Did Illinois's historical full exemption for biodiesel blends above 10% include 10.1% through 10.9%, and how were those sales and overpayments reported?

Plain-English summary

An Illinois travel-center operator had treated biodiesel blends of 10.1% through 10.9% as only partly exempt because Form ST-1 did not provide an obvious reporting line.

IDOR confirmed that the historical full exemption for blends containing more than 10% but no more than 99% biodiesel included those decimal blends. The exemption described in the letter applied to sales made on or before December 31, 2018. Until the form changed, taxpayers could report blends above 10% but below 11% on Form ST-1, Schedule A, Line 28, "Other motor fuel deductions," using the calculation from Line 25.

For past overpayments, Form ST-6 was not the correct form when the taxpayer had paid the amount shown on its original ST-1. It had to file Form ST-1-X for the same period. A claimant also had to show that it bore the tax burden or had unconditionally repaid the collected tax to the purchaser; only the retailer that paid the Department could claim the credit after refunding the purchaser.

What this means for you

This reporting instruction concerned a historical exemption ending December 31, 2018. For affected open periods, the ruling directs taxpayers to amend the original ST-1 period rather than use ST-6 and to satisfy the tax-burden or customer-repayment rule.

Common questions

Did 10.1% biodiesel qualify as more than 10%? Yes.

Which line did the letter prescribe? Schedule A, Line 28, using the Line 25 calculation until Form ST-1 changed.

Could the purchaser claim the credit directly? No. The letter said only the retailer that paid the Department could claim it, after refunding tax collected from the purchaser when necessary.

Citations and references

• 35 ILCS 120/2-10.
• 86 Ill. Adm. Code 130.1501.
• Forms ST-1, ST-1-X, and ST-6.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2016.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2016/st-16-0046-gil.pdf

Original ruling text

ST 16-0046-GIL 09/15/2016

RETURNS

The exemption from Retailers’ Occupation Tax for sales of biodiesel blends with more than
10% biodiesel includes biodiesel blends with more than 10% but less than 11% biodiesel and,
until the Form is changed, may be reported on Form ST-1 under “Other motor fuel deductions.”
See 35 ILCS 120/2-10. (This is a GIL.)

September 15, 2016
Dear Xxxxx:
This letter is in response to your letter dated February 3, 2016, 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:

COMPANY, Illinois Account ID ####, hereby requests a private letter ruling from the
Illinois Department of Revenue (Department).
Background
COMPANY is not currently under audit by the Department for the tax in question nor is it
involved in litigation on the issue discussed in this letter. To the best of COMPANY’s
knowledge, the Department has not previously ruled and COMPANY has not previously
sought a private letter ruling on this issue.
After conducting research on this issue, COMPANY is of the opinion that Illinois case
law, statutes and regulations are not dispositive of the subject of this request. In fact,
COMPANY seeks this private letter ruling for clarification on how to properly claim
exemptions on Department forms.
COMPANY operates travel centers across the United States including 46 locations
within the State of Illinois. At these travel centers, COMPANY sells motor fuel (gasoline
and diesel) at its pumps along with a myriad of retail items inside the store. As such,

COMPANY files Form ST-1, Sales and Use Tax and E911 Surcharge Return with the
Department on a monthly basis.
COMPANY is the largest seller of over the road diesel in the United States. As
biodiesel products have become more prevalent in the marketplace and tax incentives
have been created, COMPANY has incorporated those products into its diesel fuel
supply chain including within the State of Illinois.
Discussion
ILCS § 120/2-10 [sic] states “the tax imposed by this Act does not apply to the proceeds
of sales made on or after July 1, 2003 and or before December 31, 2018” of “biodiesel
blends, as defined in the Use Tax Act, with more than 10% but no more than 99%
biodiesel.”
Illinois Form ST-1 (rev.09/15), Line 23 states “Biodiesel blend (90-99 percent petroleumbased product).” Line 23a provides a box to include receipts and the calculation to
claim the 20% exemption for qualifying receipts. Illinois Form ST-1 (rev. 09/15) states
“Biodiesel blend (1-89 percent petroleum-based product).” Line 24a provides a box to
include receipts and the calculation to claim the 100% exemption for qualifying receipts.
ILCS § 120/2-10 [sic] clearly states that biodiesel blends of more than 10%, but no more
the 99% biodiesel, qualify for a full sales tax exemption. However, Form ST-1 (rev.
9/15), Line 23a and Line 24a do not provide a space to claim certain sales of biodiesel
blends of more than 10%, specifically those between 10.1 and 10.9% biodiesel.
Issues
1) The plain language of the statute supports a full exemption of sales of
biodiesel blends between 10.1 and 10.9% biodiesel from Illinois sales
tax. Is COMPANY’s understanding of this exemption correct?
2) Assuming COMPANY’s understanding is correct, it is unclear where
the 10.1 to 10.9% biodiesel blends should be reported on the current
design of Form ST-1. Where should COMPANY claim these exempt
sales on the Form ST-1? Should they be claimed in some other
manner?
3) COMPANY has not historically claimed the full exemption on 10.1 to
10.9% biodiesel blends on its returns. Would COMPANY be entitled to
a refund for any Illinois Retailer’s Occupation Tax paid on 10.1 to
10.9% biodiesel blends in open statutory periods with supporting
documentation?
Conclusion
COMPANY takes advantage of Illinois’ sales tax incentives located in ILCS § 120/2-10
[sic]. For all open tax periods and several preceding years, COMPANY has claimed the
20% exemption on sales of biodiesel blends between 1% and 10%. During this same

