Does a casual seller — an individual selling personal property, a company selling small items at auction, or an auction seller — owe Illinois sales or use tax on the transaction?

Plain-English summary

An accountant wrote to the Illinois Department of Revenue asking about three recurring client scenarios: (1) an individual buying a piece of unlicensed equipment from another individual for personal use, (2) a corporation buying small items at auction (online or otherwise) when no sales tax was charged, and (3) that same corporation instead acting as the seller at auction. Rather than answering each scenario with a yes/no, the Department issued a General Information Letter (GIL) that lays out the general legal framework for the occasional sale (also called "isolated sale") exemption and leaves the client-specific application to the taxpayer.

The core rule: Illinois' Retailers' Occupation Tax ("ROT," commonly just called sales tax) applies only to persons who are engaged in the business of selling tangible personal property at retail. If a sale is truly isolated or occasional — not part of a regular selling business — the seller owes no Retailers' Occupation Tax on it, and correspondingly the buyer owes no matching Use Tax. But the letter is explicit that this exemption is not automatic: it generally applies when someone buys an item, uses it, and later disposes of it by selling it, and it does not apply if the seller holds themselves out as being in the business of selling that item or similar property.

For auctions specifically, the letter explains that tax liability turns on whether the auctioneer discloses the identity of the principal (owner) of the property being sold. If the principal is disclosed, liability depends on whether that principal is a retailer or would themselves qualify for the occasional-sale exemption. If the principal is undisclosed, the auctioneer is treated as the seller and owes Retailers' Occupation Tax, with the purchaser owing a corresponding Use Tax.

What this means for you

Individuals buying personal property from another individual

If you buy an item (not one requiring a title/license, like a vehicle) from another individual who is not in the business of selling that kind of property, the sale is likely an occasional/isolated sale, and Retailers' Occupation Tax would not apply to the seller — which generally means no matching Use Tax liability for you as the buyer. This letter doesn't resolve the specific "unlicensed equipment" fact pattern presented, but it identifies the isolated-sale test as the relevant framework.

Businesses and corporations buying at online or in-person auctions

Whether you owe Use Tax on small items bought at auction without sales tax being charged depends on who the seller (principal) is and whether their identity was disclosed by the auctioneer. If the principal is a hobbyist making an isolated sale, no tax may be owed; if the principal is a retailer, or is undisclosed (making the auctioneer the seller), tax liability can attach. You may need to ask the auction platform whether the principal was disclosed and whether that principal regularly sells that type of item.

Businesses or corporations selling at auction

If your corporation is the one selling items at auction, ask whether you are "holding yourself out" as being in the business of selling that type of property. Regular or repeated sales of similar items — even through an auction platform — can push you out of the occasional-sale exemption and require you to charge and remit Retailers' Occupation Tax as a retailer.

Accountants and tax professionals

Because this is a GIL, not a Private Letter Ruling, it is not binding on the Department and doesn't resolve your client's specific facts. If you need a determination you can rely on for a particular transaction, the letter points to the PLR process under 2 Ill. Adm. Code 1200.110, which requires a specific-facts request.

Common questions

Q: Does this letter say whether the individual buyer owes use tax on the equipment purchase?
A: No. The letter declines to resolve that specific fact pattern and instead explains the general isolated/occasional sale test: no tax where the seller isn't in the business of selling that property and doesn't hold themselves out as such.

Q: Does a corporation always owe use tax on items bought at auction without sales tax charged?
A: Not necessarily. It depends on whether the principal/seller was disclosed and whether that principal is a retailer or qualifies for the occasional-sale exemption. If the principal is undisclosed, the auctioneer is treated as the seller and Retailers' Occupation Tax (and a corresponding Use Tax) applies.

Q: If a corporation sells items at auction, does it need to collect and remit sales tax?
A: It depends on whether the corporation is "engaged in the business" of selling that type of property or holds itself out as such. A truly isolated sale of an item the corporation isn't in the business of selling may qualify for the occasional-sale exemption; regular sales of similar property would not.

