Does Illinois sales tax or marketplace facilitator law apply to a call-answering/call-center service that takes food orders but never collects payment?

Plain-English summary

The Illinois Department of Revenue looked at a company that runs an offshore call-answering service for restaurants and other food chains. When a customer calls a restaurant, the call routes to the company's call center, where an agent enters the order into the restaurant's own point-of-sale system. The customer pays the restaurant directly, at pickup or delivery — the call-answering company never touches the money. The company asked whether it had to collect and remit Illinois sales and use tax as a "marketplace facilitator."

The Department said no on both fronts. First, as a general matter, Retailers' Occupation Tax and Use Tax do not apply to sales of service — these taxes reach sales of tangible personal property, and a pure call-answering/order-taking service does not transfer any tangible personal property to the customer. Second, and more specifically, the company does not meet the legal definition of a "marketplace facilitator" under 86 Ill. Adm. Code 131.130(a), because that definition requires the facilitator to (a) list or advertise the seller's taxable tangible personal property in a marketplace, and (b) directly or indirectly collect the customer's payment and pass it to the seller. This company does neither — it does not advertise a marketplace where goods are listed for sale, and the restaurants collect payment themselves.

The Department also flagged, in its concluding paragraph, that under the Service Occupation Tax Act businesses that provide services are instead taxed on any tangible personal property transferred incident to the service (like a repair shop taxed on parts) — but where a transaction involves no transfer of tangible personal property at all, it isn't subject to Retailers' Occupation Tax, Use Tax, Service Occupation Tax, or Service Use Tax. Since this company's service involves no transfer of goods to the customer, none of those taxes apply.

What this means for you

Call centers, order-taking services, and similar service providers

If your business only takes or routes orders — without collecting the customer's payment or advertising a marketplace of goods for sale — you are not automatically swept into marketplace facilitator status just because your platform helps a customer place an order. The two-part test in 86 Ill. Adm. Code 131.130(a) (listing/advertising the goods, plus collecting and transmitting payment) has to be satisfied on both counts.

Restaurants and food chains using third-party call/order services

This ruling is a useful data point if you outsource order-taking to a third party: as long as the vendor doesn't handle customer payment, the vendor's fees for that service are not subject to Illinois Retailers' Occupation Tax or Use Tax as "sales of service," separate from whatever sales tax you as the restaurant already collect on the food itself.

Accountants and tax professionals

Note the layered analysis: (1) the general rule that services (without a transfer of tangible personal property) fall outside Retailers' Occupation Tax, Use Tax, Service Occupation Tax, and Service Use Tax; and (2) the specific marketplace-facilitator test under 35 ILCS 120/2(c) and 86 Ill. Adm. Code 131.130(a), which turns on payment collection, not just order facilitation. Remember this is a GIL, not a PLR — it's not binding on the Department and doesn't resolve facts specific to any other taxpayer.

Common questions

Q: Does a call-answering or order-taking service have to charge Illinois sales tax on its fees?
A: Based on this ruling, no — Retailers' Occupation Tax and Use Tax do not apply to sales of service where no tangible personal property is transferred to the customer.

Q: What makes a business a "marketplace facilitator" in Illinois?
A: Under 86 Ill. Adm. Code 131.130(a), a marketplace facilitator must both (1) list or advertise, for a marketplace seller, tangible personal property subject to Retailers' Occupation Tax in a marketplace, and (2) directly or indirectly collect the customer's payment and transmit it to the seller. Missing either element means the business isn't a marketplace facilitator.

Q: Why didn't this company qualify as a marketplace facilitator even though it processes orders?
A: Because it never collects the customer's payment — the customer pays the restaurant directly at pickup or delivery — and its call-center service doesn't fit the definition of a "marketplace" where goods are listed or advertised for sale.

Q: Can this company (or another business) rely on this letter as binding guidance?
A: No. This is a General Information Letter (GIL), which merely points to relevant regulations and is not a statement of Department policy and not binding on the Department. See 2 Ill. Adm. Code 1200.120. A binding determination requires a Private Letter Ruling (PLR) under 2 Ill. Adm. Code 1200.110.

