Does Illinois Telecommunications Excise Tax or sales tax apply to a fleet-telematics company's purchased data plans and its monthly customer fee?

Plain-English summary

A company that installs onboard computing devices in trucks — collecting GPS location, engine data, and driver logs for fleet customers — asked the Illinois Department of Revenue whether two things were taxable: (1) the cellular data plans it buys from wireless carriers to transmit that data, and (2) the flat monthly per-vehicle fee it charges its trucking-company customers for the whole bundled telematics service. The company had asked for a binding Private Letter Ruling, but the Department declined to issue one and instead answered with this General Information Letter (GIL).

On the first question, the Department concluded the company's purchased cellular data connectivity is not subject to Illinois Telecommunications Excise Tax (TET). Illinois generally taxes telecommunications purchased at retail at 7% of the gross charge (35 ILCS 630/3 and 630/4), but the federal Internet Tax Freedom Act (ITFA) bars states from taxing "internet access," and the Department found that the company's data plans — which let its devices connect to the internet to transmit vehicle data and also support instant messaging — fit squarely within ITFA's definition of internet access. That is true even though the data is bundled with other, potentially taxable communications, because the Department has consistently ruled that ITFA protects internet access charges from TET whether or not they're separately stated on a bill.

On the second question, the Department concluded the company's monthly per-vehicle fee is a nontaxable information service, not subject to Illinois sales/use tax or TET. The Department reasoned by analogy to two earlier GILs: one (ST 12-0041-GIL) involving a telematics provider whose service was found to be a nontaxable information service because telecommunications were "merely a component" of the service, and another (ST 16-0032-GIL) involving a medical-alert device company where the same logic applied to bundled but not standalone telecommunications. Because the company's true "product" is processed fleet-tracking data and reporting — not the underlying phone/data connection — the company itself is treated as the consumer of the telecommunications it buys, and its downstream monthly fee to trucking customers is not itself a taxable telecommunications sale.

The letter also separately walks through general Illinois sales/use tax principles (Retailers' Occupation Tax and Use Tax on tangible personal property, and Service Occupation Tax for servicemen), noting that transactions involving no transfer of tangible personal property generally are not subject to those taxes at all — reinforcing why a pure information/data service like this one falls outside sales tax.

What this means for you

Telematics, IoT, and fleet-management companies

If your business bundles a cellular data connection into a broader information or monitoring service (vehicle tracking, remote diagnostics, connected devices, etc.), this GIL suggests two favorable data points: your purchased wireless data plans may qualify as exempt "internet access" under ITFA even if bundled with other communications, and your downstream service fee may be treated as a nontaxable information service rather than a taxable telecommunications sale — provided the communications are genuinely just a component of a larger service and not the product itself. Note the Department's caution: it did not have enough facts to confirm the carrier data plans were, in fact, internet access, and if they weren't, the company (not its customers) would owe TET to its carriers.

Accountants and tax professionals advising bundled-service clients

The key legal hooks here are the ITFA definition of "internet access" (47 U.S.C. § 151 note, §§ 1101 and 1105(5)) and the Department's consistent line of GILs (ST 11-0028, ST 12-0041, ST 16-0032) finding that a service provider — not its end customers — is the "consumer" of telecommunications purchased as a mere component of a larger nontaxable service. Watch the distinction the Department draws in ST 16-0032: if telecommunications are separately stated to the end customer rather than bundled into a service fee, the provider may instead be reselling taxable telecommunications and incur TET on that resale.

Common questions

Q: Is Illinois Telecommunications Excise Tax the same as sales tax?
A: No. TET is a separate excise tax under the Illinois Telecommunications Excise Tax Act (35 ILCS 630/1 et seq.), imposed at 7% of gross charges for intrastate or interstate telecommunications purchased at retail. It exists alongside — not as part of — the Retailers' Occupation Tax/Use Tax scheme that applies to sales of tangible personal property.

Q: Why isn't the company's purchased cellular data taxed under TET?
A: Because the federal Internet Tax Freedom Act prohibits states from taxing "internet access," and the Department found the company's data plans (used to connect its onboard devices to the internet and support instant messaging) meet ITFA's definition of internet access — even though they're bundled with other services and not separately billed.

Q: Why isn't the monthly per-vehicle fee taxed as a sale of a taxable service or telecommunications?
A: The Department found that the true object of the company's service is processed fleet data and reporting, with the telecommunications component merely incidental. Under the reasoning in earlier GILs (ST 12-0041-GIL and ST 16-0032-GIL), a company that bundles telecommunications into a genuine information service is itself treated as the consumer of that telecommunications, so its fee to end customers isn't taxed as a telecommunications sale.

