Does a company that operates a mobile app connecting truck drivers to discounted fuel at partner fuel stops -- without itself buying, selling, or distributing the fuel -- owe Illinois Motor Fuel Tax or need a motor fuel license?

Plain-English summary

A California-incorporated company (referred to here as Company) that manages a free mobile app for independent owner-operator truck drivers and small fleets asked the Illinois Department of Revenue whether it owes Motor Fuel Tax or needs a state license. The app lets operators buy fuel at a discount from fuel stops that have partnered with Company, because those fuel stops want more business from app users and are willing to sell at a lower price. An operator who stops at a partner location opens the app, selects the fuel stop, and receives a numeric fuel code; the clerk verifies the code, turns on the pump, and once the fuel is pumped the app charges the operator's card on file (the operator can get an emailed or paper receipt). Company said it never sells the fuel itself -- the fuel stops sell it and keep the sale proceeds -- and the fuel stops separately pay all applicable per-gallon fuel tax and collect, report, and remit sales tax. Company makes money only from commissions the fuel stops pay when operators use the app. Company also said it does not purchase, distribute, receive, import, or supply fuel; does not produce, refine, blend, compound, or manufacture fuel; and does not hold any fuel inventory.

Company argued it should not be liable for Motor Fuel Tax under 35 ILCS 505/2(c) because it isn't selling fuel as a retailer or reseller in Illinois, and that it isn't a "receiver," "distributor," or "supplier" under 35 ILCS 505/2(a) because it doesn't transport, receive, produce, refine, blend, compound, or manufacture fuel (citing the Motor Fuel Tax Law's definitions at 35 ILCS 505/1.2, 1.14, and 1.20). Company also argued it doesn't need a Motor Fuel Tax license, since only "distributors," "suppliers," "receivers," and "blenders" must be licensed under 86 Ill. Adm. Code 500.201, and it isn't any of those (citing 35 ILCS 505/1.2, 1.5-1.6, 1.14, and 1.20). Company asked the Department to confirm it is not liable for the tax, not responsible for remitting it, and not required to hold any state motor fuel license.

The Department's response first laid out the framework: Motor Fuel Tax is imposed "on the privilege of operating motor vehicles upon the public highways ... and recreational-type watercraft upon the waters of this State" (35 ILCS 505/2), with the tax's incidence falling on the person using or consuming the fuel while operating a vehicle on public highways. A distributor who sells or distributes motor fuel must collect the tax at the time of sale and remit it to the Department, less a collection discount (35 ILCS 505/6); a supplier (other than a licensed distributor) who sells or distributes special fuel -- which includes diesel fuel, per 35 ILCS 505/1.13 -- has the same collect-and-remit duty for special fuel (35 ILCS 505/6a). In each later resale of fuel on which the tax was already collected by a distributor or supplier, the tax amount gets added to the selling price so the tax is ultimately borne by the fuel's user. A "reseller" is any person other than a retailer who buys motor fuel for resale to someone else and on which tax has already been paid (35 ILCS 505/1.21); the Motor Fuel Tax Law itself doesn't define "retailer," but the term generally covers persons in the business of making retail sales to users or consumers.

The Department then explained why it could not answer Company's questions: it noted that it has recently seen a number of arrangements where companies provide new services to established businesses through apps -- for hotel rooms, vacation rentals, and parking spaces, among others -- and because these arrangements are unique, the Department needs a complete and thorough explanation of the actual contractual relationship between the parties before it can characterize them. Based on the limited information in Company's letter -- including the facts that the app charges the customer's card once fuel is pumped, and that the fuel stops receive the proceeds of the sale -- the Department said it could not determine the exact nature of the arrangement between a fuel stop and Company, and so could not say in a GIL whether Company is liable for Motor Fuel Tax, responsible for remitting it, or required to hold a state license. The Department also noted that Section 2(c) of the Motor Fuel Tax Law, which Company had cited, is no longer relevant: it served the limited historical purpose of taxing fuel already held by resellers and retailers when Motor Fuel Tax rates increased on August 1, 1989 and January 1, 1990. Finally, the Department flagged that sales of motor fuel and special fuel at retail are separately subject to the Retailers' Occupation Tax (35 ILCS 120/2-10), that retailers and resellers of motor fuel must register under that Act, and that the Act imposes additional obligations on motor fuel resellers and retailers (35 ILCS 120/2d, 2e, 2f, 2g) -- again saying that a proper understanding of Company's relationship with the fuel stops is necessary to sort out those obligations. The Department closed by saying Company may submit a request for a binding Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

