Must an auto glass repair and replacement company include its over-the-counter retail and wholesale glass sales when calculating its 35% 'de minimis' cost ratio, and how must it collect tax on its repair and replacement services?

Plain-English summary

The Illinois Department of Revenue ruled on how a national auto glass repair and replacement company (a "serviceman" for tax purposes) must calculate its Service Occupation Tax ("SOT") liability. The company repairs windshield chips using a proprietary resin (billed as a bundled labor-plus-resin charge, with resin costing under 2% of the charge) and replaces glass outright when repair isn't possible (billed with the replacement glass itemized separately from labor). It also makes some over-the-counter retail sales and wholesale sales of glass in Illinois.

Servicemen who transfer tangible personal property (like resin or replacement glass) as part of a repair service owe SOT, not Retailers' Occupation Tax, on that property. If a serviceman's annual cost of such transferred materials is less than 35% of its gross receipts from services, it qualifies as a "de minimis" serviceman, which allows it to pay tax on its cost price of the materials rather than the (usually higher) selling price.

The Department's key holdings:

• Retail and wholesale glass sales are excluded from the cost-ratio calculation. Only the cost of materials actually transferred to customers as part of a repair or replacement service counts toward the 35% de minimis threshold; glass sold over the counter or at wholesale is already taxed under the Retailers' Occupation Tax and is excluded. See 86 Ill. Adm. Code 140.105(c).
• The company must register as a retailer under 35 ILCS 120/2a because it makes retail sales of tangible personal property (not incident to a service) in Illinois.
• Replacement glass counts toward the cost ratio even when separately stated to the customer, because the ratio is computed on an annual aggregate basis, not transaction by transaction. 86 Ill. Adm. Code 140.105(d)-(e).
• Because the company is registered (or required to register) as a retailer and its cost ratio is under 35%, it must collect and remit SOT based on its cost price of the materials transferred in repair and replacement services, rather than remitting Use Tax (Use Tax is only for de minimis servicemen who are not required to register as retailers at all). 86 Ill. Adm. Code 140.109(a)(5).
• A de minimis serviceman may nonetheless elect to pay SOT on the selling price instead of cost price. Because the company has always separately stated and collected tax on the selling price of replacement glass, it has effectively elected that method under 86 Ill. Adm. Code 140.109(b). Under that election, SOT is due on the separately stated selling price of glass transferred, or on 50% of the entire bill if the price of tangible personal property isn't separately stated -- but never less than the company's cost price.

What this means for you

Auto glass repair/replacement businesses and similar "bundled" servicemen

If you're a serviceman who sometimes bundles materials with labor (like resin) and sometimes itemizes materials separately (like replacement glass), the 35% de minimis cost ratio is calculated once a year across all your service transactions combined -- you can't test it transaction by transaction, and you can't exclude separately stated materials from the ratio just because you itemized them on that particular invoice.

Businesses that mix retail, wholesale, and service sales of the same product

Retail and wholesale sales of a product (here, auto glass) are taxed separately under the Retailers' Occupation Tax and are excluded entirely from the de minimis cost-ratio math for your service business. But making even some retail sales of that product triggers a Retailers' Occupation Tax Act registration requirement under 35 ILCS 120/2a, which in turn determines whether you pay SOT (as a registered retailer) or Use Tax (only available if you are not required to register at all).

Accountants and tax professionals advising servicemen

This ruling walks through all four tax-base methods available to servicemen under prior guidance (PLR ST 96-0279-PLR): (1) SOT on separately stated selling price, (2) SOT on 50% of the entire bill, (3) SOT on cost price for a registered de minimis serviceman, or (4) Use Tax on cost price for a non-registered de minimis serviceman. Because this taxpayer must register as a retailer (due to its retail glass sales), method (4) is unavailable to it even though its cost ratio is under 35% -- it must use method (3) unless it elects method (1) or (2).

Common questions

Q: Do retail and wholesale sales of glass count toward the 35% de minimis cost ratio?
A: No. Only the cost of materials transferred to customers as an incident of a repair or replacement service is included. Materials sold at retail or wholesale, removed from inventory for the company's own use, or incorporated into real estate repairs are excluded. See 86 Ill. Adm. Code 140.105(c).

Q: Does separately itemizing the replacement glass on the invoice keep its cost out of the ratio?
A: No. The cost ratio is computed on an annual aggregate basis across all service transactions, not transaction by transaction, so the cost of replacement glass is included in the ratio regardless of how it's billed. See 86 Ill. Adm. Code 140.105(d)-(e).