Q: Could this outcome be different for another company with similar facts?
A: Yes. A GIL is not binding on the Department and merely explains how existing rules apply based on the facts described. The Department explicitly said it lacked enough information to confirm the company's specific carrier data plans qualified as internet access, and it noted a provider that separately states telecommunications charges to customers (rather than bundling them into a service fee) could instead owe TET as a reseller.

Q: Why did the Department issue a GIL instead of the Private Letter Ruling the company requested?
A: Under 2 Ill. Adm. Code 1200.110(a)(4), whether to issue a binding PLR is discretionary. The Department can decline and instead issue a non-binding GIL, which is exactly what happened here — the company had asked for a PLR, and the Department responded that it "determined that it would decline to issue a Private Letter Ruling" and instead answered with this GIL.

Q: Does this letter cover every detail of how the company's services are taxed?
A: No — readers with narrower or different fact patterns (for example, the specific taxability of the OBC hardware sold, which the letter notes the company already collects and remits tax on separately) should review the full original ruling text below rather than rely solely on this summary.

Citations and references

Illinois Telecommunications Excise Tax Act:

• 35 ILCS 630/1 et seq. (Telecommunications Excise Tax Act generally)
• 35 ILCS 630/3 (imposition of tax on intrastate telecommunications)
• 35 ILCS 630/4 (imposition of tax on interstate telecommunications)
• 35 ILCS 630/2(a) (definition of "gross charge")
• 35 ILCS 630/2(a)(10) (exclusion for nontaxable charges aggregated with taxable charges)
• 35 ILCS 630/2(c) (definition of "telecommunications")
• 35 ILCS 630/2(d) (definition of "interstate telecommunications")
• 35 ILCS 630/2(e) (definition of "intrastate telecommunications")
• 35 ILCS 636/5-10 and 5-15 (Simplified Municipal Telecommunications Tax Act)

Sales and Use Tax:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act)
• 35 ILCS 105/3 (Use Tax Act)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax regulations)
• 86 Ill. Adm. Code 150.101 (Use Tax regulations)
• 86 Ill. Adm. Code 150.130 (Use Tax credit for Retailers' Occupation Tax paid)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax regulations)

Telecommunications Excise Tax regulations:

• 86 Ill. Adm. Code 495.100(c) (gross charges exclusion for data storage/processing)
• 86 Ill. Adm. Code 495.100(d) (exemption for value-added services)
• 86 Ill. Adm. Code 495.100(m) (Internet Service Provider treatment)

Letter ruling procedures:

• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedures)

Federal law:

• 47 U.S.C. § 151 note, § 1101 (Internet Tax Freedom Act moratorium on internet access taxes)
• 47 U.S.C. § 151 note, § 1105(5) (Internet Tax Freedom Act definition of "internet access")

Prior Department letter rulings discussed:

• General Information Letter ST 11-0028-GIL (April 6, 2011)
• General Information Letter ST 12-0041-GIL (July 27, 2012)
• General Information Letter ST 16-0032-GIL (July 29, 2016)

Subject

Telecommunications Excise Tax

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/st19-0037-gil.pdf

Original ruling text

ST 19-0037-GIL 12/13/2019 TELECOMMUNICATIONS EXCISE TAX
Telecommunications Excise Tax is imposed upon the act or privilege of originating or receiving
intrastate or interstate telecommunications in Illinois at the rate of 7% of the gross charges for
such telecommunications purchased at retail from retailers. See 35 ILCS 630/1 et seq. (This
is a GIL.)
December 13, 2019
Dear XXX:
This letter is in response to your letter dated August 2, 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:
COMPANY ("the Company") respectfully requests a private letter ruling confirming COMPANY's
Fleet Management Service is exempt from sales/use tax as a non­taxable service and that
COMPANY's purchase of mobile telecommunication services are exempt internet access charges.
I.

