How does Illinois answer a national state-tax survey's questions on marketplace facilitator thresholds, food-delivery sourcing, digital products, qui tam sales-tax lawsuits, car-sharing/short-term-rental platforms, and the sales/use tax statute of limitations?

Plain-English summary

Like several other Illinois "Miscellaneous" GILs, this one isn't really about one taxpayer's transaction -- it's Illinois's response to a national publisher's recurring multistate tax survey (used to update a long-running state tax reference book), covering several unrelated topics in one letter. The Department noted it "cannot respond to your survey in the format provided," but answered the substance of each updated question anyway, with citations.

Marketplace facilitator thresholds: when deciding whether a marketplace facilitator must collect Illinois tax, the Department combines the facilitator's own Illinois gross receipts/transactions WITH those of the sellers on its marketplace -- it does not test each party's sales separately. A marketplace seller that sells exclusively through a facilitator that has met the threshold can still owe its own registration and filing obligations for any taxes or fees the facilitator doesn't handle (the facilitator framework covers only state and local Retailers' Occupation Tax). Below the threshold, a facilitator can't voluntarily register and collect on sellers' behalf, but an out-of-state seller without independent nexus can still voluntarily register to collect Use Tax on its own.

Food delivery: if a food-delivery service qualifies as a marketplace facilitator and has met a remittance threshold, it -- not the restaurant -- gets the retailer's discount for timely-filed returns. Sourcing splits: the delivery service generally sources tax to the delivery destination, but if the restaurant is separately subject to the Metropolitan Pier and Exposition Authority Retailers' Occupation Tax, the facilitator must remit that particular tax at the restaurant's origin rate.

Qui tam / False Claims Act: a private citizen (a "relator") can sue a retailer under the Illinois False Claims Act for knowingly concealing or improperly avoiding a sales/use tax obligation. The state can intervene and take over the case; if it does, the relator keeps 15-25% of any recovery, and if the state declines and the relator carries the case alone, the relator's share rises to 25-30%.

Digital products: downloaded books, music, newspapers, and magazines are transfers of intangible property, not tangible personal property -- so they are not subject to Illinois Retailers' Occupation or Use Tax at all.

Car-sharing, short-term rentals, and other miscellaneous services: a peer-to-peer car-sharing platform (an "Airbnb for cars") is treated as a marketplace facilitator under the Automobile Renting Occupation and Use Tax Act, since that Act incorporates the same marketplace-facilitator rules as the Retailers' Occupation Tax Act. By contrast, for short-term rentals of real estate booked through a third-party platform, the PLATFORM is not liable for Hotel Operators' Occupation Tax -- the tax obligation stays with the host/owner of the rented space.

Statute of limitations: since June 25, 2021, if a taxpayer files a sales/use tax refund or credit claim and the normal statute of limitations for the Department to issue a notice of tax liability covering that period would otherwise expire less than 6 months after the claim is filed, the deadline is automatically extended 6 months from what it would have been.

The Department also flagged a housekeeping point: its answers to a prior year's survey questions on "remote workers" and "marketplace facilitators" had cited emergency regulations that have since been formally adopted (no longer "emergency"), so those old references should be updated.

What this means for you

Marketplace sellers and facilitators

Don't assume your own sales alone determine whether your marketplace facilitator must collect Illinois tax -- Illinois looks at the facilitator's and all its sellers' Illinois sales together. And don't assume a facilitator collecting your sales tax means you have no other Illinois obligations; you may still need to register or file for other taxes/fees the facilitator doesn't cover.

Restaurants and food-delivery platforms

If your delivery partner qualifies as a marketplace facilitator, it (not you) typically claims the retailer's discount and handles sourcing to the delivery address -- except for the Metropolitan Pier and Exposition Authority tax, which is remitted at your restaurant's own location rate.

Car-sharing and short-term-rental platforms

If you operate a peer-to-peer car-sharing service, expect to be treated as a marketplace facilitator under the Automobile Renting Tax framework. If you operate a short-term real-estate rental platform, Illinois puts the Hotel Operators' Occupation Tax obligation on your hosts, not on you -- but check whether your platform has separately agreed (by contract) to collect and remit on hosts' behalf, since that's a business choice, not a legal requirement either way here.

Accountants, tax professionals, and retailers generally

Be aware that Illinois's False Claims Act exposes retailers to private whistleblower lawsuits (not just Department audits) for knowingly concealing sales/use tax liability, with real financial incentives (15-30% of the recovery) for whistleblowers to bring them. And if you're filing a refund/credit claim close to a limitations deadline, the automatic 6-month extension (effective since June 25, 2021) may give you more time than the base statute suggests.

