Instead of filling out an annual multistate tax survey, what sales-tax positions did the Illinois Department of Revenue volunteer on trade show nexus, click-through nexus, economic nexus after Wayfair, short-term rentals, the manufacturing exemption, medical items, and cannabis?

Subject

Miscellaneous

Plain-English summary

This letter is unusual: rather than answering a single specific taxpayer question, it responds to an annual multistate survey. A national organization, working with a publishing company, asked the Illinois Department of Revenue to fill out a detailed sales-tax and income-tax questionnaire (with dozens of numbered topics) for a reference publication used by other revenue departments, attorneys, corporate tax departments, and accounting firms. The survey covered things like nexus rules, economic nexus after the U.S. Supreme Court's then-new Wayfair decision, short-term rentals, manufacturing exemptions, medical equipment and supplies, marijuana/cannabis taxes, and common filing mistakes.

The Department's response states plainly: "We are unable to respond to your survey in the format provided." It did not fill in the questionnaire's checkboxes. Instead, it picked out several of the survey topics and gave narrative summaries of existing Illinois law on each one, citing its own regulations and recent legislation. It did not address every question in the survey (for example, it did not answer the "common mistakes" question at all).

The topics the Department did address are:

• Trade show nexus: An out-of-state retailer's presence at Illinois trade shows creates nexus (an obligation to collect Illinois Use Tax) unless a three-part safe harbor is met — no more than 2 Illinois trade shows per calendar year, no more than 8 aggregate days of physical presence, and no more than $10,000 in combined gross receipts from sales at those shows in a calendar year (86 Ill. Adm. Code 150.802).
• Click-through/referral nexus: A retailer that pays an in-state person to refer customers (e.g., via a website link or promo code) has a rebuttable presumption of nexus if cumulative gross receipts from such referred sales exceed $10,000 over the preceding four quarters (86 Ill. Adm. Code 150.201(c)).
• Economic nexus after Wayfair: Illinois enacted Public Act 100-587, consistent with South Dakota v. Wayfair, Inc. Beginning October 1, 2018, remote retailers with no Illinois physical presence must register and collect Use Tax if their cumulative gross receipts from Illinois sales are $100,000 or more, or if they have 200 or more separate transactions with Illinois purchasers, measured on a rolling quarterly/12-month basis.
• Short-term rentals: Automobile rentals of one year or less are taxed under the separate Automobile Renting Occupation and Use Tax (5% of gross receipts; 35 ILCS 155/1 et seq.), not the general sales/use tax, and vehicles bought for rental use are exempt from Retailers' Occupation Tax/Use Tax at purchase. Separately, the Rental Purchase Agreement Occupation and Use Tax (effective January 1, 2018; 35 ILCS 180/1 et seq.) taxes rent-to-own merchandise agreements at 6.25%.
• Manufacturing machinery and equipment exemption: The exemption for machinery/equipment used more than 50% of the time in manufacturing or assembling tangible personal property for sale or lease extends to repair and replacement parts, since "equipment" is defined to include parts requiring periodic replacement (86 Ill. Adm. Code 130.330).
• Medical equipment, supplies, and drugs: Medicines, medical appliances, and certain diabetic supplies are taxed at a reduced 1% state rate rather than the general 6.25% rate (86 Ill. Adm. Code 130.311). A "medical appliance" directly substitutes for a malfunctioning body part (artificial limbs, braces, pacemakers, dialysis machines, hearing aids, eyeglasses, contact lenses, and qualifying diabetes-monitoring supplies). Items that don't qualify as medical appliances or under another exemption are taxed at the general 6.25% rate. When a donor buys and gives away tangible personal property (including prescription drugs), the donor — not the donee — owes the applicable use tax.
• Marijuana and cannabis taxes: Medical cannabis cultivation is taxed at 7% of the sales price per ounce under the Compassionate Use of Medical Cannabis Pilot Program Act, paid by the cultivation center (not the dispensary, patient, or caregiver). Cannabis sold by a registered dispensing organization is taxed at the reduced 1% Retailers' Occupation Tax rate; cannabis paraphernalia is taxed at the general 6.25% rate.
• Miscellaneous services: The Service Occupation Tax/Service Use Tax apply only when tangible personal property is transferred incident to a service. Hotel room rentals are instead taxed separately under the Hotel Operators' Occupation Tax Act (6% of 94% of gross rental receipts, excluding permanent residents). Various gambling and gaming activities are taxed under their own separate statutes (Bingo License and Tax Act, Charitable Games Act, Illinois Pull Tabs and Jar Games Act, Video Gaming Act, Riverboat Gambling Act, Illinois Horse Racing Act of 1975) rather than sales tax.

