What corrections did Illinois give another state's survey about private vehicle sales, rentor sales, and long-term motor-vehicle leases?

Plain-English summary

Another state asked Illinois to review a recurring survey on motor-vehicle transactions. IDOR would not approve an outside publication, but said the chart generally appeared correct and suggested clearer captions separating retail sales from occasional or isolated sales.

The letter added that private-party vehicle transfers were subject to Illinois's Private Party Vehicle Use Tax. Businesses renting or leasing passenger cars were retailers when they sold those vehicles.

For qualifying motor vehicles bought for leases longer than one year after January 1, 2015, the transaction remained taxable, but selling price was the consideration under the lease contract rather than the leasing company's dealer purchase price. No trade-in credit applied when that alternate base was used. Private-party taxable vehicle sales also received no trade-in credit.

What this means for you

Vehicle tax depends on whether the sale is retail, private-party, former-rental, or part of a qualifying long-term lease. Do not apply one survey line across those different transaction types.

Common questions

Were long-term lease vehicles exempt? No.

What was the special tax base? Qualifying lease-contract consideration.

Was trade-in credit allowed? Not for the qualifying alternate lease base or private-party taxable sales described.

Citations and references

• 625 ILCS 5/3-1001 et seq.; 86 Ill. Adm. Code 151.101 et seq.
• 35 ILCS 120/1c.
• Public Acts 98-628 and 98-1080.

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-16-0061-gil.pdf

Original ruling text

ST 16-0061-GIL 11/02/2016 MOTOR VEHICLES
This letter responds to a survey concerning taxation of vehicles. (This is a GIL.)

November 2, 2016
Dear Xxxxx:
This letter is in response to your e-mail dated October 5, 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:
Each year the STATE Department of Revenue publishes information
regarding the taxability of the sale or transfer of motor vehicles that are:


sold in STATE to residents of another state; and



purchased in another state and brought into STATE.

This information is beneficial to our Department and to those motor vehicle
dealers within our state that make sales to residents of your state. So that
our Department may continue to use and distribute accurate information,
we are requesting that your agency review the specific information related
to your state and let us know of any changes that occurred in the past
year or will occur for 2017.
A copy of the document (Tax Information Publication – TIP – 120351_TIP
16A01-01 2016 Motor Vehicle Sales Tax Rate by State) issued last year is
attached.
For ease of editing, we have attached a Microsoft Word chart (State Motor
Vehicle Tax Rate Chart 10032017) of the tax rate information issued last
year is attached.

ST 16-0061-GIL

Thank you for your assistance. We would appreciate a return email with
your edits and comments to PERSON, at PERSON@XXXXX, by MONTH
02, 20XX.
DEPARTMENT’S RESPONSE:
The Department cannot approve publications other than those issued by the
Department of Revenue. We advise you to consult Illinois statutes and administrative
rules, as well as Department publications on these matters. However, the information in
the chart generally appears to be correct.
In the interest of limiting the dissemination of incomplete information, we offer the
following additional guidance and suggestions: In the “Comments” column, it is
important to note that the first sentence in this column relates to “Retail Sales” while the
remaining information in this column relates to “Occasional or Isolated Sales.” Adding
captions at the beginning of each of these provisions that note this would make this
information more clear.
General Information:
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. See 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the
privilege of using, in this State, any kind of tangible personal property that is purchased
anywhere at retail from a retailer. See 86 Ill. Adm. Code 150.101. These taxes comprise
what is commonly known as "sales" tax in Illinois. If the purchases occur in Illinois, the
purchasers must pay Use Tax to the retailer at the time of purchase. The retailers are
then allowed to retain the amount of Use Tax paid to reimburse themselves for the
Retailers’ Occupation Tax liability incurred on those sales.
With respect to the chart’s category “Exemption for Occasional or Isolated
Sales,” the State of Illinois imposes a vehicle use tax on private party (non-retail)
transactions involving motor vehicles (commonly referred to as the “Private Party
Vehicle Use Tax” or “Private Vehicle Use Tax”). See 625 ILCS 5/3-1001 et seq.
However, persons engaged in the business of leasing or renting passenger cars are
considered retailers subject to the Retailers’ Occupation Tax when they sell those motor
vehicles. See 35 ILCS 120/1c.
With respect to long-term leases of motor vehicles (i.e., the purchase of a motor
vehicle from a motor vehicle dealer by a leasing company in order to lease the motor
vehicle for a period of more than one year), there is no exemption from Retailers’
Occupation Tax or Use Tax in Illinois. Please note, however, that Public Acts 98-628
and 98-1080 changed the definition of “selling price” found in Section 1 of the Retailers’
Occupation Tax Act for sales of motor vehicles of the first division and certain motor
vehicles of the second division that are sold on or after January 1, 2015 for the purpose
of leasing the vehicle for a defined period of more than one year. The “selling price” for
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ST 16-0061-GIL

these vehicles is equal to the amount paid under the lease contract, rather than the
amount the leasing company pays to the motor vehicle dealer to purchase the vehicle.
In addition, if a motor vehicle is sold for the purpose of leasing it for a defined period
that is longer than one year and the transaction otherwise qualifies to use the amount
paid under the lease contract as the selling price, then no trade in credit is allowed.
For a sale of a motor vehicle between private parties subject to tax under 625
ILCS 5/3-1001 et seq. (i.e. an occasional or isolated sale), no trade-in credit is allowed.
See 86 Ill. Adm. Code 151.101 et seq.
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

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