Is an auction software platform that connects sellers with payment processors, but never touches funds itself, a 'marketplace facilitator' under Illinois sales tax law?

Plain-English summary

A company that sells downloaded software and a SaaS platform enabling customers to run their own online auctions submitted a detailed, multi-page argument that it is NOT a "marketplace facilitator" under Illinois law -- and therefore shouldn't have to register, collect, or remit Illinois sales tax on its customers' auction sales. Its reasoning: it doesn't create listings, set prices, finalize sales, process payments, or take title to any goods; its customers independently run their own auctions, choose their own payment processors, and often get paid completely outside the platform (cash, checks, bank transfers). The company does offer connections to a handful of payment processors within its software as a convenience, and earns revenue through subscriptions, listing fees, referral fees, and similar charges -- but argues none of that rises to "collecting payment from the customer and transmitting that payment to the marketplace seller" the way the marketplace facilitator definition requires.

The Department's response doesn't say whether this specific company wins that argument. Instead, it explains why the question is harder than the company's letter suggests: Illinois's marketplace facilitator definition uses deliberately broad language -- "facilitates," "indirectly," "arrangement," "provision" -- precisely so it can reach many different e-commerce business models. Critically, the Department states that a marketplace facilitator's participation in the payment process is NOT limited to situations where the purchaser pays the facilitator directly and the facilitator directly remits to the seller; providing FUNCTIONALITY for a connection to a payment mechanism can itself satisfy the "indirectly ... collecting payment" prong, even without the platform ever touching the funds.

The Department does offer some genuinely useful boundary markers, though: a pure advertising/listing service is excluded as long as it doesn't also engage in the payment-facilitation activities; and while an internet auction listing service (a website that lets users list items for sale via online bidding, without examining/pricing/describing the property itself) generally IS treated as a marketplace facilitator once it crosses a remittance threshold, a business licensed under the separate Auction License Act is excluded -- unless it's itself an internet auction listing service. The Department also flagged multi-factor considerations (does a vendor's storefront function like its own independent site, does it have its own URL, is it perceived by the public as a separate store) that can sometimes take a hosting platform outside the "marketplace" definition entirely, though it called that the exception rather than the rule.

What this means for you

SaaS and e-commerce platforms that connect sellers with payment processors

Don't assume that merely avoiding direct control over funds gets you out of marketplace facilitator status. Illinois reads "indirectly ... collecting payment" broadly enough that providing the technical connection or arrangement to a payment processor -- even one your customer separately contracts with -- can be enough on its own.

Auction and listing platforms

If your platform lets a customer's storefront function like its own independent website (own URL, not searchable/browsable alongside other sellers' listings, perceived by the public as a distinct store), you may have a stronger argument you're not operating a "marketplace" at all -- but the Department called this the exception, not the default outcome.

Businesses relying on the Auction License Act exclusion

Check whether you're specifically an "internet auction listing service" as defined by the Auction License Act -- that sub-category is carved BACK IN to marketplace facilitator treatment even though licensed auctioneers generally are excluded.

Anyone wanting a definitive answer, not just the general framework

Since this GIL didn't resolve the taxpayer's specific fact pattern, a business in a similar position that wants a binding answer should consider requesting a Private Letter Ruling instead, which -- unlike a GIL -- is binding on the Department as to the requesting taxpayer if the facts given are complete and accurate.

Common questions

Q: Did the Department confirm this auction-software platform is NOT a marketplace facilitator?
A: No. The Department explained the general legal standard -- which is intentionally broad and covers indirect payment facilitation -- without applying it to reach a specific conclusion for this platform's fact pattern.

Q: Does a platform have to directly collect and remit payment to be a marketplace facilitator?
A: No. The Department stated that participation in the payment process isn't limited to direct collection and remittance -- indirectly facilitating payment through an arrangement or connection with a third-party processor can be enough.

Q: Is a pure advertising/listing service treated as a marketplace facilitator?
A: No, as long as it doesn't also engage, directly or indirectly, in the payment-facilitation activities described in the marketplace facilitator definition.

Q: Are licensed auctioneers excluded from marketplace facilitator status?
A: Generally yes, under the Auction License Act exclusion -- except for internet auction listing services, which remain subject to marketplace facilitator treatment once a remittance threshold is met.

Q: How can a business get a definitive answer instead of this general framework?
A: By requesting a Private Letter Ruling, which is binding on the Department for the requesting taxpayer (to the extent the facts given are accurate and complete) -- unlike a GIL, which only points to the relevant rules.