As with all GILs, this letter is explicitly not a statement of Department policy and is not binding on the Department (2 Ill. Adm. Code 1200.120).

What this means for you

Businesses evaluating Illinois nexus or rental/service tax exposure

If you're assessing whether trade show attendance, referral/affiliate arrangements, or remote sales volume create Illinois nexus, this letter walks through the Department's own regulatory thresholds (2 shows/8 days/$10,000 for trade shows; $10,000 over four quarters for referral arrangements; $100,000 in sales or 200 transactions for economic nexus under Public Act 100-587). If your business also touches short-term vehicle rentals, rent-to-own transactions, hotel rentals, or gambling/gaming, note that Illinois taxes several of these under their own dedicated statutes rather than the general Retailers' Occupation Tax/Use Tax — so the general sales-tax rate and rules may not be the ones that actually apply.

Sellers of medical items, manufacturing equipment, or cannabis

The letter confirms the manufacturing machinery exemption reaches repair and replacement parts, not just the original equipment. It also lays out which medical items get the reduced 1% rate (true "medical appliances," prescription drugs, and certain diabetic supplies) versus the general 6.25% rate (other medical equipment/supplies that don't independently qualify for an exemption). For cannabis businesses, cultivation, dispensing, and paraphernalia sales are each taxed differently — 7% at cultivation, 1% at dispensing, and 6.25% on paraphernalia.

Anyone relying on this letter

This is a General Information Letter, not a Private Letter Ruling — it is not a statement of Department policy and is not binding on the Department. It was also written as a general-law summary in response to a third party's survey request, not as an answer to one taxpayer's specific facts, so it should be read as a convenient overview of existing rules rather than a ruling tailored to any particular transaction.

Common questions

Q: Did the Illinois Department of Revenue actually complete the survey questionnaire it was sent?
A: No. The Department stated, "We are unable to respond to your survey in the format provided," and instead gave narrative summaries of Illinois law on several of the topics the survey raised, rather than answering the survey's checkbox/fill-in-the-blank format.

Q: What triggers sales/use tax nexus from attending an Illinois trade show?
A: An out-of-state retailer's presence at an Illinois trade show creates nexus unless it fits a safe harbor: no more than 2 Illinois trade shows per calendar year, no more than 8 aggregate days of physical presence at those shows, and no more than $10,000 in combined gross receipts from sales at those shows during the calendar year (86 Ill. Adm. Code 150.802).

Q: Did Illinois adopt economic nexus for remote sellers after the Wayfair decision?
A: Yes. Illinois enacted Public Act 100-587, consistent with South Dakota v. Wayfair, Inc. Beginning October 1, 2018, a remote retailer must register and collect Illinois Use Tax if its cumulative gross receipts from Illinois sales are $100,000 or more, or if it has 200 or more separate transactions with Illinois purchasers, tested on a rolling quarterly basis.

Q: Are short-term car rentals and rent-to-own transactions taxed under the regular sales tax?
A: No. Automobile rentals of a year or less are taxed under the separate Automobile Renting Occupation and Use Tax (5% of gross receipts), and rent-to-own merchandise transactions are taxed under the separate Rental Purchase Agreement Occupation and Use Tax (6.25%), effective January 1, 2018. Vehicles purchased for rental use are exempt from Retailers' Occupation Tax/Use Tax at the time of purchase.

