Which city's local sales tax applies when a company's headquarters processes an order but the customer picks up the item at a different warehouse in another town?

Plain-English summary

This is a renewal of a private letter ruling the Illinois Department of Revenue first issued to the same taxpayer (referred to here as COMPANY1) back in 2015, addressing where COMPANY1's sales of plumbing supplies should be sourced for local Retailers' Occupation Tax (ROT) purposes -- meaning which city or village gets to tax the sale, not whether tax is owed at all. COMPANY1 asked the Department to confirm the same sourcing conclusions still apply given that the law and its facts have not materially changed since 2015.

COMPANY1 runs its headquarters and sales office ("HQ/Sales Office") out of a non-home-rule village, where it receives and processes purchase orders, sets prices, does credit approval, bills customers, and handles collections. It also keeps a warehouse in a separate home-rule municipality, used mainly for shipping and for occasional over-the-counter pickup sales. The Department's local-tax sourcing rules (86 Ill. Adm. Code 270.115) look at where the "composite of activities" that make up a sale actually occurs, using a five-factor test: (1) where sales staff solicit and bind customers, (2) where the seller accepts the order, (3) where payment is tendered or invoices are issued, (4) where the inventory sold is located, and (5) where the company's headquarters/decision-making sits. A retailer needs at least three of the five factors present at a location for sales to be sourced there.

The Department agreed with COMPANY1's own analysis on all points. Sales in which the HQ/Sales Office receives, prices, bills, and collects payment for the order have three or more of the primary factors present at the HQ/Sales Office, so those sales are sourced to the HQ/Sales Office's village. Over-the-counter sales made directly at the warehouse are sourced to the warehouse's city, because the purchaser pays and takes possession there. And orders placed by phone, in writing, or electronically at the HQ/Sales Office -- but picked up by the purchaser at the warehouse, with no prior standing commitment to buy -- are also sourced to the warehouse's city under the specific statutory rule at 35 ILCS 120/2-12(2), because that section treats the sale as occurring where the purchaser takes possession when the retailer regularly stocks that item there.

Because this is a Private Letter Ruling, it binds the Department only as to COMPANY1 and only based on the specific facts described (and it will again expire 10 years from this November 20, 2025 letter, per 2 Ill. Adm. Code 1200.110(e), unless renewed). It does not set sourcing rules for any other retailer.

What this means for you

Multi-location retailers with a headquarters and separate warehouses

If your business takes and processes orders at one office but ships or lets customers pick up goods from a warehouse in a different town, don't assume all your local sales tax automatically goes to one location. The Department looks at where each individual sale's activities (solicitation, order acceptance, payment/invoicing, inventory, and headquarters) actually happen, and a sale can be sourced to the warehouse's jurisdiction instead of the headquarters' jurisdiction if the customer pays and picks up there without having already committed to the purchase beforehand.

Accountants and tax professionals advising retailers on local ROT

This ruling is a useful illustration of how the five-factor test in 86 Ill. Adm. Code 270.115(c) and the pickup-sale rule in 35 ILCS 120/2-12(2) interact in practice: headquarters-processed orders shipped to the customer source to headquarters (3+ of the primary factors present), while orders picked up at a warehouse -- whether walk-in over-the-counter sales or phone/electronic orders picked up later -- source to the warehouse, as long as there was no pre-existing purchase commitment and the retailer regularly stocks that item there.

Businesses considering requesting or renewing a PLR

The ruling also shows the Department's approach to PLR renewals: because the taxpayer's facts and the underlying law hadn't changed since the original 2015 ruling, the Department reissued essentially the same conclusions rather than requiring a fresh full analysis. Note the 10-year expiration clock under 2 Ill. Adm. Code 1200.110(b) and (e) -- taxpayers relying on a PLR need to seek renewal before it lapses.

Common questions

Q: Does this ruling mean all of COMPANY1's sales are exempt from local sales tax?
A: No. The ruling is only about which local jurisdiction's tax applies (sourcing), not whether tax is owed. Local Retailers' Occupation Tax still applies to these sales -- the ruling just confirms which city's rate and rules govern each type of sale.

Q: Why are the over-the-counter and pickup sales sourced differently from the mail/phone/online orders shipped to customers?
A: Because the "composite of activities" that make up the sale happens in different places. For shipped orders, the HQ/Sales Office does the soliciting, order acceptance, invoicing, and payment processing, so three or more of the five primary factors point to the HQ/Sales Office. For over-the-counter and no-prior-commitment pickup sales, the customer pays and takes possession at the warehouse, and 35 ILCS 120/2-12(2) treats that as the place of sale when the retailer regularly stocks the item there.

