What did the Illinois Department of Revenue say in its 2023 responses to a national tax-survey publisher's questionnaire about repair labor, federal excise taxes, corporate liquidations, NFTs, the simplified sellers use tax program, and a retail delivery fee?

Plain-English summary

This GIL is unusual: it is not a response to one taxpayer's specific situation, but the Department's reply to an outside publisher's annual multistate tax survey. Two companies (referred to as COMPANY1 and COMPANY2) jointly compile a yearly survey of state tax laws for a well-known state tax reference book (referred to as PRODUCT), and each year they send state revenue departments a questionnaire asking about that year's law changes. The Department noted it could not answer in the survey's own format, but chose to publish its substantive answers as a GIL anyway, covering several unrelated sales/use tax topics:

• Private letter rulings on nexus: Illinois does issue private rulings, but a physical-nexus determination is too fact-specific for a GIL or PLR -- the Department says the better approach is for a Department auditor to examine all the facts.
• Repair labor: Transfers of repair parts and materials by persons who repair tangible personal property belonging to others are generally taxable under the Service Occupation Tax Act (86 Ill. Adm. Code 140.101). Repairs to real property are different -- those repairers are treated as construction contractors who, as end users of the materials they permanently affix to realty, owe use tax themselves (86 Ill. Adm. Code 130.1940(c)) rather than charging sales tax to the property owner. Maintenance agreements are taxable if their charges are baked into the selling price of the tangible personal property (e.g., a manufacturer's warranty included at no extra cost); if so, no separate tax applies later when the repair or service is actually performed.
• Federal excise taxes in the tax base: Federal excise taxes imposed directly on retail consumers, or imposed on tangible personal property sold at retail, are NOT included in Illinois gross receipts subject to tax. But federal excise taxes imposed further up the chain -- on importers, wholesalers, manufacturers, or other producers -- ARE included, because they're treated as part of the seller's cost of doing business and thus part of the selling price (86 Ill. Adm. Code 130.445).
• Corporate liquidations under IRC § 336: Sales made as part of an IRC § 336 corporate liquidation are subject to retailers' occupation tax and use tax, as long as the liquidation happens through sales made for use or consumption of tangible personal property the business customarily sells (86 Ill. Adm. Code 130.105).
• Nonfungible tokens (NFTs): NFTs are digital assets and are currently NOT subject to Illinois retailers' occupation and use tax (86 Ill. Adm. Code 130.2105(a)(3)).
• Simplified sellers use tax program: Illinois does not offer a simplified sellers use tax program letting remote sellers collect one flat rate on all sales into the state. Instead, a remote retailer that meets either nexus threshold in 86 Ill. Adm. Code 131.115(a) is treated as an Illinois retailer, owes all applicable state and local retailers' occupation taxes on sales shipped or delivered into Illinois (86 Ill. Adm. Code 131.110(a)), and is taxed at the destination location's rate (86 Ill. Adm. Code 131.110(b)).
• Retail delivery fee: Illinois does not impose a retail delivery fee (some other states, like Colorado, do). However, outgoing transportation and delivery charges ARE part of the taxable gross receipts whenever there's an "inseparable link" between the sale of goods and the delivery of them -- meaning the charges aren't separately identified to the buyer, or (even if separately stated) the seller doesn't actually give the buyer the option to pick up the goods and avoid the charge. The Department cites the Illinois Supreme Court's decision in Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009), and its own regulation at 86 Ill. Adm. Code 130.415(b)(1)(B), for this test.

What this means for you

Businesses that repair tangible personal property or real property

If you repair someone else's tangible personal property (electronics, vehicles, equipment), the parts and materials you transfer as part of that repair are generally taxable under the Service Occupation Tax Act. If instead you repair real property (a building, fixtures permanently affixed to land), you're treated as a construction contractor and you -- not your customer -- owe use tax on the materials you permanently affix to the realty. Whether a maintenance agreement is taxable turns on whether its price is bundled into the selling price of the underlying product; a manufacturer's warranty included free with a new purchase is the Department's own example of a bundled, taxable arrangement.

