What does Illinois General Information Letter ST 18-0013-GIL conclude about Prepaid Sales Tax?

Plain-English summary

An Illinois-registered fuel distributor asked the Department of Revenue whether it had to collect and remit "prepaid sales tax" on motor fuel, on top of the Motor Fuel Tax it already reported. The company imported pre-packaged race fuel (in sealed 5-, 15-, 30-, and 54-gallon cans/drums) into Illinois and sold it to race shops, speed shops, and high-performance shops for resale to their own customers.

The Department explained that Section 2d of the Retailers' Occupation Tax Act (35 ILCS 120/2d) requires certain retailers of motor fuel who are not licensed distributors or suppliers to prepay a portion of sales tax to their distributor, supplier, or reseller, when that distributor, supplier, or reseller is registered under Section 2a or 2c of the Act. The Department's regulation at 86 Ill. Adm. Code 130.551 explains this in more detail: licensed distributors must collect prepaid sales tax on motor fuel they deliver to retailers who are not themselves licensed distributors or suppliers under the Motor Fuel Tax Law.

Applying that framework to the facts described, the Department concluded that because the company was already filing Illinois sales tax returns, it was responsible for collecting prepaid sales tax on its sales of the pre-packaged race fuel. The letter is a General Information Letter (GIL) rather than a Private Letter Ruling (PLR) - it points the taxpayer to the controlling statute and regulation and applies them to the facts as described, but it is not a binding statement of Department policy.

What this means for you

Motor fuel distributors and importers

If you are registered with Illinois as a distributor, supplier, or reseller of motor fuel and you sell to retailers who are not themselves licensed distributors or suppliers, you generally must collect prepaid sales tax on those sales under 35 ILCS 120/2d and 86 Ill. Adm. Code 130.551 - in addition to any Motor Fuel Tax obligations you already handle. This applies to specialty and packaged fuel products (like the sealed cans/drums of race fuel described here), not just fuel sold through a pump.

Race shops, speed shops, and other fuel retailers

If you buy packaged fuel from a distributor for resale and you are not licensed as a distributor or supplier under the Motor Fuel Tax Law, expect your supplier to charge you prepaid sales tax on that purchase. That prepayment is part of the mechanism Illinois uses to collect sales tax on motor fuel earlier in the distribution chain.

Accountants and tax professionals

The key trigger in this letter is registration status: the taxpayer was already registered with Illinois and filing sales tax and Motor Fuel Tax returns, which the Department treated as evidence that it fell within the category of distributor/supplier/reseller responsible for collecting the prepayment under Section 2d. Note that this is a GIL, not a PLR - it is not binding on the Department and does not carry the taxpayer-specific protection of a PLR issued under 2 Ill. Adm. Code 1200.110.

Common questions

Q: Does this letter mean all motor fuel sales require prepaid sales tax collection?
A: No. The obligation under 35 ILCS 120/2d applies specifically to distributors, suppliers, or resellers registered under Section 2a or 2c selling to retailers who are not themselves licensed distributors or suppliers. The Department's answer here was tied to this specific taxpayer's registration and return-filing status.

Q: Is pre-packaged race fuel treated differently from fuel sold at a pump?
A: The letter does not draw that distinction - it applies the same statutory and regulatory framework (35 ILCS 120/2d and 86 Ill. Adm. Code 130.551) regardless of the fuel's packaging, focusing instead on the parties' licensing and registration status.

Q: Can this taxpayer rely on this letter as binding on the Department?
A: No. This is a General Information Letter under 2 Ill. Adm. Code 1200.120, which directs the taxpayer to relevant regulations but is expressly "not a statement of Department policy and is not binding on the Department." A binding Private Letter Ruling would require following the separate procedures in 2 Ill. Adm. Code 1200.110.

Q: What should a business do if it's unsure whether it owes prepaid sales tax on motor fuel?
A: Review 86 Ill. Adm. Code 130.551 and your registration status (distributor, supplier, or reseller under Sections 2a/2c of the Retailers' Occupation Tax Act), and consult a licensed Illinois tax professional, since the Department's conclusion here depended heavily on this taxpayer's specific facts.

Citations and references

Statutes and rules:

• 35 ILCS 120/2d (Retailers' Occupation Tax Act - prepayment of sales tax on motor fuel by certain retailers)
• 86 Ill. Adm. Code 130.551 (Department regulation explaining prepaid sales tax on motor fuel)
• 2 Ill. Adm. Code 1200.110 (procedures for requesting a binding Private Letter Ruling)
• 2 Ill. Adm. Code 1200.120 (procedures and effect of a General Information Letter)

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-18-0013-gil.pdf

Original ruling text

ST 18-0013-GIL 04/05/2018 PREPAID SALES TAX
This letter describes the manner in which prepaid sales tax on motor fuel is collected and
remitted. See 86 Ill. Adm. Code 130.551. (This is a GIL.)
April 5, 2018
Dear Xxxxx:
This letter is in response to your letter dated March 15, 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.
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:
We are inquiring on the requirement of Pre-Paid Sales Tax and if we are required to be
collecting and remitting tax to the State of Illinois.
We are currently a Qualified Distributor in the State of Indiana and conduct business in
the State of Illinois at least a few times during any particular week. We are currently
registered with the State of Illinois and file monthly Sales Tax and Motor Fuel Tax
returns.
Our numbers are as follows:
Federal ID#: #######
Illinois Receiver License: #####
Illinois Distributor License: ####
Illinois Business Authorization: #####
We have called and asked but have been unable to get a definite answer on whether or
not we are collecting and remitting all the proper taxes and/or fees. We are filing the
gallons of pre-packaged race fuel that we import into Illinois to our customers (Race
Shops, Speed Shops, Hi Performance Shops) for resale.
Our main concern at the moment is the pre-packaged race fuel. By pre-packaged, we
mean that the fuel is exported into Illinois already pre-packaged in 5 gallon, 15 gallon,
30 gallon and 54 gallon sealed cans/drums. We sell this fuel to the race shops and they
in turn sell them to their customers. Now the question is coming around, what about

ST 18-0013-GIL
Page 2

Pre-Paid Sales Tax? Are we required to collect and remit that too along with the Motor
Fuel Tax returns that we already file? Please advise.
Thank you for your time in this matter.
DEPARTMENT’S RESPONSE:
Provisions regarding prepayment of sales tax on motor fuel are contained in Section 2d of the
Retailers’ Occupation Tax Act (35 ILCS 120/2d), which provides, in part, that
“[a]ny person engaged in the business of selling motor fuel at retail, as defined in the
Motor Fuel Tax Law, and who is not a licensed distributor or supplier, as defined in the
Motor Fuel Tax Law, shall prepay to his or her distributor, supplier, or other reseller of
motor fuel a portion of the tax imposed under this Act if the distributor, supplier, or other
reseller of motor fuel is registered under Section 2a or Section 2c of this Act.”
The Department’s regulations at 86 Ill. Adm. Code 130.551 explain these provisions in greater
detail. As noted in the Department’s rules, licensed distributors are required to collect the prepaid
sales tax on motor fuel they deliver to persons who are engaged in the business of selling motor fuel
at retail and who are not licensed as distributors or suppliers under the Motor Fuel Tax Law.
Based on the foregoing, and the fact that you are filing sales tax returns with the Department,
you are responsible for collecting prepaid sales tax on sales of pre-packaged race fuel.
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,

Richard S. Wolters
Associate Counsel
RSW:bkl