When a seller delivers goods in Illinois to a common carrier, contract carrier, or freight forwarder that then ships them out of state or out of the country, is the sale exempt from Illinois Retailers' Occupation Tax as an interstate or foreign commerce sale, and what documentation does the seller need to prove it (or to prove a resale or manufacturing exemption instead)?

Plain-English summary

A company (referred to here as COMPANY) wrote to the Illinois Department of Revenue on April 18, 2023, asking about two related scenarios. In both, an out-of-state or out-of-country purchaser -- not registered in Illinois and not required to be -- buys materials by phone or internet from the Illinois seller, and title to the goods transfers at the seller's dock when a common carrier, contract carrier, or freight forwarder picks them up on the purchaser's behalf. In Scenario 1, the purchaser is out-of-state and arranges for a common carrier or contract carrier to pick up the goods at the seller's dock/warehouse and ship them directly out of state. In Scenario 2, the purchaser is out-of-country, has no U.S. FEIN but does have a foreign tax ID (such as a VAT number), and engages a third-party carrier or freight forwarder/forwarding agent to pick up the goods at the seller's dock and ship them directly out of the country. COMPANY asked whether these sales are taxable Illinois sales or exempt interstate/foreign commerce transactions, what documentation the seller must keep to support an exemption, and whether the purchaser could instead claim a resale exemption (using Form CRT-61) or a manufacturing exemption (using Form ST-587) depending on how the goods are picked up and shipped.

The Department responded with a GIL rather than a PLR. It explained that Illinois' Retailers' Occupation Tax (86 Ill. Adm. Code 130.101) taxes retailers on sales of tangible personal property at retail, and the complementary Use Tax (86 Ill. Adm. Code 150.101) taxes the privilege of using that property in Illinois; together these make up what is commonly called Illinois "sales tax." Ordinarily, where property is located in (or produced in) Illinois at the time of sale and delivered to the purchaser in Illinois, the sale is taxable regardless of where the contract was negotiated, where title passes, or where the purchaser resides (86 Ill. Adm. Code 130.605(a), (a)(3)). Mere possession in Illinois counts as a taxable use, and a sale stays taxable even if the purchaser immediately transports the property out of state after taking physical possession here (86 Ill. Adm. Code 130.605(a)(2)) -- Illinois has no blanket exemption for foreign or domestic travelers who take delivery and immediately leave with the goods.

However, 86 Ill. Adm. Code 130.605(d) creates a genuine interstate commerce exemption: gross receipts are not taxable when the seller is obligated under its agreement with the purchaser to deliver the property from a point in Illinois to a point outside Illinois, never to return, and delivery is actually made. This exemption applies even if the purchaser arranges for (or pays) the common carrier -- but it is critical that the seller, not the purchaser, is shown as the consignor or shipper on the bill of lading; if the purchaser is shown as consignor or shipper, the exemption does not apply. The seller must also keep documentation proving the delivery was actually made outside Illinois: for common-carrier shipments, a waybill or bill of lading requiring delivery outside the state; for mail, an authorized U.S. Postal Service receipt showing the addressee, the out-of-state destination, and the mailing date; or, if delivered by the seller's own trucks, a signed trip sheet or an affidavit from the purchaser or the purchaser's representative describing the delivery, plus other supporting data under 86 Ill. Adm. Code 130.810 and 35 ILCS 120/7 (86 Ill. Adm. Code 130.605(f)). The same interstate-commerce exemption extends to foreign commerce: under 86 Ill. Adm. Code 130.605(g), the exemption also applies when the seller delivers in Illinois to a freight forwarder who arranges for the property to be delivered outside the United States, never to return, and the same 130.605(f) documentation requirements apply.

On the resale question, the Department explained that to document a sale for resale, the seller must obtain a valid Certificate of Resale (such as Form CRT-61) from the purchaser under 86 Ill. Adm. Code 130.1405. The certificate must state the property is being purchased for resale and must include the seller's name and address, the purchaser's name and address, a description of the resold items, the purchaser's (or an authorized agent's) signature and date, and either a registration/resale number or a statement that the purchaser is an out-of-state purchaser who will resell only to purchasers located outside Illinois (86 Ill. Adm. Code 130.1405(b)). If a purchaser does not provide a Certificate of Resale, the sale is presumed not to be for resale, and the seller must charge Retailers' Occupation Tax and the corresponding Use Tax -- though that presumption can be rebutted with other evidence under 130.1405(d).

