Can a pastor use his church's tax-exempt (E-number) status to buy furniture for himself, tax-free, for the parsonage he lives in?

Plain-English summary

Someone -- referred to the Department by an IDOR employee over the phone -- wrote in asking a narrow, practical question: can a pastor use his church's tax-exempt number to buy furniture for his home, given that he lives in the church's parsonage? The requester asked for a "Legally Binding Letter," but because the inquiry was a general question about how the exemption works rather than a request tied to a fully documented, specific transaction, the Department responded with a GIL instead of a binding Private Letter Ruling (PLR).

The Department's response starts with the basics: Illinois' Retailers' Occupation Tax (86 Ill. Adm. Code 130.101) taxes sellers of tangible personal property, and the companion Use Tax (86 Ill. Adm. Code 150.101) taxes the privilege of using property bought at retail -- together, what's commonly called Illinois "sales tax." Sales to organizations that are exclusively religious, charitable, or educational are still taxable by default, unless the organization has obtained an active exemption identification number ("E-number") from the Department (86 Ill. Adm. Code 130.120(h); 130.2007). The seller must be given that E-number for the sale to be tax-exempt.

Critically, the Department stresses that only sales to the exempt organization itself -- not sales to individual members of the organization -- qualify for the exemption. What matters is not the type of item bought, but whether the item is used to further the organization's own exempt purpose (86 Ill. Adm. Code 130.2081). And to be treated as a purchase by the organization, the organization itself must pay for it -- one accepted method is a credit card billed directly to the exempt entity, in the entity's name (alone, or together with an authorized user's name).

The Department then points to the exact example that answers the question: Example 1 under 130.2081(b)(5)(A), where a minister of a church with an E-number buys furniture for the parsonage. The purchase is tax-exempt in that example because the minister (1) gave the retailer a copy of the Department's letter showing the church's E-number, which the retailer kept in its records, (2) paid using a credit card issued in the church's name, and (3) the furniture furthered the church's own organizational purpose (furnishing the parsonage it provides). The retailer also had to note the payment method on the bill of sale.

What this means for you

Churches and other exempt organizations

If your organization holds an active E-number, you can buy items tax-free, including for uses like furnishing a parsonage the organization provides to clergy -- but the purchase has to be structured as the organization's own purchase, not the individual's. That means paying with the organization's funds or a card billed to and in the name of the organization, and giving the seller a copy of the Department's E-number letter so the seller can document the exemption in its own records.

Pastors, clergy, and other individual members of exempt organizations

You personally cannot use your organization's E-number to make a tax-free purchase billed to you individually. The exemption follows the organization's own payment and documentation, not simply the fact that you're a member (or resident of parsonage housing) affiliated with an exempt group. If a purchase is really for your personal benefit and paid for out of your own pocket, it is not the kind of purchase the exemption covers.

Retailers who sell to exempt organizations

Before treating a sale as exempt, get and keep a copy of the buyer's Department letter showing an active E-number, confirm the purchase is paid for by the organization itself (e.g., an organization-billed credit card) rather than an individual, and note the payment method on the bill of sale. Absent that documentation, the default rule applies and the sale is taxable.

Accountants and tax professionals

This GIL is a useful pointer to the controlling regulations (130.120(h), 130.2007, and especially the 130.2081(b)(5)(A) example) but is not itself binding -- it does not certify that any particular client's parsonage-furniture purchase, or any other specific transaction, qualifies. A client wanting a binding determination on their own facts needs to request a PLR under 2 Ill. Adm. Code 1200.110 and provide the complete, specific facts.

Common questions

Q: Can a pastor buy furniture for the church parsonage using the church's tax-exempt number?
A: Yes, according to the Department's example, if the purchase is billed to and paid for by the church (such as with a credit card issued in the church's name), the retailer is given a copy of the Department's E-number letter, and the furniture furthers the church's organizational purpose (here, furnishing the parsonage). The key is that it must be structured as the church's purchase, not the pastor's personal purchase.

Q: Does the exemption cover purchases by individual members of an exempt organization?
A: No. The Department is explicit that only sales to exempt organizations holding an E-number are exempt -- not sales to individual members of the organization.