Q: How is medical cannabis taxed in Illinois, and is this different from ordinary sales tax?
A: Medical cannabis cultivation is taxed at 7% of the sales price per ounce under the Compassionate Use of Medical Cannabis Pilot Program Act, paid by the cultivation center. Cannabis sold by a registered dispensing organization is instead taxed at the reduced 1% Retailers' Occupation Tax rate, while cannabis paraphernalia is taxed at the general 6.25% rate.

Q: Is this letter binding on the Illinois Department of Revenue?
A: No. It is a General Information Letter, which by its nature is not a statement of Department policy and is not binding on the Department (2 Ill. Adm. Code 1200.120). It also responds to a third-party survey rather than a specific taxpayer's facts, so it functions as a general summary of law rather than a ruling on a particular transaction.

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-18-0019-gil.pdf

Original ruling text

ST 18-0019-GIL 09/10/2018 MISCELLANEOUS
This letter responds to an annual survey. (This is a GIL.)

September 10, 2018

Dear Xxxxx:
This letter is in response to your email dated June 28, 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:
ABC, in conjunction with COMPANY, annually undertakes a major information collection
effort with respect to the application of the tax laws of the states. ABC’s goal in
gathering this information is to assemble and publish the PUBLICATION. As the market
has shown, such a publication is a useful reference source for departments of revenue,
attorneys, corporate tax departments, and public accounting firms.
ABC is in the process of updating the PUBLICATION for its 2019 annual edition.
Accordingly, we ask for your state's assistance in preparing this important publication. I
have attached two Microsoft Word files—one for income tax and one for sales tax—to
serve as this year's questionnaire. The questionnaire follows the same format as in
past years. (If you do not have a copy of your 2017 response, and it would be helpful to
you in completing the 2018 questionnaire, please let me know and I will email you a
copy.)
This year, the numbering scheme and the sequence of the questions remains
essentially the same. Also, please note that the new questions are highlighted in bold,
red font. Therefore, you should be able to easily follow the changes from last year to
this year. Because of anticipated time constraints for respondents, again this year we
are asking that you only respond to the questions for which your answers require a

ST 18-0019-GIL
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change and the new questions. All unanswered questions will be considered the same
as last year's answer unless otherwise noted.
Please complete the 2018 questionnaire and return it by August 3, 2018, via email. We
are providing additional time this year recognizing the potential impact the Wayfair case
and the 2017 federal tax legislation may have upon your responses. The enclosed
questionnaire should be answered in accordance with laws in effect as of July 1, 2018.
If there is legislation pending or recently enacted that would alter your answers, please
explain any such changes that you are aware of at the time the questionnaire is
completed.
If you have any questions about the questionnaire or a specific question, please contact
me and I will promptly respond. Thank you for your continued cooperation and support.
Your contributions are extremely valuable in maintaining the quality of this outstanding
reference work.
A complimentary copy of the 2019 PUBLICATION will be sent to you when it is
published next year. Also again this year we are offering the option to receive the guide
as an ebook. If you select this option, an access code will be emailed to you so you can
download the ebook version for your use. Please let me know if you would like to
receive the ebook in lieu of the two volume hardcopy book.

A. SALES AND USE TAX: COMPLIANCE AND ADMINISTRATION
.....
.....
[16] NEXUS. If a corporation’s sole activity in your state is the activity identified below, does the activity create an
obligation to collect and remit sales/use tax (check each activity that would, by itself, create sales/use tax nexus)?
.....
.....
▪ Does your state have special nexus rules regarding attendance or booth at an in-state trade show?  Yes  No
▪ If YES, explain:
▪ Does your state require the collection of sales/use tax when a retailer makes sales of tangible personal
property or services through an independent contractor or other representative if the retailer has an
agreement with an in-state resident who directly or indirectly refers potential customers to the retailer
for consideration via a link on an Internet Web site or otherwise?
 Yes  No
▪ If YES, is there a threshold level below which such an agreement would not create nexus?
 Yes  No
▪ If YES, what is the amount of that threshold?  $5,000  $10,000  Other, specify:
.....
.....
SAFE HARBOR NEXUS ZONES
▪ Does your state provide safe-harbor areas within which certain business activities may be conducted
without creating nexus for the taxpayer conducting the business?
 Yes  No
▪ If YES, what types of business activities may be conducted without creating nexus for the taxpayer
conducting the business?
 Call center  Fulfillment center  Distribution center  Trade show  Other, explain:

