Is the entire selling price of a wheelchair-adaptive van taxed at the general 6.25% rate, or can the modification be taxed separately at the 1% low rate?

Plain-English summary

A taxpayer bought a used wheelchair-accessible van from an out-of-state dealership and was charged Illinois tax at the full 7% rate (6.25% state rate plus local tax) on the entire purchase price, including the cost of the wheelchair modification. The taxpayer believed the modification portion should have been taxed at a lower 1.5% (low) rate instead, and wrote to the Illinois Department of Revenue asking for guidance and a possible refund.

The Department's answer turns on who performed the modification and when it was sold. If a motor vehicle dealer buys a van, has it converted to make it usable by a disabled person, and then sells the completed, already-modified van, the entire selling price of that van is subject to Retailers' Occupation Tax at the general merchandise rate — 6.25% plus any applicable local tax. That is because at the point of sale, the buyer is simply purchasing finished tangible personal property (a converted van), with no separate modification transaction.

By contrast, if an individual buys an unmodified vehicle and then separately contracts — either with the dealer or with a conversion company — to have it modified afterward, only the tangible personal property used in that modification is taxed, and it is taxed at the state's low rate (1% plus any applicable local tax) rather than the general rate.

Based on the invoice and web page the taxpayer provided, the Department understood that the selling company had purchased the vehicle, made the modifications, and then sold the already-completed van to the taxpayer. Under that fact pattern, the taxpayer would owe tax on the entire selling price at the general rate, and the original 7% charge would have been correct. The Department noted that if the facts were actually the reverse — i.e., the taxpayer purchased the van first and then separately had it modified — the modification work should have been taxed at the low rate instead.

What this means for you

Buyers of disability-modified vehicles

Whether you can benefit from the lower 1% rate on modification costs depends entirely on transaction structure, not on the fact that a vehicle is disability-adapted. If you buy an already-converted van as a single finished product from a dealer, you owe the general 6.25%-plus-local rate on the whole price — there is no way to carve out the conversion cost for a lower rate after the fact. To get the low rate, you (or whoever is buying) must purchase the unmodified vehicle first and then enter into a separate contract for the conversion work.

Motor vehicle dealers and conversion companies

If you buy vehicles, convert them for disabled customers, and resell the finished vehicle, you must charge and collect the general merchandise rate on the entire selling price — not just the base vehicle cost. If instead your customer already owns the vehicle and hires you (or a conversion company) purely to perform the modification, that separate modification contract is taxed at the low 1% rate.

Accountants and tax professionals

This GIL illustrates the Department's practical test under 86 Ill. Adm. Code 130.310: look at who owned the vehicle when the modification occurred and whether the modification was priced/sold as part of one bundled sale of a finished good, or as a distinct, separately contracted service/parts transaction. Because this is only a GIL, it is not binding on the Department and does not resolve disputed facts — it simply explains how the regulation would apply to each of the two fact patterns described.

Common questions

Q: I bought a used wheelchair-adaptive van from a dealer. Should the whole price be taxed at 6.25%, or just the base van price?
A: If the dealer already converted the van before selling it to you, the entire selling price is taxed at the general merchandise rate (6.25% plus local tax) — the modification is not separately taxed at a lower rate in that scenario.

Q: How do I qualify for the lower 1% rate on the modification?
A: You must purchase the unmodified vehicle first, and then separately contract — with the dealer or with a conversion company — to have it modified afterward. In that case, only the tangible personal property used in the modification is taxed, at 1% plus applicable local tax.

Q: Did the taxpayer in this letter get a refund?
A: The Department did not order one. Based on the invoice and web page provided, it appeared the selling company had purchased, modified, and then sold the completed van as one transaction — meaning the full 7% (6.25% state plus local) charge on the entire price was correct as described.

Q: Is this letter binding on the Department?
A: No. It is a General Information Letter (GIL) issued under 2 Ill. Adm. Code 1200.120, meaning it directs the taxpayer to the relevant regulation but is not a statement of Department policy and is not binding, unlike a Private Letter Ruling (PLR).

Citations and references

• 86 Ill. Adm. Code 130.310 (tax rate for vehicles modified to be usable by a disabled person)
• 2 Ill. Adm. Code 1200.110 (procedures for requesting Private Letter Rulings)
• 2 Ill. Adm. Code 1200.120 (General Information Letters — not binding on the Department)

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/st20-0012-gil.pdf

Original ruling text

ST 20-0012-GIL 06/24/2020 MOTOR VEHICLES
The sale of a vehicle that has previously been modified to make it usable by a disabled person
is subject to Retailers' Occupation Tax liability on the entire selling price of the vehicle at the
general merchandise rate (6.25% plus any applicable local tax). See 86 Ill. Adm. Code
130.310. (This is a GIL).
June 24, 2020

Dear Xxxx:
This letter is in response to your letter dated July 16, 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:
On July 16, 20XX I purchased a 20XX VAN from an out of state dealership for $$$.
This van is a re-entry wheelchair adaptive van. The actual cost of the van is $$$, of
which I should have paid 7% sales tax ($$$). The medical adaption for the for the (sic)
wheelchair cost $$$. Of which I should have paid 1.5% ($$$). In stead [sic] of paying
these amounts I had to pay 7% on the entire $$$. ($$$). The reason being I could get
no help what so ever from anyone from the State of Ill. No one at the CITY DMV, no
one at the Department of Revenue. I spent over an hour and half waiting to talk to an
agent who could not answer any questions and be of any help. She called her
supervisor who was no help. They finally just said pay the full amount and write a letter
asking for a refund. So I feel I am owed at least $$$ in refund. The only way to get my
vehicle plates and title were to pay taxes and with no help or answers from anyone with
the state I had no choice but to pay the full price. Enclosed you will find the forms I filled
out and the invoice for the van.
My cell is XXX-XXX-XXXX, my e-mail
[email protected].
DEPARTMENT’S RESPONSE:
A vehicle that has previously been modified to make it usable by a disabled person is subject
to the general merchandise rate of tax in this State (6.25% plus any applicable local taxes). For
example, if a motor vehicle dealer purchases a van and has it converted to make it usable by a
disabled person, the entire selling price of that vehicle is subject to the general merchandise rate of
tax. However, if an individual purchases a vehicle and that person separately contracts (either with
the dealer or a conversion company) to have that vehicle modified to make it usable by a disabled

ST 20-0012-GIL
Page 2

person, any tangible personal property sold or transferred as part of that modification will be subject
to the low rate of tax (1% plus any applicable local tax).
It is our understanding based on the invoice and web page you provided that COMPANY
purchased the vehicle, made the modifications and sold the completed van to you. If this was the
case, you would owe tax on the entire selling price. If you purchased the van and subsequently had
the vehicle modified for you, the modifications should have been taxed at the low rate.
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