Citations and references

Statutes:

• 35 ILCS 120/1 (definitions -- "marketplace")
• 35 ILCS 120/2 (Retailers' Occupation Tax imposition)
• 35 ILCS 105/3, 105/3-45 (Use Tax imposition and self-assessment)
• 225 ILCS 470/5-10 (Auction License Act -- internet auction listing service definition)

Regulations:

• 86 Ill. Adm. Code 130.101, 130.1915(c) (Retailers' Occupation Tax; internet auction listing service)
• 86 Ill. Adm. Code 131.105 (marketplace / marketplace seller definitions)
• 86 Ill. Adm. Code 131.130 (marketplace facilitator definition; advertising-only exclusion)
• 86 Ill. Adm. Code 131.135 (marketplace facilitator remittance thresholds)
• 86 Ill. Adm. Code 131.145 (marketplace facilitator registration and recordkeeping)

Source

• Landing page: Illinois 2025 Sales Tax Letter Rulings
• Original PDF: ST25-0060-GIL.pdf

Original ruling text

ST 25-0060-GIL 11/19/2025 MARKETPLACE FACILITATORS
This letter discusses marketplace facilitators. See 86 Ill. Adm. Code 131.130. (This
is a GIL).
November 19, 2025
NAME
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated September 2, 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 letter you have stated and made inquiry as follows:
Company operates a business that provides both downloaded software and a
Software as a Service (“SaaS”) technology solution to enable its customers
(“Customers”) the ability to advertise items for sale online.
Please accept this letter as a request for a non-binding general information
letter regarding the applicability of Illinois marketplace facilitator rules and
sales tax obligations to the below described fact pattern.
I.

Background
Company provides its Customers with a digital infrastructure in the
form of both an offline, downloaded or remotely accessed software, as
well as an online hosting environment to enable them to manage and

COMPANY
Page 2
November 19, 2025
independently conduct auction related activities. Company does not:
(1) participate in the underlying bidding activity between Customers
and the Customer’s customers, (2) take title to any items, buy or list
products for sale, or (3) act as an agent, broker, or intermediary.
The digital infrastructure (“platform”) supports multiple auction types
(e.g., online-only auctions, pre-bidding auctions, hybrid live and online
auctions, and listings where the bidding occurs off-platform).
Customers maintain full control over their auction events, including
setting bidding terms, managing Customer’s customer eligibility, and
choosing the form of payment. Some Customers may opt to list items
exclusively on their white-label websites – custom-branded sites
powered by Company’s technology but fully controlled by the
Customer. While Company provides the digital environment necessary
for these auctions, it does not (1) set prices, (2) list products for sale,
(3) finalize sales, (4) engage in payment processing/collection, or (5)
enforce contractual terms between Customers and their own
customers (“Customer’s customers”). The Company does not have
visibility into the final outcome of an auction, nor does it have visibility
at the time of the auction if the winning bidder was the ultimate
purchaser. Company’s Customer retains the ability to select a
different Customer’s customer as appropriate. Company may provide
platform/technology support to its Customers. Customer support is
primarily provided by the Company for its own product (i.e., platform).
Company earns revenue through its platform subscription fees, listing
fees, referral fees, premium features, banner ads, custom websites,
and support/training. Company provides customizable branding
options, allowing Customers to operate under their own brand
identities. Company branding appears minimally on its hosting site,
typically labeled “powered by,” and does not appear on invoices or
transaction communications. Company does not market or represent
individual auctions as its own. Company’s customer service relates to
technical support (e.g., software performance, login issues, site
configurations). Company neither engages in dispute resolution
between Customers and Customer’s customers nor does it provide
auction-specific customer support or assistance with transactions.
However, if issues arise, such as a Customers’ customer failing to pay
or a Customer failing to ship, the platform may notify the responsible
party and expect them to resolve the matter. If complaints persist, the
platform may remove the user for non-compliance. Company is not

COMPANY
Page 3
November 19, 2025
involved in managing Customer/Customer’s customer interactions
and post-auction fulfillment.
Company does not collect, hold, or distribute funds related to auctions
on its platform. Customers independently select, contract with, and
control their preferred third-party payment processors. Company has
developed interfaces within its software that enable its Customers to
independently select from various payment methods. While Company
maintains referral relationships with certain payment processors, it
does not directly engage in the processing of payments and does not
have access to payments from these transactions. At the time of each
transaction, the Company has limited visibility into the payment
details. Customers’ customer does not have to use a specific payment
method, nor does it need to make payments via the platform or
software, further minimizing Company’s visibility into the final
outcome. Company does not act as a clearing house or a distributor of
funds with respect to payments. Customers voluntarily select
payment type (e.g., credit card, ACH, wire) and processors. Customers
independently maintain direct contractual relationships with their
chosen payment processors. Company’s position is that it maintains
technology support for certain technical integrations or referrals.
Additionally, Company does not process payments, handle refunds or
chargebacks, nor does it collect or remit taxes on behalf of Customers.
Many Customers accept alternative payment methods such as cash,
checks, or bank transfers, further limiting Company’s insight into
transaction details.
II.