Common questions

Q: Are a marketplace facilitator's and its sellers' sales tested separately against Illinois's collection threshold?
A: No. Illinois combines the facilitator's own Illinois gross receipts and transactions with those of all sellers on its marketplace to determine whether the $100,000/200-transaction threshold is met.

Q: If I sell exclusively through a marketplace facilitator, do I have any Illinois tax obligations left?
A: Possibly. The facilitator framework covers only state and local Retailers' Occupation Tax. You may still need to register, file, and remit for any other Illinois taxes or fees your sales trigger.

Q: Is a downloaded e-book or digital music file taxable in Illinois?
A: No. Illinois treats downloaded digital products (books, music, newspapers, magazines) as intangible property, not tangible personal property, so they fall outside Retailers' Occupation and Use Tax.

Q: Can someone other than the Department sue a retailer for underpaying sales tax?
A: Yes. Under the Illinois False Claims Act, a private party can bring a "qui tam" lawsuit against a retailer that knowingly conceals or avoids a sales/use tax obligation, and can recover 15-30% of any resulting judgment or settlement depending on whether the state intervenes.

Q: Is an Airbnb-style short-term rental platform responsible for Illinois Hotel Operators' Occupation Tax?
A: No -- according to this GIL, the platform itself is not liable; the tax obligation belongs to the owner/host actually renting out the space.

Citations and references

Marketplace facilitators / food delivery:

• 86 Ill. Adm. Code 131.135 (combined threshold test)
• 86 Ill. Adm. Code 131.107(c)(4), 131.150 (seller's remaining obligations and recordkeeping)
• 35 ILCS 105/6 (voluntary Use Tax registration)
• 35 ILCS 120/3; 86 Ill. Adm. Code 131.145(j) (retailer's discount)
• 86 Ill. Adm. Code 131.155(b), 131.107(c)(1)(C) (sourcing; MPEA tax origin-rate remittance)

Other topics:

• 740 ILCS 175/1 et seq. (Illinois False Claims Act qui tam suits)
• 86 Ill. Adm. Code 130.2105(a)(3) (digital products as intangibles)
• 35 ILCS 155/1 et seq., 155/3, 155/4; Illinois PLR ST-22-0002 (Automobile Renting Tax marketplace facilitator rules)
• 35 ILCS 145/2(1) et seq.; Illinois General Ruling Letter ST 17-0007 (Hotel Operators' Occupation Tax and third-party booking platforms)
• 35 ILCS 120/6 (automatic 6-month statute-of-limitations extension)

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/st22-0020-gil.pdf

Original ruling text

ST-22-0020-GIL 08/31/2022 MISCELLANEOUS
This letter responds to an annual survey. (This is a GIL.)
August 31, 2022
Dear XXX.
ADDRESS
This letter is in response to your e-mail received June 13, 2022, 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 also 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:
Each year, the COMPANY1, in conjunction with COMPANY2, collects and
disseminates information regarding the tax laws of each state. The results
of the annual survey are published in the PRODUCT, which has been one
of the premier state tax reference books for nearly 40 years.
Your assistance in the preparation of the 2023 edition is essential. Please
complete the attached corporate income tax and sales tax questionnaires
by August 8, 2022, and email them to ADDRESS. If your responses to last
year’s questionnaire would be helpful, please let us know and we will send
you a copy.
All new questions are highlighted in red font. Due to time constraints,
please respond only to the new questions and to the prior year questions
that require a change. All unanswered questions will be considered to
have the same response as last year, unless otherwise noted.
Please acknowledge receipt of this email. Also, please send us your
responses to the following questions:

1. Who is the state respondent for the corporate income tax
   questionnaire?
2. Who is the state respondent for the sales tax questionnaire?

COMPANY Sales Tax Survey
Page 2
August 31, 2022

3. Do you prefer a complimentary hardcopy of the PRODUCT or should
   we send you an access code for an eBook?
   Please contact us at ADDRESS if you have any questions, and thank you
   for your continued support of this important tax reference book.
   DEPARTMENT’S RESPONSE
   We are unable to respond to your survey in the format provided.
   However, we hope you find the following information regarding the updated
   questions helpful.
   [16] NEXUS
   MARKETPLACE FACILITATORS
   ▪ Are the sales and transactions thresholds applied separately to the marketplace
   facilitator and seller or are the thresholds applied to the combined sales and
   transactions of the two entities? For example, both a marketplace facilitator and seller
   separately have sales revenue of $60,000 in State A, for a combined total of $120,000.
    Applied separately

