Does a nonprofit's isolated-or-occasional-sale exemption still apply when it sells through a marketplace facilitator like an online platform?

Plain-English summary

A lawyer wrote to the Illinois Department of Revenue on behalf of a 501(c)(3) religious organization that regularly relies on the isolated or occasional sale exemption to sell tangible personal property without collecting Retailers' Occupation Tax. The client was considering selling an item through a marketplace facilitator (an online platform like the "COMPANY" referenced in the letter) and wanted to confirm the exemption would still apply.

The Department's answer: it would not. Effective January 1, 2021, new marketplace rules at 86 Ill. Adm. Code 131.101 et seq. define a "marketplace" as a place — physical or electronic — "held out to the public as being habitually engaged in the selling of tangible personal property." Because a marketplace is by definition a habitual selling venue, sales made on a marketplace are not considered isolated or occasional sales, per 86 Ill. Adm. Code 131.145(j). That rule applies no matter who the underlying seller is, including a nonprofit that would otherwise qualify for the occasional-sale exemption on a stand-alone sale.

The letter also walks through who actually owes the tax in a marketplace transaction. If the marketplace facilitator meets either of two economic-nexus thresholds — $100,000 or more in cumulative Illinois gross receipts, or 200 or more separate Illinois transactions (86 Ill. Adm. Code 131.135(a)) — the facilitator, not the marketplace seller, must register, collect, and remit the Retailers' Occupation Tax on sales made through its platform, including sales made on behalf of sellers like the nonprofit. A marketplace seller who has obtained the required certification from the facilitator (86 Ill. Adm. Code 131.145(b), 131.150(a)) is generally not itself liable for that tax, and the Department cannot collect the same tax from both the facilitator and the seller on the same sale (35 ILCS 120/2(h); 86 Ill. Adm. Code 131.145(k), 131.150(h)).

What this means for you

Nonprofit organizations

If your organization normally relies on the isolated-or-occasional-sale exemption, that exemption disappears the moment you sell through a marketplace facilitator's platform — the sale is taxed like any other marketplace sale. The upside is that you likely won't be the one who has to register or remit: if the facilitator meets Illinois's $100,000-receipts or 200-transaction threshold, the facilitator collects and remits the tax, not you, as long as you've given it the required marketplace-seller certification.

Business owners selling through online marketplaces

Whether you're a for-profit or nonprofit seller, using a marketplace facilitator changes your tax posture. Get the certification described in 86 Ill. Adm. Code 131.145(b)/131.150(a) from the facilitator before you sell, so you're not exposed if the facilitator fails to collect. Track whether your facilitator crosses the $100,000/200-transaction thresholds, since that determines who is on the hook.

Accountants and tax professionals

This GIL is a useful reminder that the pre-2021 emergency rules (86 Ill. Adm. Code 150.804(h), referenced in the taxpayer's original question) were superseded effective January 1, 2021 by the current marketplace rules at 86 Ill. Adm. Code 131.101 et seq. When advising clients who rely on exemptions tied to the manner of sale (like the occasional-sale exemption), confirm whether a marketplace intermediary is involved, since that alone can defeat the exemption regardless of the seller's tax-exempt status.

Common questions

Q: Can a nonprofit still claim the isolated-or-occasional-sale exemption if it sells through a marketplace facilitator?
A: No. Under 86 Ill. Adm. Code 131.145(j), sales made on a marketplace are not considered isolated or occasional sales, so the exemption does not apply, regardless of the seller's nonprofit status.

Q: If the exemption doesn't apply, who has to collect and remit the tax — the nonprofit or the marketplace facilitator?
A: Generally the marketplace facilitator, if it meets one of two thresholds: $100,000 or more in cumulative Illinois gross receipts, or 200 or more separate Illinois transactions (86 Ill. Adm. Code 131.135(a)). A marketplace seller who has obtained the facilitator's required certification is generally not liable for that tax itself (86 Ill. Adm. Code 131.145(b), 131.150(a)).