Q: Why does the company have to register as a retailer under 35 ILCS 120/2a if most of its business is repair services?
A: Because it makes some retail sales of tangible personal property (over-the-counter sales of items like wiper blades and glass) that are not incident to a service. Section 2a makes it "unlawful for any person to engage in the business of selling tangible personal property at retail in this State without a certificate of registration from the Department," regardless of how small that part of the business is.

Q: If the company is de minimis (cost ratio under 35%) and registered as a retailer, does it pay Use Tax or Service Occupation Tax?
A: Service Occupation Tax on its cost price of the transferred materials. The Use Tax cost-price method under 86 Ill. Adm. Code 140.108 is available only to de minimis servicemen who are not required to be registered as retailers at all -- since this company must register, it falls under the SOT registered-de-minimis method in 86 Ill. Adm. Code 140.109.

Q: Can a de minimis serviceman choose to pay tax on selling price instead of cost price?
A: Yes. Under 86 Ill. Adm. Code 140.109(b), a de minimis serviceman may elect to pay SOT on the separately stated selling price of transferred property (or on 50% of the entire bill if not separately stated) instead of cost price. The Department found the company had already made this election in practice by consistently collecting tax on the separately stated selling price of replacement glass.

Citations and references

• 35 ILCS 115/3; 35 ILCS 115/3-10 (Service Occupation Tax Act -- imposition and tax base)
• 35 ILCS 120/2a (Retailers' Occupation Tax Act -- retailer registration requirement)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax Act -- application to servicemen)
• 86 Ill. Adm. Code 140.105 (de minimis serviceman cost ratio, including subsections (c)-(e))
• 86 Ill. Adm. Code 140.106 (tax base: separately stated selling price or 50% of entire bill)
• 86 Ill. Adm. Code 140.108 (Use Tax method for non-registered de minimis servicemen)
• 86 Ill. Adm. Code 140.109 (SOT method for registered de minimis servicemen; election to pay on selling price)
• 86 Ill. Adm. Code 130.2015(c)(1) (repairmen not required to remit Retailers' Occupation Tax on repair services)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• Private Letter Ruling ST 96-0279-PLR (July 31, 1996) (prior ruling establishing the four tax-base methods for servicemen)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2022.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2022/st22-0006-plr.pdf

Original ruling text

ST-22-0006 06/07/2022 SERVICE OCCUPATION TAX
This letter discusses “de minimis” servicemen who incur Service Occupation Tax
on their cost price as well as the computation of the cost ratio. See 86 Ill. Adm.
Code 140.105; 86 Ill. Adm. Code 140.106. (This is a PLR.)
June 7, 2022
NAME
ADDRESS
Dear NAME:
This letter is in response to your letter dated August 16, 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.
Review of your request disclosed that all the information described in paragraphs
1 through 8 of Section 1200.110 appears to be contained in your request. This Private
Letter Ruling will bind the Department only with respect to, CORPORATION
(“CORPORATION”) for the issue or issues presented in this ruling and is subject to the
provisions of subsection (e) of Section 1200.110 governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that neither
CORPORATION nor a related taxpayer is currently under audit or involved in litigation
concerning the issues that are the subject of this ruling request. In your letter you have
stated and made inquiry as follows:
In accordance with 2 Ill. Adm. Code 1200.110, we respectfully request
a private letter ruling on behalf of our client, CORPORATION
(“CORPORATION”). A Form IL-2848- Power of Attorney is enclosed.
CORPORATION is a national auto glass repair and replacement service
and operates in all 50 states. CORPORATION offers two distinct
services: glass repair and glass replacement. CORPORATION
operates mobile repair units and will conduct glass repairs and
replacements at a customer's location. CORPORATION also operates
fixed locations where customers may have their automobile glass
repaired or replaced at CORPORATIONS location. CORPORATION

