If an out-of-state fuel company runs its sales office out of state but has trucks that pick up and deliver motor fuel to Illinois customers, does it owe Illinois county/municipal motor fuel tax and local sales tax on those Illinois deliveries?

Plain-English summary

A taxpayer representative wrote to the Illinois Department of Revenue on behalf of a client competing against out-of-state fuel companies. The representative's letter said at least two competitors run their sales operations out of Pennsylvania and Indiana, but have trucks that pick up fuel in Illinois and deliver it to Illinois customers in counties that impose a County Motor Fuel Tax (Kane, Lake, McHenry, Will, and DuPage). According to the letter, these companies charge only the 6.25% state sales tax and are not charging or collecting the county motor fuel tax or local sales tax, which the requester said made it "nearly impossible" for their own Illinois-based business (which charges an additional 4-8 cents per gallon in county motor fuel tax plus a 1.75% local sales tax) to compete. The representative asked for a "timely definitive answer" on whether a company running its sales out of state, while physically picking up and delivering fuel to Illinois customers, must charge and collect the county motor fuel tax and appropriate local (city) sales tax.

The Department responded with a GIL rather than a definitive ruling, explaining that this is not a yes-or-no question answerable in the abstract. The Retailers' Occupation Tax Act (35 ILCS 120/2) taxes persons engaged in Illinois in the business of selling tangible personal property at retail; the complementary Use Tax (35 ILCS 105/3) taxes the privilege of using property in Illinois that was purchased at retail elsewhere. Illinois law separately allows counties, municipalities, and transit authorities to impose their own local retailers' occupation taxes (55 ILCS 5/5-1006; 65 ILCS 5/8-11-1; 70 ILCS 3615/4.03(e)) and local motor fuel taxes (55 ILCS 5/5-1035.1 for counties; 65 ILCS 5/8-11-2.3 for municipalities). DuPage, Kane, Lake, Will, and McHenry counties may impose a County Motor Fuel Tax on persons engaged in the county in the business of selling motor fuel at retail for use in motor vehicles on public highways or recreational watercraft on waterways.

The Department explained that the key issue for any retailer selling across multiple jurisdictions (in Illinois or across state lines) is figuring out the correct "situs" -- the place where the business of selling is legally considered to occur. Following the Illinois Supreme Court's decision in Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130, the Department revised its sourcing rule at 86 Ill. Adm. Code 270.115, which applies not just to local retailers' occupation taxes generally but, per 86 Ill. Adm. Code 695.115 and 696.115, to the County and Municipal Motor Fuel Tax Laws as well. Under that rule, "the occupation of selling is comprised of the composite of many activities" (quoting Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321 (1943)), so determining where "the taxable business of selling is being carried on" requires a fact-specific look at the full composite of a retailer's selling activities, not any single fact like where its sales office sits.

The regulation lists five "primary selling activities" used first to find the taxing jurisdiction (86 Ill. Adm. Code 270.115(c)(1)): (A) location of sales personnel with authority to solicit and bind the seller; (B) location where the seller takes action binding it to the sale; (C) location where payment is tendered/received or invoices issued; (D) location of the inventory at the time of sale; and (E) location of the retailer's headquarters. A retailer with three or more primary activities in one location generally owes tax there (270.115(c)(2)), subject to an exception when three or more primary activities happen out of state but the sold property is in Illinois inventory at the time of sale and delivered in Illinois (270.115(d)(2)) -- in that case Illinois is still the proper situs. If no single jurisdiction has more than two primary activities, six additional "secondary selling activities" come into play (270.115(c)(4)), and if both primary and secondary activities are split, the tiebreaker is wherever inventory (c)(1)(D) or headquarters (c)(1)(E) has more combined activity (270.115(c)(5)). For internet sales shipped to an Illinois customer, 270.115(d)(3) presumes the retailer's predominant selling activity is out of state (so Illinois Use Tax, not local ROT, would apply) unless clear and convincing evidence shows otherwise, such as Illinois inventory at the time of sale or the customer taking possession at the retailer's Illinois location.