Discussion
Illinois defines “Marketplace” as a physical or electronic place, forum,
platform, application, or other method by which a marketplace seller
sells or offers to sell items. 1
Illinois provides a “Marketplace facilitator” means a person who,
pursuant to an agreement with an unrelated third-party marketplace
seller, directly or indirectly through one or more affiliates facilitates a
retail sale by an unrelated third-party marketplace seller by:

1. Listing or advertising for sale by the marketplace seller in a
   marketplace, tangible personal property that is subject to tax under
   this Act; and

1

1 ILCS § 105/2d(a).

COMPANY
Page 4
November 19, 2025

2. Either directly or indirectly, through agreements or arrangements
   with third parties, collecting payment from the customer and
   transmitting that payment to the marketplace seller regardless of
   whether the marketplace facilitator receives compensation or
   other consideration in exchange for its services. 2
   A marketplace facilitator does not include:
3. A person who provides advertising services, including listing
   products for sale, is not considered a marketplace facilitator, so
   long as the advertising service platform or forum does not engage,
   directly or indirectly through one or more affiliated persons, in the
   activities described in the definition of “Marketplace facilitator”
   under ILCS § 105/2d(a)(2).
4. Any person licensed under the Auction License Act. This exemption
   does not apply to any person who is an Internet auction listing
   service, as defined by the Auction License Act. 3
   Company notes that the state’s Marketplace Facilitator guidance
   suggests that simply listing or advertising products for sale at retail
   may trigger Marketplace Facilitator classification. While the Company
   sells a software platform that provides functionality for its Customers
   to populate and manage their own auction listings, Company does not
   perform these services. Company does not create listings or sell
   products/services on behalf of its Customers, nor do Company’s
   customer’s auction listings guarantee a sale. Customers advertise and
   manage their own listings/business activities through use of
   Company’s software. Customers retain control over whether a
   transaction occurs, which distinguishes Company’s role from that of a
   traditional Marketplace Facilitator. The Company’s technology
   enables its Customer to generate listings and display items for sale.
   The Customer creates the listing and uses the Company’s technology
   to publish the listing. Company does not view providing the
   functionality to display items for sale within the software as providing
   listing services as described by Illinois. Additionally, the lack of
   involvement in collecting payment from the purchaser and
   transmitting payment outlined under ILCS § 105/2d(a)(2) excludes it
   from classification as a Marketplace Facilitator.

2
3

ILCS § 105/2d(a).
ILCS § 120/1

COMPANY
Page 5
November 19, 2025
Company also does not satisfy ILCS § 105/2d(a)(2) which states that a
Marketplace Facilitator directly or indirectly “through agreements or
arrangements with third parties, collecting payment from the
customer and transmitting that payment to the marketplace seller
regardless of whether the marketplace facilitator receives
compensation or other consideration in exchange for its services.”
Company has established arrangements/connection capabilities with
third-party payment processors that its Customers may select from
within the technology platform; however, it is not involved in the
financial arrangements and its Customers can select alternative
payment types for its sales.
Company maintains that in most cases, at the time of the transaction,
it does not have visibility into the final selling price, final end-customer
(Company’s Customer retains the authority to reject a buyer even after
closing the auction), ultimate Customer’s customer, or payment
activities related to its Customers’ sales. Therefore, it is the
Company’s position that it does not meet the definition of a
Marketplace Facilitator as described in Illinois. Instead, Company
identifies four (4) payment processor options in its downloaded
software version, but Customers can also choose any other payment
method, including cash, cashier’s check, wire, or their preferred
payment processor. By offering four (4) identified payment processors,
the Company provides optionality for Customers. The four (4)
identified payment processors are not connected to or referenced on
the Company’s ecommerce portal. The Company’s software enables
Customers to configure payment settings within the platform;
however, this software feature is not connected to the ecommerce
portal, that allows Customers to define accepted payment methods
themselves. The final invoice may include a payment link that appears
and originates from the Customer, not the platform. While a link to the
payment processor may be included, it remains clearly separate from
the ecommerce portal and the invoice does not display any
overlapping branding. The link is a technology connection that
redirects the Customer’s customer to a third-party platform. It is not
an integrated payment processing system, and the Company has no
direct involvement with the third party nor any access to, or control
over, the funds processed through it.
All contracting with payment processors is done directly by
Customers. Company does not participate in these contractual
relationships. Company does not have commercial partnerships with

