Does a company create Illinois Use Tax nexus just by being acquired by an Illinois-based parent company?

Plain-English summary

This Illinois General Information Letter answers a question from an out-of-state company that used to have Illinois nexus (it had a salesperson living in Illinois) but closed its Illinois tax account after that relationship ended. The company was later purchased by a separate business that is based in Illinois and has its own, different federal tax ID number. The company asked whether being acquired by an Illinois-based parent automatically creates Illinois Use Tax nexus for it going forward ("nexus by affiliation"), given that its own sales into Illinois were well under six figures with fewer than 200 transactions.

The Department explained the general framework rather than ruling on the specific facts. An out-of-state retailer must register and collect Illinois Use Tax if it is a "retailer maintaining a place of business in this State" under Section 2 of the Use Tax Act (35 ILCS 105). That covers two groups: retailers with a physical presence in Illinois, and remote retailers without a physical presence who nonetheless cross economic nexus thresholds. Those thresholds, drawn from the standard the U.S. Supreme Court upheld in South Dakota v. Wayfair, Inc. and adopted by Illinois in P.A. 100-587, are $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate transactions with Illinois purchasers, measured on a rolling 12-month basis and checked quarterly.

On the specific question of whether an acquisition by an Illinois company creates nexus for the acquired company, the Department said the letter did not provide enough information about the nature of the acquisition to give an opinion. It did note, however, that if the two companies remain separate legal entities, each one independently determines its own Use Tax or Retailers' Occupation Tax obligation — meaning the parent's Illinois presence does not automatically get imputed to the subsidiary just because of common ownership, at least not without more facts than were given here.

Because this is a GIL, it does not decide the taxpayer's specific case; it only points to the relevant statutes, regulations, and general nexus rules that would govern the analysis.

What this means for you

Businesses being acquired by an Illinois company

If your out-of-state business is acquired by (or merges with) a company based in Illinois, acquisition alone does not automatically create Illinois Use Tax nexus for your business under this letter's reasoning — as long as you and the acquirer remain separate legal entities with separate FEINs. You would still need to separately check whether you meet the standard nexus tests: a physical presence in Illinois, or $100,000+ in cumulative gross receipts, or 200+ separate transactions with Illinois purchasers in a trailing 12-month period.

Remote and out-of-state retailers generally

Even without any Illinois affiliate, you must register and collect Illinois Use Tax once you cross the $100,000 sales or 200-transaction threshold in a rolling 12-month period, checked at the end of each quarter (March, June, September, December). This applies from October 1, 2018 forward; the letter also notes a slightly different formulation of the same thresholds effective January 1, 2021, under the "remote retailer" definition in the Retailers' Occupation Tax Act.

Accountants and tax professionals

Note the letter's own caveat: it is a GIL, not a PLR, precisely because there wasn't enough factual detail to give a binding answer. If a client needs a decision the Department will stand behind for their specific transaction, they should request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110, providing full facts about the corporate structure and nature of the acquisition.

Common questions

Q: Does getting acquired by an Illinois company automatically give my out-of-state company Illinois nexus?
A: Not automatically, according to this letter — but only if you remain a separate legal entity from the acquirer with your own FEIN. The Department declined to rule definitively because the taxpayer's letter didn't describe the acquisition in enough detail.

Q: What are the actual economic nexus thresholds for remote retailers?
A: $100,000 or more in cumulative gross receipts from sales to Illinois purchasers, or 200 or more separate transactions with Illinois purchasers, measured over a rolling 12-month period and re-checked quarterly (end of March, June, September, December).

Q: What if my company used to have Illinois nexus through an employee but no longer does?
A: Ending a physical-presence connection (like a resident salesperson) ends that basis for nexus. You'd then be evaluated under the remote-retailer economic nexus rules going forward, based on your own sales volume and transaction count into Illinois — not your former nexus history.

Q: What's the difference between this GIL and a Private Letter Ruling (PLR)?
A: A PLR is binding on the Department for the specific taxpayer and facts presented, and requires following the procedures in 2 Ill. Adm. Code 1200.110. A GIL, like this one, merely points to the relevant rules and is not binding — the Department issued a GIL here because the facts provided weren't sufficient for a binding PLR.

Q: Does the corporate acquisition affect the Retailers' Occupation Tax the same way?
A: The letter's reasoning is general: if the companies are separate legal entities, each independently determines its own Use Tax or Retailers' Occupation Tax obligation, based on standard nexus rules rather than the other company's Illinois presence.

