Does Illinois Retailers' Occupation (Sales & Use) Tax apply to out-of-state retailers selling to Illinois customers, and to leases of registered trailers, starting in 2025?

Plain-English summary

This General Information Letter began as a response to an annual third-party survey — a company that publishes a "Title and Registration Textbook" for government offices asked the Illinois Department of Revenue to confirm or update a long block of boilerplate text about vehicle titling, use tax on vehicle purchases, leased and rental vehicles, and related topics. The Department was explicit that it "cannot approve third-party publications" and pointed the requester to the Illinois Compiled Statutes, Administrative Code, and Department publications instead of confirming the survey text line by line.

What makes this letter useful, though, is that the Department used it to flag several 2025 statutory changes to the Retailers' Occupation Tax Act that affect the topics the survey covered. First, beginning January 1, 2025, an out-of-state retailer that maintains a place of business in Illinois but ships or delivers tangible personal property to Illinois customers from an out-of-state location is now treated as "engaged in the occupation of selling at retail" at the Illinois delivery location, and owes state and applicable local Retailers' Occupation Tax on those sales (35 ILCS 120/2(b-2); 35 ILCS 120/2-12(8), as amended by P.A. 103-983).

Second, Article 75 of Public Act 103-592 extends the Retailers' Occupation Tax, effective January 1, 2025, to leases of trailers that must be registered with an Illinois agency (other than semitrailers as defined in the Illinois Vehicle Code). Sellers of such trailers to persons in the business of leasing or renting them can sell as a nontaxable sale for resale if the resulting lease/rental will itself be taxed, and lessors must then report and pay tax on their lease/rental receipts as collected.

Third, for returns due on or after January 1, 2025, the "retailer's discount" — the amount a retailer may keep to cover the cost of recordkeeping, filing, and remitting tax — is capped at $1,000 per month across all of a retailer's transaction returns filed that month, under 35 ILCS 120/3 as amended by P.A. 103-592.

What this means for you

Out-of-state retailers with an Illinois presence

If your business maintains a place of business in Illinois (for example, a warehouse, office, or other physical presence) but fulfills Illinois customer orders by shipping from an out-of-state location, you are now considered to be selling at retail at the Illinois location where the property is delivered or where the purchaser takes possession. That means you owe Illinois Retailers' Occupation Tax — state tax plus any applicable local taxes — on those sales starting January 1, 2025.

Trailer sellers, lessors, and renters

If you sell registered trailers (other than semitrailers) to a business that leases or rents them out, you can treat that sale as a nontaxable sale for resale, provided the subsequent lease or rental is itself subject to Retailers' Occupation Tax. If you are the one leasing or renting out such trailers, you are now responsible for reporting and remitting Retailers' Occupation Tax and Use Tax on your lease/rental receipts as you collect them, effective for leases in effect, entered into, or renewed on or after January 1, 2025.

Anyone relying on third-party vehicle-tax guides

The Department pointedly declined to bless the "Title and Registration Textbook" survey language reproduced in this letter, telling the requester to consult the actual Illinois Compiled Statutes, Administrative Code, and Department publications instead. Businesses and government offices that rely on commercial compliance guides for Illinois vehicle sales/use tax rules should not treat those guides as authoritative, especially where recent law changes (like the ones in this letter) may not yet be reflected.

Common questions

Q: Does the Department endorse the survey text about vehicle titling and use tax reproduced in this letter?
A: No. The Department explicitly stated it "cannot approve third-party publications" and directed the requester to the Illinois Compiled Statutes, Administrative Code, and Department's own publications for authoritative information on those topics.

Q: What changed for out-of-state retailers starting in 2025?
A: Under 35 ILCS 120/2(b-2) and 35 ILCS 120/2-12(8) (as amended by P.A. 103-983), an out-of-state retailer that maintains a place of business in Illinois but ships to Illinois customers from an out-of-state location is, beginning January 1, 2025, treated as selling at retail at the Illinois delivery/possession location and owes Illinois Retailers' Occupation Tax, including applicable local taxes, on those sales.

