For an out-of-state retailer that sells to tax preparers (including through a marketplace facilitator), when did Illinois's economic nexus/remote-seller rules take effect, and are products like presentation folders, envelopes, tax forms, and checks taxable?

Plain-English summary

An out-of-state retailer (referred to here as COMPANY1) that sells products primarily to tax preparers -- including attorneys, CPAs, and enrolled agents -- and that also sells through a marketplace facilitator, wrote to the Illinois Department of Revenue asking for a Private Letter Ruling. COMPANY1 raised two distinct issues. First, it asked the Department to confirm the effective date of Illinois's "economic nexus" enforcement for out-of-state retailers, referencing the Leveling the Playing Field for Illinois Retail Act and the U.S. Supreme Court's Wayfair decision, and specifically asked the Department to confirm a January 1, 2021 compliance date shown on the Department's own website and flowchart. Second, COMPANY1 asked the Department to determine whether four specific "core products" it sells are subject to Illinois Sales Tax: (1) presentation tax folders (decorative/custom-cut folders used to hand clients a printed copy of their tax return, sometimes personalized with the preparer's name, address, or professional logo); (2) presentation envelopes (including state- and software-specific envelopes used to mail returns or estimated-payment vouchers, also sometimes personalized); (3) tax reporting forms such as 1099s and W-2s sold to tax preparers; and (4) blank check stock and custom-printed checks sold to tax preparers for their own business accounts, sometimes personalized with the preparer's logo, address, or banking information. COMPANY1 argued that several of these products should be non-taxable under Illinois's graphic-arts/printing and personalization rules (86 Ill. Adm. Code 130.2120, 130.2000, and 130.1995), analogized its situation to a large competitor (COMPANY3) that it understood treats similar products as non-taxable, and noted it voluntarily collects Illinois tax on its remote sales even though it does not have physical nexus in the state.

Because COMPANY1's request asked the Department to apply the law to its own specific products and facts, it was in substance a request for a Private Letter Ruling. The Department nonetheless responded with a GIL -- a lower-tier response that only directs a taxpayer to the relevant statutes and regulations rather than resolving the taxpayer's specific fact pattern. On the nexus-date question, the Department's response lays out the framework precisely: prior to October 1, 2018, out-of-state retailers needed a physical presence in Illinois before they could be required to collect Illinois Use Tax (35 ILCS 105/2). After the U.S. Supreme Court's June 21, 2018 decision in South Dakota v. Wayfair, Inc., Illinois Public Act 100-0587 enacted economic nexus standards, effective October 1, 2018, requiring an out-of-state retailer to register and collect Use Tax once it has $100,000 or more in cumulative gross receipts from Illinois sales, or 200 or more separate Illinois transactions (86 Ill. Adm. Code 150.803). Separately, Public Acts 101-0031 and 101-0604 (the "Leveling the Playing Field for Illinois Retail Act") created a different, later set of rules: beginning January 1, 2021, a remote retailer that meets the 86 Ill. Adm. Code 131.115(a) thresholds is treated as engaged in the business of selling at retail in Illinois for Retailers' Occupation Tax purposes, and must collect state and local Retailers' Occupation Tax (not just Use Tax) using "destination sourcing" -- i.e., at the rate in effect where the property is shipped, delivered, or picked up by the purchaser (86 Ill. Adm. Code 131.110). Marketplace facilitators became separately responsible, also beginning January 1, 2021, for remitting state and local Retailers' Occupation Tax on both their own sales and sales they facilitate for marketplace sellers, generally using destination sourcing (with origin sourcing available in some circumstances for a marketplace facilitator's own inventory-based sales). So the January 1, 2021 date COMPANY1 asked about is confirmed, but it is correctly understood as the effective date of the Leveling the Playing Field Retailers' Occupation Tax/destination-sourcing regime for remote retailers and marketplace facilitators -- a separate and later milestone than the October 1, 2018 Wayfair-based economic nexus standard for Use Tax collection.

