Should our online retail business collect Illinois sales tax based on our customer's location (destination sourcing) or based on where our selling activities occur (origin sourcing), especially after two merging internet retailers combine their offices, warehouse, and servers?

Plain-English summary

A company (referred to here as COMPANY) submitted a General Information Letter request on behalf of a client involved in a planned corporate merger, asking the Illinois Department of Revenue how the client's future sales should be sourced for Illinois sales tax purposes -- destination-based (by customer location) or origin-based (by where the selling activities occur).

The facts: Company A is an out-of-state internet retailer that is currently registered as a remote seller and collects Illinois sales tax based on the customer's ship-to address. Company B is an internet retailer currently headquartered in Illinois (with a satellite office and a warehouse also in Illinois), currently registered as an in-state retailer collecting tax based on where its order is received or fulfilled. Both companies fulfill orders through local third parties under network affiliations. Company A and Company B expected to merge within twelve months, with Company B surviving; the merger raised uncertainty about where the surviving company's headquarters and servers would end up, and therefore whether it would be treated as an out-of-state seller or an in-state retailer, and how its sales should be sourced. The requester asked the Department to address four specific post-merger configurations (varying satellite-office staffing, in-state vs. out-of-state server colocation, and whether the Illinois warehouse also takes sales orders) and to state whether destination or origin sourcing would apply to each.

The Department's response: the Retailers' Occupation Tax Act (35 ILCS 120/2) taxes the occupation of selling tangible personal property at retail, and Illinois law separately allows counties, home-rule municipalities, and transit authorities to impose their own local retailers' occupation taxes on the same activity (citing 55 ILCS 5/5-1006, 65 ILCS 5/8-11-1, and 70 ILCS 3615/4.03(e) as examples), while the complementary Use Tax (35 ILCS 105/3) taxes the privilege of using property purchased at retail. Both the state and local retailers' occupation taxes are imposed on the occupation of selling, not on the individual sale, and that occupation is "the composite of many activities extending from the preparation for, and the obtaining of, orders for goods to the final consummation of the sale by the passing of title and payment of the purchase price" (quoting Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321 (1943), via 86 Ill. Adm. Code 270.115(b)(2); see also Standard Oil Co. v. Department of Finance, 383 Ill. 136 (1943)). Because of that, establishing where "the taxable business of selling is being carried on" for local-tax purposes requires a fact-specific inquiry into the composite of selling activities that comprise the retailer's business -- and the Department explained that the limited facts provided did not allow it to answer the four specific merger scenarios, since "[g]enerally, a determination of this nature cannot be addressed in the context of a GIL."

Instead, the Department laid out the general sourcing framework under 86 Ill. Adm. Code 270.115, which applies uniformly to all locally imposed retailers' occupation taxes (home rule county, home rule municipal, and RTA). Under 270.115(c)(1), there are five "primary selling activities": (A) location of sales personnel with authority to solicit and bind the seller to a sale; (B) location where the seller takes the action that binds it to the sale; (C) location where payment is tendered/received or invoices issued; (D) location of inventory at the time of sale; and (E) location of the retailer's headquarters (where executive/operational decisions are made). Whichever Illinois jurisdiction has at least three of these five primary activities is the proper tax situs (270.115(c)(2)), subject to an exception: if three primary activities occur outside Illinois but the property sold is located in Illinois at the time of sale/delivery, the Illinois jurisdiction where the property sits is the situs (270.115(d)(2)). If no single jurisdiction has more than two primary activities, six secondary selling activities are considered (marketing/solicitation location, procurement location, location of pricing authority, location where purchase orders are received, location where title passes, and location of any showroom) (270.115(c)(4)), and if both primary and secondary factors are split, the situs is wherever inventory (c)(1)(D) or headquarters (c)(1)(E) has more combined activity (270.115(c)(5)).

