Did an Illinois self-assessing electricity purchaser include third-party supplier bills in taxable purchase price?

Plain-English summary

A self-assessing electricity purchaser asked whether bills from a third-party retail electric supplier, rather than its usual supplier, entered the Electricity Excise Tax purchase price.

IDOR said yes. The statutory definition of purchase price broadly covered consideration paid for electricity distribution, supply, furnishing, sale, transmission, and delivery, plus services directly related to production, transmission, or distribution.

The self-assessing return used aggregate purchase price. Unless specifically excluded, it included payments to the electricity supplier and to a separate transporter. No deduction was allowed for service, commodity, materials, labor, or other expenses.

Under the 2015 law described in the letter, the self-assessing purchaser paid 5.1% on the monthly purchase price for all electricity distributed, supplied, furnished, sold, transmitted, and delivered to it.

What this means for you

Changing suppliers did not remove the bill from the tax base. A self-assessing purchaser had to aggregate supply, transporter, and directly related service payments under the broad statutory definition.

Common questions

Were third-party supplier charges included? Yes.

Were transmission and delivery included? Yes.

Is the 5.1% rate presented as current? No; it is the rate stated in this 2015 GIL.

Citations and references

• 35 ILCS 640/2-3(d) and 640/2-4(a).
• 86 Ill. Adm. Code 511.110(c).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0008-gil.pdf

Original ruling text

ST 15-0008-GIL 01/12/2015 ELECTRICITY EXCISE TAX: The purchase price on which a
self assessing purchaser must pay tax under the Electricity Excise Tax Law includes charges for
electricity, transmission or any other service related to the sale or delivery of the electricity. See
35 ILCS 640/2-4(a) and 86 Ill. Adm. Code 511.110(c). (This is a GIL.)

January 12, 2015

Dear Xxxx:
This letter is in response to your letter dated December 16, 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:
This letter seeks clarification on the enclosed response from the Illinois
Department of Revenue, dated April 3, 2014, in regards to becoming a self
assessing purchaser of electricity. More specifically, if a customer elects to
become a self assessing purchaser of electricity and is taking supply of electricity
from a Third Party Retail Electric Supplier (i.e. not SUPPLIER), should the Retail
Electric Suppliers bills be included in the purchase price?
DEPARTMENT’S RESPONSE:
The Electricity Excise Tax Law ("Law") (35 ILCS 640/1 et seq.) imposes a tax upon the
privilege of using in this State electricity purchased for use or consumption and not for
resale. 35 ILCS 640/2-4. Electricity Excise Tax is imposed on self-assessing purchasers
at the rate of 5.1% of the self-assessing purchaser’s purchase price for all electricity
distributed, supplied, furnished, sold, transmitted and delivered to the self-assessing
purchaser in a month. 35 ILCS 640/2-4(a).

(d) "Purchase price" means the consideration paid for the distribution, supply,
furnishing, sale, transmission or delivery of electricity to a person for nonresidential use or consumption (and for both residential and non-residential use or
consumption in the case of electricity purchased from a municipal system or
electric cooperative described in subsection (b) of Section 2-4) and not for resale,
and for all services directly related to the production, transmission or distribution
of electricity distributed, supplied, furnished, sold, transmitted or delivered for
non-residential use or consumption, and includes transition charges imposed in
accordance with Article XVI of the Public Utilities Act and instrument funding
charges imposed in accordance with Article XVIII of the Public Utilities Act, as
well as cash, services and property of every kind or nature, and shall be
determined without any deduction on account of the cost of the service, product or
commodity supplied, the cost of materials used, labor or service costs, or any
other expense whatsoever.” 35 ILCS 640/2-3(d).
The definition of “purchase price” is very broad. The return requires a self-assessing
purchaser to report the “aggregate” purchase price. Generally, unless specifically excluded in
the definition of “purchase price,” all consideration or payments made by the self-assessing
purchaser to the supplier of the electricity and to the transporter, if the transporter is different
from the supplier, for the distribution, supply, furnishing, sale, transmission and delivery of such
electricity, and made to them for any services directly related to the production, transmission or
distribution of electricity distributed, supplied, furnished, sold, transmitted or delivered for nonresidential use or consumption, are taxed at the 5.1% rate. Moreover, “purchase price” must be
determined without any deduction on account of the cost of the service, product or commodity
supplied, the cost of materials used, labor or service costs, or any other expense whatsoever.
The price of electricity that a self-assessing purchaser buys from any electric supplier is
included in the aggregate purchase price on which a self-assessing purchaser pays 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,

Richard S. Wolters
Associate Counsel
RSW:kd