Q: How does the trailer-leasing change work?
A: Article 75 of Public Act 103-592 extends Retailers' Occupation Tax, effective January 1, 2025, to leases of trailers required to be registered in Illinois (other than semitrailers under 625 ILCS 5/1-187). A trailer sold to a lessor/rentor of such trailers can be a nontaxable resale if the lease/rental itself will be taxed, and the lessor then reports and pays tax on lease/rental receipts as collected.

Q: Is there a cap on the retailer's discount for filing and paying on time?
A: Yes. For returns due on or after January 1, 2025, the retailer's discount — compensation for recordkeeping, filing, and remitting — cannot exceed $1,000 per month in total across all of a retailer's transaction returns filed that month, under 35 ILCS 120/3 as amended by P.A. 103-592.

Q: Can I rely on this letter the way I could rely on a Private Letter Ruling?
A: No. This is a General Information Letter, not a Private Letter Ruling. It is not a statement of Department policy and is not binding on the Department (2 Ill. Adm. Code 1200.120). It directs the reader to statutes and regulations rather than resolving a specific taxpayer's facts.

Citations and references

Statutes and rules:

• 35 ILCS 120/2(b-2) (out-of-state retailer maintaining an Illinois place of business)
• 35 ILCS 120/2-12(8), as amended by P.A. 103-983 (situs of sale at Illinois delivery/possession location)
• 35 ILCS 120/1 (definition of "selling price")
• 35 ILCS 120/3, as amended by P.A. 103-592 ($1,000/month retailer's discount cap)
• Article 75 of Public Act 103-592 (Retailers' Occupation Tax on leases of registered trailers, excluding semitrailers under 625 ILCS 5/1-187)
• 2 Ill. Adm. Code 1200.120 (General Information Letters; not binding on the Department)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)

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/ST24-0041-GIL.pdf

Original ruling text

ST 24-0041-GIL 12/11/2024 MISCELLANEOUS
This letter responds to an annual survey. (This is a GIL.)
December 11, 2024
NAME
COMPANY
EMAIL
Dear NAME:
This letter is in response to your letter dated July 3, 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
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:
We are updating the information in the Title and Registration Textbook which
is used by government offices throughout the country…..would you like any
changes made to the information below for 2025 or is it correct as displayed?
OCCUPATION AND USE TAX/SALES TAX APPLICABLE TO TITLING NOTE:
Updates may be implemented. State tax rate is 6.25% with some locally
imposed taxes. RESIDENTS who purchase a new or used vehicle from out-ofstate dealers, lending institutions, or leasing companies pay state tax of
6.25% but may include LOCAL TAXES depending on location in the state, on
the net price after trade-in allowance, with CREDIT for sales or use taxes paid
to other state. MILITARY PERSONNEL ARE NOT EXEMPT from sales taxes.
Individuals moving into Illinois are EXEMPT from the USE TAX if vehicle was
purchased AND titled in another state for at least 3 months prior to moving
into Illinois. With some exceptions, NON-RESIDENTS who purchase a vehicle

