What does Illinois Private Letter Ruling ST 18-0005-PLR conclude about Local Taxes?

Plain-English summary

This Illinois Private Letter Ruling addresses where a multistate fuel-marketing business must remit local (home rule municipal) Retailers' Occupation Tax ("ROT") on its Illinois sales -- a question that turns on where the "business of selling" is actually carried out, not simply where fuel is delivered or where title passes.

The taxpayer was a division of a larger energy and lubricants distribution company that had recently formed a new commercial unit to sell fuel in bulk to railroads and large trucking companies. That unit was headquartered in an Illinois city, where its sales director negotiated and signed all contracts, accepted purchase orders, and where invoices were checked and issued to customers, even though back-office invoice creation happened at the parent company's out-of-state headquarters and the unit held no fuel inventory of its own. The taxpayer asked the Department to rule that, under the Illinois Supreme Court's decision in Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130, and the Department's resulting regulation at 86 Ill. Adm. Code 270.115, its sales should be sourced to that Illinois city for local ROT purposes regardless of where the fuel was actually delivered or used.

Under 86 Ill. Adm. Code 270.115, a sale is sourced to whichever single Illinois location has three or more of five "primary selling activities": (1) location of sales personnel who solicit and bind the seller, (2) location where the seller takes the action that binds it to the sale, (3) location where payment is tendered/received or invoices are issued, (4) location of inventory at the time of sale, and (5) location of the retailer's headquarters. The Department agreed the first two activities (solicitation/negotiation and contract-binding) occurred at the Illinois sales office, and further concluded that invoice issuance also occurred there because the local manager reviewed order information, checked invoices for accuracy, and issued them to customers from that office -- even though the invoices were physically generated at the out-of-state parent headquarters. The Department rejected the argument that the Illinois office was the unit's "headquarters" for the fifth test, since the unit was merely a division (not a separate legal entity) of a company that admitted its actual headquarters were out of state; the Illinois location was instead treated as a "sales office." The inventory test did not apply because the unit held no inventory.

With three of the five primary activities (solicitation/binding, contract execution, and invoicing) located in the Illinois city, the Department concluded the taxpayer's sales were sourced there, obligating it to remit that city's home rule municipal ROT on those sales.

What this means for you

Multistate sellers and distributors

If your business solicits, negotiates, executes contracts, and issues invoices from a single Illinois office, this ruling illustrates how the Department will likely find "the business of selling" happens at that location for local ROT purposes -- even if your ultimate corporate headquarters, inventory, or back-office invoice generation is elsewhere. A sales office can be treated as the sourcing location if it independently satisfies three of the five primary tests.

Business owners with divisions or business units

The ruling underscores that a division is not treated as its own legal entity for the "headquarters" test -- the Department looked to where the parent corporation's actual headquarters were, not where the division's local sales office sat. If you operate through divisions or business units, be careful about which location's activities you're counting toward each of the five tests.

Accountants and tax professionals

This PLR is a useful illustration of how 86 Ill. Adm. Code 270.115 is applied post-Hartney Fuel Oil Co. v. Hamer in a fact pattern involving remote invoice generation and non-inventory-holding sellers. Note that it is fact-specific: the Department expressly found invoice issuance occurred at the local office based on the review/approval/transmission steps performed there, not merely where the invoice document was technically created.

Common questions

Q: Where must this taxpayer remit local Retailers' Occupation Tax?
A: The Department ruled that the taxpayer's fuel sales through its commercial marketing unit are sourced to the Illinois city where its sales office is located, because three of the five primary selling activities under 86 Ill. Adm. Code 270.115 -- solicitation/binding authority, contract-binding actions, and invoice issuance -- occur there.

Q: Does it matter where the fuel is actually delivered or where title passes?
A: No. The ruling confirms that under the post-Hartney sourcing rules, the location of delivery or passage of title is not controlling; what matters is the fact-specific composite of selling activities described in 86 Ill. Adm. Code 270.115(c)(1).

Q: Why didn't the location of the sales office count as the "headquarters" for purposes of the fifth test?
A: Because the entity requesting the ruling was a division of a larger corporation, not a separate legal entity, and the parent corporation admitted its actual headquarters were located out of state. The Department treated the Illinois location as a sales office rather than the headquarters.