CORPORATION./NAME
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June 7, 2022
partners with most automobile insurance companies to repair glass
damage or replace glass in accordance with the terms of the insurance
contract. Automobile owners may also purchase glass repair and
replacement services independent of their insurance coverage.
CORPORATION can repair a windshield when there is a small chip or
crack, and the damage is not in front of a camera or sensor. If the glass
cannot be repaired using the proprietary resin, CORPORATION will
replace the entire window. To repair a windshield, CORPORATION
injects an exclusive and proprietary resin into the chip. After the resin
is fully cured, it is polished to near imperceptibility. When the glass is
repaired, CORPORATION does not transfer any tangible personal
property to the customer other than the resin injected into the crack.
When CORPORATION repairs the windshield, the repair service is billed
as a bundled charge for both the labor and the resin. CORPORATION
does not itemize the charge for the resin separately from the charge for
labor. The cost of the resin is less than 2% of the total charge of the
repair service. When the glass must be replaced, CORPORATION
itemizes the charge for the replacement glass separately from the
installation labor incurred to replace the glass. In the aggregate,
CORPORATIONS cost of materials used in their repair and
replacement services, which includes replacement glass and repair
resin, is approximately 20% of the total charges for all repairs and
replacements of glass.
CORPORATION does make over the counter retail sales in Illinois of
items like windshield wiper blades and glass. CORPORATION does
make wholesale sales of automobile glass. In previous years,
CORPORATIONS wholesale sales were a larger percentage of its overall
business. However, CORPORATION has recently curtailed their
wholesale sales of glass. This has impacted CORPORATIONS cost ratio
in Illinois.
Relevant Law and Ruling Request
The DOR has previously ruled that a serviceman such as
CORPORATION may calculate the tax base in one of four ways:

1. Separately stated selling price of tangible personal property;
2. 50% of the serviceman's entire bill;
3. Service Occupation Tax ("SOT") on the serviceman's cost price if
   the serviceman is a registered de minimis serviceman; or

CORPORATION./NAME
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June 7, 2022

4. Use Tax on the serviceman's cost price if the serviceman is de
   minimis and is not otherwise required to be registered under the
   Retailer's Occupation Tax Act. 1
   Illinois imposes the SOT on "all persons engaged in the business of
   making sales of service (referred to as "servicemen") on all tangible
   personal property transferred as an incident of a sale of service...." 2
   Persons such as CORPORATION that engage in the business of repairing
   property belonging to others, including automobile repairmen, are not
   required to remit Retailers' Occupation Tax. 3 Servicemen may itemize the
   selling price of tangible personal property that is transferred as an incident
   of selling a service. 4 If the serviceman does not itemize the selling price of
   tangible personal property, the selling price is deemed to be 50% of the
   entire bill issued to the customer. 5
   However, if a service provider's cost ratio between the tangible personal
   property transferred during the service and the serviceman's total annual
   gross receipts from all sales of service is less than 35%, the serviceman is
   a de minimis serviceman. 6 De minimis servicemen remit tax to Illinois in
   one of two ways. If the serviceman is not required to be registered as a
   retailer in Illinois, and has not voluntarily registered as a retailer, the
   serviceman owes use tax to suppliers that are registered in Illinois, or
   the serviceman must remit use tax directly to the DOR. 7 The
   serviceman should not issue resale certificates. 8 The serviceman must
   remit use tax on all sales of services for a given year and cannot use
   other methods to determine his Illinois tax liability. 9 The serviceman
   does not collect tax from service customers, but the serviceman may
   collect reimbursement of the use tax that has been paid. 10
   The second method applies to a serviceman that is required to be
   registered as a retailer under the Retailers' Occupation Tax Act. 11
   Rather than remit Use Tax, this serviceman incurs SOT on his cost price
   of tangible personal property transferred incident to sales of service. 12
   The serviceman should issue resale certificates to his suppliers. 13 The
   1

Private Letter Ruling ST 96-0279PLR (July 31, 1996)
35 Ill. Comp. Stat. 115/3
3
86 Ill. Admin. Code 130.2015(c)(l)
4
35 Ill. Comp. Stat. 115/ 3-10 and 86 Ill. Admin. Code 140.l06(a)(1)
5
35 Ill. Comp. Stat. 115/3-10 and 86 Ill. Admin. Code 140 .106(a)(2)
6
86 Ill. Admin. Code 140.l05(a) and 140.201(b)
7
86 Ill. Admin. Code 140.108(a) and (c)
8
86 Ill Admin. Code 140.108(a)(1)
9
86 Ill Admin. Code 140.108(a)(4)
10
86 Ill. Admin. Code 140.108(a)(3)
11
86 Ill. Admin. Code 140.109
12
86 Ill. Admin. Code 140.109(a)
13
86 Ill. Admin. Code 140.109(a)(1)
2