What this means for you

Mobile-app or marketplace operators that facilitate (but don't sell) fuel

If your business connects buyers and sellers of fuel through an app -- handling payment processing, discounts, or loyalty features -- without itself purchasing, distributing, receiving, importing, or holding fuel inventory, this GIL does not classify the business as a "distributor," "supplier," "receiver," or "reseller." The Department said it needed a complete and thorough explanation of the contractual relationship and could not determine the arrangement from the limited information provided. It specifically pointed to the facts that the app charges the customer's card once fuel is pumped and that the fuel stops receive the sale proceeds. The GIL leaves the liability, remittance, and licensing questions unresolved.

Truck stop and fuel stop operators who partner with discount apps

The Department generally explained that a distributor who sells or distributes motor fuel must collect and remit the Motor Fuel Tax (35 ILCS 505/6), and that a supplier selling special fuel, including diesel, has the same duty (35 ILCS 505/6a). It did not decide whether a particular fuel stop or app fits those roles in this arrangement. The Department said the actual contracts would be needed to determine the parties' obligations.

Owner-operators and small trucking fleets using discount fuel apps

The Department said that when fuel is later resold after a distributor or supplier has collected the tax, the collected amount is added to the selling price so the tax is ultimately paid by the user. This GIL did not decide how that rule applies to the app and fuel-stop arrangement.

Accountants and tax professionals

This is a GIL, not the binding determination the taxpayer wanted. The Department declined to resolve whether the app company is a "distributor," "supplier," "receiver," or "reseller" because it needed the actual contracts between the app company and the fuel stops to characterize the arrangement. It said it has encountered other new app-based arrangements involving hotel rooms, vacation rentals, and parking. A client with a similar fuel-discount, marketplace, or platform business model should not assume it is or is not subject to Motor Fuel Tax based on this letter alone. If it needs a binding answer, it may submit a Private Letter Ruling request under 2 Ill. Adm. Code 1200.110. The Department also said the Section 2(c) provision cited in the request was no longer relevant and had served a limited purpose for fuel already held by resellers and retailers when rates increased on August 1, 1989, and January 1, 1990.

Common questions

Q: Did the Department decide whether the app company owes Illinois Motor Fuel Tax? A: No. The Department said that, based on the limited information in the letter, it could not determine the exact nature of the contractual arrangement between the fuel stops and the app company, and so could not say in a GIL whether the company is liable for the tax, responsible for remitting it, or required to hold a license.

Q: What facts did the company say supported its position that it isn't liable? A: The company said it never purchases, distributes, receives, imports, or supplies fuel; never produces, refines, blends, compounds, or manufactures fuel; holds no fuel inventory; and only earns commissions when operators use the app to buy fuel from partner fuel stops, which themselves sell the fuel, keep the proceeds, and pay the per-gallon fuel tax.

Q: Why did the Department decline to answer the company's questions? A: It said the information provided did not establish the exact nature of the arrangement between the fuel stop and Company. It pointed to the app charging the card after the fuel was pumped and the fuel stops receiving the sale proceeds, and said it needed to review the actual contracts before giving an opinion.

Q: Who is legally required to collect and remit Illinois Motor Fuel Tax? A: A distributor who sells or distributes motor fuel must collect the tax at the time of sale and remit it to the Department (35 ILCS 505/6); a supplier (other than a licensed distributor) who sells or distributes special fuel, including diesel, has the same duty (35 ILCS 505/6a). In each later resale where the tax was already collected, the tax is added to the selling price so it's ultimately paid by the fuel's user.

Q: Would a decision about Motor Fuel Tax resolve every Illinois tax question in this arrangement? A: No. The Department noted that retail sales of motor fuel and special fuel are separately subject to the Retailers' Occupation Tax (35 ILCS 120/2-10), and that retailers and resellers of motor fuel must register and comply with additional obligations under that Act (35 ILCS 120/2d, 2e, 2f, 2g).