For internet sales specifically, 86 Ill. Adm. Code 270.115(d)(3) creates a rebuttable presumption that a retailer's predominant selling activities occur outside Illinois when a customer orders through a public retail website and the retailer ships the property into Illinois -- meaning such sales are presumptively subject only to Illinois Use Tax (not local retailers' occupation tax), unless clear and convincing evidence shows the retailer's predominant selling activities actually occur in Illinois. Two examples of such clear-and-convincing evidence given in the rule: the property sold was in the retailer's Illinois inventory at the time of sale (or was produced there), or the customer takes possession at an Illinois location the retailer owns or leases. The Department also noted this internet-sales presumption does not apply to (1) remote retailers meeting the tax-remittance thresholds of 86 Ill. Adm. Code 131.115(a), (2) sales by marketplace facilitators on behalf of marketplace sellers, or (3) sales by marketplace facilitators of their own property, or where the marketplace seller isn't identified.

The Department did not resolve which of the four numbered post-merger scenarios the requester described would result in origin or destination sourcing -- it said the facts provided were too limited for a specific answer and that this kind of determination "cannot be addressed in the context of a GIL." The letter is a general-education response, not a fact-specific holding.

What this means for you

Multichannel and internet retailers with Illinois operations

If your company sells through an e-commerce channel and also has any Illinois physical footprint (offices, a warehouse, servers, sales staff), don't assume destination sourcing automatically applies just because the sale started online. Under 86 Ill. Adm. Code 270.115, the Department looks at where your "primary selling activities" (sales staff, order acceptance, payment receipt, inventory, headquarters) actually happen, and whichever Illinois jurisdiction has at least three of those five factors is where you owe local retailers' occupation tax at the origin rate. Purely remote internet sales shipped into Illinois get a presumption of out-of-state selling (Use Tax only), but that presumption can be overcome if your inventory is in Illinois at the time of sale or your customers pick up from an Illinois location you own or lease.

Companies undergoing a merger, relocation, or restructuring

This GIL is a useful illustration of a common trap: sourcing isn't a one-time registration decision, it can shift as your footprint changes. The requester's own scenarios (an out-of-state headquarters combined with an Illinois satellite office with no sales staff, in-state vs. out-of-state server colocation, and whether an Illinois warehouse also takes orders) show how sensitive the analysis is to small factual variations -- and the Department confirmed it could not answer those specific configurations in a GIL. If you are restructuring in a way that changes where your sales staff, inventory, payment processing, or headquarters sit, you likely need a Private Letter Ruling under 2 Ill. Adm. Code 1200.110 (or a detailed self-assessment against 86 Ill. Adm. Code 270.115(c)) rather than relying on general guidance like this letter.

Accountants and tax professionals

Note that this GIL restates -- but does not itself decide -- the sourcing test. The operative rule is 86 Ill. Adm. Code 270.115(c) (primary/secondary selling-activity factors) and (d) (the "short cuts," including the internet-sales presumption in (d)(3)); the case law backbone is Ex-Cell-O Corp. v. McKibbin and Standard Oil Co. v. Department of Finance, both 1943 Illinois Supreme Court decisions establishing that the occupation tax attaches to the "composite of activities" comprising the business of selling, not to any single sale. Also flag for clients that the marketplace-facilitator and remote-retailer-threshold carve-outs from the internet-sales presumption (86 Ill. Adm. Code 131.115(a)) can independently change the analysis for clients selling through a marketplace.

Common questions

Q: Does this GIL tell the company whether to use origin or destination sourcing after its merger?
A: No. The Department expressly stated that "[t]he limited description provided in your ruling request regarding the business activities performed in Illinois as well as out-of-State does not allow for specific answers to your questions" and that "a determination of this nature cannot be addressed in the context of a GIL." It instead explained the general sourcing framework in 86 Ill. Adm. Code 270.115.

Q: What is the general test for where local retailers' occupation tax is owed?
A: Under 86 Ill. Adm. Code 270.115(c)(1)-(2), a retailer is engaged in the business of selling -- and owes local tax -- in the Illinois jurisdiction where at least three of five "primary selling activities" occur: location of sales personnel who can bind the seller, location where the seller's binding action on the sale occurs, location where payment is tendered/invoiced, location of inventory at time of sale, and location of the retailer's headquarters.