CORPORATION./NAME
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June 7, 2022
serviceman must remit SOT based on his cost price for all sales of
service in a given fiscal year and cannot use other methods of
determining the tax on a transaction by transaction basis.. 14 The SOT
must be collected from the customer, but the tax does not need to be
separately stated on the billing unless requested by the service
customer.15
A serviceman that meets the de minimis threshold may elect to pay SOT
on the selling price of tangible personal property. 16 If the serviceman
makes this election, the serviceman collects SOT based on the
separately stated selling price of tangible personal property.17 If there
is no separately stated selling price, tax is collected on the greater of the
serviceman’s cost price of the tangible personal property transferred or
50% of the entire customer bill. 18
Ruling Request:
Based on the facts presented, we respectfully request a response to the
following questions:
1.

2.
3.
4.

5.

14

Must CORPORATION include over the counter retail sales
and wholesale sales of glass in the calculation to
determine their cost ratio or should only sales of repair and
replacement services be used to determine their cost
ratio?
Is CORPORATION required to be registered under Section
2a of the Retailers' Occupation Tax Act since they do make
retail sales of tangible personal property in Illinois?
If CORPORATION is not required to be registered under
Section 2a of the Retailers' Occupation Tax Act, may
CORPORATION voluntarily register under this section?
Is CORPORATION required to include the cost of tangible
personal property used to replace glass in the calculation
of the cost ratio even though the glass used in replacement
services is separately stated to the customer?
If CORPORATION is not required to be registered, does not
voluntarily register under Section 2a of the Retailers '
Occupation Tax Act, and their cost ratio is less than 35%,
must CORPORATION remit Use Tax on all materials used
for all repair and replacement services performed in Illinois

86 Ill. Admin. Code 140 .109(a)(5)
86 Ill. Admin. Code 140.109(a)(4)
16
86 Ill. Admin. Code 140.109(b)
17
86 Ill. Admin. Code 140.106(a)(l)
18
86 Ill. Admin. Code 140.106(a)(2)
15

CORPORATION./NAME
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June 7, 2022

6.

7.
8.

even if they separately state the price of glass used in
replacement services?
If CORPORATION is required to be registered or is
voluntarily registered under Section 2a of the Retailers'
Occupation Tax Act, and if their cost ratio is less than 35%,
must CORPORATION remit Service Occupation Tax on
their cost basis all materials used for all repair and
replacement services performed in Illinois even if they
separately state the price of glass used in replacement
services?
May CORPORATION elect to pay SOT on their selling price
even if they meet the de minimis threshold under
86ILAC140.109(b) and if so how is that election made?
If CORPORATION elects to pay SOT on their selling price,
how must CORPORATION collect tax?
a. Is tax collected on 50% of the amounts charged to their
customers for all types of sales (i.e., sales of repairs and
sales of replacements)?
b. Or is tax collected based upon how the labor and
materials are charged to the customer? For example,
must CORPORATION collect tax on 50% of the total
invoice for repair services provided where the labor and
materials are not separately stating and collect tax on
the sales price of tangible personal property for
replacement services when the sales price of tangible
personal property is charged separately from labor
charges?

We believe the questions should be answered as follows:
1.

2.

3.
4.
19
20

CORPORATION should not include the over-the-counter
retail sales or wholesale sales in the cost ratio calculation
because these sales are taxed under the Retailers'
Occupation Tax. 19 Only sales of services and the cost of
materials transferred to customers as part of rendering a
service are included when determining the cost ratio. 20
Yes, CORPORATION is required to be registered as a
retailer due to the sales of tangible personal property
made to Illinois customers that are not sold incident to a
service.
Yes, CORPORATION may voluntarily register as a retailer if
they are not already required to register as a retailer.
CORPORATION must include the cost of tangible

35 Ill. Comp. Stat. 120/2(a)
86 Ill. Admin. Code 140.l05(c)

CORPORATION./NAME
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June 7, 2022

5.

6.

7.