Citations and references

• 35 ILCS 105/2 (Use Tax Act definition of "retailer maintaining a place of business in this State")
• 86 Ill. Adm. Code 150.803 (out-of-state and remote retailer nexus and collection thresholds)
• 35 ILCS 120/1 (Retailers' Occupation Tax Act definition of "remote retailer")
• 35 ILCS 120/2 (Retailers' Occupation Tax Act liability of remote retailers)
• 35 ILCS 120/2-12(6) (situs of remote retailer sales)
• South Dakota v. Wayfair, Inc., No. 17-494 (U.S. June 21, 2018)
• Illinois P.A. 100-587 (nexus standards effective October 1, 2018)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedures)

Subject

Use 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/st20-0013-gil.pdf

Original ruling text

ST 20-0013-GIL 07/27/2020 USE TAX
This letter discusses out-of-state and remote retailers. 86 Ill. Adm. Code 150.803; 35 ILCS
120/2. (This is a GIL)

July 27, 2020

Dear Xxxx:
This letter is in response to your letter dated April 22, 2020, 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:
It was suggested I contact you directly by EMPLOYEE in “REV.TA-Sales” after I
requested information from them regarding COMPANY’s Sales Tax Nexus
status. See email thread below:
REV.TA-Sales
to me
Hello.
I consulted technical staff and this is what I was told.
“If COMPANY was purchased by COMPANY 1, Nexus would be established
since COMPANY 1 is located in Illinois.
However, if COMPANY is operating under a different FEIN from COMPANY 1,
Nexus would not necessarily be established in Illinois. It appears that this is the
case.
I think you should probably have them get a letter ruling from legal just to be
sure.”

ST 20-0013-GIL
Page 2

If you would like to write to legal the address is provided below:
Legal Services Office, 5-500
101 West Jefferson
Springfield, IL 62702
Thank you,

EMPLOYEE
This email contains the thoughts and opinions of EMPLOYEE and does not
represent official department policy.
COMPANY used to have nexus in Illinois because we had a salesperson living in
Illinois. That relationship ended in Mid-20XX. Our last ST-1 was filed for
7/31/20XX. COMPANY’s FEIN is ###. I believe our Illinois Tax ID Number is

and it appears the account was closed on 6/30/20XX.

On 12-31-20XX, COMPANY was purchased by the COMPANY 1, in CITY Illinois.
COMPANY 1 has a separate FEIN (###). Does this give COMPANY (located in
CITY 1, STATE) Sales Tax Nexus by Affiliation, or do we fall into the “standard”
rules for establishing Nexus??
Our sales into Illinois for Q2 20XX thru Q1 20XX were ~ $XX,XXX with less than
200 transactions.
Please advise as to our current status in regard to the Affiliate Nexus and/or the
USD amount shipped into Illinois in the prior 12 months.

DEPARTMENT’S RESPONSE:
An out-of-state retailer making sales to Illinois purchasers from locations outside Illinois is
required to register with the Department and collect and remit Use Tax on those sales if it falls within
the definition of a "retailer maintaining a place of business in this State" in Section 2 of the Use Tax
Act [35 ILCS 105]. The Department is authorized to require these retailers to act as tax collectors
because they have established sufficient contacts, or nexus, with Illinois. There are two groups of
out-of-state retailers that must collect Use Tax on sales to Illinois purchasers: 1) out-of-state retailers
with a physical presence in Illinois, and 2) out-of-state retailers without a physical presence in Illinois.
86 Ill. Adm. Code 150.803.
In South Dakota v. Wayfair, Inc., No. 17-494 (U.S. June 21, 2018), the U.S. Supreme Court
upheld a South Dakota statute that imposed tax collection obligations on out-of-state retailers that
met specific selling thresholds but had no physical presence in the state. Illinois P.A. 100-587
enacted nexus standards, effective October 1, 2018, that are virtually identical to those upheld in

ST 20-0013-GIL
Page 3

Wayfair. P.A. 100-587 requires remote retailers with no physical presence in Illinois to register and to
collect and remit Use Tax.
Beginning October 1, 2018 through December 31, 2020, 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.

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 for the preceding 12-month period. If the
retailer meets either of the criteria 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. 86 Ill. Adm Code 150.803.
Beginning on January 1, 2021, a remote retailer is engaged in the occupation of selling at retail
in Illinois for purposes of this Act, 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.

"Remote retailer" means a retailer that does not maintain within this State, directly or by a subsidiary,
an office, distribution house, sales house, warehouse or other place of business, or any agent or
other representative operating within this State under the authority of the retailer or its subsidiary,
irrespective of whether such place of business or agent is located here permanently or temporarily or
whether such retailer or subsidiary is licensed to do business in this State. 35 ILCS 120/1.
Remote retailers making retail sales of tangible personal property that meet or exceed the
threshold above shall be liable for all applicable State retailers' and locally imposed retailers'
occupation taxes administered by the Department on all retail sales to Illinois purchasers. 35 ILCS
120/2. A remote retailer that meets or exceeds either of the thresholds is engaged in the business of
selling at the Illinois location to which the tangible personal property is shipped or delivered or at
which possession is taken by the purchaser. 35 ILCS 120/2-12(6).
Your letter does not provide sufficient information regarding the nature of the acquisition of
COMPANY by COMPANY 1 to enable the Department to provide any opinion. The Department
would note that, if the companies are separate legal entities, each company would independently
determine its Use Tax or retailers’ occupation tax obligation.

ST 20-0013-GIL
Page 4

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/ld