On the manufacturing exemption question, the Department declined to answer: it said COMPANY's letter did not contain sufficient information to determine whether the manufacturing machinery and equipment exemption would apply, and directed COMPANY to review 86 Ill. Adm. Code 130.330 to determine for itself whether its products qualify.

What this means for you

Sellers shipping to out-of-state or foreign purchasers

If you deliver goods in Illinois to a common carrier, contract carrier, or freight forwarder under an agreement to ship them to a point outside Illinois (or outside the U.S.) that will never return, the sale can be exempt from Illinois Retailers' Occupation Tax as an interstate or foreign commerce sale -- even if your purchaser arranges or pays for the carrier. The single most important documentation detail this GIL flags: make sure YOUR company (the seller), not the purchaser, is listed as the consignor or shipper on the bill of lading. If the purchaser is listed as consignor or shipper instead, the Department says the exemption will not apply, no matter how the transaction was otherwise structured. Keep a waybill/bill of lading, postal receipt, or trip sheet/affidavit as required by 86 Ill. Adm. Code 130.605(f) to support the exemption if audited.

Sellers relying on a resale exemption

If your purchaser claims they're buying for resale rather than final use, get a properly completed Certificate of Resale (Form CRT-61 or an equivalent letter with all the required information) before the sale, showing both parties' names and addresses, a description of the resold goods, the purchaser's signature and date, and a registration/resale number or an out-of-state-purchaser statement. Without it, the Department will presume the sale was not for resale and hold you liable for the tax, subject to rebuttal with other evidence.

Manufacturers and purchasers claiming a manufacturing exemption

This GIL does not resolve whether the manufacturing machinery and equipment exemption (86 Ill. Adm. Code 130.330) applies to any particular purchase picked up by a third-party carrier or by the purchaser's own truck. The Department told this taxpayer its letter lacked sufficient facts to decide that question. If you need a binding answer on your own specific equipment and facts, you would need to request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110 rather than rely on this GIL.

Accountants and tax professionals

Note that this GIL addresses documentation for three distinct, independently available exemptions -- interstate/foreign commerce delivery (130.605(d) and (g)), resale (130.1405), and manufacturing machinery and equipment (130.330) -- each with its own proof requirements. Confirm which exemption your client is actually relying on before advising on which documentation to collect, since a valid Certificate of Resale does not substitute for a proper bill of lading showing the seller as shipper, and vice versa.

Common questions

Q: Does having the purchaser's own carrier or contract carrier pick up the goods at the seller's dock defeat the interstate commerce exemption?
A: No. Per 86 Ill. Adm. Code 130.605(d), the exemption still applies even if the purchaser arranges for or pays the common carrier who makes the delivery outside Illinois. What matters is that the seller is shown as the consignor or shipper on the bill of lading, not who arranged or paid for the carrier.

Q: What happens if the purchaser, rather than the seller, is listed as the consignor or shipper on the bill of lading?
A: The Department states plainly that if the purchaser is shown as either the consignor or the shipper, the interstate commerce exemption will not apply. 86 Ill. Adm. Code 130.605(d).

Q: Does the same interstate commerce exemption cover sales shipped out of the country, not just out of state?
A: Yes. 86 Ill. Adm. Code 130.605(g) extends the exemption to sales where the seller delivers in Illinois to a freight forwarder who arranges for the property to be delivered outside the United States, never to return, subject to the same 130.605(f) documentation requirements.

Q: What documentation must a seller keep to prove interstate or foreign delivery?
A: Depending on the mode of delivery: a waybill or bill of lading requiring delivery outside the state (common carrier); a U.S. Postal Service receipt showing the addressee, out-of-state destination, and mailing date (mail); or a trip sheet signed by the delivery person, or an affidavit from the purchaser or their representative describing the out-of-state delivery, along with supporting data under 86 Ill. Adm. Code 130.810 and 35 ILCS 120/7 (seller's own trucks). 86 Ill. Adm. Code 130.605(f).

