Does a personal chef who prepares and delivers custom meals for private clients qualify for a special 'de minimis serviceman' exemption from Illinois Retailers' Occupation (sales) Tax, since the chef already pays sales tax on the raw ingredients?

Plain-English summary

A personal chef asked the Illinois Department of Revenue whether her business could qualify as a "de minimis serviceman" and be exempt from charging sales tax, since she already pays sales tax on the raw ingredients she buys retail. Her business model: she prepares custom weekly menus for 10-16 private clients, delivers several days' worth of cold, ready-to-reheat meals at a time, and her ingredient costs run about 20% of her gross receipts (i.e., most of her charge is for her time/service).

The Department's GIL response explains, without ruling on her specific facts, the general framework: Illinois' Retailers' Occupation Tax (commonly called "sales tax") applies to businesses selling tangible personal property at retail, while the Service Occupation Tax applies instead only when a narrow three-part "special order" test is met (the property must have use/value only for its specific purpose, have value only to that one purchaser, and the purchaser must be paying mainly for the seller's engineering/design skill rather than production). Merely making something custom, or only after an order comes in, doesn't satisfy that test — custom-made goods "substantially similar to stock or standard items" (the Department's example is tailor-made clothing) stay subject to Retailers' Occupation Tax. The Department also notes that people who sell meals for consumption owe Retailers' Occupation Tax on those sales even if they serve only a limited group of private clients, though food sold for off-premises consumption (not hot, prepared-for-immediate-eating food, candy, soft drinks, or alcohol) is taxed at a reduced 1% rate plus any local tax.

What this means for you

Personal chefs, caterers, and meal-prep businesses

Selling prepared meals to your clients is generally treated as a taxable retail sale, and the Department's letter gives no support for a blanket "de minimis serviceman" carve-out just because you also pay sales tax on your ingredients or serve a small, private clientele. If your food is delivered cold for later reheating and not consumed immediately, you may qualify for the lower 1% (plus local) rate on food for off-premises consumption rather than the full rate — but you would still be registered and collecting Retailers' Occupation Tax, not exempt from it.

Makers of custom or made-to-order goods

If what you sell is basically a customized version of a standard product (the ruling's example is tailor-made clothing or draperies), it's still taxed as a retail sale. To instead be taxed under the Service Occupation Tax (which can change how tax applies to your purchases of materials), you'd need to satisfy all three parts of the "special order items" test in 86 Ill. Adm. Code 130.2115: the item is useful only for the specific purpose it was made for, has value only to that one buyer, and the client is really paying you for engineering/design work rather than just production.

Retailers buying materials for resale

The letter is also a reminder that retailers can buy inventory tax-free from vendors by furnishing a properly executed Certificate of Resale showing an active registration or resale number (35 ILCS 120/2c; 86 Ill. Adm. Code 130.1405). Without that certificate and number, the sale is presumed not to be for resale, a presumption you can only rebut with other evidence.

Accountants and tax professionals

This GIL is a useful, non-binding restatement of the boundary between Retailers' Occupation Tax and Service Occupation Tax for custom/made-to-order businesses, plus the food-tax rate distinction in 86 Ill. Adm. Code 130.310(a). Because it is a GIL rather than a Private Letter Ruling, it does not resolve whether this specific chef's business actually qualifies for any exemption — it only points to the governing regulations.

Common questions

Q: Did the Department grant the personal chef a "de minimis serviceman" exemption?
A: The letter does not grant any specific exemption. As a GIL, it only directs the taxpayer to the relevant statutes and regulations governing Retailers' Occupation Tax, Use Tax, Service Occupation Tax, and the special-order-items test, without resolving her particular facts.

Q: If I custom-make something for a client, is it automatically exempt from sales tax as a service?
A: No. An item that is "substantially similar to stock or standard items," even if custom-made, is still subject to Retailers' Occupation Tax — the Department's example is tailor-made clothing and draperies. See 35 ILCS 120/1.

