I bought a vehicle directly from the federal government (GSA) at auction -- do I file Form RUT-50 or RUT-25, and do I owe use tax at all?

Plain-English summary

An individual bought a vehicle at auction from the U.S. General Services Administration (GSA), a federal agency. The auction was "GSA-only" -- distinct from the "dealership" auctions the same auction house sometimes ran -- and was conducted by a local Illinois auction house under contract with the federal government to handle the sale and paperwork on GSA's behalf. The auction house collected the buyer's payment and delivered a "United States Government Certificate to Obtain Title to a Vehicle," which named GSA as the Seller and included the government agent's name and contact information. The buyer then used that certificate to apply for an Illinois title.

The buyer wasn't sure which Illinois use-tax form to file: Form RUT-50 (Private Party Vehicle Use Tax Transaction, used for vehicles acquired from a private party/non-retailer, taxed at a reduced statutory flat rate) or Form RUT-25 (Vehicle Use Tax Transaction Return, used for vehicles bought from a dealership, retailer, lending institution, or leasing company, generally taxed on the actual purchase price). An IDOR agent the buyer had consulted said the law wasn't clear on this point and recommended requesting a formal ruling.

The Department's answer: file Form RUT-50. The analysis works in two layers. First, the Illinois Retailers' Occupation Tax Act taxes retailers who sell tangible personal property, and the regular Use Tax (86 Ill. Adm. Code 150.101) applies when property purchased anywhere at retail from a retailer is used in Illinois -- with a credit mechanism (86 Ill. Adm. Code 150.130) that lets retailers offset Use Tax collected against their own Retailers' Occupation Tax liability on the same sales. But a sale by the government is exempt from Retailers' Occupation Tax under 86 Ill. Adm. Code 130.2055(b), and because of that exemption, the purchaser does not owe a corresponding regular Use Tax on the purchase either.

Second, and separately, the "Private Party Vehicle Use Tax" (625 ILCS 5/3-1001) taxes the privilege of using any motor vehicle (as defined in Vehicle Code Section 1-146) acquired by gift, transfer, or purchase, at rates set by statute. Because the buyer acquired the vehicle by purchase from a non-retailer -- the federal government acting through GSA and its contracted auction house is not itself a vehicle "retailer" -- the buyer does owe this Private Party Vehicle Use Tax. Form RUT-50 is the form for vehicles purchased or acquired by gift or transfer from a private party (i.e., a non-retailer); Form RUT-25 applies instead to purchases from an unregistered out-of-state dealer, lending institution, leasing company, or retailer (or a passenger car from an unregistered Illinois lending institution or leasing company). Since GSA is not a retailer, RUT-50 -- not RUT-25 -- is the correct form.

What this means for you

If you bought a vehicle at a government or GSA auction

A GSA-run vehicle auction (even when logistically handled by a private, contracted auction house) is treated as a sale by the government, not by a retailer or dealership. That sale is exempt from Retailers' Occupation Tax, and you owe no corresponding regular Use Tax on it. But you still owe the separate Private Party Vehicle Use Tax and should file Form RUT-50, computing tax at the applicable statutory flat rate rather than on the purchase price.

If you're unsure whether to file RUT-25 or RUT-50

The dividing line is whether the seller is a retailer. RUT-25 is for purchases from a dealership, an unregistered out-of-state dealer, a lending institution, a leasing company, or another retailer. RUT-50 is for purchases, gifts, or transfers from a private party/non-retailer -- and, as this ruling confirms, that includes a purchase directly from the federal government (or its GSA auction agent), even though the transaction occurred at a formal auction rather than a casual private sale.

If you plan to rely on this GIL

This is a General Information Letter, not a Private Letter Ruling. It directs taxpayers to the relevant regulations and explains how the Department applies them, but it is not a statement of Department policy and is not legally binding on the Department, even as to the person who requested it.

Common questions

Q: Does buying from the government mean I owe no tax at all?
A: No. The government's sale to you is exempt from Retailers' Occupation Tax, and that exemption also means you don't owe the regular Use Tax on the purchase. But you still owe the separate Private Party Vehicle Use Tax under 625 ILCS 5/3-1001, because you acquired the vehicle by purchase from a non-retailer.

Q: What's the difference between RUT-25 and RUT-50?
A: RUT-25 (Vehicle Use Tax Transaction Return) applies when you buy from a dealership, an unregistered out-of-state dealer, a lending institution, a leasing company, or another retailer, and is generally computed on the actual purchase price. RUT-50 (Private Party Vehicle Use Tax Transaction) applies when you acquire a vehicle by purchase, gift, or transfer from a private party/non-retailer, and is computed at a statutory flat rate.