Background

COMPANY provides onboard telematic fleet management information to companies with truck
fleets throughout the U.S. To facilitate these services, COMPANY installs an onboard computing
("OBC") device with sensors that collect information about vehicle location and other useful data
about the vehicle (e.g. speed) and the driver (e.g. driver logs).
To communicate information gathered in the vehicle, the device is equipped with a modem that's
assigned an internal IP address. The device transmits information using a communications
network operated by a third-party cellular network, such as PROVIDER 1 or PROVIDER 2.
COMPANY procures data plans from the communications provider.
The communications carrier sends the data over the public internet to one of the three COMPANY
Network Operating Centers ("NOC") that are in STATES. From there, COMPANY's systems
track and compile performance data that can be viewed by its customers on the COMPANY webbased platform through desktops, tablets etc.
Generally, COMPANY enters into a Master Purchase Agreement ("MPA") with Customers,
whereby COMPANY provides its OBC and communication system for Customers' trucks. Per
these agreements, COMPANY sells and then installs the OBC in its Customers' trucks. 1 Once the
1

See Exhibit A and Exhibit B

ST 19-0037-GIL
December 13, 2019
OBC systems are installed, COMPANY provides Customers a monthly service that includes
COMPANY's communication system and data access. The primary benefit from this system is
real-time GPS vehicle location information that allows Customers to optimize routes and
communicate delivery information.
The MPA may include the following services:
•
•
•
•

•
•
•

Engine diagnostics (Fault Code Monitoring) - reports sent directly to user' s internal
applications alerting of engine problems;
Driver performance management tools;
Fleet Manager Web Access;
Onboard Event Recording (“OER ") - Det ailed re ports and graphs i ncludin g all engine and
accident data necessary to recreate the events before and after an accident: time,
latitude/longitude, road speed, engine speed, heading, RPM, cruise control status,
accelerator status, ignition switch status, SET switch status, coast status, resume status,
accelerator switch status, brake status, clutch status, parking brake status, fix type and fix
quality;
eDriver Logs - automates reporting of on-duty driving hours by sending reports of when
vehicles are moving and stopped;
Vusion - Provides reports analyzing fuel usage by analyzing the engine control module
(over­ speed, over-RPM, idle time, excess-speed), GPS (temperature, topography), dispatch
(load weight), vehicle (vehicle age, engine size, make and model) and fuel purchases
Wireless updates for OBC software.

A customer procures COMPANY services with a flat-monthly fee per vehicle, which may vary
depending on the complement of services selected (e.g. $$$ per vehicle). 2 There is not a separate
charge for resold telecommunications.
COMPANY collects and remits tax on the tangible personal property OBC and other hardware
sold to Customers. This ruling concerns the monthly fee COMPANY charges its Customers for the
integrated telematics solution and the mobile telecommunications services that COMPANY
acquires.
II.
1.
2.

Is COMPANY's purchase of data telecommunications from a mobile communication provider
subject to the Telecommunication s Excise Tax ("TET")?
ls COMPANY's monthly fee per vehicle subject to TET or sales tax?
III.

1.

2
3

Question

Conclusions

No. The Federal Internet Tax Freedom Act ("ITFA") restricts the ability of Illinois to impose TET
on "internet access."3 Illinois issued multiple GIL's finding that data service providers that provide
wireless internet access are exempt from the TET, pursuant to ITFA, even if bundled with taxable
voice communications. Thus, COMPANY's purchase from cellular communication providers of

See Exhibit C
47 U.S.C. § 151 note, §1101

ST 19-0037-GIL
December 13, 2019
data connectivity and instant messaging are not subject to TET.
2.

No. The DOR issued a GIL stating that a telematics provider was the consumer of
telecommunications and the service provided to the telematics customer was a nontaxable
information service and not subject to sales and use tax or TET. In another GIL the DOR
determined a medical device company incurred TET on bundled urgent response medical device
services provided to patients.
COMPANY also offers a service that is bundled with
telecommunications and provides a similar information service to the telematics provider that the
DOR determined did not owe TET or sales tax to the end user customer.
IV.

A.