8.

personal property transferred incident to a service
regardless of how CORPORATION states the charges of
the materials on their invoices because the cost ratio is
calculated on an annual aggregate basis and is not
determined on a transaction-by-transaction basis. 21
If CORPORATION is not required to register and has not
registered as a retailer and their cost ratio is less than
35%, CORPORATION must remit use tax on all materials
used for all repair and replacement services performed in
Illinois regardless of how the services are billed to their
customers. CORPORATION may collect a reimbursement
of the tax from their customers. 22
If CORPORATION is required to register, or voluntarily
registers, as a retailer and their cost ratio is less than 35%,
CORPORATION must collect and remit Service
Occupation Tax from their customers. The tax base is
CORPORATIONS cost of the materials transferred to their
customers when performing the repair and replacement
services. 23
Yes, CORPORATION may elect to incur SOT liability even
if they meet the de minimis threshold.24 CORPORATION
has always in the past and continues to collect sales tax on
the separately stated price of tangible personal property on
its
billings
to
customers.
Therefore,
under
86ILAC140.109(b) CORPORATION has elected to collect
sales tax from their customers on the separately stated
selling price of the tangible personal property transferred to
the customer on the billings.
CORPORATION must collect SOT on the sales price of
tangible personal property transferred to customers as part
of a service the sales price of tangible personal property if
separately stated from labor charges. 25 If CORPORATION
does not separately state the price of tangible personal
property transferred when performing services, the tax
base is 50% of the entire charge made to their customer.
26

DEPARTMENT’S RESPONSE:
21

86 Ill. Admin. Code 140.l05(d) and (e)
86 Ill. Admin. Code 140.108(a){3)
23
86 Ill. Admin. Code 140.109(a)(5)
24
86 Ill. Admin. Code 140.109(b)
25
86 Ill. Admin. Code 140.106(a)(l)
26
86 Ill. Admin. Code 140.106(a)(2)
22

CORPORATION./NAME
Page 7
June 7, 2022
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged
in this State in the business of selling tangible personal property to purchasers for use
or consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is
imposed on the privilege of using, in this State, any kind of tangible personal property
that is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as "sales" tax in Illinois.
If the purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at
the time of purchase. The retailers are then allowed to retain the amount of Use Tax
paid to reimburse themselves for their Retailers' Occupation Tax liability incurred on
those sales. If the purchases occur outside Illinois, purchasers must self-assess their
Use Tax liability and remit it directly to the Department.
Retailers' Occupation Tax and Use Tax do not apply to sales of service. Under
the Service Occupation Tax Act, businesses providing services (i.e., servicemen) are
taxed on tangible personal property transferred as an incident to sales of a service. See
86 Ill. Adm. Code 140.101. The transfer of tangible personal property to service
customers may result in either Service Occupation Tax liability (which includes local
taxes) or Use Tax liability for servicemen, depending upon which tax base they use to
calculate their liability. Servicemen who make retail sales, even if those sales are a
small part of their business, are required to register with the Department and remit
Retailers’ Occupation Tax. See 86 Ill. Adm. Code 130.701.
Servicemen may calculate their tax liability in one of four ways: (1) Service
Occupation Tax on the separately-stated selling price of tangible personal property
transferred as part of the service; (2) Service Occupation Tax on 50% of the
serviceman's entire bill; (3) Service Occupation Tax on the serviceman's cost price if the
serviceman is a registered de minimis serviceman; or (4) Use Tax on the serviceman's
cost price if the serviceman is de minimis and is not otherwise required to be registered
under Section 2a of the Retailers' Occupation Tax Act. See 86 Ill. Adm. Code 140.105;
86 Ill. Adm. Code 140.106.
Using the first method, the Service Occupation Tax is based on the separately
stated selling price of the tangible personal property transferred. Servicemen who do
not wish to separately state the selling price of the tangible personal property
transferred, must assess the Service Occupation Tax on 50% of the entire bill to their
service customers. See 86 Ill. Adm. Code 140.106(a). Regardless of which method is
used, the tax base cannot be less than the cost price of the tangible personal property
transferred. Id. Servicemen who incur Service Occupation Tax on their selling price
should provide Certificates of Resale to their suppliers when purchasing tangible
personal property that will be transferred to service customers and are required to
collect the corresponding Service Use Tax from their customers. See 86 Ill. Adm. Code
140.106(b) and (e).