 Applied to combined sales volume

DEPARTMENT’S RESPONSE
In applying the threshold tests, the cumulative gross receipts and transactions
from sales of tangible personal property to purchasers in Illinois made through the
marketplace by both the marketplace facilitator and marketplace seller are used to
determine whether a marketplace facilitator has met a threshold. See 86 Ill. Adm. Code
131.135.
▪ If a seller makes all its sales through a marketplace facilitator, must the seller still:
▪ Register for sales tax in your state?  Yes  No
▪ File returns for sales tax in your state?
 Yes  No
DEPARTMENT’S RESPONSE
Although a marketplace seller makes all its sales through a marketplace
facilitator that meets a threshold test, registration still may be required. The rules
established for marketplace facilitators and marketplace sellers apply only to the
remittance of State and local Retailers' Occupation Tax (“sales tax”) administered by the
Department. Marketplace sellers that incur liability for other taxes or fees administered
by the Department on sales through a marketplace facilitator remain liable for the
remittance of those taxes to the Department. See 86 Ill. Adm. Code 131.107(c)(4). See
also 86 Ill. Adm. Code 131.150 for obligations of marketplace sellers to maintain books

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August 31, 2022
and records as well as circumstances when marketplace sellers have liability for sales
tax on its sales through a marketplace facilitator.
▪ May a marketplace facilitator or seller whose sales volume is below your state’s
threshold voluntarily register, collect, and file?  Yes  No
DEPARTMENT’S RESPONSE
A marketplace facilitator may not voluntarily register and collect sales tax for
marketplace sellers if the sales through its marketplace to Illinois purchasers does not
meet either of the thresholds in 86 Ill. Adm. Code 131.135(a), because the marketplace
facilitator would not be considered the retailer for such sales.
If a marketplace seller sells through a marketplace that does not meet the
threshold test in 86 Ill. Adm. Code 131.135(a), and the marketplace seller does not
otherwise have nexus with Illinois, the marketplace seller may voluntarily register to
collect the Use Tax on its sales to purchasers in Illinois. See 35 ILCS 105/6.
▪ Must a marketplace facilitator collect and remit taxes other than sales tax?  Yes  No
▪ If YES, what taxes?
DEPARTMENT’S RESPONSE
In the case of marketplace sellers incurring additional taxes for tangible personal
property sold over a marketplace other than State and local Retailers' Occupation Tax,
the Department encourages such sellers to work with their marketplace facilitators to
make arrangements allowing the marketplace facilitator to collect these taxes and remit
them to the marketplace seller, along with the gross receipts from the sale, so that the
marketplace seller can then remit the taxes to the Department. See 86 Ill. Adm. Code
131.107(c)(4).
▪ When purchasing meals delivered from a restaurant, who is entitled to the:
▪ Vendor’s fee?
 Delivery service  Restaurant
▪ Collection discount?  Delivery service  Restaurant
DEPARTMENT’S RESPONSE
The retailers’ discount as provided in 35 ILCS 120/3 is available to a food
delivery service of restaurant meals if it qualifies as a marketplace facilitator with
respect to such meals and has met a tax remittance threshold. See 86 Ill. Adm. Code
131.145(j).
▪ When purchasing meals delivered from a restaurant, is the applicable tax rate based on the

COMPANY Sales Tax Survey
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August 31, 2022
origin (the restaurant) or the destination (delivery point)?  Origin  Delivery point
DEPARTMENT’S RESPONSE
For purposes of determining the applicable sales tax rate, food delivery services
that are marketplace facilitators and have met a tax remittance threshold, are
considered to be engaged in the business of selling at the Illinois location to which the
food is shipped or delivered. 86 Ill. Adm. Code 131.155(b). However, food delivery
services that are considered marketplace facilitators are required to remit the
Metropolitan Pier and Exposition Authority Retailers’ Occupation Tax on sales made on
behalf of a restaurant or other food establishment that is subject to the Metropolitan Pier
and Exposition Authority Retailers’ Occupation Tax (origin rate). See 86 Ill. Adm. Code
131.107(c)(1)(C).
[32] False Claims Act and Qui Tam Lawsuits. A qui tam lawsuit is a type of lawsuit in which a
whistleblower sues on behalf of the government.
▪ Can private parties bring qui tam lawsuits against:
▪ Retailers responsible for collecting and remitting sales tax?
 Yes  No
▪ Taxpayers for failure to remit consumer’s use tax?  Yes  No
▪ Are successful whistleblowers entitled to a portion of any sales or use tax recovery per the
False Claims Act?  Yes  No
DEPARTMENT’S RESPONSE
The Illinois False Claims Act (“Act”) 740 ILCS 175/1 et seq., authorizes the
Attorney General as well as private parties to bring a civil action against persons that
are in violation of section 3 of the Act. Where a private party initiates the action, the
case must be brought in the name of the State and the State must be served with a
copy of the complaint and other documents. The State then has the right to intervene
and take over the action. If it elects not to proceed, the party who initiated the action
has the right to continue on its own, subject to certain ongoing rights of the State. Id. at
4(b)(4)(B), 4(c)(3).
A claim is generally brought against a retailer responsible for collecting and
remitting sales and use taxes who knowingly conceals or knowingly and improperly
avoids or decreases an obligation to pay or transmit money or property to the State. Id.
at 3(a)(1)(G).
A private party bringing a successful claim under the Act is entitled to receive not
less than 25% nor more than 30% of the proceeds of the action to compensate it for
recovering the money on behalf of the State. Id. at 4(d)(2). If the State proceeds with
an action brought by a private party, the compensation awarded is at least 15% but not
more than 25% of the proceeds of the action or settlement received. Id. at 4(d)(1).