Analysis

Relevant Authorities
Illinois imposes a 7% tax on gross charges for intrastate and interstate telecommunications
purchased at retail. 4
Statutes
Sec. 3 Illinois [35 ILCS 630/3] [Imposition of tax on intrastate telecommunications]
" ... Beginning January 1, I998, a tax is imposed upon the act or privilege of originating in
this State or receiving in this State intrastate telecommunications by a person in this State
at the rate of 7% of the gross charge for such telecommunications purchased at retail
from a retailer by such person. However, such tax is not imposed on the act or privilege to
the extent such act or privilege may not, under the Constitution and statutes of the United
States, be made the subject of taxation by the State. Beginning January 1, 2001, prepaid
telephone calling arrangements shall not be considered telecommunications subject to the tax
imposed under this Act." (Emphasis added.)
Sec. 4 Illinois [35 ILCS 630/4] [Imposition of tax on interstate telecommunications]
"... Beginning January 1, 1998, a tax is imposed upon the act or privilege of originating in
this State or receiving in this State interstate telecommunications by a person in this State
at the rate of 7% of the gross charge for such telecommunications purchased at retail
from a retailer by such person. To prevent actual multi-state taxation of the act or privilege
that is subject to taxation under this paragraph, any taxpayer, upon proof that that taxpayer
has paid a tax in another state on such event, shall be allowed a credit against the tax
imposed in this Section 4 to the extent of the amount of such tax properly due and paid in
such other state. However, such tax is not imposed on the act or privilege to the extent such
act or privilege may not, under the Constitution and statutes of the United States, be made
the subject of taxation by the State. Beginning on January 1, 2001, prepaid telephone calling
arrangements shall not be considered telecommunications subject to the tax imposed under
this Act ". (Emphasis added.)

4

35 Ill. Comp. State § 630/3; 35 Ill. Comp. State § 630/4

ST 19-0037-GIL
December 13, 2019
Telecommunications means:
"Telecommunications", in addition to the meaning ordinarily and popularly ascribed to it, includes,
without limitation, messages or information. transmitted through use of local, toll and wide area
telephone service, private line services; channel services; telegraph services; teletypewriter; computer
exchange services; cellular mobile telecommunications service; specialized mobile radio; stationary two
way radio; paging service; or any other form of mobile and portable one-way or two-way
communications; or any other transmission of messages or information by electronic or similar means,
between or among points by wire, cable, fiber-optics, laser, microwave, radio, satellite or similar
facilities. s used in this Act, ''private line" means a dedicated non-traffic sensitive service for a single
customer, that entitles the customer to exclusive or priority use of a communications channel or group of
channels, from one or more specified locations to one or more other specified locations. The definition
of "telecommunications" shall not include value added services in which computer processing
applications are used to act on the form, content, code and protocol of the information for purposes
other than transmission. "Telecommunications" shall not include purchases of telecommunications by
a telecommunications service provider for use as a component part of the service provided by him to the
ultimate retail consumer who originates or terminates the taxable end-to-end communications. Carrier
access charges, right of access charges, charges for use of inter-company facilities, and all
telecommunications resold in the subsequent provision of, used as a component of, or integrated into endto-end telecommunications service shall be non-taxable as sales for resale" 5(Emphasis added)
35 ILCS 630/2(d)
"Interstate telecommunications" means all telecommunications that either originate or
terminate outside this State. "
.

35 ILCS 630/2(e)
"Intrastate telecommunications" means all telecommunications that originate and
terminate within this State.
35 ILCS 630/2(a)
"Gross charge" means the amount paid for the act or privilege of originating or receiving
telecommunications in this State and for all services and equipment provided in connection
therewith by a retailer, valued in money whether paid in money or otherwise, including
cash, credits, services and property of every kind or nature, and shall be determined
without any deduction on account of the cost of such telecommunications, the cost of
materials used, labor or service costs or any other expense whatsoever. In case credit is
extended, the amount thereof shall be included only as and when paid. "Gross charges"
for private line service shall include charges imposed at each channel termination point
within this State, charges for the channel mileage between each channel termination point
within this State, and charges for that portion of the interstate inter­office channel provided
within Illinois. Charges for that portion of the interstate inter­office channel provided in
Illinois shall be determined by the retailer as follows: (i) for interstate inter-office channels
having 2 channel termination points, only one of which is in Illinois, 50% of the total
5