Q: Can another Illinois retailer rely on this ruling for its own local ROT sourcing?
A: No. This is a Private Letter Ruling issued under 2 Ill. Adm. Code 1200.110, and it binds the Department only as to the specific taxpayer who requested it, and only to the extent the facts recited in the ruling were correct and complete. Other taxpayers may find its reasoning informative, but they cannot rely on it directly -- they would need their own ruling or should look to General Information Letters or regulations for general guidance.

Citations and references

Statutes and regulations:

• 86 Ill. Adm. Code 270.115 (local ROT sourcing rules; primary and secondary selling-activity tests)
• 35 ILCS 120/2 (Retailers' Occupation Tax Act - imposition of tax)
• 35 ILCS 120/2-10 (tax measured by gross receipts)
• 86 Ill. Adm. Code 130.101 (gross receipts measure; legal incidence on seller)
• 86 Ill. Adm. Code 130.801(f) (seller bears burden of proving a sale is not taxable)
• 65 ILCS 5/8-11-1 (municipal authority to impose local ROT; ruling text cites it as "65 ILCS 5/8-111")
• 2 Ill. Adm. Code 1200.110 (PLR procedures; binding only on requesting taxpayer)

Cases cited in the ruling:

• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130 (invalidated prior local sourcing regulations; established fact-intensive business-of-selling test)
• Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316 (1943) (defines "business of selling" as composite of activities)
• Standard Oil Co. v. Department of Finance, 383 Ill. 136 (1943)
• Allis-Chalmers Manufacturing Co. v. Wright, 383 Ill. 363 (1943)
• Automatic Voting Machine Corp., 409 Ill. 438 (1951)
• Marshall & Huschart Machinery Co. v. Department of Revenue, 18 Ill. 2d 496 (1960)
• Svithiod Singing Club, 11 Ill. 2d 402 (1957); Gilligan v. Korzen, 56 Ill. 2d 387 (1974)

Related Department guidance cited: ST 15-0001-GIL (Jan. 7, 2015) (sales office separate from headquarters/inventory can be sourcing location only if it performs all three of the first primary selling activities)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0005-plr.pdf

Original ruling text

ST 18-0005-PLR 06/14/2018 LOCAL TAXES
The occupation of selling is comprised of the composite of many activities extending from the
preparation for, and the obtaining of, orders for goods to the final consummation of the sale by
the passing of title and payment of the purchase price. Thus, establishing where "the taxable
business of selling is being carried on" requires a fact-specific inquiry into the composite of
activities that comprise the retailer’s business. 86 Ill. Adm. Code 270.115. (This is a PLR.)

June 14, 2018

Dear Xxxxx:
This letter is in response to your letter dated March 2, 2018, 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.
Review of your request disclosed that all the information described in paragraphs 1 through 8
of Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY and COMPANY 1 for the issue or issues presented in
this ruling, and is subject to the provisions of subsection (e) of Section 1200.110 governing expiration
of Private Letter Rulings. Issuance of this ruling is conditioned upon the understanding that neither
COMPANY and COMPANY 1 nor a related taxpayer is currently under audit or involved in litigation
concerning the issues that are the subject of this ruling request. In your letter you have stated and
made inquiry as follows:
On behalf of our client, COMPANY 1, a division of COMPANY (“Company”), we request
the Illinois Department of Revenue to issue a Private Letter Ruling with respect to the
factual situation discussed below. Our request is pursuant to 2 Ill. Adm. Code
1200.110. We request a ruling that for purposes of determining the correct “sourcing”
for local retailer’s [sic] occupation tax (“ROT”) on sales of petroleum fuel, COMPANY 5’s
sales are subject to municipal retailer’s [sic] occupation tax in CITY, Illinois regardless of
where fuel is delivered or used. The relevant facts are outlined below.
GENERAL INFORMATION

1. Enclosed please find an original form IL 2848, Power of Attorney, authorizing
   ABC to represent COMPANY 1 before the Illinois Department of Revenue (the
   “Department”).

ST 0005-PLR
Page 2

2. This Private Letter Ruling (“PLR”) is not requested with regard to hypothetical or
   alternative proposed transactions. This PLR is requested to determine the ROT
   consequences of the actual business practices of the Company.
3. The Company is not currently engaged in litigation with the Department in regard
   to this or any other tax matter.
4. The Company is not currently under audit by the Department in regard to this or
   any other tax matter.
5. The Department has not previously ruled regarding this matter for the Company.
   In addition, the Company has not submitted the same or similar issue to the
   Department.
6. The Company requests that certain information be redacted from the PLR prior to
   dissemination to others. The Company requests that its name, address, the
   location of its sales office, the name of its representatives, all references to
   Exhibits, and the Exhibits themselves be redacted.
7. The Company knows of no authority contrary to the authorities referred to and
   cited below.