COMPANY
Page 6
November 19, 2025
payment processors. Company does not set or control the payment
terms between Customers and Customers’ customers; these are
established by the Customers according to their own terms and
conditions.
Customers retain exclusive transactional control and independently
contract with payment processors, and many payments occur offplatform using cash, checks, and direct bank transfers. Company has
no visibility into or mechanism available to track these transactions.
Company generates revenue from subscription fees, fees for
displaying listings within Company’s software, final value fees, referral
fees, custom website design, promoted listings, banner ads, premium
feature purchases, and training and support for the seller. It is
Company’s position that it provides only digital tools and collects and
remits tax on these products as applicable. Customers retain full
independent control over pricing, acceptance or rejection of bids,
fulfillment, connections (‘arrangements’), and customer interactions.
While Company enables technical connections within its software that
allow its Customers to independently integrate with third-party
payment processors, and in limited instances, maintain agreements
with third-party processers for referral compensation, it does not have
formal agreements to receive, process, or distribute, funds received
for completed transactions between its Customers and Customers’
customer. In the absence of a statutory definition of “arrangement”
and “agreement”, Merriam-Webster defines an “arrangement” as an
informal agreement or settlement especially on personal, social, or
political matters, whereas an “agreement” means a contract duly
executed and legally binding.
III.

Questions

1. Does the Department agree that Company’s activities, as
   described, support its conclusion that it operates as a software
   technology provider and does not meet the definition of a
   Marketplace Facilitator in Illinois?
2. Was Illinois’s intent in defining a Marketplace Facilitator to include
   software providers whose solutions for its customers off [sic] the
   ability to connect sellers (Customers) and third-party payment
   processors, without direct involvement in processing, receiving, or
   controlling payments? Does this answer change if the software

COMPANY
Page 7
November 19, 2025
provider also offers tools for sales tax collection for Customers to
be able to collect applicable tax?

3. Does providing connection capability that enables Customers to
   connect independently with third-party payment processors
   constitute "indirect payment processing"? as contemplated by
   ILCS § 105/2d(a)?
4. What criteria is the Department using to define indirect payment
   processing?
5. Does the Company have an obligation to obtain and maintain
   transaction-level records for transactions where it is unable to
   access or control payments or confirm final sale?
   DEPARTMENT’S RESPONSE:
   Retailers’ Occupation Tax
   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. 35 ILCS 120/2; 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. 35 ILCS 105/3; 86 Ill. Adm. Code 150.101. These two taxes
   comprise what is commonly known as “sales tax” in Illinois. If the purchases occur in
   Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase. 35 ILCS
   105/3-45; 86 Ill. Adm. Code 150.401. The retailers are then allowed to retain the amount of
   Use Tax paid to reimburse themselves for their Retailers’ Occupation Tax liability incurred
   on those sales. 86 Ill. Adm. Code 150.130(b). If the purchases occur outside Illinois,
   purchasers must self-assess their Use Tax liability and remit it directly to the Department.
   35 ILCS 105/3-45; 86 Ill. Adm. Code 150.701(a).
   Marketplace Facilitators
   Beginning January 1, 2021, a marketplace facilitator is considered a retailer engaged
   in the occupation of selling at retail in Illinois for purposes of the Retailers’ Occupation Tax
   Act if either of following thresholds is met:
   1)

The cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois made through the marketplace by the marketplace
facilitator and by marketplace sellers are $100,000 or more; or

2)

Until January 1, 2026, the marketplace facilitator and marketplace sellers
selling through the marketplace cumulatively enter into 200 or more separate

COMPANY
Page 8
November 19, 2025
transactions for the sale of tangible personal property to purchasers in Illinois.
86 Ill. Adm. Code 131.135(a).
A marketplace facilitator meeting a threshold, is required to register with the
Department, file returns, and remit all applicable State and local retailers’ occupation taxes
administered by the Department for all sales made over the marketplace to Illinois
purchasers, including their own sales and sales made on behalf of marketplace sellers. See
86 Ill. Adm. Code 131.145(a) and 131.145(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 seller is a person that makes sales through a marketplace operated
by an unrelated third-party marketplace facilitator. Id. A marketplace facilitator is a person
who, pursuant to an agreement with an unrelated third-party marketplace seller, directly or
indirectly through one or more affiliates facilitates a retail sale by an unrelated third-party
marketplace seller by:
1)

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

2)

Either directly or indirectly, through agreements or arrangements with third
parties, collecting payment from the customer and transmitting that payment
to the marketplace seller regardless of whether the marketplace facilitator
receives compensation or other consideration in exchange for its services. 86
Ill. Adm. Code 131.130(a)(1). Provision on a marketplace of functionality for
connection to a payment mechanism meets these requirements. 86 Ill. Adm.
Code 131.130(a)(1)(B).