ST 18-0019-GIL
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.....
.....
ECONOMIC NEXUS FOR SALES TAX. On June 21, 2018, in the case of South Dakota v. Wayfair, Inc., the U.S. Supreme
Court ruled that an out-of-state seller can have sales tax nexus in a state even if it does not have a physical presence in
that state.
▪ In light of the Wayfair decision, has your state enacted an economic nexus statute for sales tax?  Yes  No
▪ If YES, does your state apply sales threshold amounts, transaction limits, or both
to establish economic nexus for sales tax? (check all that apply)
 Sales threshold amount. Explain:
 Transaction threshold. Explain:
 Neither, some other measure. Explain:
▪ In light of the Wayfair decision, does your state have proposed legislation in process or in planning?  Yes  No
▪ If YES, does your state intend to apply sales threshold amounts, transaction limits, or both
to establish economic nexus for sales tax? (check all that apply)
 Sales threshold amount. Explain:
 Transaction threshold. Explain:
 Neither, some other measure. Explain:
.....
.....
[28] SHORT-TERM RENTALS
▪ Does your state impose sales/use tax upon short-term rentals of tangible personal property?
 Yes  No
▪ If YES, how is “short-term” defined (e.g., number of days)?
▪ Are short-term rentals subject to taxes in lieu of your state’s sales/use tax?
 Yes  No
▪ If YES, describe the alternative tax (e.g., Rental Tax at 1%):
▪ Are short-term rentals subject to miscellaneous taxes in addition to or in lieu of your state’s sales/use tax?  Yes  No
▪ If YES, describe the miscellaneous tax (e.g., Tourism Tax at 2%):
▪ Are special taxes imposed on certain items of tangible personal property subject to short-term rentals?  Yes  No
▪ If YES, describe the special tax (e.g., Car Rental Tax at 1%):
▪ Is an election to pay sales/use tax on acquisition cost or rental proceeds available?
 Yes  No
▪ If election is made to collect tax on rental proceeds, is tax due in the event the renter is tax-exempt?
 Yes  No
.....
.....
B. SALES AND USE TAX BASE
.....
.....
[5] EXEMPTIONS
.....
.....
MANUFACTURING EQUIPMENT REPAIR AND REPLACEMENT PARTS
▪ Does your state provide a manufacturing machinery and equipment exemption?
 Yes  No
▪ If YES, does the exemption extend to repair and replacement parts?
 Yes  No
▪ If YES, do any of the following additional constraints apply to the exemption? (check all that apply)

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 Parts must be purchased at the time the equipment is purchased
 Exempt parts must have a useful life of more than one year
 Parts must replace original equipment as sold by equipment manufacturer
 Other requirements for parts to be exempt
.....
.....
[71] MEDICAL EQUIPMENT, SUPPLIES, AND OTHER TRANSACTIONS BY DOCTORS AND CLINICS
▪ Which of the following purchases by doctors and clinics are taxable to the doctor or clinic,
assuming the doctor and clinic are operated for-profit? (Check all that apply)
Medical Equipment
 Equipment used in the diagnosis of a patient, i.e., x-ray, ultrasound, etc.
 Equipment used in the treatment of a patient, i.e., inhalation equipment, physical therapy equipment,
exam tables, etc.
Supplies Used in Treatment
 Supplies provided to patients in the course of treatment for no additional charge, i.e., bandages,
casting materials, etc.
 Supplies sold to patients for a specific charge in the course of treatment, i.e., crutches, air casts, braces, etc.
 Prosthetic devices, such as artificial limbs, etc.
 Prescription eyeglasses sold to patients
Drugs Dispensed by Doctor or Clinic
 Prescription drug samples distributed by a drug company to a doctor for distribution to patients
 Drug samples are not taxed to the doctor or clinic who distributes them to the patient; they are taxed to the
drug company distributing the sample to the doctor or clinic
 Prescription drugs dispensed by pharmacy in clinic
[72] MARIJUANA AND CANNABIS TAXES
▪ Does your state allow the lawful sale or dispensing of marijuana/cannabis?
 Yes  No
▪ If YES, does your state impose a special sales tax or the general sales tax on such sales?
 Special tax  General tax  Neither
▪ If special tax, what is the rate? __
▪ If sales of marijuana/cannabis are not legal, do taxes apply to the illegal sales as well?
 Yes  No
▪ Are sales of drug paraphernalia, such as pipes, bongs, cigarette papers, etc., taxed at a special rate
or the general sales tax rate?
 Special tax  General tax  Neither
▪ If special tax, what is the rate? __
[73] MISCELLANEOUS SERVICES. Which of the following services are taxable? (Check all that apply)
 Amusements
 Cable TV charges
 Credit reporting
 Debt collection services
 Dry cleaning
 Laundry
 Membership dues
 Pest control
 Pet care
 Photographic services  Security services
 Towing service
 Transient lodging
 Vehicle parking charges
 Gambling or gaming not on Native American reservations