STATEMENT OF MATERIAL FACTS

1. General Overview: COMPANY, is a Corporation qualified to do business in Illinois.
   It has been in business since YEAR. COMPANY is a privately-held company
   recognized as an innovative leader in the distribution and marketing of energy,
   automotive and lubricant products in many parts of the United States. COMPANY
   has organized its business with operating divisions and business units, each focused
   on different aspects of the business of distribution and marketing of energy,
   automotive and lubricant products. The divisions include:
   a. COMPANY 1 – is a value-added distributor, marketer, trading and terminal
   operator of fuels and renewable energy products.
   b. COMPANY 2 – is a leading distributor and marketer of top-tier brands for
   tires, parts and lubricants in the vehicle aftermarket. COMPANY 2 has four
   Illinois locations with ## full time employees.
   c. COMPANY 3 – is a leading lubrication solutions provider offering a wide
   range of lubricants for commercial fleets, automotive dealerships, service
   shops, and lube and tire centers.
   d. COMPANY 4 – is a leading Compressed Natural Gas (CNG) provider offering
   fleet operators an environmentally friendly, cost-effective alternative to
   traditional fuel options. COMPANY 4 owns three CNG stations in Illinois, plus

ST 0005-PLR
Page 3
it has one additional branded station with its name on it whereby it receives a
royalty on sales.
In 2016, COMPANY decided to enter into a new line of business, marketing fuel at retail
to large commercial customers, primarily the major railroads and large trucking
companies. As part of its business strategy, COMPANY established a new business
unit within its COMPANY 1 to focus on this very unique market opportunity. The
COMPANY 5 (“COMPANY 5”) was formed and a person with significant experience
negotiating and performing fuel supply agreements with the Railroads was hired and
given authority to establish and grow the business. The COMPANY 5 is headquartered
in CITY, Illinois. Almost all of COMPANY 5’s business is won or lost on the
competitiveness of its bids in response to Requests for Proposals issued by the various
railroads and/or trucking companies. Although the COMPANY 5 doesn’t have many
customers (# or fewer), the sales volume is significant, currently in excess of # million
gallons of fuel per year. Attached as Exhibits A-E are current contracts with DEF,
GHI, JKL, MNO and PQR respectively.

2. Employees and Locations:
   CITY Illinois COMPANY 5 headquarters location.
   COMPANY 5 leases office space and owns the furniture and fixtures that are located
   in the office space. COMPANY 5 has # full-time employees at this location:
   a. Director, Commercial Sales: The Director, Commercial Sales is based out
   of CITY, IL. The Director, Commercial Sales, negotiates the contracts for all
   COMPANY 5 fuel sales. As described below, the Director, Commercial Sales
   travels significantly, primarily to meet with customers, prospective customers,
   fuel suppliers and transportation companies. See Exhibit F for Job
   Description.
   b. Manager, Bid Operations, Commercial Sales: The Manager, Bid
   Operations, works out of the CITY, IL office, with negligible travel
   requirements.
   The Manager, Bid Operations, is responsible for all
   COMPANY 5 bid operations. This Manager manages every aspect of the
   operations relative to the Company bid business, from submitting offers
   subjected to unilateral acceptance by buyer, to managing and fulfilling
   contract related purchase orders and final invoice verification and distribution.
   See Exhibit G for Job Description.
3. Responsibilities of COMPANY 1 Commercial Marketing Business Unit
   Employees:
   a. Director, Commercial Sales: The Director of Commercial Marketing Business
   for the COMPANY 5, is authorized to execute all COMPANY 5 commercial
   marketing agreements and any and all documents required thereunder and/or
   thereto, on behalf of COMPANY 5 and the Company, and to bind COMPANY
   5 and the Company to the terms and conditions of such agreements, subject
   to the limitations of all corporate approval limitations and policies, and such
   authority is retroactive to DATE. [See Exhibit H for Board of Directors
   Meeting Minutes – Delegation of Authority documentation.] Further, as

