Does a company that leases land under triple net leases, where tenants happen to store vehicles on it, owe Illinois Parking Excise Tax on the rent it collects?

Plain-English summary

The Illinois Department of Revenue ruled that a company leasing land to third parties under triple net leases does not owe Parking Excise Tax on the rent it collects, even though the tenants use the land to store motor vehicles, trucks, and trailers. The company holds land in its power-line rights of way and leases it out on 5-year triple net leases with a flat monthly rent that does not vary with how many vehicles (if any) are actually stored there. Under these leases, the tenant -- not the landlord -- controls the property: the tenant handles upkeep, maintenance, paving, fencing, gates, utilities, and real estate taxes, and can make alterations with the landlord's approval.

The Parking Excise Tax Act (35 ILCS 525) taxes the privilege of using a parking space in a "parking area or garage," and that tax is collected from the purchaser by the "operator" of the space. The Department's rules define an "operator" as someone who actually runs a parking area or garage, or who collects payment specifically for parking or storage of vehicles. The Department agreed with the company that a landlord under a triple net lease is not an "operator" because it has no operational control over the property and no knowledge of, or control over, how many vehicles are parked there, for how long, or whether the property is even used for vehicle storage at all.

The ruling also leaned on a Department regulation, 86 Ill. Adm. Code 195.115(f), which exempts a person "engaged in the business of renting real estate" who leases real estate to a lessee that may park vehicles for its own use -- as opposed to sub-leasing parking spaces for consideration. The rule's Example 1 (a car dealership leasing land from a landlord to park its own excess inventory) closely matched the company's fact pattern, and the Department found the company "falls squarely within the exemption contained in Section 195.115(f) and Example 1."

The Department also flagged a broader concern raised by the taxpayer: if triple net land leases were taxed as parking simply because a tenant might park vehicles on the leased premises, then nearly every commercial lease with adjoining parking -- big box retail stores, office buildings, factories, warehouses, even strip mall storefronts -- would trigger the Parking Excise Tax. The Department's ruling avoids that result by keeping the tax focused on situations where the lessor (or someone acting for it) actually operates the parking use, not on ordinary real estate leases where parking incidentally occurs.

What this means for you

Landlords and real estate investors using triple net leases

If you lease land or buildings to tenants under a genuine triple net lease -- where the tenant controls the premises, handles maintenance and taxes, and pays a flat rent unrelated to vehicle counts -- this ruling supports treating that rent as outside the Parking Excise Tax, even if tenants use the space to park or store vehicles. The key facts the Department relied on were: (1) the landlord has no control over or knowledge of vehicle activity on the site, (2) rent doesn't fluctuate with parking usage, and (3) the tenant, not the landlord, is responsible for operating and maintaining the property.

Businesses that park vehicles on leased land

If you're a tenant (for example, a business storing trucks, trailers, or inventory vehicles) leasing land for your own use under a triple net arrangement, this ruling indicates your landlord generally should not be charging you Parking Excise Tax on the rent, because the landlord isn't acting as a parking "operator." The analysis would differ if the landlord (or a third party) actively operates a parking lot and charges specifically for parking or storage.

Accountants and tax professionals

The ruling turns on the statutory definition of "operator" in 35 ILCS 525/10-5 and the Department's rule at 86 Ill. Adm. Code 195.115(f), which exempts real estate lessors whose tenants park vehicles for their own use rather than sub-leasing parking spaces for consideration. Remember this is a PLR binding only as to the specific taxpayer and facts presented -- it is useful as an illustration of the Department's reasoning on triple net leases, but each client's lease terms (degree of landlord control, whether rent varies with parking usage, who operates the premises) should be checked against the facts here before relying on the same conclusion.

Common questions

Q: Does every commercial lease that includes parking spaces trigger the Parking Excise Tax?
A: No. The Department's ruling specifically rejects that reading. The tax applies to the operator of a parking area or garage, not to every landlord whose tenant happens to have parking available -- otherwise it would sweep in ordinary leases of big box retail stores, office buildings, factories, warehouses, and strip mall storefronts.

Q: What made this landlord not an "operator" under the Act?
A: The lease vested operation and control of the property in the tenant, who was responsible for upkeep, maintenance, paving, fencing, gates, utilities, and real estate taxes. The landlord charged a flat monthly rent that didn't change based on how many vehicles were stored, and had no knowledge of or control over vehicle activity on the site.

