

Virtual Warehouse
Set-Up and
Configuration

Technical fees for setting up a customer with the
virtual warehouse including the online storage
of customer files which the customer may later
access remotely online. Designing, programming,
and customization of third-party software to
meet specific customer needs.

Cancellation Charges

Charge for Cancelling any Revenue
Category
Fees for the cancellation of a revenue
category as per the customer’s
instructions.

DEPARTMENT’S RESPONSE:
The Department generally does not complete surveys or matrices. We advise you to
consult Illinois statutes and administrative rules as well as Department publications on these
matters. However, we hope the following information will provide sufficient guidance to answer
your questions.
Tangible Personal Property
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 35 ILCS 120/2; 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 35 ILCS 105/3; 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
incurred on those sales. If the purchases occur outside Illinois, purchasers must self assess their
Use Tax liability and remit it directly to the Department.
Retailers' Occupation and Use Taxes do not apply to sales of service. The Service
Occupation Tax Act and Service Use Tax are imposed on the transfer of tangible personal
property incident to sales of service. See 86 Ill. Adm. Code 140.101 and 160.101. If the
transactions you are inquiring about do not involve the transfer of any tangible personal property

to the customer, then they generally would not be subject to Retailers’ Occupation Tax, Use Tax,
Service Occupation Tax, or Service Use Tax.
The State of Illinois taxes leases differently for Retailers’ Occupation Tax and Use Tax
purposes than the majority of other states. For Illinois sales tax purposes, there are two types of
leasing situations: conditional sales and true leases. A conditional sale is usually characterized
by a nominal or one dollar purchase option at the close of the lease term. Stated otherwise, if a
lessor is guaranteed at the time of the lease that the leased property will be sold, this transaction
is considered to be a conditional sale at the outset of the transaction. Persons who purchase
items for resale under conditional sales contracts can avoid paying tax to suppliers by providing
certificates of resale that contain all the information set forth in 86 Ill. Adm. Code 130.1405. All
receipts received by a lessor/retailer under a conditional sales contract are subject to Retailers’
Occupation Tax. See 86 Ill. Adm. Code 130.2010.
A true lease generally has no buy out provision at the close of the lease. If a buy-out
provision exists, it must be a fair market value buy-out option in order to maintain the character
of the true lease. Lessors of tangible personal property under true leases in Illinois are deemed
end users of the property to be leased. See 86 Ill. Adm. Code 130.220. As end users of tangible
personal property located in Illinois, lessors owe Use Tax on their cost price of such property.
The State of Illinois imposes no tax on rental receipts. Consequently, lessees incur no tax
liability. As stated above, in the case of a true lease, the lessors of the property being used in
Illinois would be the parties with Use Tax obligations. The lessors would either pay their
suppliers, if their suppliers were registered to collect Use Tax, or would self-assess and remit the
tax to the Department. If the lessors already paid taxes in another state with respect to the
acquisition of the tangible personal property, they would be exempt from Use Tax to the extent
of the amount of such tax properly due and paid in such other state. See subsection (a)(3) of 86
Ill. Adm. Code 150.310.
Under Illinois law, lessors may not “pass through” their tax obligation to lessees as taxes.
However, lessors and lessees may make private contractual arrangements for a reimbursement of
the tax to be paid by the lessees. If lessors and lessees have made private agreements where the
lessees agree to reimburse the lessors for the amount of tax paid, then the lessees are obligated
The taxability of maintenance agreements or extended warranties depends upon whether
the charges for the agreements are included in the selling price of the tangible personal property.
See Ill. Adm. Code 140.301(b)(3). If the charges for the agreements are included in the selling
price of the tangible personal property, those charges are part of the gross receipts of the retail
transaction and are subject to tax. No tax is incurred on the maintenance services or parts when
the repair or servicing is performed.
If maintenance contracts are sold separately from tangible personal property, sales of the
contracts are not taxable transactions. However, when service providers enter into agreements to
provide maintenance services for particular pieces of equipment for stated periods of time at
predetermined fees, the service providers incur Use Tax based on their cost price of tangible
personal property transferred to customers incident to the completion of the maintenance service.