Q: When does the Service Occupation Tax apply instead of the Retailers' Occupation Tax to a custom-made item?
A: Only when the special-order items test in 86 Ill. Adm. Code 130.2115 is fully met: (1) the property has use or value only for the specific purpose it was made for, (2) it has use or value only to that particular purchaser, and (3) the purchaser is mainly paying for the seller's engineering and design skill rather than production skill. Simply being made-to-order or altered from a standard item is not enough on its own.

Q: Do I owe sales tax on meals I sell to a small group of private clients?
A: Generally yes. The letter states that persons selling meals for use or consumption incur Retailers' Occupation Tax liability on those receipts, and it is "immaterial that the class of purchasers may be a limited one." See 86 Ill. Adm. Code 130.2145.

Q: Is there a lower tax rate for food I deliver for later consumption at home?
A: Possibly. Food consumed off the premises where sold — other than alcoholic beverages, cannabis-infused food, soft drinks, candy, and food prepared for immediate consumption — is taxed at a reduced 1% rate plus any applicable local taxes. See 86 Ill. Adm. Code 130.310(a).

Citations and references

• 35 ILCS 120/1 (Retailers' Occupation Tax Act; custom-made items substantially similar to stock items remain taxable)
• 35 ILCS 120/2c (resale certificate requirements and presumption against resale)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax on retail sales of tangible personal property)
• 86 Ill. Adm. Code 150.101 (Use Tax on tangible personal property purchased at retail)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax on property transferred incident to a service)
• 86 Ill. Adm. Code 130.2115 (special order items test: Machinery, Tools and Special Order Items)
• 86 Ill. Adm. Code 130.1405 (Certificates of Resale)
• 86 Ill. Adm. Code 130.2145 (tax on sales of meals for use or consumption)
• 86 Ill. Adm. Code 130.310(a) (reduced 1% rate for food for off-premises consumption)

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/st22-0011-gil.pdf

Original ruling text

ST-22-0011 06/07/2022 SALE AT RETAIL
If an item is an item substantially similar to stock or standard items, even though
custom-made, it would be subject to Retailers' Occupation Tax, as is the case
with tailor-made clothing, draperies, etc. See 35 ILCS 120/1. (This is a GIL.)
June 7, 2022
NAME
ADDRESS
Dear NAME:
This letter is in response to your letter, 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:
I am writing to ask your guidance regarding charging sales tax for
my personal chef business. I spoke to a representative today in
your Taxpayer Assistance office who suggested that I might qualify
as a De Minimus serviceman. I believe there is justification for this
based on my business model but I would like confirmation from
your office before proceeding.
I am currently a personal chef in the CITY. In the past, I have
worked both in clients’ own homes and in shared commercial
kitchen space. In the upcoming months I will be moving to
commercial kitchen space in CITY. As part of the city licensing
process I had to apply for my Illinois certificate of registration. My
newly obtained registration number is: ####-####. I understand that
this is how I would pay my monthly sales taxes. However, as my
business is a service and I already pay sales tax to my suppliers for
raw ingredients, I believe there is justification to be exempt from
sales tax.