Q: What can the company do to get a binding answer? A: The Department said the company may submit a request for a binding Private Letter Ruling and directed it to the requirements in 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes:

• 35 ILCS 505/2 (Motor Fuel Tax imposed on operating motor vehicles on public highways and recreational watercraft on state waters)
• 35 ILCS 505/1.2 (definition of "receiver")
• 35 ILCS 505/1.13 (definition of "special fuel," including diesel fuel)
• 35 ILCS 505/1.14 (definition of "distributor")
• 35 ILCS 505/1.20 (definition of "supplier")
• 35 ILCS 505/1.21 (definition of "reseller")
• 35 ILCS 505/6 (distributor's duty to collect and remit Motor Fuel Tax)
• 35 ILCS 505/6a (supplier's duty to collect and remit tax on special fuel)
• 35 ILCS 505/2(c) (noted by the Department as no longer relevant; applied only to fuel already held by resellers/retailers during the 1989-1990 rate increases)
• 35 ILCS 120/2-10 (Retailers' Occupation Tax applies to retail sales of motor fuel and special fuel)
• 35 ILCS 120/2d, 2e, 2f, 2g (additional Retailers' Occupation Tax obligations on motor fuel resellers and retailers)

Regulations:

• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2023.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2023/st23-0036-gil.pdf

Original ruling text

ST-23-0036-GIL 11/16/2023 MOTOR FUEL TAX
This letter discusses the Motor Fuel Tax Law. See 86 Ill. Adm. Code 500. (This is a GIL). November 16, 2023 NAME COMPANY ADDRESS RE: Motor Fuel Tax Dear NAME: This letter is in response to your letter dated April 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: I represent a company located outside of Illinois (“Company”) and, on behalf of Company, am requesting a General Information Letter regarding the tax treatment in the scenario described below. FACTS Company is incorporated in the State of California. Company manages a mobile app for independent owner-operator truck drivers and for small fleets (collectively, the “operator(s)”). The app is free to download, free to use after download, and otherwise does not charge any fees. The app allows operators to purchase fuel at a discounted price from specified fuel stops. The fuel is available to operators at a discounted price because Company partners with fuel stops, who want to

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earn more business from operators and who are willing to sell the fuel to operators at a discounted price. Operators interested in the discounted fuel price must download the app. When an operator stops at a qualifying stop, which has partnered with Company, the operator opens the app and selected [sic] the fuel stop where they are purchasing fuel. The app then generates a fuel code, which is a numeric code unique to that operator and that fuel stop. The operator shows the code to the fuel stop clerk, who verifies the operator has the Company’s app. From there, the pump is turned on for the operator to pump the fuel. Once the fuel is pumped, the app charges the debit or credit card on file, and the operator can either obtain an emailed receipt or paper receipt from the stop. Although the app provides operators with access to discounted fuel, Company does not sell fuel to operators. Rather, the fuel stops sell fuel to the operators and receive the proceeds from the sale. The fuel stops also pay all applicable fuel tax on a per gallon basis; and collect, report, and remit all applicable sales tax. Company makes its money solely on commissions paid by the fuel stops when operators use the app to purchase fuel from the stop. Moreover, Company does not purchase fuel, does not distribute fuel; does not receive fuel; does not import fuel; does not supply fuel; does not use fuel; and does not produce, refine, blend, compound, or manufacture fuel. Nor does Company maintain or possess any inventory of fuel in storage. REQUEST Illinois imposes a motor fuel tax on the privilege of engaging in the privilege of engaging in the business of selling motor fuel as a retailer or reseller on all motor fuel used in motor vehicles operating on the public highways and recreational type watercraft operating upon the waters. 35 ILCS 505/2 Sec. 2(c). Company does not appear to be liable for motor fuel tax under this statutory provision because Company is not selling fuel as a retailer or reseller in Illinois. Along with Company not meeting the statutory provisions, the fuel stops pay all applicable fuel tax on a per gallon basis. Illinois also imposes a motor fuel tax on the “receiver” of motor fuel. 35 ILCS 505/2(a). Company does not appear to be liable for motor fuel