Q: What happens if no single jurisdiction has three primary selling activities?
A: The Department looks at six "secondary selling activities" under 86 Ill. Adm. Code 270.115(c)(4) -- marketing/solicitation location, procurement location, pricing-authority location, where purchase orders are received, where title passes, and showroom location -- and if primary and secondary factors are still split between jurisdictions, situs goes to wherever inventory or headquarters has more combined activity (270.115(c)(5)).

Q: Are internet sales automatically sourced to the customer's location?
A: Not automatically, but there is a presumption in that direction. Under 86 Ill. Adm. Code 270.115(d)(3), when a customer orders through a public retail website and the retailer ships into Illinois, the Department presumes the retailer's predominant selling activities happen outside Illinois, so the sale is presumptively subject to Illinois Use Tax rather than local retailers' occupation tax -- unless there is clear and convincing evidence the predominant selling activity actually occurred in Illinois (for example, the property was in Illinois inventory at the time of sale, or the customer picked it up at an Illinois location the retailer owns or leases).

Q: Does the internet-sales presumption apply to every online seller?
A: No. The Department noted it does not apply to remote retailers that meet the tax-remittance thresholds in 86 Ill. Adm. Code 131.115(a), to marketplace facilitators selling on behalf of marketplace sellers, or to marketplace facilitators selling their own property (or where the marketplace seller isn't identified).

Q: What is the difference between the state Retailers' Occupation Tax and a "local" retailers' occupation tax mentioned in this letter?
A: The Retailers' Occupation Tax Act (35 ILCS 120/2) is the base state-level sales tax on the occupation of selling at retail. Illinois law separately lets certain counties, home-rule municipalities, and transit authorities impose their own local retailers' occupation taxes on the same selling activity (examples cited: 55 ILCS 5/5-1006, 65 ILCS 5/8-11-1, 70 ILCS 3615/4.03(e)); both state and local versions are sourced using the same fact-sensitive 86 Ill. Adm. Code 270.115 test, and both are collected centrally by the Illinois Department of Revenue rather than by the localities themselves.

Citations and references

Statutes:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act -- imposition of tax on the business of selling at retail)
• 35 ILCS 105/3 (Use Tax Act -- imposition of tax on the privilege of using property purchased at retail)
• 55 ILCS 5/5-1006 (County Retailers' Occupation Tax, cited as an example of local tax)
• 65 ILCS 5/8-11-1 (Home Rule Municipal Retailers' Occupation Tax Act)
• 70 ILCS 3615/4.03(e) (Regional Transportation Authority Act local tax)

Regulations:

• 86 Ill. Adm. Code 270.115(b) (occupation of selling as a composite of activities; local-tax intent to link liability to jurisdiction receiving governmental benefit)
• 86 Ill. Adm. Code 270.115(c) (primary selling activities and the three-of-five situs test; secondary selling activities; tiebreaker)
• 86 Ill. Adm. Code 270.115(d) (administrative "short cuts," including the internet-sales presumption at (d)(3))
• 86 Ill. Adm. Code 131.155(a), (e) (state and local retailers' occupation tax liability depends on selling activities and nexus; origin vs. destination sourcing generally)
• 86 Ill. Adm. Code 131.115(a) (remote retailer tax-remittance thresholds, an exception to the internet-sales presumption)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Cases:

• Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321 (1943) (occupation of selling is the composite of activities from order preparation through consummation of sale)
• Standard Oil Co. v. Department of Finance, 383 Ill. 136 (1943) (retailers' occupation tax is a tax on the occupation of selling, not on the sale itself)

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/st23-0035-gil.pdf

Original ruling text

ST-23-0035-GIL 11/16/2023 LOCAL TAXES
The occupation of selling is comprised of the composite of many activities
extending and establishing where “the taxable business of selling is being carried
on” requires a fact-specific inquiry into the composite of selling activities that
comprise the retailer’s business. 86 Ill. Adm. Code 270.115. (This is a GIL)
November 16, 2023
NAME
COMPANY
Dear NAME:
This letter is in response to your letter dated September 28, 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:
The purpose of the letter is to request a general information letter from the
Office of Legal Services of the Illinois Department of Revenue (“the
Department”) pursuant to 2 Illinois administrative Code 1200.120, as a
means to resolve a matter regarding the application of revenue sourcing.
COMPANY (“COMPANY”) has been engaged by our Client (or “the
Company”) to prepare and submit the general information letter. The
relevant facts and analysis are presented below.
Facts
Company A is an internet retailer headquartered out of state. Orders are
received via eCommerce websites and fulfilled by local third parties. The
local third parties receive the orders via a network affiliation and deliver
the products to Illinois customers. Company A is currently registered as a
remote seller and collects Illinois sales tax based on the customer’s ship
to address.