35 Ill. Comp. State § 630/2(c)

ST 19-0037-GIL
December 13, 2019
charge imposed; or (ii) for interstate inter-office channels having more than 2 channel
termination points, one or more of which are in Illinois, an amount equal to the total
charge multiplied by a fraction, the numerator of ·which is the number of channel
termination points within Illinois and the denominator of which is the total number of
channel termination points. Prior to January 1, 2004, any method consistent with this
paragraph or other method that reasonably apportions the total charges for interstate
inter-office channels among the states in which channel terminations points are located
shall be accepted as a reasonable method to determine the charges for that portion of the
interstate inter-office channel provided ·within Illinois for that period. However, "gross
charges" shall not include any of the following:
…
35 ILCS 630/2(a)(10)
Charges for nontaxable services or telecommunications if (i) those charges are aggregated with
other charges for telecommunications that are taxable, (ii) those charges are not separately stated
on the customer bill or invoice, and (iii) the retailer can reasonably identify the nontaxable charges
on the retailer's books and records kept in the regular course of business. If the nontaxable
charges cannot reasonably be identified, the gross charge from the sale of both taxable and
nontaxable services or telecommunications billed on a combined basis shall be attributed to the
taxable services or telecommunications. The burden of proving nontaxable charges shall be on the
retailer of the telecommunications.
Regulations
The definition of "gross charges" has an exclusion for certain data processing and information
retrieval services.
86 ILAC 495.100(c) Gross charges does not include charges for the storage of data or
information for subsequent retrieval or charges for the processing of data or information
intended to change its form or content (Section 2(a)(3) of the Act). Charges for answering
services, for example, whether provided electronically or by live operators, represent
charges for the storage of information or data for subsequent retrieval, and are not subject
to tax, provided that these charges, if provided in connection with taxable
telecommunications, are disaggregated and separately identified in the books and records of
the retailer. Charges for automated data storage, retrieval and processing services or for
the use of computer time or other equipment are not included in gross charges. Automated
information retrieval or data processing charges are not included in gross charges. For
example, a customer who accesses an on-line computer data base would not be subject to
tax on the charge for the data processing or inquiry, but would be subject to tax on the
charge for the transmission of the data. If a telecommunications retailer provides both
transmission and data processing services, the charges for each must be disaggregated
and separately identified in the books and records of the retailer.
86 ILAC 495.100(d) Value added services in which computer processing applications are
used to act on the form, content, code and protocol of the information for purposes other
than transmission are exempt (Section 2(c) of the Act). For example, the charges for
computer data, protocol conversions that permit computers to exchange data, no matter
which languages or protocols a computer's out-put may be in, and packet-switching, which
groups data into packets for efficiency of transmission, would be exempt.

ST 19-0037-GIL
December 13, 2019

86 ILAC 495.100(m) Generally, persons that provide customers access to the Internet
("Internet Service Providers" or "ISPs'') and who do not, as part of that service, charge
customers for the line or other transmission charges that are used to obtain access to the
ISP's server or other point of access, are not considered to be telecommunications retailers
from these activities. This is the case so long as such ISPs do not, as part of their billing,
charge customers for such line charges and instead pay their telecommunications suppliers
all transmission costs that they incur in providing the Internet service. In this situation, an
ISP's customer pays his telecommunications supplier for all transmission costs incurred
while using the service. The single monthly fee charged by the ISP, which often represents
a flat charge for a package of items including Internet access, e-mail, and electronic
newsletters, would generally not be subject to tax. If, however, the ISP charges customers
for line or other transmission charges, it should provide its telecommunications suppliers
with Certificates of Resale and should collect and remit the tax. For example, if an ISP
provides customers with Internet access, as described in this subsection, but also provides
customers the use of a 1-800 service to access the ISP, and separately assesses customers
per minute charges for the use of the 1-800 service, the ISP is considered a
telecommunications retailer and incurs Telecommunications Excise Tax on the charges
made for the 1-800 service. If the charges are not disaggregated as provided in subsection
(c), all charges are subject to the Telecommunications Excise Tax.
Federal Internet Tax Freedom Act (“IFTA”)
ITFA forbids state and local government from imposing tax on “internet access"
charges. 6
SEC. 1101. MORATORIUM.
"(a)Moratorium--No State or political subdivision thereof shall
impose any of the following taxes during the period beginning on
October 1, 1998, and ending 3 years after the date of the enactment
of this
Act-(1) taxes on Internet access, unless such tax was generally imposed
and actually enforced prior to October 1, 1998; and
(2) multiple or discriminatory taxes on electronic commerce".
(Emphasis added)
"Internet access" means:
(A) means a service that enables users to connect to the Internet to access content,
information, or other services offered over the Internet;
(B) includes the purchase, use or sale of telecommunications by a provider of a service
described in subparagraph (A) to the extent such telecommunications are purchased, used
or sold(i) to provide such service; or
6

47 U.S.C. §151 note, §1101

ST 19-0037-GIL
December 13, 2019
(ii) to otherwise enable users to access content, information or other services
offered over the Internet;
(C) includes services that are incidental to the provision of the service described in
subparagraph (A) when furnished to users as part of such service, such as a home
page, electronic mail and instant messaging (including voice and video-capable
electronic mail and instant messaging), video clips, and personal electronic storage
capacity;
(D) does not include voice, audio or video programming, or other products and
services (except services described in subparagraph (A), (B), (C), or (E)) that utilize
Internet protocol or any successor protocol and for which there is a charge,
regardless of whether such charge is separately stated or aggregated with the
charge for services described in subparagraph (A), (B) , (C), or (E); and
(E) includes a homepage, electronic mail and instant messaging (including voice and videocapable electronic mail and instant messaging), video clips, and personal electronic storage
capacity, that are provided independently or not packaged with Internet access. (Emphasis
added. 7)
B.