Provision of advertising services, including listing products for sale, is not enough to
qualify as a marketplace facilitator, as long as the advertising service platform or forum does
not engage, directly or indirectly through one or more affiliated persons, in the activities
described in subsection (a)(1)(B) of Section 131.130. 86 Ill. Adm. Code 131.130(a)(2).
The Department has encountered various marketing and payment arrangements
used by ecommerce businesses. Notably, the broad language of the statute and
administrative rules discussing marketplace facilitators includes such broad terms as
“facilitates,” “indirectly,” “arrangement,” and “provision,” allowing for its application to a
wide variety of ecommerce businesses. See 35 ILCS 120/1; 86 Ill. Adm. Code 131.105.
Accordingly, under Section 131.130(a)(1)(B), the participation of a marketplace facilitator in
the collection and payment process is not limited to only those instances where the
purchaser directly pays the marketplace facilitator and in turn, the marketplace facilitator

COMPANY
Page 9
November 19, 2025
directly remits the payment to the marketplace seller. Such a restrictive reading would be
contrary to the language in 35 ILCS 120/1, and 86 Ill. Adm. Code 131.130(a)(1)(B). For various
examples of the marketplace facilitator criteria being applied to different business models,
see 86 Ill. Adm. Code 131.130.
A marketplace connects multiple third-party sellers with buyers. The multiple seller
model is a key difference between an online marketplace and a traditional ecommerce
online store. An ecommerce store typically has a single seller. In contrast, a marketplace
connects multiple, unrelated third-party sellers with buyers. While it is possible that a
platform which hosts multiple sellers would not be considered a “marketplace” for
purposes of meeting the requirements under 86 Ill. Adm. Code 131.105 and 131.130, such
instance would be an exception to the general rule and would be based on the specific facts
of each case. Some considerations could include whether: 1) a vendor’s setup on the
platform functions as its own online store or website and is perceived as such by the public;
2) a vendor will have its own URL; 3) a vendor sells a unique product that could not be found
in a normal product search through the marketplace (e.g. customers are parents purchasing
school photos of their children); and 4) the platform does not function as a traditional
multiple seller marketplace (e.g. the platform does not allow multiple sellers to sell to a
customer). Generally, if a customer is directed to a platform from a code or link for a
specified seller and the platform does not allow a customer to search or browse for other
sellers for the same or different product, the platform is not acting as a marketplace
facilitator.
An internet auction listing service is a website on the internet or other interactive
computer service designed to allow or advertise as a means of allowing users to offer
personal property or services for sale or lease to prospective buyers or lessees through
online bid submission processes using the website or interactive computer service, that
does not examine, set the price, prepare the description of the personal property or service,
or use the services of a natural person as an auctioneer. 225 ILCS 470/5-10. Interactive
computer services include any information service, system, or access software provider
that provides or enables computer access by multiple users to a computer server, including
services or systems that provide access to the internet. Id.
Beginning January 1, 2021, an internet auction listing service meeting the
requirements of a marketplace facilitator, including one of the tax remittance thresholds, is
considered a marketplace facilitator subject to State and local retailers’ occupation taxes
on sales made on its marketplace to purchasers in Illinois. See 86 Ill. Adm. Code
130.1915(c); 86 Ill. Adm. Code 131.105; 86 Ill. Adm. Code 131.135.
Marketplace facilitators are required to maintain books and records for sales made
over the marketplace to Illinois purchasers on behalf of marketplace sellers in accordance
with the requirements of Section 7 of the Retailers’ Occupation Tax Act. 86 Ill. Adm. Code

COMPANY
Page 10
November 19, 2025
131.145(f). Marketplace facilitators must also maintain books and records containing the
name, address and FEIN of all marketplace sellers making sales through their marketplace.
86 Ill. Adm. Code 131.145(o).
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,
Edward Mroczkowski
Associate Counsel
(217) 782-7055
EM:slc