COMPANY/NAME
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November 16, 2023
Company B is an internet retailer currently headquartered in Location X,
with a satellite office in Location Y and warehouse in Location Z, all within
the state of Illinois. Similar to Company A, orders are received via
eCommerce websites and fulfilled by local third parties. The local third
parties receive the orders via a network affiliation and deliver the products
to Illinois customers. Company B also sells products out of Location Z, but
primarily on an exempt wholesale basis. Most of Company’s B employees
are remote, although some employees come into the office from time-totime to meet. Company B has servers at Location X, but this location is
going away at year end and the servers are being moved to co-location
facilities within Illinois. There are no salespersons with permanent offices
in any of these locations; all salespersons are remote. Only certain
administrative, IT and other non-sales personnel have offices at Location
Y. Company B is currently registered as an in-state retailer and collects
Illinois sales tax based on where the order was received or fulfilled, i.e.,
which today is Location X.
Company A and Company B expect to merge over the next twelve (12)
months, leaving Company B as the surviving legal entity. Preliminary
discussions have been made regarding the Company’s surviving
headquarter location and the final server location(s) that has caused some
uncertainty as to whether the Company would be considered an out-ofstate seller or an in-state retailer and how sales should be sourced. We
also note, all sales personnel are remote employees that travel to various
states and are located both in and out of Illinois.
Applicable Statutes and Administrative Codes
ILCS Chapter 35 §120/1 defines an out-of-state seller as a retailer who
has physical presence in Illinois. Physical presence in Illinois means
having or maintaining within Illinois, directly or by a subsidiary, an office,
distribution house, sales house, warehouse or other place of business, or
any agent or other representative operating within Illinois under the
authority of the retailer or its subsidiary, irrespective of whether such place
of business or agent or other representative is located here permanently
or temporarily, or whether such retailer or subsidiary is licensed to do
business in Illinois. They must collect and remit state and local retailers’
occupation tax at the state use rate.
An Illinois (in-state) retailer is defined as a retailer who makes sales of
tangible personal property in Illinois. An Illinois retailer’s inventory and
headquarters are generally in Illinois. They must collect and remit state
and local retailers’ occupation tax at the origin rate.

COMPANY/NAME
Page 3
November 16, 2023
Ill. Admin. Code 86 §131.155(a) states “the type of tax liability incurred by
a retailer and the manner in which that liability is sourced depends upon
the manner in which a retailer conducts its selling activities, as well as the
type of nexus (or lack thereof) that a retailer has with the State. Retailers
may incur State and local retailers’ occupation taxes based either upon
the Illinois location to which the tangible personal property is shipped or
delivered or at which possession is taken by the purchaser (“destination
sourcing”) or upon the location in Illinois at which the selling activities
occur (“origin sourcing”). Multichannel retailers may incur a combination of
these liabilities.”
Ill. Admin. Code 86 §131.155(e) states “Out-of-State sellers with a
physical presence in Illinois are not remote retailers. However, they are
“retailers maintaining a place of business in Illinois”. As a result, they
generally incur only a Use Tax collection obligation (6.25%) on sales
made to Illinois purchasers from locations outside Illinois. However, if
sales are made to Illinois purchasers from locations in Illinois, State and
local retailers’ occupation tax is incurred at the rate in effect where the
selling activities occur (“origin sourcing”) (see 86 Ill. Adm. Code
270.115(c) and (d) to determine the location at which State and local
retailers’ occupation taxes are incurred). This selling frequently occurs
when sales made to Illinois purchasers are filled from inventory located in
Illinois.”
Per Ill. Admin. Code 86 §270.115(b), “The Home Rule Municipal Retailers’
Occupation Tax Act [65 ILCS 5/8-11-1) authorizes home rule
municipalities to impose a tax on those engaged in the business of selling
tangible personal property at retail within the municipality. Because the
statute imposes a tax on the retail business of selling, and not on specific
sales, the jurisdiction in which the sale takes place is not necessarily the
jurisdiction where the local retailers’ occupation tax is due. Rather, it is the
jurisdiction where the seller is engaged in the business of selling that can
impose the tax.”...
“The occupation of selling is comprised of “the composite of many
activities extending from the preparation for, and the obtaining of, orders
for goods to the final consummation of the sale by the passing of title and
payment of the purchase price.” Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316,
321 (1943). Thus, establishing where “the taxable business of selling is
being carried on” requires a fact-specific inquiry into the composite of
activities that comprise the retailer's business.””...
“It is the intent of the Home Rule Municipal Retailers’ Occupation Tax that
retailers will incur local retailers’ occupation tax in a jurisdiction in Illinois if