Remote sellers and marketplace facilitators

Illinois has no simplified flat-rate use tax program for remote sellers. If you cross either nexus threshold in 86 Ill. Adm. Code 131.115(a), you must collect and remit the full state-and-local retailers' occupation tax stack that applies at your customer's delivery location -- not a single simplified statewide rate.

Sellers of NFTs or other digital assets

As of this 2023 letter, Illinois does not tax nonfungible tokens under the retailers' occupation and use tax. This is a snapshot in time; digital-asset tax treatment is an evolving area nationally, so confirm current guidance before relying on this for a specific transaction today.

Businesses charging separate delivery or transportation fees

Illinois does not have a standalone "retail delivery fee" the way some states do. But don't assume that means delivery charges are automatically tax-free -- if there's an "inseparable link" between the sale and the delivery (charges not separately stated, or no real pickup option offered to the customer), the delivery charge is still part of the taxable selling price.

Businesses undergoing an IRC § 336 liquidation

Sales of inventory-type tangible personal property made as part of a corporate liquidation are still subject to Illinois retailers' occupation tax and use tax if the liquidation proceeds through sales for use or consumption of goods the business customarily sold.

Accountants and tax professionals

This GIL is a useful one-stop snapshot of the Department's position on several discrete questions as of August 2023, but remember it originated as a reply to a publisher's survey, not a taxpayer's fact-specific request -- it carries the same non-binding GIL status as any other GIL, and its individual sub-answers may have been superseded by later law changes or later letter rulings.

Common questions

Q: Does Illinois tax repair labor?
A: Yes, for tangible personal property -- transfers of repair parts, materials, and related tangible personal property by persons repairing others' tangible personal property are generally subject to tax under the Service Occupation Tax Act (86 Ill. Adm. Code 140.101). Repairs to real property are handled differently: the repairer is treated as a construction contractor who owes use tax on materials permanently affixed to realty.

Q: Are federal excise taxes included in the price subject to Illinois sales/use tax?
A: It depends on who the federal tax is imposed on. Federal excise taxes imposed on retail consumers, or on property sold at retail, are excluded from the taxable gross receipts. Federal excise taxes imposed on importers, wholesalers, manufacturers, or other producers are included, because they become part of the seller's cost of doing business and thus part of the selling price (86 Ill. Adm. Code 130.445).

Q: Does Illinois impose sales/use tax on sales made during a corporate liquidation under IRC § 336?
A: Yes -- such sales are subject to retailers' occupation tax and use tax, provided the liquidation occurs through sales made for use or consumption and involving tangible personal property the business customarily sells (86 Ill. Adm. Code 130.105).

Q: Does Illinois tax nonfungible tokens (NFTs)?
A: No -- as of this August 2023 letter, NFTs are treated as digital assets not currently subject to Illinois retailers' occupation and use tax (86 Ill. Adm. Code 130.2105(a)(3)).

Q: Does Illinois have a simplified sellers use tax program for remote sellers, or a separate retail delivery fee?
A: No to both. Illinois does not offer a simplified flat-rate use tax program for remote sellers -- a remote retailer crossing the nexus thresholds in 86 Ill. Adm. Code 131.115(a) must collect the full state-and-local rate applicable at the delivery location. Illinois also does not impose a standalone retail delivery fee.

Q: Are delivery and transportation charges taxable in Illinois?
A: They can be. Outgoing transportation and delivery charges are part of the taxable gross receipts whenever there's an "inseparable link" between the sale and the delivery -- i.e., the charges aren't separately stated, or even if stated separately, the seller doesn't genuinely offer the customer the option to pick up the property and avoid the charge (citing Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009), and 86 Ill. Adm. Code 130.415(b)(1)(B)).