ST 0005-PLR
Page 4
authorized by COMPANY’s Board of Directors, the Director, Commercial
Sales negotiates, executes, delivers and causes to be performed, as
applicable, all agreements and documents (and any obligations thereunder
(sic)) related to the operations of COMPANY 1’s Commercial Marketing
Business Unit. These include (i) the procurement of fuel from refineries and
other suppliers; (ii) the sale of fuel to COMPANY 1’s Commercial customers.
Notwithstanding the delegation of authority provisions the organization has
put in place, the Director in CITY, IL, performs all solicitation and negotiation
of fuel sale contracts and signs all contracts that bind the COMPANY 5 to the
sales.
b. Manger, Bid Operations, Commercial Sales: This CITY, IL-based employee
reports directly to the Director, Commercial Sales.
This Manager is
responsible for coordinating the submission and acceptance of all petroleum
bid contracts; reviewing all On-boarding activities related to setting up
accepted bids including loading numbers, invoicing and payment setup;
accepting and fulfilling product orders; matching bid BOL’s and Manifests to
contract product orders; verifying, approving and submitting all bid related
invoices to bid customer; assist with all loading and supply issues relative to
bid contracts including outages and specification issues; monitoring customer
accounts receivable and payment activity relative to bid contracts including
invoicing and payment errors; managing the CITY, IL office including lease
negotiation, utilities, equipment and daily operations; documenting
communication efficiently and accurately; analyzing and resolving any/all
discrepancies expeditiously; utilizing computer to input, retrieve, organize or
display accounting information;.

4. Solicitation, Annual Contracts and Contracting Procedures
   a. Contracting Process: COMPANY 5’s fuel sales to its customers are
   contractually governed by a fuel supply agreement.
   The Director,
   Commercial Sales negotiates for COMPANY 5 all terms (including pricing) of
   the fuel supply agreement. He negotiates these agreements principally in
   CITY, Illinois. He executes all final contracts in CITY, Illinois.
   b. Pricing of Fuel Sales. COMPANY 5 sells its fuel at an arm’s-length per gallon
   price. The fuel supply agreement sets forth the pricing and other provisions
   governing the sales.
5. Order Acceptance Procedures: At the start of a contract period, most customers
   are provided with a communication in the form of an email or mailed
   correspondence, sent from the CITY office, outlining the location of terminal(s) fuel
   may be pick up, and a loading number to be used at the “rack”. Customer will pick
   up fuel at the designated location, providing its loading number. Sometimes, the
   contract requires the COMPANY 5 to arrange for a third-party transportation
   company to deliver the fuel to the customer. In the event a fuel purchase does not
   require a purchase order, it is sent to the CITY office for acceptance and processing.

ST 0005-PLR
Page 5

6. Invoicing and Payment Procedures:
   a. Invoicing: Invoices for fuel deliveries for most customers are generated
   through one of a variety of electronic data interchanges. The Manager,
   Commercial Sales reviews the relevant customer order information prior to
   invoice preparation, including fuel supply price, fuel sale price, transportation
   charges, etc. Once determined to be correct, the respective invoice is
   created in COMPANY’s CITY 1, STATE offices where it is sent electronically
   to the Manager Commercial Sales. The Manager checks invoices for
   accuracy and either emails or mails the invoices from the CITY office to the
   customer. Most contracts require invoicing within 72 hours of product delivery
   and payment within ten days of a valid invoice. [See Exhibit I for Sample
   Invoices]
7. Inventory and Title Transfer: Transfer of title and risk of loss typically occurs at
   the terminal or “rack” location, where the customer picks up the fuel. This is
   commonly referred to as “COMPANY 5 Rack Business”. In some cases, Company
   owns the fuel in transit, typically in situations when Company contracts with thirdparty transportation companies to deliver fuel to a customer location. This is
   commonly referred to as “COMPANY 5 Delivered Business”.
8. Fuel Procurement: As COMPANY 5 receives RFP’s from potential customers, as
   part of its bidding process, the Director, Commercial Sales will seek pricing for
   designated supplies to meet RFP requirements. Specifically, Director, Commercial
   Sales will contact an Energy Trader within COMPANY to seek proposals, as well as
   contact third party suppliers directly if Director, Commercial Sales believes he can
   get a better price. After securing binding proposals for the fuel supply, COMPANY 5
   will price its bid accordingly, and if the new business is won, a contract will be
   entered into, or an existing contract amended, with a third-party fuel supplier to
   cover the bid requirements. See Attached Exhibits J-M for existing supply
   contracts with STU, VWX, YZ and AAA.
   Ruling Requested
   On behalf of the Company, we respectfully request the Department to rule that
   COMPANY 1’s Commercial Marketing Business Unit sales are appropriately sourced to
   CITY, Illinois for purposes of local ROT.
   Relevant Authorities
   Description of Relevant Taxes
   The tax commonly known as the Illinois “sales tax” is composed of the ROT, the service
   occupation tax (“SOT”), the use tax (“UT”), and the service use tax (“SUT”).
   The Illinois ROT Act imposes a tax on persons engaged in the business of making retail
   sales of tangible personal property. 35 Illinois Complied Statutes 120/2 (hereinafter

