Does Illinois's Parking Excise Tax residential off-street parking exemption still apply if the parking facility is located near a building rather than inside it?

Plain-English summary

A firm representing parking facility operators asked the Illinois Department of Revenue to confirm something about the Parking Excise Tax's residential off-street parking exemption: does it matter whether the parking spaces are physically inside the tenant's own apartment or condo building, or in a separate facility located nearby?

The Department's answer was no, location doesn't matter. The Illinois Parking Excise Tax Act taxes "the privilege of using in this state a parking space in a parking area or garage," with the tax collected by the "operator" of the facility from the purchaser. But the Act carves out an exemption for residential off-street parking for home or apartment tenants or condominium occupants, so long as the parking arrangement is set out in the lease or a separate writing between the landlord and tenant, or in a condominium agreement between the association and the owner, occupant, or guest — regardless of whether the parking charge is paid to the landlord, the condo association, or directly to the parking operator.

The Department confirmed that neither the statute (35 ILCS 525/10-20(2)) nor its regulations (86 Ill. Adm. Code 195.115(c)) require the parking spaces to be located in the same building as the residence, or even contiguous to it. It did add one practical limit: the parking space "should be close enough to the building to serve the purpose for which it is intended" — that is, actually functioning as residential off-street parking for that building's tenants or occupants.

What this means for you

Parking facility operators

If you operate a parking garage or lot and provide spaces under contract to landlords or condo associations to satisfy their tenants' residential parking needs, you don't lose the exemption just because your facility isn't inside the residential building itself. As long as there's a written arrangement (a lease provision, a separate writing between landlord and tenant, or a condo agreement) covering the residential off-street parking, you aren't required to collect the Parking Excise Tax on it — even if the tenant pays you directly rather than paying the landlord or association.

Landlords and condominium associations

When you contract with a nearby parking facility to fulfill a building's off-street parking requirement for tenants or unit owners, the exemption travels with the arrangement, not with the building's walls. Keep the required written documentation (lease terms, a separate parking writing, or the condo agreement) so the operator can substantiate the exemption in its books and records, per the examples in 86 Ill. Adm. Code 195.115(c).

Accountants and tax professionals

This GIL is a useful, narrow confirmation for advising parking-industry and property-management clients: the residential off-street parking exemption under 35 ILCS 525/10-20(2) is not limited to parking physically located within or contiguous to the residential building. The only qualifier the Department flagged is a rough proximity/purpose test — the space must be "close enough to the building to serve the purpose" of residential off-street parking. Remember this is a GIL, not a PLR: it directs taxpayers to the regulations and is not binding Department policy for any specific taxpayer's facts.

Common questions

Q: Does the residential parking exemption require the parking space to be in the same building as the apartment or condo?
A: No. The Department confirmed that neither the Parking Excise Tax Act nor its regulations require the parking facility to be located in, or contiguous to, the residential building.

Q: What paperwork does the exemption require?
A: A written arrangement for the parking — in the lease, in a separate writing between landlord and tenant, or in a condominium agreement between the association and the owner, occupant, or guest of a unit. It doesn't matter whether the parking charge is paid to the landlord, the condo association, or directly to the operator of the parking spaces.

Q: Is there any limit on how far away the parking facility can be?
A: The Department noted the parking space "should be close enough to the building to serve the purpose for which it is intended" — functioning as residential off-street parking for that building's tenants or occupants — even though no specific distance is set out in the statute or regulations.

Q: Is this letter binding on the Department?
A: No. It's a General Information Letter (GIL) issued under 2 Ill. Adm. Code 1200.120, which directs taxpayers to relevant regulations and other information sources but is not a statement of Department policy and is not binding, unlike a Private Letter Ruling (PLR).

Citations and references

Statutes and rules:

• 35 ILCS 525 (Illinois Parking Excise Tax Act)
• 35 ILCS 525/10-5 (tax base; definition of "operator")
• 35 ILCS 525/10-10(a) (imposition of the tax)
• 35 ILCS 525/10-20(2) (residential off-street parking exemption)
• 86 Ill. Adm. Code 195.110 (imposition and collection)
• 86 Ill. Adm. Code 195.115(c) (residential off-street parking exemption; illustrative examples)
• 86 Ill. Adm. Code 270.115 (fact-specific inquiry into where selling occurs)
• 2 Ill. Adm. Code 1200.110 (PLR procedure)
• 2 Ill. Adm. Code 1200.120 (GIL 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/st21-0015-gil.pdf

Original ruling text

ST 21-0015 04/01/2021 PARKING EXCISE TAX
The occupation of selling is comprised of the composite of many activities
extending from the preparation for, and the obtaining of, orders for goods to the
final consummation of the sale by the passing of title and payment of the
purchase price. Thus, establishing where "the taxable business of selling is being
carried on" requires a fact-specific inquiry into the composite of activities that
comprise the retailer’s business. 86 Ill. Adm. Code 270.115. (This is a GIL.)
April 1, 2021
Dear Xxxx:
This letter is in response to your letter dated March 11, 2021, 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:

Illinois Parking Excise Tax

The parking facility is usually located next to or near the residential
building. This is a request for a general information letter on the
application of the residential off­street parking exemption in the Illinois
Parking Excise Tax ("Parking Tax").
I represent a number of parking facilities that at times provide
residential off-street parking by contract with landlords or condominium
associations to the occupants of their apartment and condominium
("condo") buildings in order to satisfy the residential off-street parking
requirements of such buildings
The residential off-street parking exemption in the Parking Tax
provides that residential off-street parking by home or apartment tenants
or condo occupants is exempt from the Parking Tax, if there is a written
arrangement for parking between the landlord and tenant, or between the
condo association and its owners, occupants or guests of the unit, to
provide for residential off­ street parking. 35 ILCS 525/L0-20(2). It has

