Is an out-of-state municipality's tax-exempt certificate enough to avoid Illinois telecommunications tax on a data-center internet connection located in Illinois?

Plain-English summary

A local government from another state, which provides internet service only within its own home state, pays a vendor for a data-center connection physically located in Illinois. That vendor charged Illinois telecommunications taxes on the invoice. The municipality asked the vendor to remove the taxes, pointing to its own state's tax-exempt certificate -- but the vendor said it needed an ILLINOIS tax-exempt certificate instead, which the municipality doesn't have, since it only operates in its home state. The municipality asked the Department directly: is it legally obligated to pay Illinois tax on a data-center connection located in Illinois, even though it provides no services here and holds only its own state's exemption certificate?

The Department's answer is a clear yes, it owes the tax. Illinois's Telecommunications Excise Tax, the related Simplified Municipal Telecommunications Tax (which individual Illinois municipalities may separately impose), and the Telecommunications Infrastructure Maintenance Fee are all structured around a narrow exemption: the "sale at retail" exclusion for telecommunications taxes specifically carves out sales to the FEDERAL government, the STATE government, and Illinois state universities (and certain related-party subsidiary transfers) -- but conspicuously does NOT carve out local governments at all, whether based in Illinois or elsewhere. Generally, local governments are not exempt from either the State or a municipal telecommunications excise tax. The infrastructure maintenance fee is even more explicit: its statute affirmatively states there's no exemption for retailers selling telecommunications to federal, state, OR local governments -- retailers are liable for that fee on all their gross charges to any level of government.

Because the tax exemption categories are defined by Illinois law itself, an out-of-state municipality's own home-state tax-exempt certificate simply has no bearing on Illinois tax obligations -- there's no cross-jurisdictional recognition mechanism here. The vendor's request for an Illinois-specific exemption certificate reflects the reality that Illinois doesn't have a certificate to offer this municipality in the first place, since local governments (of any state) aren't in the exempt category to begin with.

What this means for you

Out-of-state local governments buying Illinois-located telecom/data services

Don't expect your home state's tax-exempt certificate to work in Illinois. Illinois's telecommunications tax exemptions are narrowly limited to federal and state governments (plus Illinois state universities) -- local governments, wherever based, generally owe the tax on services connected to or delivered from Illinois.

Illinois telecom vendors serving government customers

Confirm which level of government your customer is before waiving tax -- federal and (Illinois) state government customers may qualify for the retail-sale exemption, but local governments (municipalities, counties, and their out-of-state counterparts) generally do not, and there's no exemption at all under the Infrastructure Maintenance Fee Act for any level of government.

Municipalities and public agencies budgeting for out-of-state vendor services

If you're contracting for a data center, colocation, or telecom service physically located in another state, budget for that state's own telecommunications and infrastructure taxes -- your home jurisdiction's tax-exempt status typically won't travel with you.

Common questions

Q: Does a state tax-exempt certificate from another state work in Illinois?
A: No. Illinois's tax exemptions are governed entirely by Illinois law, and an out-of-state exemption certificate has no legal effect here.

Q: Are local governments exempt from Illinois's Telecommunications Excise Tax?
A: No. That exemption is limited to the federal government, the State government, and Illinois state universities -- local governments (Illinois-based or otherwise) are not included.

Q: Is there any exemption for governments under the Telecommunications Infrastructure Maintenance Fee?
A: No. That statute explicitly states there's no exemption for federal, state, or local government customers -- retailers owe the fee on all such gross charges.

Q: Does it matter that the municipality provides no services in Illinois?
A: No. What matters is that the telecommunications purchase (the data-center connection) is being received in Illinois -- the municipality's own service territory being entirely out of state doesn't change its Illinois tax liability on that purchase.

Citations and references

Statutes:

• 35 ILCS 630/2, 630/3(c), 630/4(c) (Telecommunications Excise Tax Act -- imposition and "sale at retail" exemption for federal/state governments)
• 35 ILCS 636/5-7, 636/5-10, 636/5-15 (Simplified Municipal Telecommunications Tax Act)
• 35 ILCS 635/10(a), 635/10(f), 635/15(b), 635/25(a) (Telecommunications Infrastructure Maintenance Fee Act -- no government exemption)

Regulations:

• 86 Ill. Adm. Code 495.140 (Telecommunications Excise Tax rate)

Source

• Landing page: Illinois 2025 Sales Tax Letter Rulings
• Original PDF: ST25-0053-GIL.pdf

Original ruling text

ST 25-0053-GIL

10/24/2025

TELECOMMUNICATIONS EXCISE TAX

In general, the Telecommunications Excise Tax, 35 ILCS 630; Simplified Municipal
Telecommunications Tax, 35 ILCS 636; and Telecommunications Infrastructure
Maintenance Fee, 35 ILCS 635; are imposed on units of local government. (This is a
GIL).