Q: Why does a purchase from the federal government count as coming from a "private party" for this purpose?
A: Because the Private Party Vehicle Use Tax turns on whether the seller is a vehicle retailer, not on whether the seller is a private individual in the everyday sense. The federal government, acting through GSA and its contracted auction house, isn't in the business of retailing vehicles, so a purchase from it is treated the same as a purchase from any other non-retailer for RUT-50/RUT-25 purposes.

Q: Does it matter that the sale happened at a formal, GSA-run auction rather than an informal private sale?
A: No. What mattered to the Department was the identity and status of the seller (the federal government, a non-retailer), not the format of the sale. The "United States Government Certificate to Obtain Title to a Vehicle" naming GSA as Seller supported that the transaction was a government sale, regardless of the auction-house logistics.

Citations and references

Statutes and regulations cited:

• 625 ILCS 5/3-1001 (Private Party Vehicle Use Tax)
• 86 Ill. Adm. Code 130.2055(b) (government-sale exemption from Retailers' Occupation Tax)
• 86 Ill. Adm. Code 150.101 (Use Tax on retail purchases used in Illinois)
• 86 Ill. Adm. Code 150.130 (retailer credit against Use Tax remittance)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0015-gil.pdf

Original ruling text

ST 19-0015-GIL 07/15/2019 MISCELLANEOUS
A person purchasing a motor vehicle from the federal government should file a RUT-50,
Private Party Vehicle Use Tax Transaction. 625 ILCS 5/3-1001. (This is a GIL.)

July 15, 2019
Dear Xxxx:
This letter is in response to your letter dated May 24, 2019, 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:
I write to you per advice of IDOR agent “NAME” with whom I discussed my question on
DATE. Per his advice, the law is not clear in this area and the best way to proceed is to
get a letter ruling on classification from IDOR.
Question – when an Illinois individual purchases a vehicle directly from the Federal
Government, which form should be used to figure the use tax due, RUT-50 (Private
Party Vehicle Use Tax Transaction), or RUT-25 (Vehicle Use Tax Transaction Return)?
Background Details – on DATE, I purchased a vehicle at an auction from the General
Services Administration (GSA), an agency of the Federal Government LINK. The
auction was conducted by a local Illinois auction house contracted by Federal
Government to run the auction and do the paperwork on their behalf. The auction was
‘GSA-only’, as opposed to other ‘dealership’ auctions that they may also conduct from
time to time. All the paper work was handled by this auction house. They collected my
payment and delivered to me The United States Government Certificate to Obtain Title
to a Vehicle (copy attached), which I subsequently delivered to the DMV to apply for a
title. The certificate clearly indicates that the Seller is GSA, with government agent’s
name and contact information included. The auction house has also confirmed to me
that the purchase was directly from the US Government and they can attest to this
officially if necessary.

ST 19-0015-GIL
Page 2
From my understanding of the rules and regulations in this case, automobile
transactions with a dealership are subjected to the use tax figured on RUT-25; however,
those conducted directly with a private party (no dealership involved) are subject to the
reduced use tax computed on RUT-50. Since my purchase was directly from the seller,
it seems I should be able to use RUT-50 in my case. However, per agent NAME’s
advice, the law is not clear in this case and thus my request for a ruling letter.
I thank you for your time and attention in advance.
DEPARTMENT’S RESPONSE:
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. Use Tax is imposed on the privilege of using, in this State, any kind of tangible
personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as “sales” tax in Illinois. If the purchases
occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase. The
retailers are then allowed to reduce the amount of Use Tax they must remit by the amount of
Retailers' Occupation Tax liability which they are required to and do pay to the Department with
respect to the same sales. See 86 Ill. Adm. Code 150.130.
A tax is imposed on the privilege of using, in this State, any motor vehicle, as defined in
Section 1-146 of Vehicle Code, acquired by gift, transfer, or purchase. The tax is commonly referred
to as the Private Party Vehicle Use Tax. The rates are set by statute. 625 ILCS 5/3-1001.
A person must file Form RUT-50, Private Party Vehicle Use Tax Transaction, if he or she
purchased or acquired by gift or transfer a motor vehicle from a private party, e.g., from a non-retailer.
In contrast, if the person purchased a vehicle from an unregistered out-of-state dealer, lending
institution, leasing company, or retailer, or he or she purchased a passenger car from an unregistered
Illinois lending institution or leasing company, he or she must complete Form RUT-25, Vehicle Use
Tax Transaction Return.
The sale by the government is exempt from Retailers’ Occupation Tax. 86 Ill. Adm. Code
2055(b). The purchaser does not owe a corresponding Use Tax. However, since the purchaser
acquired the motor vehicle by purchase from a non-retailer, the purchaser owes Private Party Vehicle
Use Tax.
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:rkn