CORPORATION./NAME
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June 7, 2022
The third way servicemen may account for their tax liability only applies to de
minimis servicemen who have either chosen to be registered or are required to be
registered because they incur Retailers’ Occupation Tax liability with respect to a
portion of their business. Servicemen may qualify as de minimis if they determine that
their annual aggregate cost price of tangible personal property transferred incident to
sales of service is less than 35% of their annual gross receipts from service transactions
(75% in the case of pharmacists and persons engaged in graphic arts production). See
86 Ill. Adm. Code 140.109.
The cost ratio is a measure of the amount of tangible personal property
transferred with a service. It is calculated by comparing the serviceman’s product cost
to his total income from services. The cost of materials that are not transferred to
customers incident to a service, such as those sold at retail, removed from inventory for
use, or incorporated into repairs of real estate, must be excluded when determining the
cost ratio. See 86 Ill. Adm. Code 140.105(c).
Registered de minimis servicemen are authorized to pay Service Occupation Tax
based upon the cost price of tangible personal property transferred incident to sales of
service. Servicemen that incur Service Occupation Tax collect the Service Use Tax
from their customers. They remit tax to the Department by filing returns and do not pay
tax to their suppliers. They provide suppliers with Certificates of Resale for the tangible
personal property transferred to service customers.
See 86 Ill. Adm. Code
140.109(a)(1) and (a)(4).
The final method of determining tax liability may be used by de minimis
servicemen that are not otherwise required to be registered under Section 2a of the
Retailers' Occupation Tax Act. Servicemen may qualify as de minimis if they determine
that the annual aggregate cost price of tangible personal property transferred as an
incident to his sales of service is less than 35% of the servicemen's annual gross
receipts from service transactions (75% in the case of pharmacists and persons
engaged in graphic arts production). Such de minimis servicemen handle their tax
liability by paying Use Tax to their suppliers. If their suppliers are not registered to
collect and remit tax, the servicemen must register, self-assess, and remit Use Tax to
the Department. The servicemen are considered the end-users of the tangible personal
property transferred incident to service. Consequently, they are not authorized to collect
a "tax" from the service customers. See 86 Ill. Adm. Code 140.108.
The final method of determining tax liability would not apply in your case since,
as stated in the summary of facts, “CORPORATION does make over the counter retail
sales in Illinois of items like windshield wiper blades and glass.”
We now turn to a discussion of the application of the law to your ruling request.
The Department’s responses follow the numerical order of your questions.
Ruling Request

CORPORATION./NAME
Page 9
June 7, 2022
1.

2.

3.

4.

5.

6.

Must CORPORATION include over the counter retail sales and
wholesale sales of glass in the calculation to determine their cost ratio
or should only sales of repair and replacement services be used to
determine their cost ratio?
Response - The cost of materials that are not transferred to customers
incident to a service, such as those sold at retail, removed from
inventory for use, or incorporated into repairs of real estate, must be
excluded when determining the cost ratio. See 86 Ill. Adm. Code
140.105(c).
Is CORPORATION required to be registered under Section 2a of the
Retailers' Occupation Tax Act since they do make retail sales of tangible
personal property in Illinois?
Response – Yes, Section 2a of the Retailers’ Occupation Tax Act
provides that “[i]t is unlawful for any person to engage in the business
of selling tangible personal property at retail in this State without a
certificate of registration from the Department.” 35 ICLS 120/2a.
If CORPORATION is not required to be registered under Section 2a of
the Retailers' Occupation Tax Act, may CORPORATION voluntarily
register under this section?
Response – CORPORATION is required to be registered under the
Retailers' Occupation Tax Act, because it makes retail sales of tangible
personal property in Illinois. 35 ILCS 120/2a.
Is CORPORATION required to include the cost of tangible personal
property used to replace glass in the calculation of the cost ratio even
though the glass used in replacement services is separately stated to
the customer?
Response – Yes, the cost of materials that are transferred to
customers incident to a service is included in the cost ratio. See 86 Ill.
Adm. Code 140.105(c).
If CORPORATION is not required to be registered, does not voluntarily
register under Section 2a of the Retailers ' Occupation Tax Act, and
their cost ratio is less than 35%, must CORPORATION remit Use Tax on
all materials used for all repair and replacement services performed in
Illinois even if they separately state the price of glass used in
replacement services?
Response – CORPORATION is required to be registered for the
Retailers’ Occupation Tax because it makes retail sales of tangible
personal property in Illinois. 35 ILCS 120/2a.
If CORPORATION is required to be registered or is voluntarily registered
under Section 2a of the Retailers' Occupation Tax Act, and if their cost
ratio is less than 35%, must CORPORATION remit Service Occupation
Tax on their cost basis for all materials used for all repair and
replacement services performed in Illinois even if they separately state
the price of glass used in replacement services?