Q: What does a seller need from a purchaser to document a sale for resale?
A: A valid Certificate of Resale (e.g., Form CRT-61) under 86 Ill. Adm. Code 130.1405, containing the seller's and purchaser's names and addresses, a description of the resold property, the purchaser's (or authorized agent's) signature and date, and either a registration/resale number or a statement that the purchaser is an out-of-state purchaser reselling only outside Illinois.

Q: Did the Department decide whether the manufacturing machinery and equipment exemption applies to COMPANY's purchases?
A: No. The Department said the letter did not contain sufficient information to determine that, and directed COMPANY to review 86 Ill. Adm. Code 130.330 itself.

Q: Is mere physical possession of goods in Illinois enough to trigger Use Tax, even if the purchaser leaves the state right away?
A: Yes. Per 86 Ill. Adm. Code 130.605(a)(2), a sale is taxable even if the purchaser takes physical possession in Illinois and immediately transports the property out of state for use elsewhere -- Illinois has no exemption just because the purchaser is a traveler taking goods with them.

Citations and references

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposed on retail sellers)
• 86 Ill. Adm. Code 150.101 (Use Tax imposed on the privilege of using property in Illinois)
• 86 Ill. Adm. Code 130.605(a) (situs of taxable sale; place of contract negotiation, title transfer, and purchaser residence immaterial)
• 86 Ill. Adm. Code 130.605(a)(2) (sale taxable even if purchaser immediately removes property from Illinois after taking possession here)
• 86 Ill. Adm. Code 130.605(a)(3) (place of contract execution and purchaser residence immaterial)
• 86 Ill. Adm. Code 130.605(d) (interstate commerce exemption; seller must be shown as consignor/shipper on bill of lading)
• 86 Ill. Adm. Code 130.605(f) (documentation required to support interstate/foreign delivery exemption)
• 86 Ill. Adm. Code 130.605(g) (foreign commerce exemption for delivery to a freight forwarder for shipment outside the U.S.)
• 86 Ill. Adm. Code 130.330 (manufacturing machinery and equipment exemption)
• 86 Ill. Adm. Code 130.1405 (Certificate of Resale requirements)
• 86 Ill. Adm. Code 130.1405(b) (required contents of a Certificate of Resale)
• 86 Ill. Adm. Code 130.1405(d) (presumption against resale absent a Certificate of Resale; rebuttable)
• 86 Ill. Adm. Code 130.810 (supporting documentation for deductions taken on tax returns)
• 35 ILCS 120/7 (Retailers' Occupation Tax Act recordkeeping requirement)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2023.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2023/ST-23-0013-GIL.pdf

Original ruling text

ST-23-0013-GIL 05/10/2023 INTERSTATE COMMERCE / SALE FOR RESALE
This letter discusses sales in interstate commerce that originate in Illinois to
locations outside Illinois never to return. Appropriate documentation must be
obtained in support of sales in interstate commerce and for resale. See 86 Ill.
Adm. Code 130.605 and 130.1405. (This is a GIL).
May 10, 2023

COMPANY
ADDRESS
Dear NAME:
This letter is in response to your letter dated April 18, 2023, 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 would like to confirm if the interstate or foreign commerce exemptions as
well as if the resale or manufacturing exemptions may apply in specific
situations below when the purchaser is from out-of-state or out-of-country
(neither registered in IL nor required to be). Please note, that in each
situation, the Title is transferred at the dock of the seller and a [sic]
when common carrier or freight forwarder is providing the
transportation, the purchaser is hiring them/directing the seller to
transfer the materials to them.
Scenario 1 –
Out-of-state purchaser requests to purchase materials via phone or
internet from an in-state seller. Purchaser, as part of contract with seller,
directs seller to “deliver” the materials at the seller’s dock/warehouse to
the common carrier/shipping company.
The purchaser has

COMPANY/NAME
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May 10, 2023
arranged/engaged the common carrier/shipping company to pick up the
materials and ship them directly out of state. The title to the materials
transfer [sic] to the purchaser once the materials are picked-up by the
common carrier/contract carrier/private carrier or if they pick up via their
own truck.
1.