timeframe, COMPANY has only claimed the full exemption on sales of biodiesel blends
of 11% or greater.
As indicated in the Department’s General Information Letter 07-0057-GIL (06/07/2007),
Form ST-1, in a previous format, “does not make any provisions for how to report
decimal amounts of fuel in the blend.” Further, the GIL states that the form “makes it
difficult for the taxpayer to properly calculate the appropriate exemption.” These
statements are still applicable to the current version of the Form ST-1.
As a result of the text and format of Form ST-1 and informal guidance from the
Department, COMPANY to its detriment, has not claimed a full sales tax exemption for
those biodiesel blends that are more than 10% biodiesel (10.1 to 10.9 percent
biodiesel). COMPANY’s interpretation of the exemption statute is reasonable based on
the plain language of the statute and should be able to claim the full exemption on all
qualifying biodiesel blends which are more than 10% biodiesel.
COMPANY seeks additional guidance from the Department on the appropriate method
to claim the full exemption of these biodiesel blends for future periods. Please provide
additional information on how COMPANY should properly claim these exempt sales.
Additionally, COMPANY wants to claim all overpayments of tax paid on these biodiesel
blends. COMPANY intends to file Form ST-6, Claim for Sales and Use Tax
Overpayment for the overpayment of Illinois tax on biodiesel blends between 10.1 to
10.9 percent biodiesel. If an alternative method or expedited procedure is available,
please advise COMPANY on the most effective way to claim these overpayments of
tax.
Thank you for your consideration of this request. If you should require additional
information or have any questions, please contact me at [email protected]
or ####.
DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization” provides that
“[w]hether to issue a private letter ruling in response to a letter ruling request is within the discretion of
the Department. The Department will respond to all requests for private letter rulings either by
issuance of a ruling or by a letter explaining that the request for ruling will not be honored.” 2 Ill. Adm.
Code 1200.110(a)(4). The Department recently met and determined that it would decline to issue a
Private Letter Ruling in response to your request. We hope however, the following General
Information Letter will be helpful in addressing your questions.
Biodiesel blends:
Section 2-10 of the Retailers’ Occupation Tax Act (35 ILCS 120/2-10) provides that with
respect to biodiesel blends with no less than 1% and no more than 10% biodiesel, the tax applies to
80% of the proceeds of sales made on or before December 31, 2018. With respect to biodiesel
blends with more than 10% but no more than 99% biodiesel, the tax does not apply to the proceeds
of sales made on or before December 31, 2018. The exemption for biodiesel blends with more than
10% biodiesel includes those blends with more than 10% but less than 11% biodiesel. However,
Form ST-1, Schedule A, Section 2, captioned “Motor fuel deductions” does not make any specific

provisions for how to report biodiesel blends with more than 10% but less than 11% biodiesel. The
Form also bases the exemption calculation on the percentage of petroleum-based product rather than
the percentage of biodiesel included in the blend; i.e., “1-89 percent petroleum based product.” This
makes it difficult for the taxpayer to report biodiesel blends with more than 10% but less than 11%
biodiesel. Until such time as Form ST-1 is changed to allow for the reporting of all exempt biodiesel
blends on one line, taxpayers may report sales of biodiesel blends with more than 10% but less than
11% biodiesel on Line 28 of Schedule A labeled “Other motor fuel deductions,” using the same
calculation as provided on Line 25 “Biodiesel blend (1-89 percent petroleum-based product).”
Claim for credit or refund:
If a taxpayer pays an amount of tax under the Retailers' Occupation Tax Act that is not due,
either as a result of a mistake of fact or an error of law, the taxpayer may file a claim for credit with
the Department. See 86 Ill. Adm. Code 130.1501. Please note that only persons who have actually
paid tax to the Department can file a claim for credit.
No credit shall be given the taxpayer unless the taxpayer shows that he or she has borne the
burden of the tax or has unconditionally repaid the amount of the tax to the purchaser from whom it
was collected. In other words, if a purchaser has paid tax to a retailer, only that retailer can file a
claim for credit. The retailer must first refund tax money paid by the purchaser before proceeding with
the claim. Once the retailer has done this, he or she must apply for the credit in the manner described
in the regulation. Retailers are not required by law to apply for such credits; rather, this procedure is
voluntary. Whether or not the retailer refunds the tax paid and files a claim for credit with the
Department is a private matter between the retailer and the purchaser.
Please note that the form ST-6 Claim for Sales and Use Tax Overpayment/Request for Action
on a Credit Memorandum, is not the form to use in the situations described in this letter. If a taxpayer
pays the amount that was shown due on an original Form ST-1, Sales and Use Tax Return, then the
taxpayer must file a corresponding ST-1-X, Amended Sales and Use Tax Return for that same period
if it later determines that all or part of the tax shown on the original return was paid in error.
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,

Samuel J. Moore
Associate Counsel
SJM:bkl