Did an Illinois municipality owe Gas Revenue Tax when its own gas system supplied municipal buildings without billing them?

Short answer The tax measured on that distribution was zero. Gas Revenue Tax was the lower of 2.4 cents per therm or 5% of gross receipts for each customer and billing period. Because the municipality received no gross receipts when it supplied gas to its own buildings, the 5%-of-receipts measure was zero and therefore the lower amount.

State

Ruling

ST 16-0019-GIL

Tax type

Illinois Retailers' Occupation (Sales & Use) Tax

Issued

2016-05-02

Issued by

Illinois Department of Revenue

Requested by

A municipality asking about natural gas supplied from its own system to municipal buildings without internal billing

Topics

gas revenue tax municipality natural gas gross receipts

Source

View Original PDF

Apply this to your situation

This page answers the general question as of 2016. Ask about yours and see what current Illinois tax law says, with citations.

Disclaimer: This is an official Illinois Department of Revenue General Information Letter (GIL), issued under 2 Ill. Adm. Code 1200.120. A GIL merely directs a taxpayer to the relevant Department regulations or other sources of information; it is NOT a statement of Department policy and is NOT binding on the Department. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Illinois tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A municipality operated its own gas system and supplied natural gas to municipal buildings without billing those buildings.

Illinois Gas Revenue Tax was calculated for each customer and billing period as the lower of 2.4 cents per therm or 5% of the supplier's gross receipts from that customer.

Because the municipality received no gross receipts for gas supplied to its own buildings, the gross-receipts measure was zero. IDOR therefore said the tax measured on that distribution was zero.

What this means for you

The result followed from the lower-of-two-rates formula and the absence of gross receipts. The letter did not create a general municipal exemption from Gas Revenue Tax.

Common questions

Did the municipality owe 2.4 cents per therm anyway? No, because zero under the gross-receipts measure was the lower rate.

Was this a blanket exemption for municipal gas systems? No.

Citations and references

35 ILCS 615/2.
86 Ill. Adm. Code 470.110 and 470.185.

Source

Original ruling text

ST 16-0019-GIL 05/02/2016 GAS REVENUE TAX:
The Gas Revenue Tax is imposed upon persons engaged in this State in the business of distributing, supplying, furnishing or selling gas to persons for use or consumption and not for resale. See 86 Ill. Adm. Code 470.110 and 470.185. (This is a GIL.)

May 2, 2016

Dear Xxxxx:
This letter is in response to your letter dated October 23, 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: I have a question and I was asked to write to your division. If a municipality owns its own gas system and uses natural gas for its buildings but doesn’t bill out for that gas used does it need to pay gas revenue tax? DEPARTMENT’S RESPONSE: The Gas Revenue Tax Act imposes a tax on persons engaged in the business of distributing, supplying, furnishing or selling gas to persons for use or consumption and not for resale at the rate of 2.4 cents per therm of all gas which is so distributed, supplied, furnished, sold or transported to or for each customer in the course of such business, or 5% of the gross receipts received from each customer from such business, whichever is the lower rate as applied to each customer for that customer's billing period. See 35 ILCS 615/2 and 86 Ill. Adm. Code 470.110.

If a municipality supplies natural gas to its buildings and does not receive any gross receipts for supplying the natural gas to those buildings, the Gas Revenue Tax measured on that distribution of natural gas would be zero. See 86 Ill. Adm. Code 470.185. 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,

Samuel J. Moore
Associate Counsel
SJM:bkl

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