What documentation applied when a registered truck-body manufacturer drop-shipped a vehicle to Illinois for an unregistered reseller?

Plain-English summary

A registered truck-body manufacturer sold to an out-of-state customer that was not registered in Illinois, then delivered the completed vehicle directly to that customer's Illinois buyer. The manufacturer asked which exemption document to obtain and whether it had to receive the certificate before or after the sale.

IDOR described this as the normal drop-shipment pattern: an out-of-state purchaser buys for resale from an Illinois-registered company and directs delivery to its Illinois customer. The Department referred the manufacturer to the drop-shipment rule and the seller's certificate-of-resale responsibilities.

The GIL did not select a specific form or answer the timing question. It did caution that Form ST-587, the Equipment Exemption Certificate, generally applied to equipment primarily used in graphic arts, manufacturing or assembly, production agriculture, or specified coal and aggregate activities—and excluded motor vehicles required to be registered under the Illinois Vehicle Code.

What this means for you

Do not substitute an equipment-exemption form for resale documentation merely because the delivered product is commercial equipment. A seller in this pattern should analyze the resale-certificate requirements in 86 Ill. Adm. Code 130.1405. This GIL did not provide a fact-specific safe harbor.

Common questions

Did IDOR approve Form ST-587 for the completed vehicle? No.

Did the letter say exactly when the resale certificate had to be received? No.

What rules did IDOR identify? The drop-shipment and certificate-of-resale regulations.

Citations and references

• 86 Ill. Adm. Code 130.225.
• 86 Ill. Adm. Code 130.1405.

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-15-0079-gil.pdf

Original ruling text

ST 15-0079-GIL 12/16/2015 SALE FOR RESALE
This letter discusses the standard drop-shipment scenario and certificates of resale. See 86
Ill. Adm. Code 130.225 and 86 Ill. Adm. Code 130.1405. (This is a GIL.)

December 16, 2015

Dear Xxxxx:
This letter is in response to your letter dated October 9, 2015, 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 a manufacturer of truck bodies, with manufacturing sites in STATE 1, STATE 2,
STATE 3, STATE 4, STATE 5, STATE 6 and STATE 7. We are currently registered in
the state of Illinois.
We recently had a STATE 5 customer buy directly from one of our manufacturing sites
to which we delivered directly to their customer in Illinois. Our STATE 5 customer is not
registered in Illinois. I called the ILDOR twice for advice on sales tax exemption for this
sale.
The first call it was suggested our STATE 5 customer complete form CRT–61 Certificate
of Resale. It was mentioned since this was a sale for resale our customer's end-user
would be responsible for the sales tax. It was also suggested that we retain from our
STATE 5 customer supplementary information to document the sale for resale.
Supplementary documentation included invoice from the purchaser to his customer
showing that the item was actually resold, along with a statement from the purchaser
explaining why it had not obtained a resale certifying that the purchase was a purchase
for resale in Illinois.
The second call to the ILDOR resulted in the suggestion to use Form ST–587
Equipment Exemption Certificate. Reasoning that since the sale was of a completed
vehicle the end user will pay the sales tax when they register the vehicle in the state of
Illinois.

Since ABC has several customers under the same circumstance we would like a
general letter ruling regarding which document our customers should supply to us in
order for us to not charge sales tax on their transaction. Also, do we need to accept the
certificate prior or after the sale?
We appreciate your response.

DEPARTMENT’S RESPONSE:
The Department’s regulations regarding drop shipments can be found at 86 Ill. Adm. Code
130.225 and a Seller’s Responsibility to Obtain Certificates of Resale and Requirements for
Certificates of Resale at 86 Ill. Adm. Code 130.1405. A drop-shipment situation is normally one in
which an out-of State purchaser makes a purchase for resale from a company which is registered
with Illinois and has that company drop-ship the property to the Purchaser’s customer located in
Illinois.
Note, generally, Form ST-587, entitled “Equipment Exemption Certificate” is given to the seller
by the purchaser when the purchaser is purchasing equipment that will be used primarily (1) in
graphic arts production; (2) in the manufacturing or assembling of tangible personal property for
wholesale or retail sale or lease; (3) in production agriculture; or (4) for coal and aggregate
exploration and related mining, off-highway hauling, processing, maintenance, and reclamation, but
excluding motor vehicles required to be registered under the Illinois Vehicle Code.
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.]
Sincerely,

Debra M. Boggess
Associate Counsel
DMB:ej