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December 11, 2024
in Illinois for registration in another state are not subject to tax if not titled in
Illinois. Nonresidents are not entitled to this exemption if the vehicle will be
titled in a
state that does not give Illinois residents an exemption on their purchases in
that state of vehicles that will be titled in Illinois (i.e. if there is no reciprocal
exemption). Purchaser must acquire or affix driveaway permit or purchaser
must affix non-Illinois license plates to remove from Illinois. Vehicles sold to
an INTERSTATE CARRIER to be used for hire, governmental body, a
corporation, society, association, foundation, or institution organized and
operated exclusively for charitable, religious, or educational purposes, with
an active identification number issued by the Department are EXEMPT. The
gift, transfer, or purchase of a vehicle from a private party other than a retailer
is subject to PRIVATE PARTY VEHICLE USE TAX (Form RUT-50) on the model
year if the selling price was less than $15,000, and on the selling price if
$15,000 or more. The PRIVATE PARTY VEHICLE USE TAX on gifts, transfers, or
purchases of motorcycles and ATVs is $25.00, and $15.00 on motor vehicles
when the gift, transfer, or purchase of any motor vehicle is between spouse,
parent, brother, sister, or child. Effective September 1, 2021, a $15.00 tax
liability applies when a transfer is from one spouse to the other spouse in a
dissolution of marriage and the transfer is made no later than 90 days from the
date of a final, non-appealable order of dissolution of marriage. The Illinois
Department of Revenue collects Chicago and Cook County’s Local Vehicle
Use Tax on non-retail transactions on Form RUT-50 as well. TAX EXEMPT when
transferring to a surviving spouse. NOTE: There are NO USE TAXES on PRIVATE
PARTY TRANSFERS on mobile homes, trailers, and snowmobiles. You need a
use permit. The gift, transfer, or non-retail purchase of an airplane or boat is
subject to the AIRCRAFT or WATERCRAFT USE TAX, respectively, at the rate of
6.25% with no locally imposed taxes. The tax is based on the selling price or
fair market value of the airplane or boat, whichever is greater. TAX EXEMPT
when purchased from a non-retailer for use by an EXEMPT ORGANIZATION or
INTERSTATE CARRIER for hire, is given to a SURVIVING SPOUSE, or is used in
PRODUCTION AGRICULTURE. When a customer receives more than one
vehicle from a dealer for their trade-in, and no money changes hands (even
trade), a completed tax form is required with every Application for Title,
regardless of whether taxes are due or not. The net purchase price is defined
as the actual purchase price less the trade-in value(s). If the net purchase
price is zero or less, then the tax due is zero. To receive assistance with tax
computation and for updates please contact the Illinois Department of
Revenue at (800) 732-8866 or (217) 782-3336. By mail contact Illinois
Department of Revenue, Sales and Use Taxes, 101 W. Jefferson Street,
Springfield, IL 62702 and on the Internet https://tax.illinois.gov/. Also

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December 11, 2024
consider accessing the Leveling the Playing Field for Illinois Retail Act and 86
III. Adm. Code 131.101 et seq. NOTE: Updates may be implemented, for
details please contact the state. (Also See Section V.)
OCCUPATION USE TAX/SALES TAX APPLICABLE TO REGISTRATION —
None. For information please contact the Illinois Department of Revenue at
(800) 732-8866 or (217) 782-3336. By mail contact Illinois Department of
Revenue, Sales and Use Taxes, 101 W. Jefferson Street, Springfield, IL 62702
and on the Internet https://tax.illinois.gov/. NOTE: Updates may be
implemented, for details please contact the state. (Also See Section I.)
LEASED VEHICLES — NOTE: Updates may be implemented. A leased vehicle
is a motor vehicle, which has its possession or right of possession transferred
to a user for a valuable consideration FOR A PERIOD OF ONE YEAR OR MORE.
Evidence of insurance is not required at the time of registration, but Illinois
motorists will need to carry an Illinois Insurance Card showing proof of
minimum mandatory insurance coverage. On RENTALS (a motor vehicle
which has its possession or right of possession transferred to a user for a
valuable consideration FOR A PERIOD OF LESS THAN ONE YEAR), you must
submit proof of insurance, $50,000 / $100,000 / $50,000, or a combined single
limit coverage of $150,000. You must carry a current rental agreement in the
vehicle to serve as evidence of liability insurance. If registering a newly
purchased rental passenger vehicle for the first time, the registration fee shall
be prorated from and including month of purchase through December of the
year of purchase. The fee is $12.00 per month. If registering for the first time
in Illinois a rental passenger vehicle that has been previously registered by the
same owner in another state, the registration fee shall be prorated from and
including month the vehicle becomes subject to registration in Illinois through
December of that year. TAXES — All vehicles brought into Illinois to be titled
and registered require an Illinois Use Tax Transaction Return (Form RUT-25) to
be filed within 30 days of bringing the vehicle into the state. (Note: Taxes on
vehicles purchased from an Illinois dealer are generally handled directly by
the dealer.) For LEASED VEHICLES (periods of more than one year): Lessor is
considered user of the vehicle and incurs Illinois Use Tax liability when vehicle
is brought into the state. Effective January 1, 2015, the taxable “selling price”
of motor vehicles of the first division and certain motor vehicles of the second
division sold for the purpose of leasing the vehicles for a defined period of
more than one year is based on the amount of the lease contract, with no
credit for trade-ins. See the definition of “selling price” at 35 ILCS 120/1. The
Illinois Use Tax is due upfront at the time of applying for title and registration
and is based on address of lessee where vehicle will be titled and registered.