The Department declined to say whether the specific competitors described in the letter owed the county motor fuel tax and local sales tax, stating that "the 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 also addressed the "Leveling the Playing Field for Illinois Retail Act" flowchart the requester had attached: those 2019 amendments (Public Acts 101-31 and 101-604) require remote retailers meeting a tax-remittance threshold to collect State and local retailers' occupation tax starting January 1, 2021, but a "remote retailer" is one with no physical presence in Illinois -- which the Department noted does not appear to describe the retailer discussed in the letter, since the flowchart shows that a retailer with an Illinois presence could still owe state and local ROT or Use Tax depending on where its selling activities, under the 270.115 test, actually occur.

What this means for you

Multi-state and multi-jurisdiction retailers (especially fuel distributors)

If your business sells across county, municipal, or state lines -- particularly if you have some combination of an out-of-state sales office, in-state trucks/drivers, in-state inventory, or in-state delivery -- you cannot assume that where your "sales office" is located determines your Illinois local tax obligations. The Department applies the 86 Ill. Adm. Code 270.115 composite-of-activities test, weighing where your sales personnel, order-binding actions, payment/invoicing, inventory, and headquarters are actually located. This same sourcing rule governs both local retailers' occupation tax and the County/Municipal Motor Fuel Tax under 86 Ill. Adm. Code 695.115 and 696.115.

Businesses concerned about a competitor's tax compliance

This GIL shows that the Department will not make a determination about a THIRD PARTY's (a competitor's) tax liability based on a general description in someone else's information request -- it needs the specific facts of that business's own operations, and even then a binding answer on those facts would require a Private Letter Ruling (2 Ill. Adm. Code 1200.110) requested by or naming that taxpayer, not a competitor.

Remote and multi-state sellers evaluating "remote retailer" status

If you are weighing whether you qualify as a "remote retailer" (no physical presence in Illinois) under the Leveling the Playing Field for Illinois Retail Act changes (Public Acts 101-31 and 101-604, effective January 1, 2021), remember that having Illinois trucks, drivers, facilities, or other physical presence generally takes you out of that category -- meaning you may instead owe state AND local retailers' occupation tax (or Use Tax) depending on where your selling activities under the 270.115 test actually occur, not the lower remote-retailer remittance regime.

Accountants and tax professionals

Note that this GIL does not resolve any specific taxpayer's liability -- it lays out the 270.115 composite-of-activities framework (primary activities, secondary activities, the inventory-in-Illinois exception, and the internet-sales presumption) that a client should apply to its own facts. A client that needs a binding, fact-specific answer about its own local-tax sourcing should pursue a Private Letter Ruling under 2 Ill. Adm. Code 1200.110 rather than relying on this GIL.

Common questions

Q: Does this GIL say whether the out-of-state fuel companies described in the letter owe Illinois county motor fuel tax and local sales tax?
A: No. The Department expressly declined to answer, saying the letter's description of the companies' Illinois and out-of-state business activities was too limited to allow a specific answer, and that "a determination of this nature cannot be addressed in the context of a GIL."

Q: What test does Illinois use to decide which jurisdiction gets to tax a sale?
A: Under 86 Ill. Adm. Code 270.115 (adopted after Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130), the "occupation of selling" is a composite of activities -- from preparing and obtaining orders through the final sale by passing title and payment -- so the taxing jurisdiction is wherever the fact-specific composite of those activities is centered, not any single factor like the location of the sales office.

Q: What are the "primary selling activities" used in that test?
A: Per 86 Ill. Adm. Code 270.115(c)(1): (A) location of sales personnel who can solicit customers and bind the seller; (B) location where the seller takes action binding it to the sale; (C) location where payment is tendered/received or invoices issued; (D) location of the retailer's inventory at the time of sale; and (E) location of the retailer's headquarters. Three or more primary activities in one place generally makes that place the taxing jurisdiction.