ST 18-0019-GIL
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[74] COMMON MISTAKES CORPORATIONS MAKE IN FILING RETURNS AND REMITTING TAXES
▪ What are the most common mistakes that corporations make in filing sales and use tax returns and
remitting sales
and use taxes? For ease of presentation in a chart, please organize your response as a bullet point list, as
follows:
1.

2.

3.

and so on

DEPARTMENT’S RESPONSE:
We are unable to respond to your survey in the format provided. However, we hope you find
the following information helpful.

Trade show appearances
The Department of Revenue has adopted an administrative rule governing trade show
appearances. It is found at 86 Ill. Adm. Code 150.802. The rule provides that the presence of an outof-State retailer or its representative in Illinois to engage in trade show activities brings that retailer
within the definition of “retailer maintaining a place of business in this State.” As a result, the out-ofState retailer is required to collect Illinois Use Tax on all sales to Illinois purchasers from out-of-State.
The rule provides for a safe harbor. The presence in Illinois of an out-of-State retailer for purposes of
engaging in trade show activities will not result in the determination that the retailer is a “retailer
maintaining a place of business in this State” if the retailer meets each of the following 3 conditions:
1) the retailer attends no more than 2 Illinois trade shows during any calendar year;
2) the retailer is physically present at those 2 Illinois trade shows for an aggregate total of no
more than 8 days during any calendar year; and
3) combined gross receipts from sales made subject to Retailers’ Occupation Tax at all Illinois
trade shows during any single calendar year do not exceed $10,000.

Agreement with in-State resident to refer customers through an Internet link or otherwise
Section 150.201(c) of the Department’s rules (86 Ill. Adm. Code 150.201(c)) provides that a
"retailer maintaining a place of business in this State", or any like term, shall mean and include any
retailer having a contract with a person located in this State under which the person, for a commission
or other consideration based upon the sale of tangible personal property by the retailer, directly or
indirectly refers potential customers to the retailer by providing to the potential customers a
promotional code or other mechanism that allows the retailer to track purchases referred by such

ST 18-0019-GIL
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persons. Examples of mechanisms that allow the retailer to track purchases referred by such
persons include but are not limited to the use of a link on the person's Internet website, promotional
codes distributed through the person's hand-delivered or mailed material, and promotional codes
distributed by the person through radio or other broadcast media. The rule provides that it applies
only if the cumulative gross receipts from sales of tangible personal property by the retailer to
customers who are referred to the retailer by all persons in this State under such contracts exceed
$10,000 during the preceding 4 quarterly periods ending on the last day of March, June, September,
and December. A retailer may rebut this presumption by maintaining in its records documentation
that shows that persons with whom the retailer has agreements have not engaged in solicitation
activities on behalf of the retailer in Illinois that are sufficient to meet the nexus standards of the
United States Constitution during the preceding 4 quarterly periods.