See 86 Ill. Adm. Code 140.301(b)(3). Purchasers of separate maintenance agreements are not
charged tax on the labor or tangible personal property that is transferred incident to the
completion of the maintenance contract.
Warehouse Services
Illinois Retailers' Occupation Tax is imposed upon gross receipts from the sale of
tangible personal property to end-users, and gross receipts is defined to mean all the
consideration received by sellers valued in money whether received in money or otherwise, but
not including the value of or credits given for like kind traded-in property. In computing
Retailers' Occupation Tax liability, no deductions shall be taken by a taxpayer from gross
receipts on account of the cost of the property sold, the cost of materials used, labor costs, or any
other expense whatsoever. See 86 Ill. Adm. Code 130.410.
In the context of selling storage services, the fuel surcharges are costs of doing business
subject to the tax. The question of whether delivery fees or charges may be deducted by retailers
in calculating Retailers' Occupation Tax liability depends not upon the separate billing of such
delivery charges but upon whether the charges are included in the selling prices of the property
or are agreed to by purchasers and retailers separately from the selling price of the property.
If a seller delivers the tangible personal property to the buyer, and the seller and the buyer
agree upon the transportation or delivery charges separately from the selling price of the tangible
personal property which is sold, then the cost of the transportation or delivery service is not a
part of the "selling price" of the tangible personal property which is sold, but instead is a service
charge, separately contracted for, and need not be included in the figure upon which the seller
computes his or her tax liability. See 86 Ill. Adm. Code 130.415(d).
A separate listing on an invoice of such charges is not sufficient to demonstrate a separate
agreement. The best evidence that transportation or delivery charges were agreed to separately
and apart from the selling price is a separate and distinct contract for transportation or delivery.
However, documentation which demonstrates that the purchaser had the option of taking
delivery of the property, at the seller's location, for the agreed purchase price, or having delivery
made by the seller for the agreed purchase price, plus an ascertained or ascertainable delivery
charge, will suffice. Note, as stated in Section 130.415 of the Department’s regulations, if the
charges for transportation or delivery exceed the cost of delivery or transportation, the excess
amount is subject to tax. For further information, see Nancy Kean v. Wal-Mart Stores, Inc., 235
Ill. 2d 351, 919 N.E.2d 926 (2009).
Storage and Shredding
The tax liabilities of warehousemen who hold themselves out to the public as being
engaged in the business of moving, storing, packing and shipping tangible personal property
belonging to other persons are generally engaged in a service transaction. See 86 Ill. Adm. Code
130.2170. The business of providing security, shredding and storage services would generally
fall under this category. Again, if no tangible personal property is transferred to the service
customer, then no Retailers' Occupation Tax, Use Tax, Service Occupation Tax, or Service Use

Tax, is incurred. Retailers' Occupation Tax liability may be incurred on any shredded material
that is sold to a third party. Such a transaction may be exempt from tax if the purchaser is making
a purchase of the shredded material for resale. See 86 Ill. Adm. Code 130.1405.
Use Tax liability would be incurred on equipment and materials used in Illinois in the
performance of the service transaction. Some equipment, such as the shredder and balers, may
qualify for the manufacturing machinery and equipment exemption. See 86 Ill. Adm. Code
130.330 and general information letter ST-03-0117-GIL.
Digital Services
Generally, sales of “canned” computer software are taxable retail sales in Illinois. Canned
computer software is considered to be tangible personal property regardless of the form in which
it is transferred or transmitted, including tape, disc, card, electronic means, or other media.
However, if the computer software consists of custom computer programs, then the sales of such
software may not be taxable retail sales. See 86 Ill. Adm. Code 130.1935. Computer software
that is not custom software is considered to be canned computer software, whether it is “standalone” or not. Custom computer programs or software are prepared to the special order of the
customer. The selection of pre-written or canned programs assembled by vendors into software
packages does not constitute custom software unless real and substantial changes are made to the
programs or creation of program interfacing logic. See Section 130.1935(c)(3).
If transactions for the licensing of computer software meet all of the criteria provided in
subsection (a)(1) of Section 130.1935, neither the transfer of the software nor the subsequent
software updates will be subject to Retailers' Occupation Tax. A license of software is not a
taxable retail sale if:
A)

It is evidenced by a written agreement signed by the licensor and the customer;

B)

It restricts the customer’s duplication and use of the software;

C)

It prohibits the customer from licensing, sublicensing or transferring the software
to a third party (except to a related party) without the permission and continued
control of the licensor;

D)

The licensor has a policy of providing another copy at minimal or no charge if the
customer loses or damages the software, or permitting the licensee to make and
keep an archival copy, and such policy is either stated in the license agreement,
supported by the licensor’s books and records, or supported by a notarized
statement made under penalties of perjury by the licensor; and

E)

The customer must destroy or return all copies of the software to the licensor at
the end of the license period. This provision is deemed to be met, in the case of a
perpetual license, without being set forth in the license agreement.