On the taxability of the four specific products, the Department's response does not mention presentation folders, presentation envelopes, 1099/W-2 forms, or checks by name at all, and never states whether any of them is taxable or exempt. Instead, it walks through the general legal framework a taxpayer would need to apply: the Retailers' Occupation Tax Act taxes persons in the business of selling tangible personal property for use or consumption (35 ILCS 120/2), while the Use Tax Act taxes the privilege of using tangible personal property purchased at retail (35 ILCS 105/3); the two together make up what is commonly called Illinois "sales tax." For graphic arts and printing specifically, the Department restates the general rule (86 Ill. Adm. Code 130.2000): a printer who produces custom material to a customer's specifications and is primarily engaged in a service occupation is not selling tangible personal property and does not owe Retailers' Occupation Tax on the printing -- unless the item produced serves substantially the same function as a stock or standard item that is otherwise sold at retail (in which case Retailers' Occupation Tax liability can apply), with legal forms and stock greeting cards given as examples of items that CAN trigger the tax. The Department also notes that a serviceman who loses control of printed material once it is placed with a common carrier outside Illinois for delivery into Illinois generally does not incur Use Tax or Service Use Tax collection obligations on that shipment. Because businesses like COMPANY1 that transfer tangible personal property as part of a service can be taxed instead under the Service Occupation Tax Act (86 Ill. Adm. Code 140.101) and the related Service Use Tax Act (86 Ill. Adm. Code 160.101), the Department also explains, in detail, the four ways a "serviceman" may calculate tax liability on tangible personal property transferred incident to a sale of service: (1) tax on a separately stated selling price; (2) tax on 50% of the entire bill if the price is not separately stated; (3) for de minimis servicemen who are registered, Service Occupation Tax on cost price (a serviceman qualifies as de minimis if the annual cost price of transferred property is under 35% of gross receipts from services, or 75% for pharmacists and persons engaged in graphic arts production, per 86 Ill. Adm. Code 140.101(f)); or (4) for de minimis servicemen not otherwise required to register, Use Tax paid to their own suppliers on cost price. The letter closes by explaining that if Illinois Service Occupation Tax on a transaction is remitted by a serviceman located in a home-rule municipality, that serviceman must also remit any applicable local service occupation tax on the same transaction (86 Ill. Adm. Code 280.115).

What this means for you

Out-of-state and remote retailers

This GIL is a clean, citable confirmation of two different Illinois nexus dates that are easy to conflate: October 1, 2018 is when Illinois's Wayfair-based economic nexus standard for Use Tax collection took effect ($100,000 in sales or 200 transactions, 35 ILCS 105/2; 86 Ill. Adm. Code 150.803), and January 1, 2021 is the later, separate effective date of the Leveling the Playing Field Act's Retailers' Occupation Tax and destination-sourcing regime for remote retailers and marketplace facilitators (86 Ill. Adm. Code 131.110, 131.115(a)). If your business crossed the $100,000/200-transaction threshold before 2021, you may have owed Illinois Use Tax collection obligations starting in 2018, even though the sourcing and Retailers' Occupation Tax mechanics changed later.

Sellers of custom-printed or personalized products (folders, envelopes, forms, checks, and similar items)

The Department did not tell this taxpayer whether its specific presentation folders, envelopes, tax forms, or checks are taxable -- and this GIL should not be read as establishing that they are, or are not. What it does confirm is the framework you'd need to work through: whether you are "selling tangible personal property" (potentially subject to Retailers' Occupation/Use Tax) versus primarily performing a service that only incidentally transfers property (potentially subject instead to Service Occupation/Service Use Tax), and, within the graphic-arts area specifically, whether your product serves substantially the same function as a stock/standard item sold at retail (more likely taxable) versus being produced to unique customer specifications as part of a service (more likely non-taxable). Personalizing a customer's own property, or producing one-of-a-kind items to that customer's specifications, tends to point toward the service side of that line -- but the Department did not confirm this for COMPANY1's actual products, and a competitor's tax treatment of similar-sounding products is not a substitute for your own analysis or your own PLR.

Marketplace sellers and businesses using marketplace facilitators

If you sell through a marketplace facilitator, remember that since January 1, 2021 the facilitator itself is generally responsible for collecting and remitting state and local Retailers' Occupation Tax on the sales it facilitates on your behalf, using destination sourcing in most cases. That does not necessarily relieve you of your own registration or collection obligations on sales you make outside the marketplace.

Accountants and tax professionals

Note the citation trap in the source PDF: the truncated summary line at the very top of the extracted text cites "86 Ill. Admin. Code 130.605," but that section is never mentioned again anywhere in the Department's actual response -- the Department's substantive discussion instead cites 86 Ill. Adm. Code 130.101, 130.2000, 131 (and its subparts 131.107, 131.110, 131.115, and 131.155), 140.101, 150.101-150.803, 160.101/160.115, and 280.115. Also remember this is a GIL, not a PLR: it confirms general nexus/sourcing dates but expressly does not resolve whether any of the taxpayer's four specific products is taxable.