COMPANY/NAME
Page 4
November 16, 2023
they “enjoyed the greater part of governmental [services and] protection”
in that jurisdiction.”...
“A seller incurs Home Rule Municipal Retailers’ Occupation Tax in a home
rule municipality if its predominant and most important selling activities
take place in the municipality. Isolated or limited business activities within
a jurisdiction do not constitute engaging in the business of selling in that
jurisdiction when other more significant selling activities occur outside the
jurisdiction, and the business predominantly takes advantage of
government services provided by other jurisdictions.”...
“The Department “may look through the form of a putatively
[multijurisdictional] transaction to its substance” to determine where
“enough of the business of selling took place” and, thus, where the seller
is subject to local retailers’ occupation tax.” ...
“For purposes of determining where a retailer is engaged in the business
of selling, it does not matter whether the retailer is engaged in selling
activities in taxing jurisdictions in multiple states, or in multiple jurisdictions
in this State. The legal standard is the same. The retailer is engaged in the
business of selling in the taxing jurisdiction where its predominant and
most important selling activities take place.”...“Because it is not practicable
for retailer to divide retailers occupation tax among competing
jurisdictions, a retailer subject to the retailers’ occupation tax is engaged in
the business of selling in only one location in Illinois for each sale.”
Ill. Admin. Code 86 §270.115(d)(3) further states “... when a customer
places an order for the purchase of tangible personal property through a
consumer-based retailer website available without limitation on the world
wide web and the retailer ships the property to the customer in this State,
the Department will presume that the retailer’s predominant selling
activities take place outside of this State. Therefore, such a sale will be
subject to the Illinois Use Tax Act unless there is clear and convincing
evidence that the retailer's predominant and most important selling
activities take place in this State. Clear and convincing evidence sufficient
to overcome the presumption provided for in this subsection (d)(3)
includes, but is not limited to, the following circumstances:
(A) the tangible personal property that is sold is in an inventory in
the possession of the retailer located within a jurisdiction in
Illinois at the time of its sale (or is subsequently produced by the
retailer in the jurisdiction), in which case the retailer is engaged
in the business of selling in the jurisdiction where the property is
located at the time of the sale with respect to the sale; or

COMPANY/NAME
Page 5
November 16, 2023
(B) the customer takes possession of the tangible personal property
at a place of business owned or leased by the retailer in the
State, in which case the retailer is engaged in the business of
selling in the jurisdiction where the customer takes possession
of the property with respect to that sale.”
Disclosures
This issue is not under consideration by the Department in connection with
an audit examination of any type, a refund request, an administrative
hearing, or litigation for the Company or any affiliate or related person.
Response Requested
In preparation of the upcoming merger, our Client would like to confirm the
impact of each scenario below on its registration status and its sales tax
collection obligations in Illinois, specifically if the Company should be
sourcing its revenue based on customer location (destination) or where
the order was taken (origin).
1.

2.

3.
4.