ST 0005-PLR
Page 6
“ILCS”); 86 Ill. Adm. Code §130.10 (hereinafter “ILAC”). In accordance with Section 210 of the Act, this tax is measured by the seller’s gross receipts. 35 ILCS 120/2-10; 86
ILAC 130.101. The legal incidence of the ROT falls on the seller, who effects
reimbursement by collecting UT from its customer. 86 ILCA 130.101(d).
Generally speaking, all sales of tangible personal property, including fuel, are presumed
subject to the ROT unless it can be established that the transfer of property is incident
to a service or an exemption applies. The seller has the burden of proving that a
transaction is not taxable or otherwise not subject to the ROT. 86 ILAC 130.801(f).
The ROT authorizes municipalities to impose corresponding local ROT. 65 ILCS 5/8-111. The CITY [sic] of CITY, and the County of COUNTY, have not imposed a home rule
municipal ROT.
The Illinois Supreme Court previously addressed the method by which an Illinois sale is
sourced to a local jurisdiction in Hartney Fuel Oil Co. v Hamer, 2013 IL 115130 (Nov.
21, 2013). The Hartney Oil decision invalidated long-standing local tax sourcing
regulations, emphasizing a business-specific, fact-intensive sourcing methodology. The
Court noted:
[T]he location of the business of selling inside or outside the state controls, and not the
location of transfer of title, Standard Oil Co. v. Department of Finance, 383 Ill. 136, 142
(1943). The business of selling itself is:
“the composite of many activities extending from the preparation for, and
the obtaining of, orders for goods to the final consumption of the sale by
the passing of title and payment of the purchase price. It is obvious that
such activities are as varied as the methods which men select to carry on
retail business and it is therefore not possible to prescribe by definition
which of the many activities may take place in Illinois to constitute it an
occupation conducted in this State. Except for a general classification that
might be made of the many retail occupations, it is necessary to determine
each case according to the facts which reveal the method by which the
business is conducted.” Ex-Cell-O Corp., 383 Ill. at 321-22.
The Court also noted other important points:
•

The business of selling is distinct from the business of mere solicitation, as the
Retailers’ Occupation Tax Act did not authorize a tax on mere solicitation. AllisChalmers Manufacturing Co. v. Wright, 383 Ill. 363, 366 (1943).

•

In parsing the many activities making up the business of selling, some
combinations of activities within the state are insufficient for the ROT to apply
and “each case, of necessity, rests completely and entirely on the foundation of
its own facts.” Automatic Voting Machine Corp., 409 Ill. 438, 447 (1951),

•

In determining whether the business of selling has taken place in the state,
courts may look through the form of a putatively interstate transaction to its

ST 0005-PLR
Page 7
substance, in determining whether enough of the business of selling took place
within the state to subject it to the ROT. Marshall & Huschart Machinery Co. v.
Department of Revenue, 18 Ill. 2d 496, 501 (1960),
•

In evaluating Legislative intent as regards application of the ROT, Illinois courts
have concluded that the General Assembly intended to link application of the
Retailer’s [sic] Occupation Tax to consumption of government services. Svithiod
Singing Club, 11 Ill. 2d 402, 406-407 (1957); Gilligan v Korzen, 56 Ill. 2d 387,
391-92 (1974).