Common questions

Q: When did Illinois require out-of-state retailers to collect Illinois tax without a physical presence in the state?
A: Effective October 1, 2018, following the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc., Illinois Public Act 100-0587 required an out-of-state retailer to register and collect Illinois Use Tax once its cumulative Illinois sales reached $100,000 or its Illinois transactions reached 200 in a year (35 ILCS 105/2; 86 Ill. Adm. Code 150.803).

Q: Is the January 1, 2021 date the taxpayer asked about correct?
A: Yes, but it refers to a different, later change. Beginning January 1, 2021, the Leveling the Playing Field for Illinois Retail Act (Public Acts 101-0031 and 101-0604) required remote retailers meeting the 86 Ill. Adm. Code 131.115(a) thresholds, and marketplace facilitators, to collect state and local Retailers' Occupation Tax using destination sourcing (86 Ill. Adm. Code 131.110), on top of the Use Tax collection obligations that had already existed since 2018.

Q: Does this GIL say whether presentation folders, envelopes, 1099/W-2 forms, or checks sold to tax preparers are taxable in Illinois?
A: No. The Department describes the general rules that distinguish a taxable sale of tangible personal property from a non-taxable (or Service Occupation Tax-covered) service transaction, and the graphic-arts-specific rule turning on whether an item serves the same function as a stock/standard retail item versus being custom-produced to a customer's specifications -- but it never applies those rules to COMPANY1's four specific products or states an outcome for any of them.

Q: What's the difference between the Retailers' Occupation/Use Tax treatment and the Service Occupation/Service Use Tax treatment mentioned in this letter?
A: Retailers' Occupation Tax and Use Tax apply to sales of tangible personal property. Service Occupation Tax and Service Use Tax apply instead when a business (a "serviceman") is primarily providing a service and only incidentally transfers tangible personal property as part of that service; servicemen calculate their tax under one of four methods described in the letter (separately stated selling price; 50% of the entire bill; de minimis registered cost-price method; or de minimis unregistered Use-Tax-to-supplier method), per 86 Ill. Adm. Code 140.101 and 140.108-140.109.

Q: Why did the Department issue a GIL instead of the Private Letter Ruling the company asked for?
A: The company's letter asked the Department to determine the taxability of its own specific products -- a fact-specific question that would normally call for a binding PLR under 2 Ill. Adm. Code 1200.110. The Department instead issued a GIL, which only directs the taxpayer to the applicable statutes and regulations (2 Ill. Adm. Code 1200.120) and is not binding on the Department.

Q: Can this taxpayer, or a similarly situated business, rely on this GIL for legal protection on its own products?
A: No. A GIL is not a statement of Department policy and is not binding on the Department, even as to the company that requested it. A business wanting a binding answer on whether its own specific products are taxable needs to request its own PLR.

Citations and references

Statutes:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act imposition on sellers of tangible personal property)
• 35 ILCS 105/2 (Use Tax Act definition of "retailer maintaining a place of business in this State"; economic nexus standards)
• 35 ILCS 105/3 (Use Tax imposition on the privilege of using tangible personal property purchased at retail)
• 35 ILCS 105/2a (referenced regarding servicemen's Retailers' Occupation Tax registration status)

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax Regulations)
• 86 Ill. Adm. Code 130.2000 (persons engaged in graphic arts or related occupations and their suppliers)
• 86 Ill. Adm. Code 130.2120 (suppliers of persons engaged in service occupations and professions) -- cited by the taxpayer
• 86 Ill. Adm. Code 130.1995 (personalizing tangible personal property) -- cited by the taxpayer
• 86 Ill. Adm. Code 131, 131.107, 131.110, 131.115(a), 131.155 (Leveling the Playing Field regulations for remote retailers and marketplace facilitators: types of retailers, destination sourcing, nexus thresholds, sourcing rules)
• 86 Ill. Adm. Code 140.101, 140.101(f), 140.108, 140.109 (Service Occupation Tax Regulations, including the de minimis serviceman threshold)
• 86 Ill. Adm. Code 150.101, 150.130, 150.801, 150.802, 150.803 (Use Tax Regulations, including nexus standards)
• 86 Ill. Adm. Code 160.101, 160.115 (Service Use Tax Regulations)
• 86 Ill. Adm. Code 280.115 (local service occupation tax jurisdictional rule)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Legislation and case law:

• Illinois P.A. 100-0587 (economic nexus standards effective October 1, 2018)
• Illinois P.A. 101-0031 and P.A. 101-0604 (Leveling the Playing Field for Illinois Retail Act, effective January 1, 2021)
• South Dakota v. Wayfair, Inc., No. 17-494 (U.S. June 21, 2018)

Note: the source PDF's truncated top-of-letter summary cites "86 Ill. Admin. Code 130.605," but that section does not appear anywhere in the Department's actual response -- likely an abstract/indexing artifact rather than a citation the Department's substantive answer relies on.

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-23-0016-GIL.pdf

Original ruling text

ST-23-0016-GIL 05/30/2023 INTERSTATE COMMERCE
This letter discusses the component of interstate commerce involving
shipment/delivery on sales by remote retailers to purchasers in Illinois. (86 Ill.
Admin. Code 130.605; 86 Ill. Adm. Code 131) (This is a GIL)
May 30, 2023

NAME
COMPANY1
ADDRESS
Dear NAME:
This letter is in response to your letter dated April 24, 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:
We are writing to request a private letter ruling regarding the application of
Illinois Sales Tax to sales to professional who prepares tax returns
including those whose have designations of attorneys, Certified Public
Accountants and Enrolled Agents as we are an Out of State Retailers who
also sell inside of a Marketplace Facilitator.
We have a variety of products and services to our customers but would
like some clarification.
We believe that our understanding of the applicable tax laws and
regulations are accurate and with discussion from a department staff
member (link follows) conflicts with other information we have received
both online and from others with the Department.
The link provided by the

COMPANY1/NAME
Page 2
May 30, 2023
https://www.law.cornell.edu/regulations/illinois/lll-Admin-Code-tit-86-SS130.2120.
Ill. Admin. Code tit. 86, § 130.2120- Suppliers of Persons Engaged in
Service Occupations and Professions
When Liable For Retailers' Occupation Tax
Suppliers of persons engaged in service occupations and professions
incur Retailers' Occupation Tax liability when, apart from engaging in a
service occupation or profession themselves, they sell tangible personal
property, such as tools, office equipment, fixtures, supplies, soap and
other tangible personal property to such persons, who retain and use or
consume such tangible personal property, or who give such property away
apart from their sale of other tangible personal property or service.
When Not Liable For Retailers' Occupation Tax
1)
Persons who sell tangible personal property to purchasers who
resell the property to others, either as an incident to engaging in a service
occupation or profession, or apart from engaging in any such activity, are
selling tangible personal property to purchasers for purposes of resale and
do not incur Retailers' Occupation Tax liability when making such sales.
2)
However, suppliers are required to collect the Service Occupation
Tax from servicemen when selling them tangible personal property which
they will retransfer as an incident to rendering services for users (see
Subpart A of the Service Occupation Tax Regulations).
Notes
Ill. Admin. Code tit. 86, § 130.2120 Amended and effective April 19, 1968
However, we seek clarification and confirmation from the Department of
Revenue to ensure that we are in compliance with all relevant tax laws
and regulations.
The first is agreement on Economic Nexus enforcement. We believe the
Leveling the Playing Field for Illinois Retail Act created an effective date
for out of state retailers as 1/1/2021 as the Wayfair act compliance laws
were changed and clarified with the aforementioned Act that passed in
2020.
Please inform us of the nature of compliance date as January 1, 2021 per
the date on your website including the flowchart showing an effective date
of January, 1, 2021.
The second is a request for determination of four core products.

COMPANY1/NAME
Page 3
May 30, 2023
In support of our request, we have provided the following information:
1.
2.
law;
3.
4.

A detailed description of 4 core products
Relevant legal authorities, including statutes, regulations, and case
Any relevant facts or circumstances that may impact the application
of sales tax; and
Any other information that may be relevant to the Department's
analysis.

Based on the information provided, we respectfully request that the
Department of Revenue issue a private letter ruling addressing the
following issues:
1.
2.
3.
4.

Whether the transaction or activity described is subject to Illinois
Sales Tax;
The applicable rate of tax if jurisdictional, if any;
Whether any exemptions, exclusions, or other special provisions
apply; and
Any other issues that the Department deems relevant.