Is COMPANY's purchase of data telecommunications from a mobile communication
provider subject to the Telecommunications Excise Tax ("TET")?
Illinois imposes TET on the privilege of intrastate and interstate
Taxable telecommunications include the use of a "cellular mobile
telecommunications. 8
telecommunication service." 9 However, ITFA restricts the ability of Illinois to impose TET on "
internet access." 10
"Internet access" means:
(A)
means a service that enables users to connect to the Internet to access
content, information, or other services offered over the Internet;
….
(E) includes a homepage, electronic mail and instant messaging (including voice and videocapable electronic mail and instant messaging), video clips, and personal electronic storage
capacity, that are provided independently or not packaged with Internet access 11. (Emphasis
added.)
COMPANY purchases data services from communication providers, which allows COMPANY to
connect to the Internet to access content, information or other services offered over the Internet.
COMPANY also offers instant messaging services to customers. Both services fit the definition of
"internet access" and Illinois is restricted by Federal law to tax those services.
The Illinois Department of Revenue ("DOR") has consistently ruled that ITFA exempts cellular
internet access from TET, even if bundled with taxable voice communications. Illinois excludes
nontaxable services or telecommunications from the definition of "gross charges", even if the

47 U.S.C. §151 note, §1105(5)
35 Ill. Comp. State § 630/3; 35 Ill. Comp. State § 630/4
9
35 Ill. Comp. State § 630/2(c)
10
47 U.S.C. §151 note, §1101
11
47 U.S.C. §151 note, §1105(5)
7
8

ST 19-0037-GIL
December 13, 2019
charges are not separately stated. 12 The DOR ruled that a commercial wireless broadband data
service met the definition of an exempt "internet access" service.13 The company purchased and
resold mobile broadband data plans from cellular and PCS wireless carriers like PROVIDER 3,
PROVIDER 1, and PROVIDER 4. The company bundled the data plans with charges for taxable
services. The DOR ruled that ITFA allows a provider to exclude charges for exempt internet
access from taxable services, even when not separately stated. 14 Accordingly, COMPANY's
purchase of data connectivity and instant messaging from cellular communication carriers is not
subject to TET.
C.

Is COMPANY's monthly fee per vehicle subject to TET or sales tax?
In 2012, the DOR issued a GIL stating that a telematics provider was the consumer of
telecommunications, and the service provided to the telematics customer was a nontaxable
information service and not subject to sales and use tax or TET. 15 The company provided
telematics services with a basic package that offered automatic collision notification, roadside
assistance, Safe Ride cab calling service, remote door lock and unlock, search and send driving
directions, weather information, stolen vehicle location assistance, alarm notification, and
emergency call response. A Plus Package included the basic package, plus location-based traffic
information, route assistance, traffic information, and concierge services. Customers could only
connect to the vendor's call centers, which were located outside Illinois.
The GIL noted the exclusion from gross charges for processing of data or information.
"Telematic services that allow only voice and data communications between a
customer vehicle and a call center and do not permit the customer to make calls to, or
receive calls from, the public switched telephone network are considered information
services and are not subject to Telecommunications Excise Tax."
The DOR determined that the telematics service provider was the party liable for the TET on the
purchase of telecommunications services from a communications provider. Accordingly, the sale to
the telematics customer was not subject to sales and use tax or TET.
Likewise, the DOR determined that an urgent response medical device service provided to patients
was not subject to TET.16 Instead, the telecommunications were consumed by the medical device
company and any voice usage minutes were taxable to the medical device company, but data
charges or add-on services were not taxable due to the ITFA. The DOR stated that the telematics
service addressed in ST 12-0041-GIL was not subject to TET because the "company was providing
a service and the communications provided were merely a component of the service." Thus, the true
object of the bundled service was a nontaxable service, not a telecommunication subject to TET.
Instead, the telematics provider owed TET on the telecommunications services it consumed.
However, the DOR noted that the medical device company incurred TET liability on the standard
cell phone service offering because it wasn't bundled with nontaxable services. This implies that if
the telecommunications service is separately stated to the end user customer, the service provider

