If a boat (or other item) is located in Illinois and handed over to an out-of-state buyer here, does the Illinois dealer have to collect and remit Illinois sales tax, even though the buyer immediately takes it out of state?

Plain-English summary

The Illinois Department of Revenue was asked whether a boat dealer has to collect and remit Illinois Retailers' Occupation Tax (sales tax) when a company's new or used inventory boat is located in Illinois at closing, sold to a non-Illinois resident, and immediately removed to another state.

The Department's answer: the sale is taxable in Illinois. Where tangible personal property (like a boat) is located in Illinois at the time of sale and the purchaser physically takes possession of it in Illinois, the sale is a taxable retail sale — even if the buyer then transports the property out of state, uses it out of state, or even uses it in interstate commerce. It does not matter where the sales contract was negotiated or signed, where title passes, where the buyer lives, or whether the buyer is a carrier. See 86 Ill. Adm. Code 130.605(a).

The letter also explains the narrow situations where a sale would be treated as exempt interstate commerce: if the seller (not the buyer) is contractually obligated to physically deliver the goods itself, or by common carrier or mail, from a point in Illinois to a point outside Illinois — and the seller, not the buyer, is shown as the consignor/shipper on the bill of lading. See 86 Ill. Adm. Code 130.605(c)-(d). Based on the facts described (buyer takes possession in Illinois at closing), none of those exceptions applied here.

What this means for you

Boat dealers and other retailers selling to out-of-state buyers

If your customer picks up the item at your Illinois location — even a customer from another state who drives or hauls it away immediately — you owe Illinois sales tax on that sale. The buyer's home state, residency, or stated intent to use the property elsewhere does not change that. The only way to treat the sale as tax-exempt interstate commerce is if you, the seller, are obligated under the sales agreement to deliver the goods to a point outside Illinois yourself (or via a carrier where you are shown as consignor/shipper), and the delivery actually happens that way.

Accountants and tax professionals advising dealers

The controlling test is possession, not destination or residency. Watch for three narrow statutory exceptions under 86 Ill. Adm. Code 130.605(b)-(d): the seller must be contractually bound to deliver out of state, the delivery must actually occur, and the seller (not the buyer) must be the consignor/shipper of record. If a client wants to claim the exemption, make sure they retain proof under 130.605(f) — a bill of lading requiring out-of-state delivery, a signed trip sheet, or a purchaser affidavit showing the out-of-state delivery details.

Business owners handling brokerage vs. retail sales

The letter notes the Department had previously clarified that this company was NOT required to collect tax on "brokerage deals," implying a different tax treatment can apply to brokered transactions versus the company's own retail inventory sales. This GIL only addresses retail sales of the company's own new/used inventory, where the company itself is the seller taking the sale price and delivering possession in Illinois.

Common questions

Q: We sold a boat to a customer from another state, but they picked it up and drove it away from our Illinois lot. Do we owe Illinois tax?
A: Yes. Under 86 Ill. Adm. Code 130.605(a), if the property is located in Illinois at the time of sale and delivered to the purchaser in Illinois, the sale is taxable, regardless of what the buyer does with it afterward or where the buyer lives.

Q: Does it matter that the buyer will use the boat in another state, or even in interstate commerce (as a carrier)?
A: No. The letter is explicit that use outside Illinois, or use in interstate commerce, does not change the result once the buyer has taken physical possession in Illinois.

Q: How could a sale like this actually qualify as exempt interstate commerce?
A: Only if the seller (not the buyer) is obligated under the sales agreement to deliver the goods from a point in Illinois to a point outside Illinois, and that delivery actually happens, with the seller shown as consignor/shipper on the bill of lading. See 86 Ill. Adm. Code 130.605(c)-(d).

Q: What records would we need to support an interstate-commerce exemption?
A: Under 86 Ill. Adm. Code 130.605(f), acceptable proof includes a waybill or bill of lading requiring delivery outside Illinois, a trip sheet signed by the delivery person if using the seller's own transportation, or an affidavit from the purchaser showing the seller's and purchaser's names/addresses and the time and place of out-of-state delivery.

Q: Is this letter binding on the Department?
A: No. This is a General Information Letter (GIL), not a Private Letter Ruling. A GIL merely points the taxpayer to relevant regulations and is not a statement of Department policy or binding on the Department. See 2 Ill. Adm. Code 1200.120.