Company B has an out-of-state headquarters location, a
Location Y Illinois satellite office with no salespersons, and
servers located in Illinois at colocation facilities to be
determined. Sales are received via the servers (i.e.,
eCommerce platform) and delivered to Illinois customers.
Company B has an out-of-state headquarters location, a
location Y Illinois satellite office with no salespersons, and
servers at a colocation outside of Illinois. Sales are received
via the servers (i.e., eCommerce platform) and delivered to
Illinois customers.
Does the response change for 1 and 2 if the warehouse,
located in Illinois, also takes sales orders via the ecommerce
platform?
Does the response change for l and 2 if the warehouse,
located outside Illinois, also takes sales orders via the
ecommerce platform?

Your prompt consideration of the letter is sincerely appreciated. Please
contact me at PHONE or at E-MAIL should you have any questions
regarding this request.
DEPARTMENT’S RESPONSE:

COMPANY/NAME
Page 6
November 16, 2023
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. [35 ILCS 120/2]. Likewise, Illinois law allows for the imposition of a
local Retailers’ Occupation Tax by certain county and municipal governments and
transit authorities upon all persons engaged in the business of selling tangible personal
property at retail within such regions. For an example of such local taxes, see 55 ILCS
5/5-1006; 65 ILCS 5/8-11-1; 70 ILCS 3615/4.03(e). The Use Tax which complements
the Retailers’ Occupation 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.
[35 ILCS 105/3]. These taxes comprise what is commonly known as “sales tax” in
Illinois.
The State and local retailers’ occupation taxes impose a tax liability upon the
occupation of selling at retail and not on the sale itself. See 86 Ill. Adm. Code
270.115(b)(1); see also Standard Oil Co. v. Department of Finance, 383 Ill. 136, (1943).
The occupation of selling is comprised of “the composite of many activities extending
from the preparation for, and the obtaining of, orders for goods to the final
consummation of the sale by the passing of title and payment of the purchase price”.
See 86 Ill. Adm. Code 270.115(b)(2) (quoting Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316,
321 (1943)). The business of selling under the Home Rule County Retailers’
Occupation Tax Law, the Home Rule Municipal Retailer’s Occupation Tax Law, the
Regional Transportation Authority Act, and all other locally imposed retailers’ occupation
taxes is judged under the same fact sensitive approach. See 86 Ill. Adm. Code
270.115(b)(2). The statutory intent of the local occupation taxes is to link the retailer’s
tax liability to where it principally enjoys the benefits of government services. See 86 Ill.
Adm. Code 270.115(b)(4).
A principal consideration for retailers with selling activities in multiple jurisdictions
within Illinois or in jurisdictions located in more than one state is a determination of the
proper situs for the business of selling to be taxed. The limited description provided in
your ruling request regarding the business activities performed in Illinois as well as outof-State does not allow for specific answers to your questions.
Generally, a
determination of this nature cannot be addressed in the context of a GIL. We hope the
following information regarding the relevant administrative rules which govern the
sourcing of local retailers’ occupation taxes will provide you with the guidance you seek.
See 86 Ill. Adm. Code 270.115.
Because of the variation of selling activities a retailer may use, it is impossible to
cover in a sourcing rule the tax consequences of every possible scenario. To assist
taxpayers in determining the proper jurisdiction for local tax liability, the administrative
rules include guidelines which discuss “primary selling activities”, “secondary selling
activities” and “short cuts”. The home rule municipal retailers’ occupation tax
administrative rule (86 Ill. Adm. Code 270.115), the substance and provisions of which
applies to all locally imposed retailers’ occupation taxes administered by the
Department, provides these guidelines as well as examples.

COMPANY/NAME
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November 16, 2023
The five primary selling activities which are used to determine the location at
which a retailer is engaged in the business of selling are:
A)

Location of sales personnel exercising discretion and authority to
solicit customers on behalf of a seller and to bind the seller to the
sale;

B)

Location where the seller takes action that binds it to the sale,
which may be acceptance of purchase orders, submission of offers
subject to unilateral acceptance by the buyer, or other actions that
bind the seller to that sale;

C)

Location where payment is tendered and received, or from which
invoices are issued with respect to each sale;

D)

Location of inventory if tangible personal property that is sold is in
the retailer’s inventory at the time of its sale or delivery; and

E)

Location of the retailer’s headquarters, which is the principal place
from which the business of selling tangible personal property is
directed or managed. In general, this is the place at which the
offices of the principal executives are located. When executive
authority is located in multiple jurisdictions, the place of daily
operational decision making is the headquarters.