35 Ill. Comp. State § 630/2(a)(1)
General Information Letter ST 11-0028-GIL, Illinois Department of Revenue, April 6, 2011
14
47 U.S.C. §151 note, §1105
15
General Information Letter ST 12-0041-GIL, Illinois Department of Revenue, July 27, 2012.
16
General Information Letter ST 16-0032-GIL, Illinois Department of Revenue, July 29, 2016
12
13

ST 19-0037-GIL
December 13, 2019
would incur TET on the telecommunications service sold to the end user customer. In that instance,
the service provider would be reselling taxable telecommunication services.
Similar to the facts outlined in both GIL's, COMPANY provides a service that bundles
telecommunications as a component of the service. The true object of the COMPANY service is
processed data and information gathered from tracking fleet vehicles. COMPANY bundles the service
for one monthly fee per vehicle. COMPANY's telematic services are nontaxable information services
in Illinois and are not subject to sales and use tax or TET. Further, COMPANY is the consumer of
any telecommunications that are a component of a bundled service offering.

COMPANY respectfully requests a Private Letter Ruling confirming the taxability of two
sales:

1. COMPANY's Fleet Management Service is exempt from sales/use tax as a non-tax
   service;
2. COMPANY's purchase of cellular data telecommunication services are exempt
   internet charges
   To the extent you have any questions or concerns regarding this request, COMPANY would
   appreciate the opportunity to have a telephone call at ###-###-#### to address any questions
   or concerns with the analysis and request.
   DEPARTMENT’S RESPONSE:
   The Department’s regulation “Public Information, Rulemaking and Organization”
   provides that “[w]hether to issue a private letter ruling in response to a letter ruling request is
   within the discretion of the Department. The Department will respond to all requests for private
   letter rulings either by issuance of a ruling or by a letter explaining that the request for ruling will
   not be honored.” 2 Ill. Adm. Code 1200.110(a)(4). The Department recently met and determined
   that it would decline to issue a Private Letter Ruling in response to your request. We hope,
   however, that the following General Information Letter will be helpful in addressing your
   question.
   Sales Tax
   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 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, 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 35 ILCS 105/3; 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.

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December 13, 2019

Service Transactions
Retailers' Occupation Tax and Use Tax do not apply to sales of service. Under the
Service Occupation Tax Act, businesses providing services (i.e., servicemen) are taxed on
tangible personal property transferred as an incident to sales of service. See 86 Ill. Adm. Code
140.101. The transfer of tangible personal property to service customers may result in either
Service Occupation Tax liability or Use Tax liability for servicemen, depending upon which tax
base they choose to calculate their liability.
Servicemen may calculate their tax base in one of four ways: (1) separately stated selling
price; (2) 50% of the entire bill; (3) Service Occupation Tax on cost price if they are registered
de minimis servicemen; or (4) Use Tax on cost price if the servicemen are de minimis and are
not otherwise required to be registered under Section 2a of the Retailers’ Occupation Tax Act.
If a transaction does not involve the transfer of any tangible personal property to the
customer, then it generally would not be subject to Retailers’ Occupation Tax, Use Tax, Service
Occupation Tax, or Service Use Tax.
Telecommunications Excise Tax
The Illinois Telecommunications Excise Tax Act imposes a tax on the act or privilege of
originating or receiving intrastate or interstate telecommunications by persons in Illinois at the
rate of 7% of the gross charges for such telecommunications purchased at retail from retailers by
such persons. 35 ILCS 630/3 and 4. The Simplified Municipal Telecommunications Tax Act
allows municipalities to impose a tax on the act or privilege of originating in such municipality
or receiving in such municipality intrastate or interstate telecommunications by persons in
Illinois at a rate not to exceed 6% for municipalities with a population of less than 500,000, and
at a rate not to exceed 7% for municipalities with a population of 500,000 or more, of the gross
charges for such telecommunications purchased at retail from retailers by such persons. 35 ILCS
636/5-10 and 5-15.
“Telecommunications,” in addition to the meaning ordinarily and popularly ascribed to it,
includes, without limitation, messages or information transmitted through use of local, toll and
wide area telephone service; private line services; channel services; telegraph services;
teletypewriter; computer exchange services; cellular mobile telecommunications service;
specialized mobile radio; stationary two way radio; paging service; or any other form of mobile
and portable one-way or two-way communications; or any other transmission of messages or
information by electronic or similar means, between or among points by wire, cable, fiber-optics,
laser, microwave, radio, satellite or similar facilities. “Telecommunications” does not include
“value added services in which computer processing applications are used to act on the form,
content, code and protocol of the information for purposes other than transmission.” See 35
ILCS 630/2(a) and 2(c). If telecommunications retailers provide these services, the charges for
each service must be disaggregated and separately stated from telecommunications charges in the