Q: What determines whether a purchased item qualifies for the exemption?
A: Not the type of item, but whether it is used in furtherance of the exempt organization's own organizational purpose. A parsonage furniture purchase can qualify because furnishing housing the church provides serves the church's purpose.

Q: How does a retailer document that a sale to an exempt organization was properly tax-exempt?
A: The retailer should keep a copy of the Department's letter containing the organization's E-number and note the method of payment (e.g., a credit card issued in the organization's name) on the bill of sale, per the Example 1 illustration under 86 Ill. Adm. Code 130.2081(b)(5)(A).

Q: Is this GIL a legally binding ruling the requester (or anyone else) can rely on?
A: No. The requester specifically asked for a "Legally Binding Letter," but the Department issued a GIL, which directs taxpayers to the relevant regulations and is not a statement of Department policy and not binding on the Department. A binding answer requires a PLR request under 2 Ill. Adm. Code 1200.110.

Citations and references

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposed on sellers of tangible personal property)
• 86 Ill. Adm. Code 150.101 (Use Tax on the privilege of using property purchased at retail)
• 86 Ill. Adm. Code 130.120(h) (tax status of sales to exempt organizations)
• 86 Ill. Adm. Code 130.2007 (exempt organizations; E-number requirement)
• 86 Ill. Adm. Code 130.2081, including Example 1 under 130.2081(b)(5)(A) (documenting and paying for exempt purchases; church-parsonage-furniture illustration)
• 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/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0008-GIL.pdf

Original ruling text

ST 24-0008-GIL 02/29/2024 EXEMPT ORGANIZATIONS
This letter discusses sales to exempt organizations. See 86 Ill. Adm. Code 130.2007; 86 Ill.
Adm. Code 130.2081. (This is a GIL.)
February 29, 2024
NAME
ADDRESS
Dear Xxxxx:
This letter is in response to your letter dated December 5, 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 https://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:
To Whom it may concern,
I was referred to you from an IDOR employee, over the phone.
What I am asking is:
Can a pastor use his church’s tax exempt number to purchase furniture for his home?
He lives in the church’s parsonage.
Please send me your reply Legally Binding Letter format.

DEPARTMENT’S RESPONSE:
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. In Illinois, a Use Tax is imposed on the privilege of using, in this State, any kind
of tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm.
Code 150.101. These taxes comprise what is commonly known as “sales tax” in Illinois.
Sales to exempt organizations that qualify as exclusively religious, charitable, or educational
are subject to tax unless the exempt organization has obtained an active exemption identification
number (E-number) from the Department. See 86 Ill. Adm. Code 130.120(h); 86 Ill. Adm. Code

NAME
Page 2
February 29, 2024
130.2007. Persons or businesses selling tangible personal property to these organizations or
governmental entities must be provided with an E-number for the sales to be tax exempt.
Only sales to exempt organizations holding the E-number are exempt, not sales to individual
members of the organization. The type of item purchased by the exempt organization is not
determinative of its tax-exempt status. Whether the item is used in furtherance of the organizational
purpose of the exempt entity determines whether the item can be purchased tax-free. See 86 Ill.
Adm. Code 130.2081. For a purchase by an exempt entity to be tax exempt, an exempt entity must
pay for its purchase. One method of payment authorized in 86 Ill. Adm. Code 130.2081, is by use of
a credit card that is directly billed to an exempt entity and is either in an exempt entity’s name only or
in an exempt entity’s name and the name of a person authorized to use it. Note 86 Ill. Adm. Code
130.2081(b)(5)(A) provides the following example:
EXAMPLE 1: A minister of a church with an E-number purchases some furniture for the
parsonage. The minister gives the furniture retailer a copy of the letter from the
Department that contains the church’s E-number and pays for the furniture by a credit
card issued in the church’s name. The retailer notes the method of payment on the bill
of sale. This purchase is tax exempt because the minister gave the retailer a copy of
the Department’s letter, which the retailer retained in its books and records. The
purchase was in furtherance of the church’s organizational purpose and was paid for by
a credit card in the church’s name.
I hope this information is helpful. If you require additional information, please visit our website
at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information Division at (217) 7823336.
Very truly yours,
Thomas Grudichak
Associate Counsel
TG:rkn