We understand that the information provided will be kept confidential and
that the ruling will apply only to the specific transaction or activity
described. We also understand that the ruling may be relied upon by us
and by the Department of Revenue in the administration and enforcement
of Illinois Sales Tax. Thank you for your attention to this matter. Please do
not hesitate to contact us if you require any additional information or if you
have any questions.

Example 1. Presentation Tax Folders

Based upon the Tax Preparer’s Commercial Software we sell - Tax Return
Folders and Tax Presentation Folders which provide an image of quality
and distinction creating a memorable, tactile holder for the tax return. This
reinforces the value of the service, and leaves them with shear volume
and impression of the work.
[IMAGE OMITTED]

This image represents a cut out folder where the Tax Preparers' Name
and the Tax Clients name and address show through from the software
page - we are using a COMPANY2 Software Folder as an example above.

COMPANY1/NAME
Page 4
May 30, 2023
COMPANY2 Software is a tax preparation software used by over 70,000
tax preparers and had custom cuts.
As the Nation has transitioned every year to digital filing, almost all
preparers have a client print setting in their software. The best practice in
the Tax industry is to hand a Complete Copy of a Tax return to the client
as proof of filing completion. Although Digital is wonderful advancement in
tax compliance, alas, most individual taxpayers do not have the
knowledge to secure and protect this valuable data digitally, so we support
the IRS recommendation and requirements to keep a secure copy of the
return. This folder is an ancillary product for the professional service and
costs are minimal per folder.
Also note, there is an option as you see from this above there is a CPA
logo, so part of our services. Our clients can choose to customize this
printed product with their name, address, and logo of any group they are
affiliated with including Enrolled Agents and Certified Public Accountants.
This below is an example of a custom folder which we also believe is nontaxable for another reason custom printing and had seen other private
letter rulings issued for client’s customization which is standard operating
practice for larger firms.
[IMAGE OMITTED]
We believe the above falls under II. Admin. Code tit. 86, § 130.2000 Persons Engaged in the Printing, Graphic Arts or Related Occupations,
and Their Suppliers. We provide custom printing for tax preparers.
Persons Engaged in the Graphic Arts - When Not Liable For Tax
1) A photostater who is employed to reproduce material for his customer
by the photostating process, or a printer who is employed to print material
for his customer in accordance with copy supplied to the printer by the
customer or otherwise in accordance with the customer's specifications
and special order, or a person who otherwise engages primarily in the
transaction in furnishing graphic arts' services is not engaged in such
transaction in the business of selling tangible personal property within the
meaning of the Act, if the item so produced does not serve substantially
the same function as stock or standard items of tangible personal property
that are sold at retail, but is engaged in such transaction primarily in a
service occupation. For example, a printer that is hired by a customer to
print personalized wedding invitations or greeting cards is engaged in the
transaction as a serviceman.
In addition, we feel this rule also represents our products.

COMPANY1/NAME
Page 5
May 30, 2023
II. Admin. Code tit. 86, § 130.1995 - Personalizing Tangible Personal
Property
b) When The Tax Does Not Apply
1) Sellers of personalized business calling cards, greeting cards,
letterheads, envelopes, labels, name plates, badges, medallions and the
like do not incur Retailers' Occupation Tax liability on their receipts from
such sales because they are primarily engaged in a service occupation in
producing or procuring such items, which have no commercial value for
their customers.
2) Persons who personalize tangible personal property which already
belongs to their customers also are engaged primarily in a service
occupation and do not incur Retailers' Occupation Tax liability upon their
receipts from engaging in such service occupation.
3) For information concerning the application of the Service Occupation
Tax to the purchase and retransfer of tangible personal property by
servicemen as an incident to sales of service, see the Service Occupation
Tax Regulations.
This entire class is called Presentation Folders and we request a ruling if
these are taxable or non-taxable based on the information presented
under section Admin. Code tit. 86,§ 130.2120 or further codes.