COMPANY/NAME
Page 2
June 7, 2022
I would very much appreciate an official answer from your office as
to if this is the case. Here is more detail about my business model:
I work for regular private clients, who number between 10 and 16
depending on circumstances. For each client, I prepare and deliver
several meals for consumption over the following days (typically
one week, sometimes two). The meals are delivered together, on
the same day, cold, for later consumption.
I do not sell food to the general public and only have a portfolio of
private clients. Each client receives a specially designed menu that
I create for them which takes into account both their food
preferences and nutritional needs. Menus change each week and
are proposed by myself and approved by the client. I purchase all
my raw ingredients retail as the quantities I need are too small to
qualify for wholesale. As each client’s menu is different, I am
unable to buy most ingredients in bulk and need to go to the
grocery store each day to get what I need. I always pay sales tax
on all of my groceries and other raw ingredients.
I charge my clients two different ways: either for my time plus
groceries, or one set price (which is a combination of time and
groceries). The end result is the same: I charge much more for my
time than for the ingredients themselves. The final product
delivered to the client is approximately 5 days’ worth of personally
designed meals that are cold and ready to either freezer or
refrigerate, and reheat when the client is ready for them.
My food costs (ingredients) represent around 20% of my gross
receipts.
When I move to commercial space my business model will be the
same. The space will be solely used for food preparation, and will
not be open to the general public. Food will be delivered cold, ready
to store in the refrigerator or freezer for reheating at a later date.
After discussions with the tax office and studying the statutes, I
believe there is justification for the De Minimus classification,
however, I only want to proceed this way with written verification by
your office. If you have additional questions for my I am happy to
discuss this further. I can be reached by phone at ###-###-#### or
by email at E-MAIL
Thank you very much for your consideration,

COMPANY/NAME
Page 3
June 7, 2022
DEPARTMENT’S RESPONSE:
The Retailers' Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property at retail to purchasers for use
or consumption. See 86 Ill. Adm. Code 130.101. 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 86 Ill. Adm. Code 150.101. These taxes
comprise what is commonly known as “sales tax” in Illinois. Illinois also imposes a tax
upon persons engaged in this State in the business of making sales of a service, based
on tangible personal property transferred incident to sales of service. See 86 Ill. Adm.
Code 140.101.
If an item is an item substantially similar to stock or standard items, even though
custom-made, it would be subject to Retailers' Occupation Tax, as is the case with
tailor-made clothing, draperies, etc. See 35 ILCS 120/1. The test for special order
items set forth in the Department's regulations at Section 130.2115, with respect to
Machinery, Tools and Special Order Items, requires that in order to be taxable under the
Service Occupation Tax, rather than the Retailers' Occupation Tax, the following must
apply: (1) the property must have a use or value for the specific purpose for which it is
produced; (2) the property must have use or value only to the purchaser; and (3) the
purchaser must employ the seller primarily for engineering and design skills rather than
simply production skills. The fact that tangible personal property transferred is not a
stock item and is only produced after an order is received, or is an alteration of a
standard item, is not sufficient to exempt it from Retailers' Occupation Tax unless these
three factors are met. 86 Ill. Adm. Code 130.2115.
When retailers buy tangible personal property from vendors that they will resell to
purchasers, they may purchase such items tax-free by providing their vendors with
properly executed Certificates of Resale. See the Department’s regulation at 86 Ill.
Adm. Code 130.1405, which describes the requirements for Certificates of Resale. A
sale may be made tax-free if the purchaser has an active registration number or resale
number from the Department and furnishes that number to the seller in connection with
certifying to the seller that any sale to such purchaser is nontaxable because of being a
sale for resale. See 35 ILCS 120/2c. Failure to present an active registration number
or resale number and a certification to the seller that a sale is for resale creates a
presumption that a sale is not for resale. This presumption may be rebutted by other
evidence that all of the seller's sales are sales for resale, or that a particular sale is a
sale for resale.
Persons engaged in the business of selling meals to purchasers for use or
consumption incur Retailers' Occupation Tax liability on their receipts from those sales,
and it is immaterial that the class of purchasers may be a limited one. See 86 Ill. Adm.
Code 130.2145. For general information purposes food which is to be consumed off the
premises where it is sold (other than alcoholic beverages, food consisting of or infused
with adult use cannabis, soft drinks, candy and food that has been prepared for

COMPANY/NAME
Page 4
June 7, 2022
immediate consumption), the tax imposed is at the lower rate of 1% plus local taxes if
any. See 86 Ill. Adm. Code 130.310(a). For more information on the taxation of food,
please refer to the Department’s regulation on Food, Soft Drinks and Candy at 86 Ill.
Adm. Code 130.310.
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