Q: Does this mean the restaurant itself doesn't owe sales tax on the food sold?
A: No — this ruling only addresses the call-center service provider's own tax obligations on its service fees. It doesn't change the restaurant's obligation to collect sales tax on its taxable food sales to the end customer.

Citations and references

Statutes and rules:

• 35 ILCS 105/3-45 (nexus/maintaining a place of business in Illinois)
• 35 ILCS 105/2 (definition of retailer maintaining a place of business)
• 35 ILCS 120/1 (definitions of marketplace and marketplace seller)
• 35 ILCS 120/2(c) (marketplace facilitator engaged in selling at retail, effective January 1, 2021)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax Act)
• 86 Ill. Adm. Code 131.105 (definition of marketplace)
• 86 Ill. Adm. Code 131.130(a) (definition of marketplace facilitator)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax Act)
• 86 Ill. Adm. Code 150.101 (Use Tax)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)

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/ST24-0025-GIL.pdf

Original ruling text

ST 24-0025-GIL 06/11/2024 SALES OF SERVICE
Retailers’ Occupation Tax and Use Tax do not apply to sales of service. A call
answering service does not meet the definition of a marketplace facilitator. (86 Ill.
Adm. Code 131.130(a)). (This is a GIL)

June 11, 2024
COMPANY
NAME
ADDRESS
Dear NAME:
This letter is in response to your letter dated April 15, 2024, 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 this request is to obtain a private letter ruling from the
Office of Legal Services of the Illinois Department of Revenue
(“Department”) on behalf of our client, (hereinafter, referred to as the
“Company”), in order to receive a determination regarding the taxability or
exemption of the Company’s services that the Company sells within
Illinois. We request this determination from the Department to ensure that
the Company complies with Illinois sales and use tax requirements. The
Company does not have the same issue under audit or appeal with the
Department or any other taxing or revenue authority. The Company has
not been notified an audit or examination is pending. The Company is not
currently litigating the issues.
The Company does not require a
determination of nexus in the state.
FACTS

COMPANY
Page 2
June 11, 2024
The Company operates a call center service business that provides call
center services. The primary focus of the Company is to provide call
center service for the restaurant industry as well as a variety of other food
chain stores. When a customer contacts a restaurant, the customer’s
phone call is automatically directed to the Company’s call centers. The
Company’s call centers are located offshore, primarily overseas. At the
offshore call centers, agents handle the customer’s order and have access
to the food chain’s Point of Sale (POS) system. As the customer places
their order, the customer’s order is entered into the POS system and
appears on the screen of the restaurant stores. Upon completion of the
customer’s order and upon pickup or delivery, the customer pays the food
chain directly for their order. The Company does not process payment,
but is rather initiating orders via the Company’s customers’ POS system.
In accordance with the Company’s Statement of Work and Master Service
Agreement, the Company provides services, which include, but are not
limited to the following:

1. Inbound Order Calls: Order Taking
   1.1. The Company will handle customer orders
   1.2. The Company will cross-sells alternative menu items
   1.3. The Company will up-sell additional menu items
   1.4. The Company will enroll customers into Loyalty Program
2. Inbound Non-Order Calls: Non-Order Service Calls
   2.1. The Company will transfer calls from customers directly to
   restaurants
   2.2. The Company will input changes to customer information
   upon request
   2.3. The Company will respond to other general inquiries
   The Company generates its revenue by contacting [sic] directly with the
   various food chains. For example, the Company has pricing, including,
   but not limited to, the following: (i) flat monthly fees; (ii) fees determined if
   the customer calls to place an order; (iii) fees determined if the customer
   calls for inquiries; etc. If a call falls within a certain limited timeframe, the
   Company does not charge the food chains.
   ISSUES & REQUESTED ADVISEMENT
   The Company requests the Department to provide guidance on:
3. Whether the Company is a Marketplace Facilitator with responsibility to
   collect and remit sales and use tax. The Company does not seek a ruling
   regarding economic nexus.