Example 2. Presentation Envelopes
As in example 1, envelope fall in the same category. Based upon the Tax
Preparer's Commercial Software we sell - Tax Return Envelopes and Tax
Presentation Envelopes which provide an image of quality and distinction
as a tactile holder for the tax return to secure mailing and storing the
return. This reinforces the value of the service and leaves them with shear
volume and impression of the work.
[IMAGE OMITTED]
This envelope is the COMPANY2 Tax Envelope that could be mailed to
the client, the taxing authority including the Illinois Department of
Revenue. The tax software selects the recipient and pre-prints a mailing
sheet. As each software is different so there are many versions of this
type of envelope
Other envelopes in this category include an E-file or Mail Completed
Presentation Envelope where a customer can use no matter what
software. This provides on the cover everything for the client and preparer

COMPANY1/NAME
Page 6
May 30, 2023
to track and complete the return along with instructions, amounts due and
notes for next year. The Tax Return can be sealed inside for safe storage
and everything a customer and tax preparer needs to know is put on the
cover including an invoice for service performed.
[IMAGE OMITTED]
The last group of envelopes we provide are grouped in state specific or
software specific.
State specific Individual and Estimate Envelopes like Illinois below where
clients are given this to file their return to the State of Illinois.

[IMAGE OMITTED]
As for Software specific, COMPANY2 Software as mentioned above prints
estimated 1040-es forms an state estimate payments forms. These
envelopes match these payments forms with custom window envelopes
which match federal printing requirements. This saves the practitioner time
with making labels depending on their location or form. Although they look
generic the COMPANY2 Software are custom made to, comply with all the
Federal Mail Codes, Unique State Addresses and forgive alignment issues
by thousands of preparers printer settings.

[IMAGE OMITTED]

We believe this is an ancillary service. It is best practice to give them a
physical reminder with envelopes to make estimated payments each
quarter to avoid penalties and interest.
We also personalize envelope just like folders with logos, names and
addresses but feel your determination on personalized Folders would fall
into personalized envelopes. So the rules that apply to Folders mentioned
above also can apply to envelopes.

Example 3. Tax Forms
We sell several government tax reporting forms primarily 1099 and W-2
and those related forms. These forms are sold to Tax Preparers who use
them in their service for clients. We believe these are also ancillary
services for professionals. Here is one example of the many types of

COMPANY1/NAME
Page 7
May 30, 2023
products we sell and could fill many pages on the variations of 2 or 4 per
page forms and all their variations.
[IMAGE OMITTED]
We will further add our research on of the largest sellers of ancillary
products in this category has deemed tax products and their kits as nontaxable in Illinois under this rule.

As an example - we entered an order and theoretically shipped 100 of the
above forms to the Department Illinois Revenue physical address under
our and found this is not a Taxable Product.
Although COMPANY3 is an out of state corporation, they are an In State
Retailer with a physical location in CITY
[IMAGE OMITTED]
COMPANY3 has an entire tax department with expert knowledge
however, we could not get a resource to explain it to us other than it is
non-taxable per their experts. They did refer me to their sales tax policy
confirming they collect the right amount of sales tax.
ADDRESS2
Does COMPANY3 charge sales tax?
Yes, COMPANY3 collects sales tax based on the laws of the state in
which the order recipient resides.

Example 4. Checks and Deposit Slips
We sell primarily to our tax preparers blank check stock used in their
practices in addition we allow our customers to build custom printed
checks based upon their bank accounts.
Are tax preparers purchases of blank check stock taxable and part of
ancillary service of their profession?
If they customize their check putting a logo, address, and banking
information the check would this make it non-taxable?
As further reference we used COMPANY3 as our example and with a
checkout of a customized checks with an address located at the

COMPANY1/NAME
Page 8
May 30, 2023
Department of Revenue in Illinois. The COMPANY3 had calculated tax on
this not know my use or profession.

[IMAGE OMITTED]

There answer was the same, we have experts who work with the Illinois
Department of Revenue.
We utilize COMPANY3 products and feel it is very important to align our
sales tax collection even though we do not have physical nexus in your
state which is the purpose for the Level the Playing Field Illinois Retail Act.
DEPARTMENT’S RESPONSE:
Retailers’ Occupation Tax Act
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 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 sales. See 86 Ill.
Adm. Code 150.130.
Nexus
Prior to October 1, 2018, out-of-State retailers had to have a physical presence in
Illinois before they could be required to collect Use Tax. The types of activities
constituting a physical presence are found in Section 2 of the Use Tax Act's definition of
a "retailer maintaining a place of business in this State". 35 ILCS 105/2. Any out-ofState retailer that has a physical presence in Illinois will continue to be required to act as
a Use Tax collector. Regulations describing these types of retailers are found at 86 Ill.
Adm. Code 150.801 and 150.802.
In South Dakota v. Wayfair, Inc., No. 17-494 (U.S. June 21, 2018), the U.S.
Supreme Court upheld a South Dakota statute that imposed tax collection obligations
on out-of-State retailers that met specific selling thresholds but had no physical
presence in the state. This decision abrogated the longstanding physical presence