Q: Does this sourcing rule apply to motor fuel taxes too, or just general sales tax?
A: Both. 86 Ill. Adm. Code 695.115 (County Motor Fuel Tax Law) and 86 Ill. Adm. Code 696.115 (Municipal Motor Fuel Tax Law) both incorporate 270.115's sourcing provisions, so the same composite-of-activities analysis applies to the County Motor Fuel Tax (55 ILCS 5/5-1035.1) and Municipal Motor Fuel Tax (65 ILCS 5/8-11-2.3).

Q: Does having Illinois delivery trucks automatically make a company a non-"remote retailer" that owes local tax?
A: The GIL notes that a "remote retailer" under the Leveling the Playing Field for Illinois Retail Act is one with NO physical presence in Illinois, and observes that the retailer described in the letter would not appear to fit that description -- but it stops short of a firm ruling, and directs the reader back to the 270.115 composite-of-activities test to determine exactly where the selling activity (and therefore the tax liability) is sourced.

Citations and references

Statutes:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act)
• 35 ILCS 105/3 (Use Tax Act)
• 55 ILCS 5/5-1006 (county local retailers' occupation tax)
• 65 ILCS 5/8-11-1 (municipal local retailers' occupation tax)
• 70 ILCS 3615/4.03(e) (regional transit authority retailers' occupation tax)
• 55 ILCS 5/5-1035.1 (County Motor Fuel Tax)
• 65 ILCS 5/8-11-2.3 (Municipal Motor Fuel Tax)

Regulations:

• 86 Ill. Adm. Code 270.115 (Home Rule Municipal Retailers' Occupation Tax sourcing rule; the "composite of activities" test)
• 86 Ill. Adm. Code 695.115 (applies 270.115 sourcing to the County Motor Fuel Tax Law)
• 86 Ill. Adm. Code 696.115 (applies 270.115 sourcing to the Municipal Motor Fuel Tax Law)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Cases:

• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130 (Illinois Supreme Court decision prompting the Department's revised local-tax sourcing rule)
• Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316, 321 (1943) (origin of the "composite of many activities" selling-situs standard)

Legislation referenced:

• Public Acts 101-31 and 101-604 (Leveling the Playing Field for Illinois Retail Act, remote-retailer remittance threshold effective January 1, 2021)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0002-GIL.pdf

Original ruling text

ST 24-0002-GIL 01/29/2024 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. For purposes of jurisdictional questions for the County Motor Fuel Tax Law
and the Municipal Motor Fuel Tax Law, the provisions of 86 Ill. Adm. Code 270.115, which are
not incompatible, shall apply. See 86 Ill. Adm. Code 695.115; 86 Ill. Adm. Code 696.115.
(This is a GIL)
January 29, 2024
NAME
TAXPAYER REPRESENTATIVE
ADDRESS
Dear NAME:
This letter is in response to your letter dated November 14, 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 looking for a timely definitive answer as to whether a company who runs their
sales (in Illinois the sale of fuel to an Illinois customer) out of state needs to charge and
collect county motor fuel tax as well as appropriate city sales tax. I have attached the
Flowchart for the Illinois Level the Playing field Act to refer to as we believe that a
company picking up and selling fuel in Illinois or even buying the product in Indiana and
delivering it to Illinois customers should have to charge and remit local sales tax and
county motor fuel tax. There are at least two fuel companies who run their sales out of
Pennsylvania and Indiana. The companies have trucks in Illinois and pick up fuel
products in Illinois and deliver it to Illinois customers. These customers are in counties
that require a county motor fuel tax such as Kane, Lake, McHenry, Will and Dupage,
however, they are not charging the tax. One of the companies has a facility in Illinois
where they run their operations even though they run their sales out of Pennsylvania.
These companies are only charging sales tax of 6.25% and not charging or collecting
county motor fuel tax which makes it nearly impossible for us to compete against them