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[47] DIGITAL PRODUCTS. Does your state impose sales/use tax on these items when sold in
digital form
(check all that apply)?
 Books
 Movies
 Recorded music
 Magazines
 Newspapers
 Subscriptions to magazines or
newspapers
 Streaming video
 Remote access software  Digital automated service (DAS)
 Cryptocurrency
 Other, specify:

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DEPARTMENT’S RESPONSE
Information or data that is downloaded electronically, such as downloaded books,
musical recordings, newspapers or magazines, does not constitute the transfer of
tangible personal property. These types of transactions represent the transfer of
intangibles and are thus not subject to Retailers' Occupation and Use Tax. See 86 Ill.
Adm. Code 130.2105(a)(3).
[73] MISCELLANEOUS SERVICES. Which of the following services are taxable? (Check all
that apply)
 Amusements  Cable TV charges  Credit reporting  Debt collection services
 Dry cleaning  Laundry  Membership dues  Pest control
 Pet care  Photographic services  Security services  Towing service
 Transient lodging  Vehicle parking charges  Gambling or gaming not on Native
American reservations
 Peer-to-peer sharing: Carsharing (Airbnb for cars)
 Peer-to-peer sharing: Short-term rentals (less than 30 days) of real estate, such as
Airbnb
DEPARTMENT’S RESPONSE
Persons who are engaged in the business of renting automobiles in Illinois under
rental terms of one year or less are subject to the Automobile Renting Occupation and
Use Tax Act (“ART”). See 35 ILCS 155/1 et seq. Furthermore, ART has incorporated
the Sections of the Retailers’ Occupation Tax Act related to marketplace facilitators.
See 35 ILCS 155/3 and 4. A car rental company operating a peer-to-peer motor vehicle
sharing platform is acting as a marketplace facilitator subject to the same provisions and
requirements as a marketplace facilitator under the Retailers’ Occupation Tax Act. See
Illinois Private Ruling Letter ST-22-0002 (2/1/2022).
The Hotel Operators' Occupation Tax Act imposes a tax upon persons engaged
in the business of renting, leasing or letting rooms in a hotel. HOOT defines “hotel” to
include any building or buildings in which the public may, for consideration, obtain living
quarters, sleeping or housekeeping accommodations. See 35 ILCS 145/2(1) et seq. In
the context of the providing of short-term accommodations that are rented through the
use of a third-party platform, the third-party platform is not liable for HOOT. Rather, the
tax obligation is on the owner/host of the accommodations which are being rented. See
Illinois General Ruling Letter ST 17-0007 (3/2/2017).

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DEPARTMENT UPDATES
[5] STATUTE OF LIMITATIONS, ETC.
▪ What is the statutory time limit for assessing sales/use tax in your state?
Beginning June 25, 2021, for any period included in a claim for credit or refund
for which the statute of limitations for issuing a notice of tax liability under would expire
less than 6 months after the date a taxpayer files the claim for credit or refund, the
statute of limitations is automatically extended for 6 months from the date it would have
otherwise expired. 35 ILCS 120/6.
Also, please note that the Department’s response to the 2022 survey questions
titled “REMOTE WORKERS”, and “MARKETPLACE FACILITATORS” contained
references to emergency rules in effect at such time which amended certain regulations
under 86 Ill. Adm. Code 131.101 et seq. Amendments to the cited regulations have
been adopted and the emergency rules are no longer in effect and such reference to
them should be removed.
I hope this information is helpful. If you require additional information, please visit
our website at www.tax.illinois.gov
Very truly yours,

Thomas Grudichak
Associate Counsel