Citations and references

Statutes and rules:

• 86 Ill. Adm. Code 130.605(a) (sale is taxable when property is located/delivered in Illinois)
• 86 Ill. Adm. Code 130.605(b) (exceptions to the interstate-commerce disqualification)
• 86 Ill. Adm. Code 130.605(c) (seller-obligated delivery outside Illinois is exempt)
• 86 Ill. Adm. Code 130.605(d) (seller as consignor/shipper via carrier or mail)
• 86 Ill. Adm. Code 130.605(f) (proof required to support the exemption)
• 86 Ill. Adm. Code 130.810 (recordkeeping requirements)
• Section 7, Retailers' Occupation Tax Act (supporting data for deductions)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letters, non-binding)

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-21-0007-gil.pdf

Original ruling text

ST-21-0007 01/28/2021 INTERSTATE COMMERCE
A boat dealer selling a boat to an out-of-state customer picking up the boat in Illinois is subject
to tax. See 86 Ill. Adm. Code 130.605. (This is a GIL.)

January 28, 2021
To Xxxx:
This letter is in response to your letter dated November 5, 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:
RE: New and Used Inventory Please clarify:
If a COMPANY New or Used Inventory boat is located in Illinois at the time of
closing; being sold to a NON IL resident; removed immediately to another state, is
COMPANY required to collect and remit tax to IL?
ILDOR clarified previously COMPANY is NOT required to collect and remit tax on
brokerage deals.
DEPARTMENT’S RESPONSE:
Your letter contains little information regarding the nature of the transaction. We are
assuming, for the purposes of this letter, that you are a retailer selling boats located in Illinois to
purchasers. Where tangible personal property is located in this State at the time of its sale (or is
subsequently produced in Illinois), and then delivered in Illinois to the purchaser, the seller is taxable
if the sale is at retail. This is so notwithstanding the fact that the purchaser may, after receiving
physical possession of the property in this State, transport or send the property out of the State for
use outside the State or for use in the conduct of interstate commerce. The place at which the
contract of sale or contract to sell is negotiated and executed and the place at which title to the
property passes to the purchaser are immaterial. The place at which the purchaser resides is also
immaterial. It likewise makes no difference that the purchaser is a carrier when that happens to be the
case. 86 Ill. Adm. Code 130.605(a). There are three exceptions to the rule that the sale is not deemed
to be a sale in interstate commerce if the purchaser or his representative receives physical
possession of the property in Illinois. See 86 Ill. Adm. Code 130.605(b). None of these three
exceptions would be applicable based on the facts stated in your letter.

ST-21-0007
Page 2
January 28, 2021
The tax does not extend to gross receipts from sales in which the seller is obligated, under the
terms of his or her agreement with the purchaser, to make physical delivery of the goods from a point
in this State to a point outside this State, not to be returned to a point within this State, provided that
the delivery is actually made. 86 Ill. Adm. Code 130.605(c). Nor does the tax apply to gross receipts
from sales in which the seller, by carrier (when the carrier is not also the purchaser) or by mail, under
the terms of his or her agreement with the purchaser, delivers the goods from a point in this State to a
point outside this State not to be returned to a point within this State. The fact that the purchaser
actually arranges for the common carrier or pays the carrier that effects delivery does not destroy the
exemption. However, it is critical that the seller is shown as the consignor or shipper on the bill of
lading. If the purchaser is shown as either the consignor or the shipper, the exemption will not apply.
86 Ill. Adm. Code 130.605(d).
To establish that the gross receipts from any given sale are exempt because the tangible
personal property is delivered by the seller from a point within this State to a point outside this State
under the terms of an agreement with the purchaser, the seller will be required to retain in his or her
records, to support deductions taken on his or her tax returns proof that satisfies the Department that
there was an agreement and a bona fide delivery outside this State of the property that is sold.
Acceptable forms of proof include: If shipped by common carrier, a waybill or bill of lading requiring
delivery outside this State; and if sent by seller's own transportation equipment, a trip sheet signed by
the person making delivery for the seller and showing the name, address and signature of the person
to whom the goods were delivered outside this State; or, in lieu thereof, an affidavit signed by the
purchaser or his or her representative, showing the name and address of the seller, the name and
address of the purchaser and the time and place of the delivery outside Illinois by the seller; together
with other supporting data as required by 86 Ill. Adm. Code 130.810 and by Section 7 of the Retailers’
Occupation Tax Act. See 86 Ill. Adm. Code 130.605(f).
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