Economic nexus for sales tax
Illinois enacted Public Act 100-587, which is consistent with the ruling in South Dakota v.
Wayfair, Inc. No. 17-494 (U.S. June 21, 2018).
Public Act 100-587 requires remote retailers with no physical presence in Illinois to register
and collect and remit Use Tax, as provided below.
(1)
Beginning October 1, 2018, a retailer making sales of tangible personal property to
purchasers in Illinois from outside of Illinois must register with the Department and
collect and remit Use Tax if:
(A)
the cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois are $100,000 or more; or
(B)
the retailer enters into 200 or more separate transactions for the sale of tangible
personal property to purchasers in Illinois.
(2)
A retailer shall determine on a quarterly basis, ending on the last day of March, June,
September, and December, whether he or she meets either of the criteria in item (1) for
the preceding 12-month period. If the retailer meets either of the criteria in item (1) for a
12-month period, he or she is considered a retailer maintaining a place of business in
Illinois and is required to collect and remit the Use Tax and file returns for one year.
(A)
At the end of that one-year period, the retailer shall determine whether he or she
met either of the criteria of item (1) during the preceding 12-month period. If the
retailer met either of the criteria in item (1) for the preceding 12-month period, he
or she is considered a retailer maintaining a place of business in Illinois and is
required to collect and remit Use Tax and file returns for the subsequent year.
(B)
If at the end of a one-year period a retailer that was required to collect and remit
the Use Tax determines that he or she did not meet either of the criteria in item
(1) during the preceding 12-month period, the retailer shall subsequently
determine on a quarterly basis, ending on the last day of March, June,
September, and December, whether he or she meets either of the criteria of item
(1) for the preceding 12-month period.
Short-term rentals
Persons who are engaged in the business of renting automobiles in Illinois under rental terms
of one year or less are subject to the Automobile Renting Occupation and Use Tax. See 35 ILCS
155/1 et seq. and 86 Ill. Adm. Code 180.101. This tax is imposed at the rate of 5% of the gross
receipts from such business. Illinois provides an exemption from Retailers’ Occupation Tax and Use

ST 18-0019-GIL
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Tax at the time of purchase of a motor vehicle that is used for automobile renting, as defined in the
Automobile Renting Occupation and Use Tax Act.
Effective January 1, 2018, the Rental Purchase Agreement Occupation and Use Tax took
effect in Illinois. See 35 ILCS 180/1 et seq. The Rental Purchase Agreement Occupation Tax is
imposed upon persons engaged in this State in the business of renting merchandise under a rentalpurchase agreement in Illinois at the rate of 6.25% of the gross receipts received from the business.
A complementary Rental Purchase Agreement Use Tax is imposed upon the privilege of using, in this
State, merchandise which is rented from a merchant at the rate of 6.25% of the rental price paid to
the merchant under any rental purchase agreement. A "rental purchase agreement" is an agreement
for the use of merchandise by a consumer for personal, family, or household purposes for an initial
period of 4 months or less that is automatically renewable with each payment after the initial period
and that permits the consumer to become the owner of the merchandise. Illinois provides an
exemption from Retailers’ Occupation Tax and Use Tax at the time of purchase of merchandise that
is subject to the Rental Purchase Agreement Occupation and Use Tax.
Manufacturing equipment repair and replacement parts
Illinois’ manufacturing machinery and equipment exemption applies to machinery and
equipment that is used primarily (over 50% of the time) in the manufacturing or assembling of tangible
personal property for wholesale or retail sale or lease. See 86 Ill. Adm. Code 130.330. "Equipment"
includes any parts that require periodic replacement in the course of normal operation. (86 Ill. Adm.
Code 130.330(c)(3))
Medical equipment, supplies, and other transactions by doctors and clinics
All gross receipts from sales of tangible personal property in Illinois are subject to Retailers’
Occupation Tax unless an exemption is specifically provided. Medicines and medical appliances are
not taxed at the basic State rate of 6.25% plus applicable local taxes. These items are taxed at a
reduced State rate of 1% plus applicable local taxes. See 86 Ill. Adm. Code 130.311, Drugs,
Medicines, Medical Appliances and Grooming and Hygiene Products. Items subject to this lower tax
rate include prescription and nonprescription medicines, drugs, medical appliances, and insulin, urine
testing materials, syringes, and needles used by diabetics, for human use.
A medical appliance is an item that is used to directly substitute for a malfunctioning part of the
human body. “Medical appliances” are such items as artificial limbs, dental prostheses and
orthodontic braces, crutches and orthopedic braces, wheelchairs, heart pacemakers, and dialysis
machines (including the dialyzer). Corrective medical appliances such as hearing aids, eyeglasses
and contact lenses qualify for 1% rate as well. Moreover, generally, home glucose monitors, test
strips and related supplies used to treat human diabetes also qualify for the 1% State rate of tax. See
86 Ill. Adm. Code 130.311(e). Unless medical equipment or supplies qualify as a medical appliance
or otherwise qualify for an exemption, they will be taxed at the State rate of 6.25% plus applicable
local taxes.
In a gift situation the donor who purchases the tangible personal property and gives it away
makes a taxable use of the property when making the gift. See the Department’s regulation at 86 Ill.
Adm. Code 150.305(c), which can be found on the Department’s website. When such a gift is made,
the donee incurs no Use Tax liability as a result of the gift. In general, the donor of prescription drugs
would be liable for the use tax, at the rate of 1% plus applicable local taxes, for the prescription drugs.