COMPANY1/NAME
Page 9
May 30, 2023
requirement. Illinois P.A. 100-0587 enacted nexus standards, effective October 1,
2018, that are virtually identical to those upheld in Wayfair. 35 ILCS 105/2. See 86 Ill.
Adm. Code 150.803.
Beginning October 1, 2018, a retailer making sales of tangible personal property
to purchasers in Illinois from outside of Illinois must register with the Department and
collect and remit Use Tax if:
A)

The cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois are $100,000 or more; or

B)

The retailer enters into 200 or more separate transactions for the sale of
tangible personal property to purchasers in Illinois.

Leveling the Playing Field
Public Acts 101-0031 and 101-0604 implemented a series of structural changes
to the Illinois sales tax law that are intended to "level the playing field" between Illinoisbased retailers and remote retailers by imposing State and local retailers' occupation
taxes on Illinois retailers, remote retailers and marketplace facilitators alike. The
regulations at 86 Ill. Adm. Code 131 implement the new requirements for remote
retailers and marketplace facilitators.
On and after January 1, 2021, a remote retailer that meets either of the
thresholds in 86 Ill. Adm. Code 131.115(a) is considered a retailer engaged in the
occupation of selling at retail in Illinois for purposes of the Retailers’ Occupation Tax Act
and is liable for all applicable State and local retailers' occupation taxes administered by
the Department on all retail sales shipped or delivered to Illinois purchasers. Remote
retailers are deemed to be engaged in the business of selling at the Illinois location to
which the tangible personal property is shipped or delivered or at which possession is
taken by the purchaser. State and local retailers' occupation taxes are incurred at the
rate in effect at this location. 86 Ill. Adm. Code 131.110.
Beginning January 1, 2021, marketplace facilitators are required to remit State
and local retailers' occupation taxes on sales made over the marketplace on their own
sales and sales made on behalf of marketplace sellers. The legislation provides that
State and local retailers' occupation taxes on sales made by remote retailers and
marketplace facilitators on behalf of marketplace sellers are incurred based on the rate
in effect at the location to which the tangible personal property is shipped or delivered or
at which possession is taken by the purchaser ("destination sourcing"). State and local
retailers' occupation taxes for a marketplace facilitator's own marketplace sales are
incurred, depending on the nature of the transaction, either at the rate in effect at the
location of Illinois inventory from which a sale is fulfilled or the Illinois location where
selling activities otherwise occur ("origin sourcing"), or by using destination sourcing.

COMPANY1/NAME
Page 10
May 30, 2023
Section 131.107 describes the different types of retailers after January 1,2021. Section
131.155 explains the sourcing rules for different types of retailers.
Graphic Arts
Persons engaged in the graphic arts or related occupations may, under certain
circumstances, be considered to be engaged in the business of selling tangible personal
property to purchasers for use or consumption, in which event they incur Retailers'
Occupation Tax liability. This is the case, for example, when they sell to purchasers for
use or consumption tangible personal property which is standard enough to be stocked
for sale or offered for sale from catalogues or other sales literature, or which otherwise
is sold at retail apart from the seller's engaging in a service occupation. Illustrations
would include legal forms, stock or standard greeting cards, pictures or other items
which are stocked for sale or offered for sale to the public generally, or products of
photoprocessing. 86 Ill. Adm Code 130.2000.
A printer who is employed to print material for his customer in accordance with
copy supplied to the printer by the customer or otherwise in accordance with the
customer's specifications and special order, or a person who otherwise engages
primarily in the transaction in furnishing graphic arts' services is not engaged in such
transaction in the business of selling tangible personal property within the meaning of
the Act, if the item so produced does not serve substantially the same function as stock
or standard items of tangible personal property that are sold at retail, but is engaged in
such transaction primarily in a service occupation. For example, a printer that is hired
by a customer to print personalized wedding invitations or greeting cards is engaged in
the transaction as a serviceman. To the extent to which any such person engages in a
service occupation, he is not liable for Retailers' Occupation Tax on his receipts
therefrom, including receipts from both labor and tangible personal property.
The Department has recognized situations where printed materials are “used”
outside Illinois and then placed for mailing by mail or common carrier outside Illinois for
delivery into Illinois, and during which, the serviceman loses the ability to exercise
control over the printed materials (e.g., to recall the materials). Generally, in those
situations, a serviceman would not incur a Use Tax liability nor a Service Use Tax
collection obligation if the serviceman does not retain the ability to exercise control over
the shipment of the printed materials after entry into Illinois. The general information
letters referenced above also describe the general tax liabilities of printers in special
order printing situations. Such liabilities may accrue, if the serviceman were to have
any control over the printed materials in this State.
Service Occupation Tax
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 service. 86 Ill.