Citations and references

Regulations:

• 86 Ill. Adm. Code 140.101 (Service Occupation Tax on repair of tangible personal property)
• 86 Ill. Adm. Code 130.1940(c) (construction contractors as end users of materials affixed to realty)
• 86 Ill. Adm. Code 140.141 and 140.301(b)(3) (manufacturer's warranties bundled into selling price)
• 86 Ill. Adm. Code 130.445 (federal excise taxes in the tax base)
• 86 Ill. Adm. Code 130.105 (retailers' occupation tax and use tax on liquidation sales)
• 86 Ill. Adm. Code 130.2105(a)(3) (NFTs not subject to retailers' occupation and use tax)
• 86 Ill. Adm. Code 131.115(a) (remote retailer nexus thresholds)
• 86 Ill. Adm. Code 131.110(a)-(b) (remote retailer liability and sourcing)
• 86 Ill. Adm. Code 130.415(b)(1)(B) (inseparable-link test for delivery charges)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Case law:

• Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009) (inseparable-link test for transportation and delivery charges)

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/st23-0027-gil.pdf

Original ruling text

ST-23-0027-GIL 08/16/2023 MISCELLANEOUS
This letter responds to an annual survey. (This is a GIL.)
August 16, 2023

Dear
NAME1
NAME2
ADDRESS
This letter is in response to your email dated June 15, 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:

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 40 years. Your assistance in
the preparation of the 2024 edition is essential.
Please complete the attached corporate income tax and sales tax
questionnaires and email the completed questionnaires to ADDRESS by
August 18, 2023. All new questions are highlighted in red font. To save
time, 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. If your responses to last year’s questionnaire would be helpful, let
us know and we will send you a copy.
Please acknowledge the receipt of this email and send us your responses
to the following questions:

COMPANY/ NAME
Page 2
August 16, 2023
1.
Who is the state respondent for the corporate income tax
questionnaire?
2.

Who is the state respondent for the sales tax questionnaire?

3.
Do you prefer a complimentary hardcopy of the PRODUCT 2024,
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.
A. SALES AND USE TAX: COMPLIANCE AND
ADMINISTRATION
[11] Does your state issue private rulings?  Yes
following questions:
Taxpayers can obtain sales tax rulings on nexus

 No

▪ If YES, answer the

DEPARTMENT’S RESPONSE
Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. Generally, a determination
regarding physical nexus is very fact specific and cannot be addressed in the context of
a GIL or PLR. The Department has found that the best manner to determine nexus is
for a Department auditor to examine all relevant facts and information.
B. SALES AND USE TAX BASE
[1] Taxable Items
Which items are subject to sales/use tax in your state (check all that apply)?
 Repair labor on tangible personal property  Repair labor on real property
DEPARTMENT’S RESPONSE
Transfers of repair parts, repair materials and other tangible personal property by
persons who repair tangible personal property belonging to others as an incident of
furnishing repair services are generally subject to tax under the Service Occupation Tax
Act. See 86 Ill. Adm. Code 140.101. Persons who repair real property are considered

