Were electronic textbooks sold or rented entirely online subject to Illinois sales or service tax?

Plain-English summary

A company planned to sell and rent electronic textbooks to public- and private-school students entirely through the Internet and asked whether the transactions were taxable.

IDOR said viewing or downloading books, music, newspapers, magazines, and similar data over the Internet was an intangible transfer rather than a transfer of tangible personal property.

An electronically downloaded book therefore was not subject to Illinois Retailers' Occupation Tax, Use Tax, Service Occupation Tax, or Service Use Tax, whether the book was rented or sold.

The letter distinguished canned software downloads, which Illinois treated as taxable tangible personal property under the separate software rule.

What this means for you

The character of the download mattered. A digital book was treated as an intangible in this guidance; a software download followed the canned-software rules instead.

Common questions

Were online e-book sales taxable? No.

Were online e-book rentals taxable? No.

Did the same answer apply to canned software? No.

Citations and references

• 86 Ill. Adm. Code 130.2105(a)(3).
• 86 Ill. Adm. Code 130.1935.
• 86 Ill. Adm. Code 130.101, 140.101, 150.101, and 160.101.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2014.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2014/st-14-0031.pdf

Original ruling text

ST 14-0031-GIL 05/12/2014 MISCELLANEOUS
The electronic download of a book is not subject to Retailers' Occupation Tax, Use Tax, Service Occupation
Tax or Service Use Tax. See 86 Ill. Adm. Code 130. 2105(a)(3). (This is a GIL.)

May 12, 2014
Dear Xxxx:
This letter is in response to your letter dated April 22, 2014, 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 asking for an opinion letter to two sales matters:
Our company will be selling and renting electronic textbooks to students in public
and/or private schools. This transaction will be done entirely via the internet. Is this a
taxable transaction?
Thank you for your assistance with this matter. If you have any questions or concerns,
please call me at xxx-xxx-xxxx.
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. 86 Ill. Adm.
Code 130.101. The Use Tax Act imposes a tax upon the privilege of using in this State tangible
personal property purchased at retail from a retailer. 86 Ill. Adm. Code 150.101. If no tangible
personal property is being transferred to the customers, then neither Illinois Retailers’ Occupation Tax
nor Use Tax would apply. Likewise, the Service Occupation Tax Act and Service Use Tax are
imposed on the transfer of tangible personal property incident to sales of service. 86 Ill. Adm. Code
140.101 and 160.101. If no tangible personal property is being transferred to customers incident to
the services being provided then no Illinois Service Occupation Tax or Service Use Tax would apply.
The Department does not consider the viewing and downloading of text and similar data over
the Internet such as downloaded books, musical recordings, newspapers or magazines to be the
transfer of tangible personal property. These types of transactions represent the transfer of
intangibles and are thus not subject to Retailers' Occupation and Use Tax. However, downloads of

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May 12, 2014

canned software, as defined more fully in 86 Ill. Adm. Code 130.1935, are subject to Retailers'
Occupation and Use Tax. See 86 Ill. Adm. Code 130. 2105(a)(3). Thus, the electronic download of a
book is not subject to Retailers' Occupation Tax, Use Tax, Service Occupation Tax or Service Use
Tax liability in this State regardless of whether it is rented or sold.
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

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