COMPANY
Page 3
June 11, 2024

Applicable Law & Analysis
Any retailer or retailer maintaining a place of business in Illinois is
engaged in making “sales at retail”, has nexus with Illinois and must
collect retailer occupation tax. 35 ILCS 105/3-45.
A “retail [sic]
maintaining a place of business in Illinois” is a retailer who engages in
activities in Illinois, which activities in the state in which the retail business
engaging in such activities is located would constitute maintaining a place
of business in that state. 35 ILCS 105/2. A marketplace facilitator that
meets one of two economic thresholds for nexus in Illinois is a retailer
under sales and use tax law. Id. A “marketplace” is a physical or
electronic place, forum, platform, application, or other method by which a
marketplace seller sells or offers to sell items. 35 ILCS 120/1. Examples
of marketplaces include Internet marketplace platforms on which tangible
personal property is offered for sale; antique malls, home shopping
networks selling tangible personal property over television, cable or
satellite networks; or consignment shops selling tangible personal property
on behalf of numerous persons. Id. A “marketplace facilitator” is a person
who, facilitates a retail sale by an unrelated third-party marketplace seller
by doing both of the following: listing or advertising for sale by the
marketplace seller in a marketplace, tangible personal property that is
subject to tax under the retailers’ occupation tax; and either directly or
indirectly, through agreements or arrangements with third parties,
collecting payment from the customer and transmitting that payment to the
marketplace seller. Id. A marketplace facilitator is required to certify to
each marketplace seller that it is required to collect sales and use tax. Id.
Analysis
The Company does not qualify as a marketplace facilitator and the state
will not impose sales tax on the Company’s call center services. The
Company’s services do not appear to fit within the definition of taxable
services and the Company does not fall into the definition of a
marketplace facilitator. A marketplace facilitator collects the payment from
the purchaser and transmits the payment to the person selling the
property. Here, the Company does not collect the payment of the taxable
sale, as the payment is directly collected by the Company’s clients.
Therefore, the Company does not satisfy the definition of a marketplace
facilitator. Further, the Company’s business may not meet the definition of
a “marketplace” as the definition does not include a call center as a
potential marketplace.
CONCLUSION

COMPANY
Page 4
June 11, 2024
Based on the foregoing, and based upon our review of the Company’s
facts, as well as the law cited, the Company’s services are not taxable,
and the company does not qualify as a marketplace facilitator.
We respectfully await the State’s determination upon the taxability of the
Company’s services. Should you have any questions or concerns, or
additional information or documentation is necessary, please contact me
at NUMBER, or by email at EMAIL. Thank you very much for your time
and consideration.
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, 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.
Beginning January 1, 2021, a marketplace facilitator is engaged in the
occupation of selling at retail tangible personal property in Illinois for the purposes of the
Retailers’ Occupation Tax Act. 35 ILCS 120/2(c). A marketplace is a physical or
electronic place, forum, platform, application, or other method by which a marketplace
seller sells or offers to sell items. See 86 Ill. Adm. Code 131.105. A marketplace
facilitator is a person who, pursuant to an agreement with an unrelated third-party
marketplace seller, directly or indirectly facilitates a retail sale by an unrelated thirdparty marketplace seller by:
a)

listing or advertising for sale, by the marketplace seller in a
marketplace, tangible personal property that is subject to tax under
the Retailers’ Occupation Tax Act; and

b)

either directly or indirectly, through agreements or arrangements
with third parties, collecting payment from the customer and
transmitting that payment to the marketplace seller.

86 Ill. Adm. Code 131.130(a).
Retailers’ Occupation Tax and Use Tax do not apply to sales of service. Under
the Service Occupation Tax Act, businesses providing services (i.e., servicemen) are
taxed on tangible personal property transferred as an incident to sales of a service. See
86 Ill. Adm. Code 140.101. If a transaction does not involve the transfer of any tangible

COMPANY
Page 5
June 11, 2024
personal property to the customer, then it would not be subject to Retailers’ Occupation
Tax, Use Tax, Service Occupation Tax, or Service Use Tax.
I hope this information is helpful. If you require additional information, please
visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.
Very truly yours,
Thomas Grudichak
Associate Counsel
TG:sce