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December 11, 2024
The STATE TAX rate is 6.25% but may include LOCAL TAXES up to 7.25%
depending on location in the state. For a sale of a leased vehicle a Bill of Sale
or other specific proof of the purchase price must be submitted with the Use
Tax Return. Trade-in deduction (except in cases where the taxable selling
price is the amount of the lease contract) and/or credit for sales tax previously
paid in another state is allowed to reduce Illinois Use Tax but only if clearly
and separately stated on the Bill of Sale or other proof of purchase. For
RENTAL VEHICLES (one year or less): Rentor is considered user of vehicle. If
rentor is currently registered to collect AUTOMOBILE RENTING TAX in Illinois,
vehicle is exempt from up front Illinois Use Tax, however a Use Tax Return is
still required when applying for title and registration. Rentor pays Automobile
Renting Tax each month based on receipts received from renting.
AUTOMOBILE RENTING TAX rate is 5% STATE, 1% LOCAL (if applicable), and
6% METROPOLITAN PIER AND EXPOSITION AUTHORITY (if applicable). No
PERSONAL PROPERTY TAXES. MUNICIPAL OR COUNTY USE TAX on vehicles
imposed by certain home rule municipalities or by Cook County, which,
except for Chicago in some cases, are administered and collected by the
municipality or county. The Illinois Department of Revenue administers
collections of state taxes on vehicles. NOTE: Updates may be implemented
please contact Taxpayer Assistance at (800) 732-8866 or (217) 782-3336. The
issuance of titles and registrations of vehicles are administered by the Office
of the Secretary of State. For more information, call (217) 782-6387. (Also See
Section I and V).
DEPARTMENT’S RESPONSE:
The Department cannot approve third-party publications. You should consult the
Illinois Complied Statutes, Administrative Code, and Department’s publications for
information on these matters. However, several recently enacted public acts may require
a reevaluation of your explanation of Illinois sales tax
Beginning on January 1, 2025, a retailer maintaining a place of business in this State
that makes retail sales of tangible personal property to Illinois customers from a location
or locations outside of Illinois is engaged in the occupation of selling at retail in Illinois for
the purposes of the Retailers’ Occupation Tax Act. Such retailers are liable for all
applicable State and locally imposed retailers’ occupation taxes administered by the
Department on retail sales made by such retailers to Illinois customers from locations
outside of Illinois. 35 ILCS 120/2(b-2). The retailer is engaged in the business of selling at
the Illinois location to which the tangible personal property is shipped or delivered or at
which possession is taken by the purchaser. 35 ILCS 120/2-12(8) as amended by P.A. 103983.

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December 11, 2024

Article 75 of Public Act 103-592 provides, among other things, that the tax imposed
by the Retailers’ Occupation Tax Act on tangible personal property includes leases of
trailers that are required to be registered with an agency of this State, other than
semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, for leases in effect,
entered into, or renewed on or after January 1, 2025. The lessor, in collecting the tax, may
collect for each tax return period, only the tax applicable to that part of the selling price
received during such tax return period. Effective January 1, 2025, sellers of trailers that are
required to registered with an agency of this State, other than semitrailers as defined in
Section 1-187 of the Illinois Vehicle Code, to persons engaged in the business of leasing or
renting the trailers are authorized to sell these trailers as a nontaxable sale for resale if the
lease or rental of the trailers will be subject to Retailers’ Occupation Tax. Effective January
1, 2025, persons engaged in the business of leasing or renting such trailers are subject to
Illinois Retailers’ Occupation Tax and Use Tax and must report and pay tax on their lease or
rental receipts as they are collected from the customer.
Beginning with returns due on or after January 1, 2025, the retailer’s discount
allowed to reimburse the retailer for the expenses incurred in keeping records, preparing
and filing returns, remitting the tax and supplying data to the Department on request under
the Retailers’ Occupation Tax Act and the Use Tax Act, including any local tax administered
by the Department and reported on the same transaction return, shall not exceed $1,000
per month for all transaction returns filed during the month. 35 ILCS 120/3 as amended by
P.A. 103-592.
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) 782-3336.
Very truly yours,

Samuel J. Moore
Associate Counsel
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