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books and records of the retailers. If these charges are not thus disaggregated, the entire charge is
taxable as a sale of telecommunications.
“Gross charges” means the amount paid for the act or privilege of originating or receiving
telecommunications in this State and for all services and equipment provided in connection
therewith by a retailer, valued in money whether paid in money or otherwise, including cash,
credits, services and property of every kind or nature, and shall be determined without any
deduction on account of the cost of such telecommunications, the cost of materials used, labor or
service costs or any other expense whatsoever. “Gross charges” do not include “charges for the
storage of data or information for subsequent retrieval or the processing of data or information
intended to change its form or content.” See 86 Ill. Adm. Code 495.100(c).
Internet Access
The Internet Tax Freedom Act imposes a federal moratorium on state or municipal taxes
on Internet access. 47 USCA § 151 note; § 1101. “Internet access”:
(A) means a service that enables users to connect to the Internet to access content,
information, or other services offered over the Internet;
(B) includes the purchase, use or sale of telecommunications by a provider of a service
described in subparagraph (A) to the extent such telecommunications are purchased, used
or sold(i) to provide such service; or
(ii) to otherwise enable users to access content, information or other services
offered over the Internet;
(C) includes services that are incidental to the provision of the service described in
subparagraph (A) when furnished to users as part of such service, such as a home page,
electronic mail and instant messaging (including voice and video-capable electronic mail
and instant messaging), video clips, and personal electronic storage capacity;
(D) does not include voice, audio or video programming, or other products and services
(except services described in subparagraph (A), (B), (C), or (E)) that utilize Internet
protocol or any successor protocol and for which there is a charge, regardless of whether
such charge is separately stated or aggregated with the charge for services described in
subparagraph (A), (B), (C), or (E); and
(E) includes a homepage, electronic mail and instant messaging (including voice and
video-capable electronic mail and instant messaging), video clips, and personal electronic
storage capacity, that are provided independently or not packaged with Internet access.

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Telecommunications that are purchased, used or sold by a provider to enable users to
connect to the Internet or to otherwise enable users to access content, information or other
services offered over the Internet are subject to the federal moratorium. 47 USCA § 151 note; §
1101(B). Generally, data plans provided by mobile or wireless telecommunications providers are
subject to the moratorium.
Services
In ST 11-0028-GIL, ST 12-0041-GIL, and ST 16-0031-GIL, the Department had the
opportunity to respond to taxpayer inquiries regarding certain services and determine whether the
services were telecommunications services subject to Telecommunications Excise Tax. In ST
12-0041, the Department responded:
“Telematic services that allow only voice and data communications between a
customer vehicle and a call center and do not permit the customer to make calls
to, or receive calls from, the public switched telephone network are considered
information services and are not subject to Telecommunications Excise Tax. In
those situations, the telematics service provider would be liable for
Telecommunications Excise Tax on telecommunications services purchased from
vendors and used by it to provide telematic services.”
In ST 16-0032, the Department clarified its decision in ST12-0041:
“It is important to note that the Department’s decision in ST 12-0041 was based
on representations made by the company that the company was providing a
service and the communications provided were merely a component of that
service. The Department may reach a different result in the future based on
different set of facts if the Department concludes that the services being provided
are in fact telecommunications services.”
It does not appear that the company is providing a telecommunications service to
its customers, and the communications the company provides are merely a component of
the company’s service. However, the Department does not have sufficient information to
determine whether the telecommunications services you purchase from PROVIDER 1
and PROVIDER 2 are in fact Internet access. If the services you purchase are not
Internet access or are not used to provide Internet access to your customers, you would be
liable to PROVIDER 1 and PROVIDER 2 for Telecommunications Excise Tax.
I hope this information is helpful. 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,

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Richard S. Wolters
Associate Counsel
RSW:rkn