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always been understood that it makes no difference if the building itself
has the parking availability or there is a facility near the building that
provides for the parking. Neither the Parking Tax nor the Parking Tax
Regulations suggest that the location of the facility makes any difference
as to whether the residential off-street parking qualifies for the exemption.
While in many instances, the apartment or condo building has
parking built into the building, in many other instances the residential
building has to rely upon parking facilities next to or near the building
for the required residential off-street parking for its tenants or
occupants. In both of those cases (whether parking is in the same
building or near the building), when the landlord or condo association
is not the owner or operator of the parking facility, the landlord or
condo association either licenses space from or contracts with the
parking facility owner or operator to fulfill the necessary residential offstreet parking that it has arranged to provide to its tenants or
occupants. As a result, the landlord or condo association will enter into
an agreement with the tenant or occupant that will arrange for the
parking, and then direct the tenant or occupant to the parking facility to
obtain the arranged-for parking. Sometimes the landlord or condo
association will collect the parking rent and pay the facility for the
parking while in other situations the parking facility will have the
tenant or occupant sign an additional separate agreement based on
the license or contract with the landlord or condo association and
collect the rent directly.
Issue: An issue was raised by a landlord as to whether it makes
any difference if the residential off- street parking is provided in the same
residential building or in a facility next to or near the building where the
tenant or occupant resides. However, based on the language of the
Parking Tax and the Regulations, the location of the parking facility is
irrelevant to the exemption if the requirements of the exemption are met.
This letter simply asks the Illinois Department of Revenue (''TDOR") to
confirm that fact.
Analysis: The Parking Tax is "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 ...." 35ILCS 525/10-10( a); 86 Ill. Admin
Code Section 195.110(a) However, the Parking Tax exempts from the
tax:
residential off-street parking for home or apartment tenants or
condominium occupants, if the arrangement for such parking is

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provided in the home or apartment lease or in a separate writing
between the landlord and tenant, or in a condominium
agreement between the condominium association and the
owner, occupant, or guest of a unit, whether the parking charge
is payable to the landlord, condominium association , or to the
operator of the parking spaces….
35 ILCS 525/10-20(2). The Parking Tax Regulations, like the Parking Tax
itself, recognize that the parking itself may be provided by someone other
than the landlord or condo association since the payment may be made
directly to the "operator of the parking spaces". 86 Ill. Admin Code
Section 195.115(c)(emphasis added). The regulations explain in more
detail in Example 1 that the exemption encompasses agreements with
separate operators that provide the actual parking:
A person enters into a residential lease agreement with a
landlord that requires the landlord to provide 2 parking spaces
to the tenant for $$$ per month. The landlord has made
arrangements with an operator of a parking garage to make
available 2 parking spaces to the tenant. The lease requires the
tenant to pay the $$$ per month directly to the operator of the
garage. The operator is not required to collect tax from the
tenant on the use of the 2 parking spaces. The operator should
obtain a copy of the lease and maintain it in its books and
records.
See also, Example 2 to 86 Ill. Admin Code Section 195.115(c).
Nowhere does the Regulation require that the parking facility be in the
same residential building, which makes sense since the entire
purpose of the exemption is simply to exempt residential off-street
parking of residents and occupants of these buildings.
Because it makes no difference where the residential off-street
parking is provided under the explicit language of the Parking Tax and the
Regulations, nor would such a distinction appear logical for either the
purposes or intent of the exemption, we request the IDOR issue a general
information letter confirming this fact.
If you have any questions, please call or email me.
DEPARTMENT’S RESPONSE:
The Illinois Parking Excise Tax Act (the “Act”) imposes a Parking Excise Tax (the “Tax”)
effective January 1, 2020 “on the privilege of using in this state a parking space in a

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parking area or garage”. 35 ILCS 525. The Tax is on the purchaser of the parking and
is collected by the operator. The total purchase price paid for parking is taxable under
the Tax. 35 ILCS 525/10-5. This includes “the consideration paid for the purchase of
the parking space” including all convenience fees, markups, service fees, facilitation
fees, and other charges. Id.
Under the Act, an “operator” required to collect the Tax is 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 ....”
35 ILCS 525/10-5.
The operator of a parking area or garage must collect the tax on the purchase of all
parking spaces in a parking area or garage unless the operator is exempt from
collecting the tax or the tax is not due on the transaction. 86 Ill. Adm. Code 195.110(d).
The tax imposed by the Act does not apply to
residential off-street parking for home or apartment tenants or condominium
occupants, if the arrangement for such parking is provided in the home or
apartment lease or in a separate writing between the landlord and tenant, or in a
condominium agreement between the condominium association and the owner,
occupant, or guest of a unit, whether the parking charge is payable to the
landlord, condominium association, or to the operator of the parking spaces [35
ILCS 525/10-20(2)]; 86 Ill. Adm. Code 195.115(c).
The Department’s parking rules provide two examples to help explain the exemption for
residential off-street parking for home or apartment tenants or condominium occupants.
There is no requirement in the Parking Excise Tax Act or the Department’s
parking rules that require that off-street parking spaces provided in the home or
apartment lease or in a separate writing between the landlord and tenant, or in a
condominium agreement between the condominium association and the owner,
occupant, or guest of a unit, be in located in the residential or condominium building
occupied by the tenant or condominium owner, occupant, or guest, or be contiguous to
such building for the exemption to apply. However, such a parking space should be
close enough to the building to serve the purpose for which it is intended -- residential
off-street parking for home or apartment tenants or condominium occupants.
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,

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Richard S. Wolters
Associate Counsel
RSW:rkn