Q: What is a "marketplace" under the current Illinois rules?
A: A physical or electronic place, forum, platform, application, or other method by which a marketplace seller sells or offers to sell items — defined at 35 ILCS 120/1 and 86 Ill. Adm. Code 131.105.

Q: Could the Department collect the tax from both the facilitator and the seller on the same sale?
A: No. Illinois is prohibited from collecting state and local Retailers' Occupation Tax from both the marketplace facilitator and the marketplace seller on the same transaction (35 ILCS 120/2(h); 86 Ill. Adm. Code 131.145(k), 131.150(h)).

Q: Does this letter bind the Department the way a Private Letter Ruling would?
A: No. This is a General Information Letter (GIL), which directs taxpayers to relevant regulations but is not a statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120.

Citations and references

Statutes and rules:

• 35 ILCS 120/1 (definitions of marketplace, marketplace facilitator, marketplace seller)
• 35 ILCS 120/2(h) (no double collection from facilitator and seller on same transaction)
• 86 Ill. Adm. Code 131.101 et seq. (marketplace facilitator rules, effective January 1, 2021)
• 86 Ill. Adm. Code 131.105 (definitions)
• 86 Ill. Adm. Code 131.135(a) (economic nexus thresholds)
• 86 Ill. Adm. Code 131.145(a), (b), (c), (j), (k) (registration, remittance, certification, occasional-sale carve-out, no double taxation)
• 86 Ill. Adm. Code 131.150(a), (h) (marketplace seller certification; no double taxation)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure, referenced for contrast)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2021.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2021/st-21-0003-gil.pdf

Original ruling text

ST 21-0003 01/28/2021 RETAILERS’ OCCUPATION TAX
Sales made on a marketplace are not considered isolated or occasional sales. See 86 Ill. Adm.
Code 131.145(j). (This is a GIL.)
January 28, 2021
Dear Xxxx:
This letter is in response to your email dated September 18, 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 nice meeting you last week. Thank you so much for taking my call and being willing
to pass along my question to the appropriate person.
The reason for reaching out today is to confirm my understanding of recent marketplace
facilitator legislation effective January 1, 2020 in Illinois and its application to a 501C3
religious organization making isolated or occasional sales of items located in Illinois
through a marketplace facilitator.
Background:
My client is a religious organization that has in the past made sales that qualify for the
isolated or occasional sale exemption and such sales are not subject to Retailers’
Occupation Tax. The organization is considering using a marketplace facilitator such as
COMPANY to facilitate a sale of tangible personal property located in Illinois and
potentially shipped to an Illinois buyer.
The sale qualifies for exemption under the isolated and occasional sales rules. However,
I would like to confirm that if my client were to use a marketplace facilitator to broker the
transaction the exemption would still be available to them. We want to avoid triggering
liability to register and remit Retailers’ Occupation Tax as a result of making a marketplace
sale.
The reason the question arises is based on a reading of the emergency rules of January
3, 2020 (attached). Regarding obligations of a marketplace seller, Admin. Code tit. 86,
§150.804(h) says:

ST-21-0003
Page 2
January 28, 2021
“A marketplace seller must separately register and remit tax on all sales of tangible
personal property, including those made over a marketplace that result in Retailers’
Occupation Tax. For sales made over the marketplace that result in Retailers’ Occupation
Tax, the marketplace seller is considered the retailer and must remit tax on such sales as
provided in the Retailers’ Occupation Tax, as well as applicable local occupations taxes.
The marketplace facilitator is not considered the retailer with respect so such sales.”
If my client were to make a sale through COMPANY, for example, they would be defined
as a marketplace seller. It appears, however, the organization would only need to
separately register and remit tax if the transaction results in Retailers’ Occupation Tax.
The transaction should not result in Retailers’ Occupation Tax to the extent the exemption
for isolated or occasional sales applies.
Question:
• Is the exemption for isolated or occasional sales available to marketplace sellers
such as nonprofits selling over a marketplace?
• Can a marketplace seller such as a nonprofit claim a sale is occasional or isolated
and not subject to Retailers’ Occupation Tax even when such sales are made over
a marketplace? Including sales of items located in Illinois and sold to an Illinois
purchaser?
• If the answer is yes, could you provide the specific code section that applies to
support the answer?
I really appreciate your time and consideration of my question and I look forward to
hearing from you.
DEPARTMENT’S RESPONSE:
As of January 1, 2021, the laws cited in your letter are no longer in effect. New administrative
rules can be found at 86 Ill. Adm. Code 131.101 et seq. Further information can be found on the
Department’s Resource Page for the “Leveling the Playing Field for Illinois Retail Act” at
www2.illinois.gov/rev/research/taxinformation/sales/Pages/Level-the-Playing-Field.aspx.
Under the new rules, a marketplace is a physical or electronic place, forum, platform, application,
or other method by which a marketplace seller sells or offers to sell items. See 35 ILCS 120/1; 86 Ill.
Adm. Code 131.105. A Marketplace Facilitator is a person who, pursuant to an agreement with an
unrelated third-party marketplace seller, directly or indirectly through one or more affiliates, facilitates
a retail sale by an unrelated third-party marketplace seller by listing or advertising for sale, by the
marketplace seller in a marketplace, tangible personal property that is subject to tax under the Retailers'
Occupation Tax Act; and either directly or indirectly, through agreements or arrangements with third
parties, collecting payment from the customer and transmitting that payment to the marketplace seller
regardless of whether the marketplace facilitator receives compensation or other consideration in
exchange for its services. See 35 ILCS 120/1; 86 Ill. Adm. Code 131.105. A Marketplace Seller is a
person who makes sales through a marketplace operated by an unrelated third-party marketplace
facilitator and who has obtained a certification from the marketplace facilitator as provided in 86 Ill.
Adm. Code 131.145. See 35 ILCS 120/1; 86 Ill. Adm. Code 131.105.

ST-21-0003
Page 3
January 28, 2021
Beginning January 1, 2021, a marketplace facilitator, as defined above, is considered a retailer
engaged in the occupation of selling at retail in Illinois for purposes of the Retailers’ Occupation Tax
Act if either of following thresholds is met:
1)

The cumulative gross receipts from sales of tangible personal property to purchasers in
Illinois made through the marketplace by the marketplace facilitator and by marketplace
sellers are $100,000 or more; or

2)

The marketplace facilitator and marketplace sellers selling through the marketplace
cumulatively enter into 200 or more separate transactions for the sale of tangible personal
property to purchasers in Illinois.

See 86 Ill. Adm. Code 131.135(a).
Marketplace facilitators meeting either of these thresholds are required to register with the
Department, file returns, and remit all applicable State and local retailers' occupation taxes
administered by the Department for all sales made over the marketplace to Illinois purchasers, including
their own sales and sales made on behalf of marketplace sellers. See 86 Ill. Adm. Code 131.145(a)
and 131.145(c). Further, marketplace facilitators are subject to audit on all such sales. Section
131.145(c).
In your letter, you state that your client makes isolated or occasional sales, and therefore, does
not collect or remit sales tax in Illinois. However, your client is considering using a marketplace
facilitator to sell tangible personal property in Illinois. Under the new rules, a marketplace is a location
held out to the public as being habitually engaged in the selling of tangible personal property. As such,
sales made on a marketplace are not considered occasional sales. See 86 Ill. Adm. Code 131.145(j).
If the marketplace facilitator meets one of the two thresholds mentioned above, it would be liable for
collecting and remitting all applicable sales tax on any tangible personal property sold by your client
through the marketplace.
Generally, a marketplace seller is not liable for State and local retailers' occupation taxes for
sales of tangible personal property sold to Illinois purchasers through a marketplace, provided that,
prior to its sales, it has obtained a certification from the marketplace facilitator. See 86 Ill. Adm. Code
131.145(b) and 131.150(a). The Department is prohibited from collecting State and local retailers'
occupation taxes from both the marketplace facilitator and the marketplace seller on the same
transaction. See 35 ILCS 120/2(h); 86 Ill. Adm. Code 131.145(k); 86 Ill. Adm. Code 131.150(h).
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,
Alexis K. Overstreet
Associate Counsel
AKO:rkn