Q: Can another business rely on this ruling for its own local-tax sourcing question?
A: No. This is a Private Letter Ruling, binding on the Department only as to the taxpayer who requested it (COMPANY1) and only to the extent its stated facts are accurate and complete. Other businesses can use it only as an illustration of the Department's reasoning, not as binding authority for their own situation.

Q: How long is this ruling good for?
A: Under 2 Ill. Adm. Code 1200.110(e), a Private Letter Ruling automatically expires 10 years after it is issued. This ruling itself is a renewal of a PLR originally issued to the same taxpayer on December 22, 2015; the taxpayer requested this renewal because the original ruling was approaching that same expiration limit.

Q: What triggered Illinois's current local-tax sourcing test in the first place?
A: The Illinois Supreme Court's 2013 decision in Hartney Fuel Oil Co. v. Hamer prompted the Department to revise its local ROT sourcing regulations (86 Ill. Adm. Code 270.115) to focus on the real-world "composite of activities" that make up a sale, rather than allowing sales to be sourced based on a single formality like where an order-acceptance stamp was applied.

Citations and references

• 35 ILCS 120/2-12(2) (statutory sourcing rule for pickup sales with no prior purchase commitment)
• 86 Ill. Adm. Code 270.115 (local Retailers' Occupation Tax sourcing regulation -- primary and secondary factors)
• 86 Ill. Adm. Code 693.115 (incorporates Section 270.115 for the Non-Home Rule Municipal Retailers' Occupation Tax)
• 86 Ill. Adm. Code 130.101 (imposition of the Retailers' Occupation Tax)
• 86 Ill. Adm. Code 150.101 (imposition of Use Tax)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures, including 10-year expiration and renewal)
• Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130 (Illinois Supreme Court decision prompting the sourcing rule revisions)
• Ex-Cell-O Corp. v. McKibbin, 383 Ill. 316 (1943) (origin of the "composite of activities" sourcing test)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0007-plr.pdf

Original ruling text

ST 25-0007-PLR 11/20/2025 Local Taxes
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.
Thus, establishing where "the taxable business of selling is being carried on"
requires a fact-specific inquiry into the composite of activities that comprise the
retailer’s business. See 86 Ill. Adm. Code 270.115 and 35 ILCS 120/2-12(2). (This is
a PLR).
November 20, 2025
NAME
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated October 27, 2025, 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.
Review of your request disclosed that all the information described in paragraphs 1
through 8 of Section 1200.110 appears to be contained in your request. This Private Letter
Ruling will bind the Department only with respect to COMPANY1, for the issue or issues
presented in this ruling, and is subject to the provisions of subsection (e) of Section
1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling is
conditioned upon the understanding that neither COMPANY1, nor a related taxpayer is
currently under audit or involved in litigation concerning the issues that are the subject of
this ruling request. In your letter you have stated and made inquiry as follows:

COMPANY1/NAME
Page 2
November 20, 2025
This letter is a private letter ruling request by which we seek renewal of
a private letter ruling previously issued by the Illinois Department of Revenue
("Department"). On December 22, 2015, the Department issued a private
letter ruling to COMPANY1 ("COMPANY1") in which the Department ruled on
the application of the local sales tax sourcing regulations to COMPANY1. A
copy of the 2015 private letter ruling is enclosed with this letter. See Exhibit 1.
Our firm represented COMPANY1 in requesting the 2015 private letter ruling.
The Department's Regulation § 1200.1l0(b) concerning private letter
rulings states in pertinent part that "every private letter ruling is revoked on the
date that is 10 years after the date of issuance of the ruling...." Section
1200.110(b) also provides "[t]axpayers entitled to rely on the opinion
contained in a particular private letter ruling must apply for a new ruling prior
to the aforementioned revocation date."
No authority exists that is contrary to the positions expressed in this
request for renewal of the 2015 private letter ruling. Pertinent law and the
Department's regulations have not changed. COMPANY1’s factual
representations in the 2015 private letter ruling have not changed. Nor are the
issues in this request part of a current audit or litigation matter with the
Department concerning COMPANY1 or any related company. There are no
regulations that are clearly dispositive of the issues in this request.
To the best of the knowledge of both COMPANY1 and its
representatives, the Department has not previously ruled on the same or a
similar issue for COMPANY1 or a predecessor, except for the private letter
ruling issued to COMPANY1 on December 22, 2015. Neither COMPANY1 nor
its representatives has previously submitted a request on the same or a
similar issue to the Department and withdrew the request before a letter ruling
was issued. There are no authorities that COMPANY1 or its representatives
are aware of that are contrary to the ruling request made herein by
COMPANY1.
Background
COMPANY1 is engaged in the business of making retail sales of
plumbing supplies. COMPANY1's headquarters, sales and administrative
offices have been located in CITY, Illinois (its "HQ/Sales Office") since January
1, 2016. The Village of CITY is a non-home rule municipality. A copy of a lease
extension agreement through December 31, 2026, is attached hereto as
Exhibit 2.