86 Ill. Adm. Code 270.115(c)(1).
Under 86 Ill. Adm. Code 270.115(c)(2), the location where at least three of the
primary selling activities are conducted is considered the proper situs for the business of
selling to be taxed. An exception to 86 Ill. Adm. Code 270.115(c)(2) applies when three
of the primary selling activities are conducted outside of the State, but the tangible
personal property which is sold is located in Illinois at the time of its sale or delivery. In
such case, the Illinois jurisdiction where such property is located is considered the
proper tax situs. See 86 Ill. Adm. Code 270.115(d)(2).
If no individual jurisdiction has more than two primary selling activities, 86 Ill.
Adm. Code 270.115(c)(4) requires the following additional selling activities be
considered to determine the jurisdiction in which the retailer is engaged in the business
of selling.
A)

Location where marketing and solicitation occur;

B)

Location where the seller engages in activities necessary to
procure goods for sale;

COMPANY/NAME
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November 16, 2023
C)

Location of the retailer’s officers, executives or employees with
authority to set prices or determine other terms of sale if
determinations are made in a location different than that identified
in subsection (c)(1)(A);

D)

Location where purchase orders or other contractual documents
are received when purchase orders are accepted, processed, or
fulfilled in a location or locations different from where they are
received;

E)

Location where title passes; and

F)

Location where the retailer displays goods to prospective
customers, such as a showroom.

For situations which require the consideration of both primary and secondary
selling activities, the proper jurisdiction for taxation is where the retailer’s inventory is
located under subsection (c)(1)(D), or where its headquarters is located under
subsection (c)(1)(E), whichever location is where more selling activities occur,
considering both primary and secondary selling activities.
86 Ill. Adm. Code
270.115(c)(5.)
In recognition that determining the appropriate tax situs can present substantial
administrative difficulties for certain classes of retailers with unique, complicated or
widely dispersed selling activities, the Department’s rule 86 Ill. Adm. Code 270.115(d),
provides administrative “short cuts” that balance the administrative difficulties presented
by certain selling operations against the need for accurate tax assessment for both
retailers and the Department. These short-cuts pertain to the following situations: 1) InState inventory (previously discussed), 2) Internet sales (see below), 3) Sales to a
nominal lessee, and 4) Sales of coal or other minerals.
With respect to internet sales when the retailer ships the property to the customer
in this State, 86 Ill. Adm. Code 270.115(d)(3) creates a presumption that the retailer’s
predominant selling activities take place outside of Illinois. In such case, the sale would
be subject to the Illinois Use Tax Act. There is an exception to this presumption when
there is clear and convincing evidence that the retailer’s predominant and most
important selling activities take place in Illinois. Examples of such clear and convincing
evidence sufficient to overcome the presumption include when:
A)

the tangible personal property that is sold is in an inventory in the
possession of the retailer located within a jurisdiction in Illinois at
the time of its sale (or is subsequently produced by the retailer in
the jurisdiction), in which case the retailer is engaged in the

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November 16, 2023
business of selling in the jurisdiction where the property is located
at the time of the sale with respect to the sale; or
B)

the customer takes possession of the tangible personal property at
a place of business owned or leased by the retailer in the State, in
which case the retailer is engaged in the business of selling in the
jurisdiction where the customer takes possession of the property
with respect to that sale.

Please note that the presumption for internet sales under 86 Ill. Adm. Code
270.115(d)(3) does not apply in the following situations: 1) sales made by remote
retailers that meet either of the tax remittance thresholds set out at 86 Ill. Adm. Code
131.115(a), 2) sales made by marketplace facilitators on behalf of marketplace sellers,
or 3) sales made by marketplace facilitators of its own tangible personal property or
when the marketplace seller of the tangible personal property is not identified.
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,

TG:dlb

Tom Grudichak
Associate Counsel