TAXPAYER REPRESENTATIVE/ NAME
Page 2
January 29, 2024
as we have to charge anywhere from 4-8 cents per gallon and an additional 1.75% local
sales tax.
We are looking for a definitive ruling because if a company can run "sales" out of
another state, charge a lower sales tax rate and not charge county motor fuel tax, there
is no benefit for us to keep our sales office in Illinois. We cannot stay competitive in the
state.
DEPARTMENT’S RESPONSE:
The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. [35
ILCS 120/2]. 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.
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). Similarly, Illinois law allows for the
imposition of a local motor fuel tax by certain county and municipal governments at 55 ILCS 5/51035.1 and 65 ILCS 5/8-11-2.3, respectively.
The county boards of the counties of DuPage, Kane, Lake, Will, and McHenry may impose a
County Motor Fuel Tax by ordinance or resolution. See 55 ILCS 5/5-1035.1. The County Motor Fuel
Tax is imposed upon all persons engaged in the county in the business of selling motor fuel at retail
for the operation of motor vehicles upon public highways or for the operation of recreational watercraft
upon waterways.
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 out-of-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.
In response to the Illinois Supreme Court decision in Hartney Fuel Oil Co. v. Hamer, 376 Ill.
Dec. 294 (2013), the Department of Revenue revised the administrative rules that govern the
sourcing of local retailers’ occupation taxes. See the Home Rule Municipal Retailers’ Occupation Tax
administrative rule (86 Ill. Adm. Code 270.115), the substance and provisions of which apply to all
locally imposed retailers’ occupation taxes. 86 Ill. Adm. Code 270.115 provides:
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

TAXPAYER REPRESENTATIVE/ NAME
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January 29, 2024
composite of activities that comprise the retailer’s business. Hartney Fuel Oil Co. v.
Hamer, 2013 IL 115130, paragraph 32 (citing Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316,
321-22 (1943). 86 Ill. Adm. Code 270.115(b)(2).
Please note that for purposes of jurisdictional questions for the County Motor Fuel Tax Law
and the Municipal Motor Fuel Tax Law, the provisions of 86 Ill. Adm. Code 270.115, which are not
incompatible, shall apply. See 86 Ill. Adm. Code 695.115; 86 Ill. Adm. Code 696.115. Thus, the
discussion regarding the sourcing rules for local retailers’ occupation taxes under 86 Ill. Adm. Code
270.115, in this GIL will apply as well to the county and municipal motor fuel taxes.
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, 86 Ill. Adm. Code 270.115 includes guidelines which
discuss in part, “primary selling activities”, “secondary selling activities” and “short cuts”. The
administrative rule provides that a retailer engaging in three or more primary selling activities in one
location in the State or outside of the State for a particular sale shall remit either the retailers’
occupation tax imposed at that in-State location or use tax for sales sourced outside of the State.
See 86 Ill. Adm. Code 270.115(c)(2).
An exception to 86 Ill. Adm. Code 270.115(c)(2) applies when three or more of the primary
selling activities are conducted outside of the State, but “the tangible personal property which 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), then delivered in Illinois to the
purchaser”. See 86 Ill. Adm. Code 270.115(d)(2). In such case, the Illinois jurisdiction where the
property is located or is subsequently produced is considered the proper tax situs.
Under 86 Ill. Adm. Code 270.115(c)(1), the five primary selling activities 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.

TAXPAYER REPRESENTATIVE/ NAME
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January 29, 2024
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;

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.)
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 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.

The Leveling the Playing Field for Illinois Retail Act Flowchart which was referenced in, and
included with your letter, was prepared by the Department in response to Public Acts 101-31 and

TAXPAYER REPRESENTATIVE/ NAME
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January 29, 2024
101-604 which amended the retailers’ occupation tax to require remote retailers who meet a tax
remittance threshold to remit State and local retailers’ occupation taxes beginning January 1, 2021.
The changes made by these Acts are intended to “level the playing field” between Illinois-based
retailers and remote retailers by imposing State and local retailers’ occupation taxes on Illinois
retailers and remote retailers alike. A remote retailer is a retailer with no physical presence in Illinois.
This would not appear to be the case of the retailer mentioned in your letter However, the flowchart
does show that a retailer with a presence in Illinois could owe State and local retailers’ occupation tax
or use tax depending on where the retailer’s selling activities occur, as discussed above.
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,
Tom Grudichak
Associate Counsel
TG:sc