Q: Does the exemption depend on what the tenant stores on the land?
A: The ruling's reasoning and the cited regulation (86 Ill. Adm. Code 195.115(f), Example 1) focus on whether the tenant parks vehicles "for the lessee's own use and not for the purpose of sub-leasing parking spaces for consideration." If the tenant instead operated its own paid parking business on the leased land and sub-leased parking spaces for a fee, the analysis could differ.

Q: Can other taxpayers rely on this ruling?
A: No. As a Private Letter Ruling, it binds the Department only as to the specific company that requested it, and only to the extent the facts it described were correct and complete. Under 2 Ill. Adm. Code 1200.110(e), it also expires 10 years after issuance, or earlier if the law or the underlying facts change.

Q: What is the "parking area or garage" definition that the Department applied?
A: Under 35 ILCS 525/10-5, a "parking area or garage" is real estate or a structure where vehicles are stored, housed, or parked for hire, charge, fee, or other valuable consideration, or where rent is paid to the owner, manager, operator, or lessee for housing or storing vehicles. The Department found the triple net land leases here didn't fit this definition because the company itself wasn't collecting consideration for parking as such -- it was simply collecting land rent.

Citations and references

• 35 ILCS 525/10-1 et seq. (Parking Excise Tax Act)
• 35 ILCS 525/10-5 (definitions of "parking area or garage," "charge or fee paid for parking," and "operator")
• 35 ILCS 525/10-10(a) (imposition of tax on the privilege of using a parking space)
• 35 ILCS 525/10-10(b) (tax collected from the purchaser by the operator)
• 86 Ill. Adm. Code 195.110(g) (lessors of commercial real estate)
• 86 Ill. Adm. Code 195.110(h) (lessors of storage units)
• 86 Ill. Adm. Code 195.115(f) (exemption for persons engaged in the business of renting real estate)
• 86 Ill. Adm. Code 195.115(g) (occasional sales of parking spaces)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure, including subsection (e) on expiration)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)

Subject

Parking Excise Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2020.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2020/st20-0003-plr.pdf

Original ruling text

ST 20-0003-PLR 06/03/2020 PARKING EXCISE TAX
This letter discusses the taxability of commercial leases under the Parking Excise Tax. 86 Ill.
Adm. Code 195.115(f). (This is a PLR.)

June 3, 2020

Dear Xxxx:
This letter is in response to your letter dated December 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.
Review of your request disclosed that all the information described in paragraphs 1 through 8 of
Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY, for the issue or issues presented in this ruling, and is
subject to the provisions of subsection (e) of Section 1200.110 governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that neither COMPANY, nor a
related taxpayer is currently under audit or involved in litigation concerning the issues that are the
subject of this ruling request. In your letter you have stated and made inquiry as follows:
The purpose of this letter (“Letter”) is to request a private letter ruling under 86 Ill.
Admin. Code § 1200.110 on behalf of COMPANY on which COMPANY may rely. Specifically,
COMPANY requests a private letter ruling that, for purposes of the Illinois Parking Excise Tax
Act (the “Act,” 35 ILCS 525/10-1, et seq.), the rental payments COMPANY receives with
respect to triple net leases of land, as described below, are not subject to tax under the Act.
No parking tax audit or litigation is pending with the Illinois Department of Revenue (the
“Department”) involving COMPANY. Neither COMPANY nor any representatives of
COMPANY have previously submitted a ruling request related to the same or similar issues to
those presented below to the Department but withdrew them before a letter ruling was issued.
A power of attorney authorizing the undersigned to represent COMPANY with respect to
this ruling request is attached.
Relevant Facts
COMPANY leases land held for future use in its power line rights of way to third parties for
storage of motor vehicles, trucks, and trailers. The leases are typically triple net leases of