COMPANY/ NAME
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August 16, 2023
construction contractors. Construction contractors are considered the end users of
tangible personal property they permanently affix to realty, and as the end user of such
property, the construction contractor incurs Illinois use tax liability. See 86 Ill. Adm.
Code 130.1940(c). The taxability of maintenance agreements depends upon whether
charges for the agreements are included in the selling price of the tangible personal
property. If the charges for the agreements are included in the selling price of the
tangible personal property, those charges are part of the gross receipts of the retail
transaction and are subject to tax. In those instances, no tax is incurred on the
maintenance services or parts when the repair or servicing is performed.
A
manufacturer’s warranty that is provided without additional cost to a purchaser of a new
item is an example of an agreement that is included in the selling price of the tangible
personal property. See 86 Ill. Adm. Code 140.141 and 140.301(b)(3).
[4] TAX BASE
Which items are included in the price that is subject to sales/use tax (check all that
apply)?
 Federal excise tax on tires  Federal excise tax on sporting equipment
DEPARTMENT’S RESPONSE
Federal taxes which are imposed upon consumers, and federal excise taxes
imposed upon tangible personal property sold at retail (as opposed to tangible personal
property sold by a wholesaler, importer, manufacturer or other producer) are not
includable in the gross receipts subject to tax. However, when federal taxes are
imposed upon importers, wholesalers, manufacturers or other producers, the tax is
includable in the gross receipts subject to tax. In the latter instance, these taxes are
considered to be part of the cost of doing business, and thus are part of the selling price
of the tangible personal property being sold. See 86 Ill. Adm. Code 130.445.
[7] CORPORATE TRANSACTIONS
Does your state impose sales/use tax on the following (check all that apply)?
 Liquidation under IRC § 336
DEPARTMENT’S RESPONSE
Such sales are subject to the retailers' occupation tax and use tax provided that
the liquidation takes place by means of sales, and provided that the sales are made for
use or consumption and consist of tangible personal property customarily sold by such
business. See 86 Ill. Adm. Code 130.105.
[47] DIGITAL PRODUCTS
Does your state impose sales/use tax on these items when sold in digital form (check all
that apply)?
 Nonfungible tokens (NFTs)

COMPANY/ NAME
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August 16, 2023
DEPARTMENT’S RESPONSE
Nonfungible tokens are considered digital assets and are currently not subject to
the retailers’ occupation and use tax. See 86 Ill. Adm. Code 130.2105(a)(3).
[74] Simplified Sellers Use Tax Program
Does your state offer a simplified sellers use tax program that allows
remote sellers to collect a single simplified rate for all sales into the state?
No
If YES, does the state require prior application to the program?
Yes
If YES, what is the tax rate?
If YES, what form is used?

Yes
No

DEPARTMENT’S RESPONSE
Illinois law does not allow for remote retailers to collect a simplified rate for all
sales into the State. 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 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. See 86 Ill. Adm. Code 131.110(a). 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, and the State and local retailers' occupation taxes are incurred
at the rate in effect at this location. See 86 Ill. Adm. Code 131.110(b).
[75] Retail Delivery Fee
YES
NO

Does your state impose a retail delivery fee?
If YES:
What is the effective date?

What is the fee amount or rate? __
If YES:

Is delivery by motor vehicle necessary?
Is the delivery fee applicable to all retailers, including marketplace facilitators,

making taxable retail sales?

Is the delivery fee applicable to wholesale sales?

Is the delivery fee applicable to retail sales exempt from sales tax?

Is there a small seller exemption?

Must the retail delivery fee be separately stated?

Is the retail delivery fee part of the tax base subject to sales and use tax?
What are the time periods for which the retail delivery fee returns must be











COMPANY/ NAME
Page 5
August 16, 2023
filed?
 Monthly

 Quarterly

 Semi-annual

 Annually

COMPANY/ NAME
Page 6
August 16, 2023
DEPARTMENT’S RESPONSE
Illinois does not impose a retail delivery fee. Outgoing transportation and
delivery charges are part of the gross receipts subject to the retailers' occupation tax
when there is an inseparable link between the sale of tangible personal property and the
outgoing transportation and delivery of the property. (See Kean v. Wal-Mart Stores,
Inc., 235 Ill. 2d 351(2009). An inseparable link exists when the transportation and
delivery charges are not separately identified to the purchaser on the contract or invoice
or when the transportation and delivery charges are separately identified to the
purchaser on the contract or invoice, but the seller does not offer the purchaser the
option to receive the tangible personal property in any manner except by the payment of
transportation and delivery charges added to the selling price of the item. For example,
the seller does not offer the purchaser the option to pick up the tangible personal
property. See 86 Ill. Adm. Code 130.415(b)(1)(B).
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,

Thomas Grudichak
Associate Counsel
TG