COMPANY1/NAME
Page 3
November 20, 2025
COMPANY1 has no office, warehouse or place of business in any other
state nor in any other city in Illinois, except for a warehouse in CITY1, Illinois,
which is a home rule municipality. At its HQ/Sales Office, COMPANY1
receives, accepts and processes purchase orders for plumbing supplies,
does pricing, credit checks and credit approvals, solicits sales, performs
solicitation and marketing, and signs written contracts, performs accounts
receivable processing, does billing, and payment application, as well as
collections and customer service. COMPANY1's officers, administrative
personnel, and its salesmen are stationed at this office. The HQ/Sales Office's
employees and officers, consist of approximately XX to XX persons, and
include the company's president, vice president/general manager of
operations, data processing operators, customer service employees, sales
employees and administrative employees. At its CITY1 warehouse,
COMPANY1 continues to maintain facilities for shipment and pick up
purposes.
COMPANY1 HQ/Sales Office personnel have authority to solicit
additional sales and bind COMPANY1. Therefore, for other than over-thecounter sales at the CITY1 warehouse, order acceptance for all purchase
orders are made by COMPANY1 from its HQ/Sales Office in CITY, Illinois.
Therefore, except for the over-the-counter sales at the CITY1 warehouse, the
HQ/Sales Office personnel receive and process all orders, credit purchases
and credit card payments. However, in some instances, over-the-counter
sales can occur directly from the warehouse in CITY1, or a sales order
received and processed at the HQ/Sales Office may be picked up by the
purchaser at the CITY1 warehouse. This is a small percentage of COMPANY1's
sales.
Rulings Requested
1.

COMPANY1 requests that a ruling be issued that confirms that all of its
retail sales of products in which sales orders are received and
processed at its HQ/Sales Office and shipped to a customer in Illinois,
are to be sourced to COMPANY1's HQ/Sales Office located in CITY,
Illinois.

2.

As to: (a) over-the-counter sales from the CITY1 warehouse; or (b) sales
from the HQ/Sales Office that are non-pre-existing contract sales paid
by phone, electronically or in writing and picked up at the CITY1
warehouse, COMPANY1 requests a ruling that confirms such sales are
to be sourced to CITY1.

COMPANY1/NAME
Page 4
November 20, 2025
Applicable Laws
The statutory intent of the Home Rule Municipal Retailers' Occupation
Tax, as well as the Non-Home Rule Municipal Retailers' Occupation Tax, is
that retailers will incur local retailers' occupation tax in a jurisdiction in Illinois
if they "enjoyed the greater part of governmental services and protection in
that jurisdiction." See, e.g., 86 Ill. Admin. Code 270.l15(b)(4); see also 86 Ill.
Admin. Code 693.115 (incorporating § 270.115 were [sic] not incompatible).
Local retailers' occupation taxes are sourced under the regulations based on
a composite of selling activities by the seller. See, e.g., 86 Ill. Admin. Code
270.115(b)(2). Under the regulations, there are five primary factors. See, e.g.,
Section 270.115(c)(1). Under the primary factors test, a retailer needs to have
at least three of these five primary factors at its sales location to consider its
sales as occurring at that location. If less than three of these factors are at a
selling location in Illinois (and no more than two of the primary factors occur
outside of Illinois), then the six additional secondary factors (see, e.g., Section
270.115(c)(4)) shall be considered to determine the location of the sale in
Illinois. In those instances where the secondary factors are used along with
the primary factors, either the inventory location or the headquarters location
will be deemed the location of the sale based on the location that has the
greater number of combined factors with respect to the sales at issue.
The primary factors are: (1) location of sales personnel exercising
discretion and authority to solicit customers on behalf of a seller and to bind
the seller to the sale; (2) 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; (3) the location where payment is tendered and received,
or from which invoices are issued with respect to each sale; (4) 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 (5) the 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. See, e.g., 86 Ill. Admin. Code
270.115(c)(l)(E).
Moreover, if a purchaser, having no prior commitments to the retailer,
agrees to make a purchase of tangible personal property and makes payment
over the phone, in writing or over the internet, and then takes possession of
property at a retailer's place of business, the sale shall be deemed to occur at

COMPANY1/NAME
Page 5
November 20, 2025
that place of business, if the retailer regularly stocks similar items there. 35
ILCS 120/2-12(2).
Analysis
Applying the sourcing regulations to COMPANY1 situation, it appears
that all of COMPANY1 sales should be sourced to its HQ/Sales Office in CITY,
except for the over-the-counter sales or pick­up sales in CITY1 noted above.
At the HQ/Sales Office, four of the five primary selling activities will occur for
all sales, including:
1.

where COMPANY1 officers and employees are located
that can exercise discretion to negotiate and bind
COMPANY1 on such sales, since COMPANY1
headquarters and sales office is located at this facility
and since COMPANY1's officers and sales employees
are located at this facility and prices are set at this
facility;

2.

the location where offers are prepared and made; or
where purchase orders are accepted, since orders are
received and accepted, and processed and billed at this
facility;

3.

location where invoices are sent out or where payments
are received, since invoices will be sent out of their
office, and credit and credit card payments will be
processed at this facility; and

4.

the location where the headquarters and principal place
of business is located, since this is the headquarters and
administrative office of COMPANY1, as well as the
location where the daily operational decisions are made.