CORPORATION./NAME
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June 7, 2022

7.

8.

Response - Even though a serviceman meets the de minimis threshold
and is otherwise eligible to pay Service Occupation Tax on his cost price,
he can nevertheless opt to pay Service Occupation Tax on the selling
price of the tangible personal property transferred to service customers.
See 86 Ill. Adm. Code 140.109(b). However, a de minimis serviceman
incurring Service Occupation Tax liability on his cost price who does not
opt to pay Service Occupation Tax on selling price must remit Service
Occupation Tax on cost price on all taxable sales of service for a given
fiscal year. He cannot utilize other methods of determining his Service
Occupation Tax liability on a transaction-by-transaction basis. See 86 Ill.
Adm. Code 140.109(a)(5).
May CORPORATION elect to pay SOT on their selling price even if they
meet the de minimis threshold under 86 Ill. Adm. Code 140.109(b) and
if so how is that election made?
Response – Even though a serviceman meets the de minimis threshold
and is otherwise eligible to pay Service Occupation Tax on his cost price,
he can nevertheless opt to pay Service Occupation Tax on the selling
price of the tangible personal property transferred to service customers.
See 86 Ill. Adm. Code 140.190(b). However, a de minimis serviceman
incurring Service Occupation Tax liability on his cost price who does not
opt to pay Service Occupation Tax on selling price must remit Service
Occupation Tax on cost price on all taxable sales of service for a given
fiscal year. He cannot utilize other methods of determining his Service
Occupation Tax liability on a transaction-by-transaction basis. See 86 Ill.
Adm. Code 140.109(a)(5). A serviceman may record the election
under Section 140.109(b) to pay Service Occupation Tax on selling
price in his books and records.
If CORPORATION elects to pay SOT on their selling price, how must
CORPORATION collect tax?
a. Is tax collected on 50% of the amounts charged to their customers for
all types of sales (i.e., sales of repairs and sales of replacements)?
b. Or is tax collected based upon how the labor and materials are
charged to the customer? For example, must CORPORATION
collect tax on 50% of the total invoice for repair services provided
where the labor and materials are not separately stating and collect
tax on the sales price of tangible personal property for replacement
services when the sales price of tangible personal property is charged
separately from labor charges?
Response – Even though a serviceman meets the de minimis threshold
and is otherwise eligible to pay Service Occupation Tax on his cost price,
he can nevertheless opt to pay Service Occupation Tax on the selling
price of the tangible personal property transferred to service customers.
See 86 Ill. Adm. Code 140.109(b). He may pay Service Occupation Tax
on 1) the separately stated selling price of the tangible personal
property transferred incident to service as shown on billings to the

CORPORATION./NAME
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June 7, 2022
service customer; or 2) on 50% of the entire customer bill if the selling
price of the tangible personal property transferred is not separately
shown on billings to the service customer. However, in no event can the
Service Occupation Tax be based on an amount less than the
serviceman's cost price of the tangible personal property being
transferred. See 86 Ill. Adm. Code 140.106. Depending on the type of
service rendered, some customers could be billed without a breakout
of the selling price of tangible personal property transferred and some
customers could be billed with a breakout of the selling price of
tangible personal property transferred. It should be noted that a
registered de minimis serviceman who is authorized to pay Service
Occupation Tax based on the cost price may elect to pay tax on the
separately stated selling price, or 50% of the bill, but whichever
method is chosen, (cost or selling price), must be followed for the
entire fiscal year. See 86 Ill. Adm. Code 140.109(a)(5). See also 86
Ill. Adm. Code 140.110, Example of Methods Used by Servicemen to
Determine Liability.
The factual representations upon which this ruling is based are subject to review
by the Department during the course of any audit, investigation, or hearing and this
ruling shall bind the Department only if the factual representations recited in this ruling
are correct and complete. This Private Letter Ruling is revoked and will cease to bind
the Department 10 years after the date of this letter under the provisions of 2 Ill. Adm.
Code 1200.110(e) or earlier if there is a pertinent change in statutory law, case law,
rules or in the factual representations recited in this ruling.
I hope this information is helpful If you have further questions related to the
Illinois sales tax laws, please visit our website at www.tax.illinois.gov or contact the
Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,
Samuel J. Moore
Private Letter Ruling Committee Chairman
SJM:TG:rkn