In response to the Hartney Oil decision, the Illinois Department of Revenue promulgated
new regulations to aid retailers in performing a fact-specific analysis for purposes of
determining in which jurisdiction a sale should be subject to local ROT. 86 ILAC
270.115 is the regulation that governs the Home Rule Municipal Retailer’s [sic]
Occupation Tax.
The regulation provides guidance for retailers who conduct selling activities in multiple
jurisdictions, providing that “[a] retailer is engaged in the business of selling in only one
location for each sale, but may be engaged in the business of selling in different
locations for different sales”. 86 ILAC 270.115(c). The regulation then sets forth five
primary selling activities and provides that “[a] retailer engaging in three or more primary
selling activities in one location in the State after a particular sale shall remit the
retailers’ occupation tax imposed by the taxing bodies with authority to impose retailers’
occupation tax on those engages [sic] in the business of selling in that location.” Id. The
primary selling activities are set forth in section (c)(1):
A) Location of sales personnel exercising discretion and authority to solicit
customers on behalf of a seller and to bind the seller to the sale;
B) Location where the seller takes action that binds it to the sale, which may be
acceptance of purchase orders, submission of offers subject to unilateral
acceptance by the buyer, or other actions that bind the seller to that sale;
C) Location where payment is tendered and received, or from which invoices are
issued with respect to each sale;
D) Location of inventory if tangible personal property that is sold is in the
retailer’s inventory at the time of its sale or delivery; and
E) The location of the retailer’s headquarters, which is the principal place from
which the business of selling tangible personal property is directed or
managed. In general, this is the place at which the offices of the principal
executives are located. When executive authority is located in multiple
jurisdictions, the place of daily operational decision making is the
headquarters.
With regard to a particular sale, if no single Illinois jurisdiction is the place of three or
more selling activities, the regulation provides that the sale will be sourced to either the

ST 0005-PLR
Page 8
locality where its inventory is located or where its headquarters is located and the
Regulation provides a list of six additional or “secondary” selling activities that must be
considered along with the primary selling activities to determine in which of the two
locations the retailer engaged in the business of selling with respect to the given sale.
Id. The secondary selling activities are set forth in section (c)(4):
A) Location where marketing and solicitation occur;
B) Location where the seller engages in activities necessary to procure goods for
sale;
C) Location of the retailer’s officers, executives or employees with authority to
set prices or determine other terms of sale if determinations are made in a
location different that that identified in subsection (c)(1)(A);
D) Location where purchase orders or other contractual documents are received
when purchase orders are accepted, processed, or fulfilled in a location or
locations different from where they are received;
E) Location where title passes; and
F) Location where the retailer displays good to prospective customers, such as a
showroom.
Discussion and Analysis
To implement the Illinois Supreme Court’s decision in Hartney Oil and the “business of
selling” principles set forth in the cases that preceded Hartney Oil, the Department
enacted new regulations. The provisions of 86 ILAC 270.115, which governs local
sourcing for home rule municipal retailers’ occupation taxes are analyzed below. As
noted above, the regulation sets forth five primary selling activities. If three or more of
these primary activities apply to a sale and occur in the same location, the sale will be
sourced to the location where the activities occur. 86 ILAC 270.115(c)(2)
Primary Selling Activities
First Primary Selling Activity Test
The first primary selling activity is the “[l]ocation of sales personnel exercising discretion
and authority to solicit customers on behalf of a seller and to bind the seller to the sale.”
86 ILAC 270.115(c)(1)(A). Company 1’s Director, Commercial Sales solicits and
negotiates all sales to potential customers. The Director, Commercial Sales’ sales,
solicitations and negotiations all occur at the CITY, Illinois COMPANY 5 headquarters.
Signature of the contract, the act that binds COMPANY 5 to the sale, is performed in
CITY, Illinois. Under the first primary selling activity, the COMPANY 5 is engaged in the
business of selling in CITY, Illinois.
Second Primary Selling Activity Test