COMPANY1/NAME
Page 11
May 30, 2023
Adm. Code 140.101. The transfer of tangible personal property to service customers
may result in either Service Occupation Tax liability or Use Tax liability for servicemen,
depending upon which tax base they choose to calculate their liability.
Servicemen may calculate their tax base in one of four ways: (1) separately
stated selling price; (2) 50% of the entire bill; (3) Service Occupation Tax on cost price if
they are registered de minimis servicemen; or (4) Use Tax on cost price if the
servicemen are de minimis and are not otherwise required to be registered under
Section 2a of the Retailers’ Occupation Tax Act.
Using the first method, servicemen may separately state the selling price of each
item transferred as a result of sales of service. The tax is based on the separately
stated selling price of the tangible personal property transferred. If servicemen do not
wish to separately state the selling price of the tangible personal property transferred,
those servicemen must use the second method where they will use 50% of the entire
bill to their service customers as the tax base. Both of the above methods provide that
in no event may the tax base be less than the cost price of the tangible personal
property transferred. Under these methods, servicemen are required to provide their
suppliers with Certificates of Resale when purchasing the tangible personal property to
be transferred as a part of sales of service. They are required to collect the
corresponding Service Use Tax from their customers.
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 140.101(f). This class of registered de minimis servicemen is
authorized to pay Service Occupation Tax (which includes local taxes) 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.
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 of 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

COMPANY1/NAME
Page 12
May 30, 2023
remit tax, the servicemen must register, self-assess, and remit Use Tax to the
Department. The servicemen are considered to be 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.
Jurisdictional Issues – Service Occupation Taxes
If the Illinois Service Occupation Tax on a transaction is being remitted to the
Department by the serviceman, the serviceman shall also pay any local service
occupation tax to the Department on the same transaction if such serviceman engages
in the business of making sales of service within a jurisdiction that has adopted a local
service occupation tax. If a purchase order is accepted outside this State but the
tangible personal property which is sold incident to the sale of service is in the inventory
of a serviceman located within a home rule municipality at the time of its sale (or is
subsequently produced in the home rule municipality) then delivered in Illinois to the
service customer, the place where the property is located at the time of the sale (or
subsequent production in the municipality) will determine where the seller is engaged in
business for local service occupation tax purposes with respect to such sale. See, for
example, 86 Ill. Adm. Code 280.115.
Service Use Tax
The Service Use Tax is a privilege tax imposed on the privilege of using, in this
State, tangible personal property that is received anywhere as an incident to a purchase
of service from a serviceman. However, if the serviceman would not be taxable under
the Service Occupation Tax Act despite all elements of the sale of service occurring in
Illinois, then the tax imposed by the Service Use Tax Act does not apply to the use of
such property in this State. Any evidence that property was sold by any person for
delivery to a person residing in or engaged in business in this State shall be prima facie
evidence that such property was sold for use in this State. The rate of the Service Use
Tax is 6.25% of the serviceman's selling price of the tangible personal property
transferred by the serviceman as an incident to a sale of service. 86 Ill. Adm. Code
160.101. The Service Use Tax shall be based on the selling price of the tangible
personal property transferred incident to the sale of service if stated separately on the
invoice from the serviceman. If not stated separately, then the tax will be imposed on
50% of the entire billing from the serviceman. However, the Service Use Tax which is
collected by a de minimis serviceman who incurs Service Occupation Tax on his cost
price of tangible personal property transferred incident to service, as provided at 86 Ill.
Adm. Code 140.109, shall be based upon his cost price of tangible personal property
transferred incident to his or her sales of service. 86 Ill. Adm. Code 160.115.
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.

COMPANY1/NAME
Page 13
May 30, 2023
Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:db