October 24, 2025
NAME
MUNICIPALITY
EMAIL
Dear NAME:
This letter is in response to your emails dated October 2, 2025, and October 7, 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.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your email dated October 2, 2025, you have stated and made inquiry
as follows:
We are a tax exempt local government providing internet in STATE only.
We pay a vendor for a data center connection in Illinois. That vendor is
charging us taxes for that data center connection. When we asked them to
remove the taxes because we are tax exempt (I’ve attached our STATE tax
exempt certificate), we are told we must provide an IL tax exempt certificate,
not our STATE one. But, since we only do business in STATE, and we’re a STATE
municipality, we only have a STATE tax exempt certificate.
I was told on the phone to ask you, are we are legally obligated to pay
any taxes to IL for our data center connection located in Illinois? We do not
provide any services in Illinois, only in STATE. If not, can you give us a

MUNICIPALITY
Page 2
October 24, 2025
certificate or any type of notification that would let them know we are tax
exempt?
In your email dated October 7, 2025, you have stated and made inquiry as follows:
Good morning,
I have attached an invoice we received from one of our vendors with
the tax breakdown shown. For your convenience, I have also attached another
copy of our tax exempt certificate.
Again, the question is whether or not we are legally obligated to pay
these taxes, as we are a tax exempt local government providing internet
service only in our area of STATE.
Thank you,
DEPARTMENT’S RESPONSE:
The Illinois Telecommunications Excise Tax Act imposes a tax on the act or privilege
of originating or receiving intrastate or interstate telecommunications by persons in Illinois
at the rate of 8.65%, effective July 1, 2025, of the gross charges for such telecommunications
purchased at retail by such persons. 35 ILCS 630/3(c) and 4(c), as amended by Public Act
104-0006; 86 Ill. Adm. Code 495.140.
The Simplified Municipal Telecommunications Tax Act allows municipalities to
impose a tax on the act or privilege of originating in such municipality or receiving in such
municipality intrastate or interstate telecommunications by persons in Illinois at a rate not
to exceed 6% for municipalities with a population of less than 500,000, and at a rate not to
exceed 7% for municipalities with a population of 500,000 or more, of the gross charges for
such telecommunications purchased at retail by such persons. 35 ILCS 636/5-10 and 5-15.
The incidence of the tax is on the person who originates or terminates intrastate or
interstate telecommunications in Illinois, and the tax is collected and remitted to the
Department by the retailer of the telecommunications. Moreover, a “sale at retail” means
the transmitting, supplying or furnishing of telecommunications and all services and
equipment provided in connection therewith for a consideration to persons other than the
Federal and State governments, and State universities created by statute and other than
between a parent corporation and its wholly owned subsidiaries or between wholly owned
subsidiaries for their use or consumption and not for resale. 35 ILCS 630/2; 35 ILCS 636/57. Generally, local governments are not exempt from either the State or a municipal
telecommunications excise tax.

MUNICIPALITY
Page 3
October 24, 2025
The Telecommunications Infrastructure Maintenance Fee Act imposes a State
infrastructure maintenance fee upon telecommunications retailers equal to 0.5% of all
gross charges charged by the telecommunications retailer to service addresses in this State
for telecommunications, other than wireless telecommunications, originating or received in
this State. 35 ILCS 635/15(b). A telecommunications retailer shall charge each customer an
additional charge equal to the State infrastructure maintenance fee attributable to that
customer’s service address. Such additional charge shall be shown separately on the bill to
each customer. 35 ILCS 635/25(a).
The Telecommunications Infrastructure Maintenance Fee Act does not contain an
exemption for retailers selling telecommunications to federal, state, or local governments.
35 ILCS 635/10(f). Retailers are liable for the infrastructure maintenance fee upon all gross
charges by the telecommunications retailer to federal, state, and local governments. 35
ILCS 635/10(a).
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 800-732-8866.
Very truly yours,

George L. Encarnacion Jr.
Associate Counsel
GLE:sce