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land, vesting operation and control of the property in the leases and making the lessees
responsible for upkeep, maintenance, paving, fencing, gates, and real estate taxes. Because
power lines and towers are located in the rights of way, the leases preclude tenants from
erecting significant structures, generally limit use to storing vehicles, require approvals from
COMPANY before making certain changes, and allow COMPANY limited access rights to
service power lines and towers in the right of way. Under the leases, the lessees retain all
operational control over any storage of vehicles. Attached is a representative lease agreement
with names redacted. Pertinent provisions of the lease are summarized below:
➢ The lease is a 5-year lease. Lease § 1.
➢ A flat monthly rental is charged that does not vary with the number of vehicles, or
whether any vehicles at all, are stored at that location. Lease § 3.
➢ Tenant is liable for its proportionate share of real estate taxes imposed on the leased
premises. Lease § 4.
➢ Tenant agrees to maintain the premises at its sole cost and expense. Lease § 6.
➢ Tenant is obligated to perform at its sold cost and expense any and all necessary
paving, grading, landscaping, cutting, mowing, snow and ice removal. Id.
➢ Tenant is obligated to provide its own utilities. Lease § Id.
➢ “Tenant assumes all of the responsibilities normally identified with the ownership of the
Leased Premises, including, but not limited to, responsibility for the condition of the
Leased Premises, such as the operation, repair, replacement, maintenance and
management of the Leased Premises, including, without limitation, repairs to all
buildings, structures, fixtures, equipment and other property thereat….” Id.
➢ Tenant may make alterations (including paving, filling, and installing gates and fences)
to the premises, at its sole cost and expense, upon approval of COMPANY. Lease §
9(a), (b) and (d).
➢ Tenant agrees that it “shall conduct its operations on the Leased Premises in
compliance with all applicable Environmental Laws.” Lease § 15.
➢ All equipment and other property installed upon the Leased Premises by Tenant shall
remain property of Tenant. Lease § 28.
Relevant Portions of the Statute
Under the Act, tax is imposed on—
The privilege of using in this State a parking space in a parking area or garage for the
use of parking one or more motor vehicles, recreational vehicles, or other self-propelled
vehicles, at the rate of:

1. 6% of the purchase price for a parking space paid for an hourly, daily, or weekly
   basis; and
2. 9% of the purchase price for a parking space paid for on a monthly or annual basis.
   (35 ILCS 525/10-10(a).
   “Parking area or garage” means “any real estate, building, structure, premises,
   enclosure or other place, whether enclosed or not, except a public way, within the State, where
   motor vehicles, recreational vehicles, or other self-propelled vehicles, are stored, housed or
   parked for hire, charge, fee or other valuable consideration in a condition ready for use, or

ST 20-0003-PLR
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where rent or compensation is paid to the owner, manager, operator or lessee of the premises
for the housing, storing, sheltering, keeping or maintaining motor vehicles, recreational
vehicles, or other self-propelled vehicles. “Parking area or garage” includes any parking area
or garage, whether the vehicle is parked by the owner of the vehicle or by the operator or an
attendant.” 35 ILCS 525/10-5.
“Charge or fee paid for parking” means “the gross amount of consideration for the use
or privilege of parking a motor vehicle in or upon any parking lot or garage in the State,
collected by an operator and valued in money, whether received in money or otherwise,
including cash, credits, property, and services, determined without any deduction for costs or
expenses, but not including charges that are added to the charge or fee on account of the tax
imposed by this Act or on account of any other tax imposed on the charge or fee.” Id.
(Emphasis supplied.)
“Operator” means “any person who engages in the business of operating a parking area
or garage, or who, directly or through an agreement or arrangement with another party,
collects the consideration for parking or storage of motor vehicles, recreational vehicles, or
other self-propelled vehicles, at the parking place. This includes, but is not limited to, any
facilitator or aggregator that collects from the purchaser the charge or fee paid for parking.
‘Operator’ does not include a bank, credit card company, payment processor, booking
intermediary, or person whose involvement is limited to performing functions that are similar to
those performed by a bank, credit card company, payment processor, or booking
intermediary.” Id. (Emphasis supplied.)
Analysis
Summary of Arguments
•
•
•

The Tax is imposed with respect to the purchase or lease of a parking space from an
operator—not on rental payments for land leases where the tenant is in control of the
leased premises.
The leases in the question are triple net leases for land that the tenant, not COMPANY,
operates and controls.
Imposition of the taxes on triple net leases would cause every triple net lease to a
tenant of a big box retail store, entire office building, factory or warehouse that includes
land surrounding the building for employees or customers to park to be subject to
parking tax.