ST 18-0019-GIL
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Marijuana and cannabis taxes
Beginning January 1, 2014, a tax is imposed under the Compassionate Use of Medical
Cannabis Pilot Program Act upon the privilege of cultivating medical cannabis at a rate of 7% of the
sales price per ounce. The tax is paid by a cultivation center and is not the responsibility of a
dispensing organization, qualifying patient, or designated caregiver. The tax imposed under this Law
shall be in addition to all other occupation or privilege taxes imposed by the State of Illinois or by any
municipal corporation or political subdivision thereof. See 86 Ill. Adm. Code 429. 110. Medical
cannabis, including medical cannabis infused products, sold by registered dispensing organization
under the Compassionate Use of Medical Cannabis Pilot Program Act, is subject to Retailers'
Occupation Tax at the 1% rate, plus applicable local taxes. See 86 Ill. Adm. Code 130.311(a). The
tax imposed under the Compassionate Use of Medical Cannabis Pilot Program Act is not imposed on
sales of cannabis paraphernalia, which are, however, subject to the Retailers’ Occupation Tax at the
general merchandise rate of 6.25%, plus applicable local taxes.
Miscellaneous services
The Service Occupation Tax Act and Service Use Tax are imposed on the transfer of tangible
personal property incident to sales of service. See 86 Ill. Adm. Code 140.101 and 160.101. If no
tangible personal property is transferred incident to the services provided, then no Service
Occupation Tax Act or Service Use Tax would apply. With respect to the services listed in the
question, Illinois imposes a Hotel Operators' Occupation Tax Act upon persons engaged in the
business of renting, leasing or letting rooms in a hotel at the rate of 6% of 94% of the gross rental
receipts from the renting, leasing or letting, excluding, however, from the gross rental receipts, the
proceeds of the renting, leasing or letting to permanent residents of a hotel. See 86 Ill. Adm. Code
480.101. With respect to gambling or gaming, the following taxes and Acts may apply: the Bingo
License and Tax Act (230 ILCS 25/1 et seq.; 86 Ill. Adm. Code 401.101 et seq.); the Charitable
Games Act (230 ILCS 30/1 et seq.; 86 Ill. Adm. Code 435.101 et seq.); the Illinois Pull Tabs and Jar
Games Act (230 ILCS 20/1 et seq.; 86 Ill. Adm. Code 432.101 et seq.); the Video Gaming Act (230
ILCS 40/1 et seq.), administered by the Illinois Gaming Board; the Riverboat Gambling Act (230 ILCS
10), administered by the Illinois Gaming Board; and the Illinois Horse Racing Act of 1975 (230 ILCS
5/1 et seq.), administered by the Illinois Racing Board.
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