As a result, under the regulations, COMPANY1 should source these
sales to its HQ/Sales Office.
As to COMPANY1's over-the-counter sales from its warehouse in
CITY1, these sales are received at this location and the purchaser either pays
at this location by cash, credit card or by pre-approved credit. Possession of
the supplies purchased are also transferred at this location. However,

COMPANY1/NAME
Page 6
November 20, 2025
invoicing may be done from the HQ/Sales Office. Please confirm that the
CITY1 office is the correct location to source these sales.
For COMPANY1's sales at its HQ/Sales Office in CITY that are picked
up at the CITY1 warehouse, these sales orders are received by phone or fax at
the HQ/Sales Office in CITY and processed and paid by pre-approved credit or
credit card at the HQ/Sales Office location. Please confirm that these sales
are to be sourced to the CITY1 warehouse because the purchaser took
possession of the supplies purchased at this warehouse. Note: These are not
long-term or keep full contracts with a prior commitment by the purchasers to
buy these products.
Based on the above, we request a private letter ruling be issued that
confirms COMPANY1's HQ/Sales Office in CITY is the location that it should
source all of its sales orders for delivery in Illinois, except for the sales that
occur over-the counter or for pick-up in CITY1 as noted herein.
Please reach out to me at your convenience if you have any questions
about this ruling request or would like any additional information. A power of
attorney is attached hereto.
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. See 86 Ill. Adm. Code 130.101. 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.
In response to the Illinois Supreme Court decision in Hartney Fuel Oil Co. v. Hamer,
2013 IL 115130, 376 Ill. Dec. 294 (2013), the Illinois Department of Revenue revised the
administrative rules that govern the sourcing of local retailers’ occupation taxes. See 86 Ill.
Adm. Code 270.115. The rules provide that:
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 composite of activities that comprise

COMPANY1/NAME
Page 7
November 20, 2025
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).
Based on a review of the activities described in your letter and an analysis of the
Department’s regulations found at 86 Ill. Adm. Code 693.115 (incorporating Section 270.115
where not incompatible), the Department finds that with respect to COMPANY1’s sales
discussed above which occur at the headquarters in CITY, Illinois, COMPANY1 is engaged
in three or more primary selling activities in CITY, Illinois and therefore those sales should
be sourced to CITY, Illinois. See 86 Ill. Adm. Code 270.115(c)(2).
It is our understanding that while most sales occur in CITY, some over the counter
sales are conducted from the CITY1, Illinois warehouse. Over the counter sales made from
the CITY1, Illinois warehouse should be sourced to CITY1, Illinois. See 86 Ill. Adm. Code
270.115(c)(3)(A).
It is also our understanding that some orders may be received and processed over
the phone, electronically or in writing from the CITY, Illinois location but the item is picked
up at the warehouse in CITY1, Illinois. As you noted in your letter, certain selling activities
are governed by statute under 35 ILCS 120/2-12(2). Because the purchaser is not previously
committed to COMPANY1, orders are received and processed via phone, electronically, or
in writing from the CITY, Illinois headquarters, and the purchaser takes possession of the
tangible personal property at the CITY1, Illinois warehouse, such sales should be sourced
to the CITY1, Illinois warehouse when COMPANY1 regularly stocks the item or similar items
in the quantity, or similar quantities as that purchased by the purchaser.
The factual representations upon which this ruling is based are subject to review by
the Department during the course of any audit, investigation, or hearing and this ruling shall
bind the Department only if the factual representations recited in this ruling are correct and
complete. This Private Letter Ruling is revoked and will cease to bind the Department 10
years after the date of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or
earlier if there is a pertinent change in statutory law, case law, rules or in the factual
representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this
Private Letter Ruling, you may contact me at (217) 782-7055. If you have further questions
related to the Illinois sales tax laws, please visit our website at https://tax.illinois.gov/ or
contact the Department’s Taxpayer Information Division at (800) 732-8866.
Very truly yours,

COMPANY1/NAME
Page 8
November 20, 2025

Samuel J. Moore
Chairman, Private Letter Ruling Committee
SJM:EJM:slc