ST 0005-PLR
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The second primary selling activity is the “[l]ocation where the seller takes action that
binds it to the sale, which may be the acceptance of purchase orders, submission of
offers subject to unilateral acceptance by the buyer, or other actions that bind the seller
to that sale.” 86 ILAC 270.115(c)(1)(B). As noted above, COMPANY 5’s Director,
Commercial Sales negotiates and executes all of its fuel sale agreements in CITY,
Illinois. In addition, any customer purchase orders under those agreements are sent to
the CITY, Illinois headquarters, are accepted in CITY, and delivery of fuel based on
those orders is directed from CITY. Under the second primary selling activity, the
COMPANY5 is engaged in the business of selling in CITY, Illinois.
Third Primary Selling Activity Test
The third primary selling activity is the “[l]ocation where payment is tendered and
received, or from which invoices are issued with respect to each sale.” 86 ILAC
270.115(c)(1)(C).
Pricing and billing terms are established as contracts are
consummated and new customer accounts are set up. COMPANY employees in CITY
1, STATE assist with that effort. COMPANY 5 can commence selling product to
customers once the set-up is completed. The applicable test for this business is the
location from which invoices are issued.1
For COMPANY 5 Rack Business, the supply terminal generates a bill of lading and/or a
delivery ticket at the time the COMPANY 5 customer’s delivery truck is loaded.
Information concerning the delivery is electronically delivered by the supply terminal to
the CITY office and COMPANY office in CITY 1, STATE. After review of the transaction
specifics by the Manager, Commercial Sales, a COMPANY 5 invoice is created and
sent to the CITY office where it is issued to the COMPANY 5 customer. Invoices are
also checked by the Manager, Commercial Sales for accuracy.
For COMPANY 5 Delivered Business, the customer’s need for fuel is electronically
communicated to COMPANY 5’s third party carrier. When that carrier’s truck is loaded
the supply terminal generates a bill of lading and/or delivery ticket. Information
concerning the delivery is electronically delivered by the supply terminal to the CITY
office and COMPANY’s office in CITY 1, STATE. After review of the transaction
specifics by the Manager, Commercial Sales, a COMPANY 5 invoice is created and
sent to the CITY Office where it is issued to the COMPANY 5 customer. Invoices are
also checked by the Manager, Commercial Sales for accuracy. The COMPANY 5 is
engaged in the business of selling in CITY, Illinois for purposes of the third primary
selling activity.
Fourth Primary Selling Activity Test
The fourth primary selling activity is the “[l]ocation of inventory if tangible personal
property that is sold is in the retailer’s inventory at the time of its sale or delivery.” 86
ILAC 270.115(c)(1)(D). The COMPANY 5 does not own inventory. Fulfillment of
customer fuel purchase agreements is made from COMPANY or third-party inventory.
1

Cash payments are wired by customers to a COMPANY bank account, not made by check or bank draft. Due to all payments being
effected via wire, there is no locus for payments for purposes of this test.

ST 0005-PLR
Page 10
Thus, the fourth primary test would not apply since the Company does not own
inventory at the time of its sale or delivery.
Fifth Primary Selling Activity Test
The fifth primary selling activity is the “[l]ocation of the retailer’s headquarters, which is
the principal place from which the business of selling tangible personal property is
directed or managed. In general, this is the place at which the office of the principal
executives are located. When executive authority is located in multiple jurisdictions, the
place of daily operational decision making is the headquarters.” 86 ILAC
270.115(c)(1)(E). The COMPANY 5 has its headquarters in CITY, Illinois, and this is
where its principal executive is located. The Director, Commercial Sales, who directs,
manages, and performs the business of selling tangible personal property is located in
CITY and performs his duties and functions from that location. While COMPANY’s
Headquarters and some back-office functions are performed in CITY 1, STATE, the
direction and management of the COMPANY 5 occurs, in CITY, Illinois. Under the fifth
primary selling activity test, the COMPANY 5’s headquarters [sic] in CITY, Illinois, and
COMPANY 5 is engaged in the business of selling in CITY, Illinois.
CITY is also the place where overall daily operational decision making regarding the
COMPANY 5 selling activities occur for the COMPANY 5’s nationwide activities and
where the vast majority if not all “daily operational decision making” activities associated
with Illinois sales occur. In CITY, the Director, Commercial Sales solicits and negotiates
the COMPANY 5’s sales and signs the contracts that bind it to its sales. In CITY, the
COMPANY 5 personnel receive and accept all fuel purchase orders under those
contracts and perform activities necessary for the procurement of fuel. In CITY, the
Director, Commercial Sales identifies supply commitments by contacting the COMPANY
trader responsible for the given market to secure supply pricing, and if necessary,
Director, Commercial Sales, contacts third-party suppliers directly to secure bids on fuel
supply.
CONCLUSION
“A retailer engaging in three or more primary selling activities in one location in the State
after a particular sale shall remit the retailers’ occupation tax imposed by the taxing
bodies with the authority to impose retailers’ occupation tax on those engaged in the
business of selling in that location.” 86 ILAC 270.115(c)(2). A retailer can only be
engaged in the business of selling in one jurisdiction for each sale. 86 ILAC
270.115(b)(8). The COMPANY 5 engages in four of the five primary selling activities in
one location – CITY, Illinois. Therefore, the Company is obligated to remit home rule
municipal ROT to CITY, Illinois as that is the location where the COMPANY 5 is
engaged in the business of selling under the regulation for all its Illinois sales.
We respectively request that the Department issue a ruling stating that, under the
provisions of 86 ILAC 270.115, the COMPANY 5 is engaged in the business of selling in
CITY, Illinois with regard to the business activities set forth above and that its
associated sales of fuel in Illinois must be sourced to CITY, Illinois.