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tax under this statutory provision because Company is not a “receiver”, “distributor,” or “supplier” as it does not transport or receive fuel; and does not produce, refine, blend, compound, or manufacture motor fuel. 35 ILCS 505/1.2; 35 ILC 505/1.14; 35 ILCS 505/1.20. Along with Company not meeting the statutory provisions, the fuel stops pay all applicable fuel tax on a per gallon basis. Finally, under Illinois law, it appears that only “distributors,” “suppliers,” “receivers,” and “blenders,” must be licensed for motor fuel tax. Reg. 500, Section 500.201. Company does not appear to need a license for motor fuel tax, as it is not a “distributor,” “supplier,” “receiver,” and “blender.” 35 ILCS 505/1.2; 35 ILCS 505/1.5-1.6; 35 ILCS 505/1.14; 35 ILCS 505/1.20. Nevertheless, please advise whether the Department believes Company is liable for motor fuel tax, Company is responsible for remitting motor fuel tax, and Company is required to obtain any state licenses for motor fuel tax. CONCLUSION Your advice on this matter is greatly appreciated. If you should have any questions, please do not hesitate to call me at PHONE. DEPARTMENT’S RESPONSE: The Motor Fuel Tax is imposed “on the privilege of operating motor vehicles upon the public highways and recreational-type watercraft upon the waters of this State”. 35 ILCS 505/2. The incidence of the tax is imposed on the person using or consuming motor fuel while operating a motor vehicle on public highways. A distributor who sells or distributes any motor fuel, which he is required by Section 5 of the Law to report to the Department when filing a return, shall collect at the time of such sale and distribution, the amount of tax imposed under the Law on all such motor fuel sold and distributed, and at the time of making a return, the distributor shall pay to the Department the amount so collected, less a discount allowed for collecting and remitting the tax, to the Department. 35 ILCS 505/6. A supplier, other than a licensed distributor, who sells or distributes any special fuel, which he is required by Section 5a of the Law to report to the Department when filing a return, shall collect at the time of such sale and distribution, the amount of tax imposed under the Law on all such special fuel sold and distributed, and at the time of making a return, the supplier shall pay to the Department the amount so collected, less

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a discount allowed for collecting and remitting the tax, to the Department. 35 ILCS 505/6a. “Special Fuel” includes diesel fuel. 35 ILCS 505/1.13 and 2(b). In each subsequent sale of motor fuel or special fuel on which the amount of tax imposed under the Law has been collected by a distributor or supplier as provided in Section 6 and 6a, respectively, the amount so collected shall be added to the selling price, so that the amount of tax is paid ultimately by the user of the motor fuel. A “reseller” is any person, other than a retailer, who purchases motor fuel for resale to a person, and on which tax has been paid. 35 ILCS 505/1.21. Although the Law does not define “retailer”, a retailer generally means and includes persons engaged in the business of making sales at retail to users or consumers. Recently, the Department has encountered a number of arrangements where companies have provided new services to established businesses through the use of apps downloaded on mobile devices of consumers seeking, for example, hotel rooms, vacation rentals, and parking spaces. Because these new arrangements are unique, the Department requires a complete and thorough explanation of the contractual relationship between the parties. Based on the limited information provided in your letter, the Department cannot determine the exact nature of the arrangement between a fuel stop and the Company. Your letter states that, “[o]nce the fuel is pumped, the app charges the debit card or credit card on file”. Your letter also states the fuel stops receive the proceeds from the sale. As noted above, without reviewing the actual contractual arrangements between the Company and the fuel stops, the Department cannot provide an opinion in a GIL whether the Company is liable for motor fuel tax, the Company is responsible for remitting motor fuel tax, or Company is required to obtain any state licenses for motor fuel tax. Section 2(c) that you reference in your letter is no longer relevant. 35 ILCS 550/2(c). The limited purpose of Section 2(c) was to tax the motor fuel already in the possession of resellers and retailers when the rates of tax on fuels were increased on August 1, 1989, and on January 1, 1990. Sales of motor fuel and special fuel at retail are subject to the Retailers’ Occupation Tax. 35 ILCS 120/2-10. A proper understanding of the relationship between your client and fuel stops is necessary to determine their obligations under the Retailers’ Occupation Tax Act. Retailers and resellers of motor fuel are required to register under the Act. The Act also imposes additional obligations on resellers and retailers of motor fuel. See 35 ILCS 120/2d, 2e, 2f, and 2g. You may submit a request for a binding private letter ruling. Please review the requirements for obtaining a private letter ruling at 2 Ill. Adm. Code 1200.110.

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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,

RSW:dlb

Richard S. Wolters
Associate Counsel