2.

3.

Is this sale deemed to be an in-state sale sourced/taxed in IL
or an exempt inter-state transaction when the shipper is a
common carrier?
a.
If an exempt inter-state transaction, what
documentation must the seller secure?
Does the answer above change if the shipper is instead a
contract carrier (transportation services negotiated under
contract with unrelated 3rd party)?
If taxable, may the purchaser claim a resale exemption when
a 3rd party carrier is used?
a.
May purchaser claim a resale exemption when
picking up with their own truck?’
b.
May purchaser claim a manufacturing exemption if
when [sic] 3rd party carrier is used?
c.
May purchaser claim a manufacturing exemption
when picking up with their own truck?
1.
If able to claim the resale exemption, use CRT61 (or letter with all required information) noting
authorized to do business out-of-state and not
selling to IL customers, correct?
2.
If able to claim the manufacturing exemption,
use ST-587 (or letter with all required
information), correct?

Scenario 2 –
Same facts as above, however, the out-of-country/foreign purchaser is not
registered in any US state, does not have a US FEIN, but does have a
foreign tax ID (VAT or other). Again the foreign purchaser will place the
order from outside IL, will engage the 3rd party unrelated carrier/forwarding
agent/freight forwarder and direct the seller to transfer the materials at the
Sellers [sic] dock to the forwarder for shipment directly out of the country.
4.

Is this sale deemed to be an in-state sale sourced/taxed in IL
or a foreign commerce transaction when the shipper is a
common carrier/contract carrier/forwarding agent/freight
forwarder?
a.
If an exempt foreign transaction, what documentation
must the seller secure?

COMPANY/NAME
Page 3
May 10, 2023
5.

If taxable, may the foreign purchaser claim a resale
exemption when a 3rd party carrier is used?
a.
May purchaser claim a resale exemption when
picking up with their own truck?’
b.
May purchaser claim a manufacturing exemption if
when 3rd party carrier is used?
c.
May purchaser claim a manufacturing exemption
when picking up with their own truck?
3.
If able to claim the resale exemption, use CRT61 (or letter with all required information) noting
authorized to do business out-of-country and
not selling to IL customers?
4.
If able to claim the manufacturing exemption,
use ST-587 (or letter with all required
information), correct?

If more convenient for you to give me a call, please feel free to do so.
Thank you for your time,
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.
Where tangible personal property is located in Illinois or subsequently produced
in Illinois at the time of its sale, and then delivered to the purchaser in Illinois, the seller
is taxable if the sale is at retail. 86 Ill. Adm. Code 130.605(a). 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. Further, the place at which the
purchaser resides is also immaterial. 86 Ill. Adm. Code 130.605(a)(3).
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 reduce the amount of
Use Tax they must remit by the amount of Retailers' Occupation Tax liability which they
are required to and do pay to the Department with respect to the same sale. See 86 Ill.
Adm. Code 150.130. If the retailer does not collect the Use Tax from the purchaser for
remittance to the Department, the purchaser is responsible for remitting the Use Tax
directly to the Department. See 86 Ill. Adm. Code 150.130.