ST 0005-PLR
Page 11
If the Department cannot conclude that the COMPANY 5 is engaged in the business of
selling in this CITY, Illinois for the reasons outlined above, we respectfully request that
the Department contact the undersigned to determine what additional information is
required or to allow the taxpayer to rescind this ruling request.
Thank you in advance for your prompt consideration of the matter.
DEPARTMENT’S RESPONSE:
In response to the Illinois Supreme Court decision in Hartney Fuel Oil Co. v. Hamer, 2013 IL
115130, 376 Ill. Dec. 294 (2013), the Illinois Department of Revenue revised the administrative rules
that govern the sourcing of local retailers’ occupation taxes. See 86 Ill. Adm. Code 270.115.
The occupation of selling is comprised of "the composite of many activities extending from the
preparation for, and the obtaining of, orders for goods to the final consummation of the sale by the
passing of title and payment of the purchase price". Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321
(1943). Thus, establishing where "the taxable business of selling is being carried on" requires a factspecific inquiry into the composite of activities that comprise the retailer’s business. Hartney Fuel Oil
Co. v. Hamer, 2013 IL 115130, paragraph 32 (citing Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321-22
(1943)
The primary selling activities are set forth in 86 Ill. Adm. Code 270.115(c)(1):
A. Location of sales personnel exercising discretion and authority to solicit customers on
behalf of a seller and to bind the seller to the sale;
B.

Location where the seller takes action that binds it to the sale, which may be
acceptance of purchase orders, submission of offers subject to unilateral acceptance
by the buyer, or other actions that bind the seller to that sale;

C.

Location where payment is tendered and received, or from which invoices are
issued with respect to each sale;

D. Location of inventory if tangible personal property that is sold is in the retailer’s
inventory at the time of its sale or delivery; and
E. The location of the retailer’s headquarters, which is the principal place from which the
business of selling tangle personal property is directed or managed. In general, this is the
place at which the offices of the principal executives are located. When executive authority
is located in multiple jurisdictions, the place of daily operational decision making is the
headquarters.
Based on a review of the activities described in your letter, the Department concludes that the
first two primary selling activities take place in CITY, Illinois.
You note that payment is not tendered and received in CITY, Illinois. We must determine
whether the invoice is issued from CITY, Illinois. The method for issuing invoices is similar for rack

ST 0005-PLR
Page 12
sales and delivered sales. In either case, the supply terminal electronically informs the CITY 1,
STATE headquarters and the CITY office of a delivery to a customer. The Manager, Commercial
Sales, reviews the relevant customer order information. Once the information is determined to be
correct, an invoice is created at COMPANY’s CITY 1, STATE office. The invoice is sent electronically
to the Manager, Commercial Sales. The Manager checks invoices for accuracy and either emails or
mails the invoices from the CITY office to the customer.
It is apparent from the description of the invoice process, activities necessary to issue an
invoice to the customer take place in more than one location. However, the review of customer order
information by the Manager, Commercial Sales, prior to creation of the invoice, the check for
accuracy of the actual invoice by the Manager, Commercial Sales, and issuance of the invoice to the
customer take place at the CITY location. The Department believes these activities are sufficient to
conclude that invoices are issued from CITY, Illinois.
Inventory is not maintained in CITY and the fourth primary test does not apply.
The fifth test is the location of the retailer’s headquarters. COMPANY 1 claims its
headquarters are in CITY. The Department disagrees. COMPANY 1 is a division of COMPANY, not
a separate legal entity. COMPANY admits its headquarters are in CITY 1, STATE. The CITY
location for the purposes of the rule is a sales office. “[A] retailer may source to a sales office
separate from its headquarters and inventory only if it conducts all of the first three primary selling
activities in that location.” ST 15-0001-GIL (Jan. 7, 2015).
The Department concludes that the first three selling activities identified in subsection
(c)(1)(A)-(E) take place in CITY, Illinois, and sales made by COMPANY 1 are subject to municipal
retailers’ occupation tax in CITY, Illinois.
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
If you have further questions concerning this Private Letter Ruling, you may contact me at
(217) 782-2844. If you have further questions related to the Illinois sales tax laws, please visit our
website at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217)
782-3336.
Very truly yours,

Richard S. Wolters
Chairman, Private Letter Ruling Committee
RSW:bkl