In general, maintenance agreements that cover computer software are treated the same as
maintenance agreements for other types of tangible personal property. See 86 Ill. Adm. Code
130.1935(b). The taxation of maintenance agreements is discussed in the Service Occupation
Tax Act. See 86 Ill. Adm. Code Sec. 140.301(b)(3). The taxability of agreements for the repair
or maintenance of tangible personal property depends upon whether charges for the agreements
are included in the selling price of the tangible personal property. If the charges for the
agreements are included in the selling price of the tangible personal property, those charges are
part of the gross receipts of the retail transaction and are subject to tax. In those instances, no tax
is incurred on the maintenance services or parts when the repair or servicing is performed. A
manufacturer’s warranty that is provided without additional cost to a purchaser of a new item is
an example of an agreement that is included in the selling price of the tangible personal property.
If agreements for the repair or maintenance of tangible personal property are sold
separately from tangible personal property, sales of those agreements are not taxable
transactions. However, when maintenance or repair services or parts are provided under those
agreements, the service or repair companies will be acting as service providers under provisions
of the Service Occupation Tax Act that provide that when service providers enter into
agreements to provide maintenance services for particular pieces of equipment for stated periods
of time at predetermined fees, the service providers incur Use Tax based on their cost price of
tangible personal property transferred to customers incident to the completion of the maintenance
service. See 86 Ill. Adm. Code 140.301(b)(3). The sale of an optional maintenance agreement or
extended warranty is an example of an agreement that is not generally a taxable transaction.
If, under the terms of a maintenance agreement involving computer software, a software
provider provides a piece of object code (“patch” or “bug fix”) to be inserted into an executable
program that is a current or prior release or version of its software product to correct an error or
defect in software or hardware that causes the program to malfunction, the tangible personal
property transferred incident to providing the patch or bug fix is taxed in accordance with the
provisions discussed above.
In contrast to a patch or bug fix, if the sale of a maintenance agreement by a software
provider includes charges for updates of canned software, which consist of new releases or new
versions of the computer software designed to replace an older version of the same product and
which include product enhancements and improvements, the general rules governing taxability
of maintenance agreements do not apply. This is because charges for updates of canned software
are fully taxable as sales of software under Section 130.1935(b). (Please note that if the updates
qualify as custom software under Section 130.1935(c) they may not be taxable). Therefore, if a
maintenance agreement provides for updates of canned software, and the charges for those
updates are not separately stated and taxed from the charges for training, telephone assistance,
installation, consultation, or other maintenance agreement charges, then the whole agreement is
taxable as a sale of canned software.
Telecommunications
Telecommunications services are not taxable under Illinois’ sales and use taxes. For
information regarding the Illinois Telecommunications Excise Tax, we refer you to the

Telecommunications Excise Tax Act, which is set forth at 35 ILCS 630/1 et seq. The
Department’s regulations for this tax are found at 86 Ill. Adm. Code Part 495. The
Telecommunications Excise Tax is imposed upon the act or privilege of originating or receiving
intrastate or interstate telecommunications in Illinois at the rate of 7% of the gross charges for
such telecommunications purchased at retail from retailers. See 35 ILCS Sections 630/3 and
630/4. Telecommunications retailers collect tax from end users and remit it to the Department.
See 86 Ill. Adm. Code 495.140. If a retailer only charges for the search and downloading of
information, and does not charge for the telecommunications transmission, then those
transactions are not subject to Telecommunications Excise Tax and Simplified Municipal
Telecommunications Tax liability. See 35 ILCS 630/1 et seq. and 35 ILCS 636/5-1 et seq.
Should a retailer charge customers for transmission or telephone line charges, then the abovementioned telecommunications taxes would apply. Charges for data processing and information
retrieval are not subject to telecommunications taxes. See 86 Ill. Adm. Code 495.100(c). If
retailers provide both transmission (such as telephone line charges) and data processing services,
the charges for each must be separately stated and identified in the books and records of the
retailers. If such charges are not separately stated in this manner, then all charges are taxable.
Cancellation Charges
A cancellation fee typically does not involve retail sales or the sale or transfer of tangible
personal property incident to a sale of service. Such charges are not subject to tax.
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,

Cara Bishop
Associate Counsel
CB:msk