COMPANY/NAME
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May 10, 2023
Mere possession in Illinois is considered a use. Consequently, if the purchase
occurs in Illinois, the purchaser must pay the Use Tax to the retailer. Please note that a
sale is taxable even though a purchaser that receives physical possession of the
property in this State immediately transports the property out of this State for use
outside the State. See 86 Ill. Adm. Code 130.605(a)(2). The State of Illinois has no
specific exemption for purchases by foreign or domestic travelers if the property is
delivered and used in Illinois. Section 130.605 identifies several exceptions to this rule.
Section 130.605(d) states that the gross receipts from such sales are not subject
to tax when a sale is conducted in which the seller is obligated, under the terms of an
agreement with the purchaser, to make delivery of the property from a point in this State
to a point outside this State, not to be returned to this State, provided that such delivery
is actually made. Such sales are sales in interstate commerce and are exempt from
Illinois and local Retailers' Occupation Tax. Even if the purchaser arranges for the
common carrier or pays the carrier who is to make the delivery, the sale will still be
exempt. 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).
Section 130.605(f) provides that the seller will be required to retain in their
records documentation to support any deductions taken on their tax returns. Such
documentation must demonstrate there was an agreement between the seller and the
purchaser for the seller to deliver the tangible personal property from inside the State to
a point outside the State and that there was a bona fide delivery outside the State to the
Department’s satisfaction. Depending on the mode of delivery, the most acceptable
proofs include:
1)

If shipped by common carrier, a waybill or bill of lading requiring
delivery outside the State;
2)
if sent by mail, an authorized receipt from the U.S. Post Office for
articles sent by registered mail, parcel post, ordinary mail or
otherwise, showing the name of the addressee, the point outside
Illinois to which the property is mailed and the date of the mailing; if
the receipt does not comply with these requirements, other
supporting evidence will be required;
3)
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 [the purchaser’s] 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
Section 130.810 and 35 ILCS 120/7.
86 Ill. Adm. Code 130.605(f).

COMPANY/NAME
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May 10, 2023
Your letter has also raised the question about a direct sale to a customer that will
be made into international commerce. If applicable to your situation, please review 86
Ill. Adm. Code 130.605 for more information regarding these types of transactions.
Section 130.605(d) states that the gross receipts from such sales are not subject to tax
when a sale is conducted in which the seller is obligated, under the terms of an
agreement with the purchaser, to make delivery of the property from a point in this State
to a point outside this State, not to be returned to this State, provided that such delivery
is actually made. Such sales are sales in interstate commerce and are exempt from
Illinois and local Retailers' Occupation Tax. The exemption also would apply when a
seller makes delivery in Illinois to a freight forwarder who handles the arrangements for
the property to be delivered outside the United States, not to be returned to the United
States. 86 Ill. Adm. Code 130.605(g). Section 130.605(f) identifies the type of
documents a seller must retain in his or her records to support such an exemption.
Your letter does not contain sufficient information to determine whether the
manufacturing exemption would apply to these purchases. However, to determine
whether the company’s product qualifies for the manufacturing machinery and
equipment exemption, review the Department’s regulations regarding Manufacturing
Machinery and Equipment at 86 Ill. Adm. Code 130.330.
Your letter also makes inquiry regarding the resale exemption. To document that
a sale to a purchaser is a sale for resale, a company is obligated by Illinois to obtain a
valid Certificate of Resale from a purchaser. See 86 Ill. Adm. Code 130.1405. A
Certificate of Resale is a statement signed by the purchaser that the property purchased
by him is purchased for purposes of resale. In addition to the statement that the
property is being purchased for resale, a Certificate of Resale must contain:
1)
2)
3)
4)

The seller's name and address;
the purchaser's name and address;
a description of the items being purchased for resale;
purchaser's signature, or the signature of an authorized employee
or agent of the purchaser, and date of signing; and
5)
Registration Number, Resale Number, . . . or a statement that the
purchaser is an out-of-State purchaser who will sell only to
purchasers located outside the State of Illinois.
86 Ill. Adm. Code 130.1405(b).
If purchasers fail to provide Certificates of Resale, the sales are presumed to not be for
resale and sellers would incur Retailers' Occupation Tax and would be required to
charge the corresponding Use Tax to the purchasers. See Section 130.1405(d). It is
possible to rebut this presumption with other evidence as set out in Section
130.1405(d).

COMPANY/NAME
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May 10, 2023
Any of these exemptions may be used when appropriate, and a seller must
document each and obtain necessary supporting documentation as discussed above,
and in the Department’s applicable regulations. See 86 Ill. Adm. Code 130.605 (d), (f),
130.330, and 130.1405.
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,

Kimberly A. Rossini
Associate Counsel
KAR:dlb