Detailed Arguments
The Tax is imposed only when it is collected by an operator. The Tax is imposed only
when it is collected by an operator. The lessor of triple net leased property is no [sic] an
operator. In a triple net lease, all operations of, and control over, the property are vested in the
tenant. The fact that the tenant uses some of all of the property for parking vehicles does not
convert the landlord into an operator. This is entirely distinct from taxing self parked vehicles
in a lot owned or operated by a third party, when the third party exercises control over the
facility. Further, there is no tax imposed for leasing land for a fixed monthly rent without regard
to the number of vehicles parked or the duration that each such vehicle is parked and where
the lessor has no knowledge or control over the vehicles brought in or out, the number of

ST 20-0003-PLR
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vehicles that will be parked at the site, the duration that any particular vehicle will be at the site,
and whether the property stored is exempt (because, for example it is [sic] trailer that is not
self-propelled).
The leases are triple net leases of land, not leases of parking spaces. COMPANY does
nothing more than lease land to its tenants. Under the leases, COMPANY does not operate or
control the premises -- the tenant controls the premises subject to certain approvals by
COMPANY and allowing COMPANY certain access rights to service power lines and towers in
the right of way. Specifically, the lessee is responsible for upkeep, maintenance, paving,
fencing, gates, and real estate taxes. Further, COMPANY has no control over or knowledge of
the number of vehicles to be stored on the premises, the timing of how long any individual
vehicle will be stored, ingress or egress of vehicles, or whether exempt property such as
trailers that are not self-propelled will be stored on the poperty [sic]. As such, COMPANY is
not an “operator” within the meaning of the Act. Notably, the definition of a “parking lot or
garage” expressly contemplates that the operator may be a lessee rather than the lessor of the
property.
Tax would apply to every retail tenant where parking is available. If the tax were to
apply to triple net leases, then it would apply to most leases to tenants of big box retail stores,
entire office buildings, factories or warehouses that includes land surrounding the building for
employee or customer parking. Such facilities are commonly triple net leased from real estate
investors, and invariably have adjoining parking that is included in the lease. Even a tenant in
a strip mall will have parking rights associated with its lease of a store front. It cannot be the
case that the lessee in such a situation must pay the Tax to its landlord merely because the
premises includes spaces that the tenant’s customers or employees can use to park their cars.
Yet, that would be the inevitable result of subjecting triple net lease of land to the tax.
COMPANY is not aware of any authorities contrary to the requested ruling.
Thank you for your consideration of this request. Please do not hesitate to contact me if
you have any questions, or would like any additional information. We respectfully request a
conference in the event you tentatively conclude that an adverse ruling would be warranted.

DEPARTMENT’S RESPONSE:
Beginning January 1, 2020, the Parking Excise Tax Act ("Act") [35 ILCS 525] imposes a tax on
the privilege of using in this State a parking space in a parking area or garage for the use of parking
one or more motor vehicles, recreational vehicles, or other self-propelled vehicles. 35 ILCS 525/1010(a). The tax is imposed upon the person purchasing and using a parking space in a parking area
or garage and collected from the purchaser by the operator of the parking area or garage. 35 ILCS
525/10-10(b).
The Department recently adopted rules implementing the Act. 86 Ill. Adm. Code 195, effective
May 13, 2020; 44 Ill. Reg. 9222, May 29, 2020. The rules address, among others, lessors of
commercial real estate (Section 195.110(g)), lessors of storage units (Section 195.110(h)), persons
engaged in the business of renting real estate (Section 195.115(f)), and occasional sales of parking
spaces (Section 195.115(g)).

ST 20-0003-PLR
Page 5
Section 195.115(f) of the rule states: “The tax imposed by the Act shall not apply to:
f)

a person engaged in the business of renting real estate that leases real estate to a
lessee that may park motor vehicles, recreational vehicles or self-propelled vehicles for
the lessee's own use and not for the purpose of sub-leasing parking spaces for
consideration. This person is not engaged in the business of operating a parking area or
garage.
EXAMPLE 1: A car dealership leases real estate from a person to park the dealership's
excess inventory. The lessor is not engaged in the business of operating a parking area
or garage.
EXAMPLE 2: A car dealership leases real estate from a person to park motor vehicles
for the purpose of making retail sales of the motor vehicles. The lessor is not engaged
in the business of operating a parking area or garage.
EXAMPLE 3: A railroad company leases real estate to a municipality. The municipality
makes improvements on the property to permit commuters to park their motor vehicles
on the real estate. The railroad company is not engaged in the business of operating a
parking area or garage;”

The Department finds that when COMPANY leases real estate pursuant to the triple net lease
described in its request and attached as an exhibit, COMPANY falls squarely within the exemption
contained in Section 195.115(f) and Example 1, is not engaged in the business of operating a parking
area or garage, and is not required to collect the tax from the lessee.
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this Private Letter
Ruling, you may contact me at (217) 782-2844. If you have further questions related to the Illinois sales
tax laws, please visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.
Very truly yours,

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