Q: Is this letter binding on the Illinois Department of Revenue?
A: No. It is a General Information Letter issued under 2 Ill. Adm. Code 1200.120, which by definition directs taxpayers to relevant regulations but is not a statement of Department policy and is not binding. A binding answer would require a Private Letter Ruling request under 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes and rules:

• 35 ILCS 120/1 (Retailers' Occupation Tax Act, definition of "person")
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposed on persons engaged in the business of selling tangible personal property at retail)
• 86 Ill. Adm. Code 130.110 (occasional/isolated sales exemption from Retailers' Occupation Tax)
• 86 Ill. Adm. Code 130.1915 (auctioneers' liability depending on disclosure of principal)
• 86 Ill. Adm. Code 150.101 (Use Tax imposed on tangible personal property purchased at retail)
• 86 Ill. Adm. Code 150.130 (retailer collection of Use Tax; purchaser liability if not collected)
• 2 Ill. Adm. Code 1200.110 (procedures for requesting a Private Letter Ruling)
• 2 Ill. Adm. Code 1200.120 (General Information Letters are not binding Department policy)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2017.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2017/st-17-0037-gil.pdf

Original ruling text

ST 17-0037-GIL

12/06/2017

OCCASIONAL SALE

When persons sell tangible personal property which they are not otherwise engaged in the
business of selling, such transactions may be occasional sales not subject to Retailers
Occupation Tax. See 86 Ill. Adm. Code 130.110. (This is a GIL.)

December 6, 2017

Dear Xxxxx:
This letter is in response to your letter dated September 13, 2017, in which you requested
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:
Several questions have been asked of us recently by clients that I need an official
answer.
(1) Individual (not a business) purchase a piece of equipment for personal use from
another individual. This is not an item that is licensed. Does the purchaser owe use
tax on this item?
(2) A corporation purchases small items on auction (on-line or otherwise) when sales
tax is not charged. Does corporation owe use tax on these purchases?
(3) Same as (2) above, but corporation is the seller. Should the corporation charge and
remit sales tax?
Please help us decide these issues for our clients.
clarification.
DEPARTMENT’S RESPONSE:

If you prefer, please call for

ST 17-0037-GIL
Page 2

The Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. See 86
Ill. Adm. Code 130.101. 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. The retailers are
then allowed to retain the amount of Use Tax paid to reimburse themselves for Retailers' Occupation
Tax which they are required to and do pay to the Department with respect to the same sale. If the
retailer does not collect the Use Tax from the purchaser for remittance to the Department, the
purchaser is responsible for remitting the Use Tax directly to the Department. See 86 Ill. Adm. Code
150.130.
A person, however, does not incur Retailers' Occupation Tax liability on the gross receipts from
an isolated or occasional sale. See 86 Ill. Adm. Code 130.110 regarding "Occasional Sales."
Consequently, the purchaser of that tangible personal property does not incur a corresponding Use
Tax liability on that purchase. See 86 Ill. Adm. Code 150.101(d). As a general proposition, the
occasional sale exemption is only available when a person (as defined in Section 1 of the Retailers’
Occupation Tax Act, 35 ILCS 120/1) purchases an item and then, after using the item, disposes of it
by selling it. See 86 Ill. Adm. Code 130.110. However, the sale will not qualify as an isolated or
occasional sale if the person holds himself out as being engaged in the retail sale of that item or
similar type of tangible personal property.
With respect to auctions, an auctioneer and purchaser’s liability depends upon disclosure of
the identity of the principal or owner of the property being auctioned. See the Department’s
regulation at 86 Ill. Adm. Code 130.1915. If the principal is disclosed, the tax liability attributable to
him depends upon whether he is a retailer or whether he would qualify as an isolated or occasional
seller of the type of property that is being sold. If the principal is not disclosed, the auctioneer is
considered the seller and is subject to Retailers’ Occupation Tax; the purchaser incurs a
corresponding Use Tax liability.
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,

Debra M. Boggess
Associate Counsel
DMB:bkl