Illinois State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Illinois, with full citations and the original source on every page.
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How did Illinois tax game access codes, downloadable software, subscription or points cards, and online content?
Cards or coupons redeemable for property were generally intangible when sold, with tax arising when property was redeemed. Ordinary electronically transferred data was intangible, but downloaded canne…
Was a nonresident military spouse's Illinois self-employment income from providing child care exempt under the Servicemembers Civil Relief Act?
Yes, conditionally. The federal protection was not limited to employee wages and could extend to a military spouse's self-employment income to the extent it came from the spouse's own services. The sp…
How did Illinois tax medical-record services delivered on paper, CD, or electronically to in-state and out-of-state recipients?
IDOR could not assign liability without invoices or determine whether the arrangement was multi-service. Electronic transmission was not tangible property. Paper or CD delivery could create service-ta…
How did Illinois tax a direct-mail postcard campaign bought from an out-of-state advertising agency and rebilled to dealers?
IDOR could not decide without invoices, contracts, and the parties' registration status. The campaign could be a service with postcards transferred incident to it and a multi-service arrangement betwe…
Was downstream reseller documentation enough for an out-of-state seller drop shipping directly to an Illinois customer?
The documents provided were incomplete. The seller had to obtain a valid resale certificate from its own purchaser containing all required information, including that purchaser's number or qualifying …
Did grass seed, sod, trees, hydromulch, and fertilizer qualify for Illinois's enterprise-zone building-materials exemption?
Permanently planted trees, shrubs, topsoil, sod, and grass seed generally qualified as building materials for an eligible enterprise-zone project. Hydromulch and fertilizer did not. The sale also had …
Did an Illinois self-assessing electricity purchaser include third-party supplier bills in taxable purchase price?
Yes. The aggregate purchase price included payments to the electricity supplier and, when different, the transporter for supply, transmission, delivery, and directly related services unless specifical…
When was a custom millwork transaction an Illinois construction contract rather than a retail sale with installation?
A combined contract to sell and install cabinets, countertops, or other property permanently affixed to a structure was a construction contract, making the contractor the end user taxable on material …
Did two automation-software licenses qualify as nontaxable Illinois licenses, and how were maintenance and updates treated?
IDOR declined to classify the two agreements. Canned software was taxable unless a license met all five regulatory conditions. Separately sold optional maintenance was generally nontaxable when sold, …
Were Illinois sales of tobacco products to out-of-state wholesalers or retailers exempt from Tobacco Products Tax?
For tobacco products other than little cigars, purchases by wholesalers not selling at retail and purchases by wholesalers or retailers for delivery outside Illinois were exempt. The seller had to obt…
Did Illinois rule that dry-film photoresist sold for printed-circuit-board manufacturing qualified for the machinery and equipment exemption?
No determination was made. The manufacturing exemption was use-based, so IDOR would not issue a supplier-specific ruling because the supplier was not the user. A customer using the photoresist could r…
How did Illinois's 2014 local sales-tax sourcing rules locate primary selling activities, sales offices, master agreements, and Internet sales?
A retailer generally sourced to a jurisdiction where at least three of five primary selling activities occurred. A separate sales office needed all first three: authorized sales personnel, binding agr…
Was a membership fee taxable when it was calculated from the savings on each retail purchase?
Yes, based on the facts described. Membership fees generally were nontaxable intangibles when they transferred only membership rights. Here, the fee was charged with each purchase, tied to that item's…
Could an Illinois dealer document a nonresident vehicle sale when the buyer had an Illinois driver's license?
Yes, but the Illinois license created a rebuttable presumption of Illinois residency. The dealer had to retain clear nonresidency evidence, such as out-of-state voter, home, tax, credit, or property r…
Could canned software be licensed tax-free in Illinois, and how was custom software treated?
Yes, as a general rule. A canned-software license and its later updates were not taxable when the license met all five conditions in Section 130.1935(a)(1). Separately, qualifying custom software prep…
Could an Illinois governmental unit use the exempt-organization event rules for food and alcohol sales at community festivals?
No. The limited sales exceptions in Section 130.2005 applied to qualifying charitable, religious, and educational organizations, not governmental bodies. Government sales to the public were taxable un…
How did Illinois's 2014 local sourcing rules apply to leases treated as conditional sales?
Illinois used origin sourcing, so ultimate destination was not the controlling shortcut. The conditional-sale presumption applied only when the agreement was a conditional sale and the property was in…
Could Illinois residents claim a credit for Indiana tax on nonprofessional gambling winnings when their other reported loss was entirely Illinois-sourced?
No. Illinois capped the other-state credit by the share of base income that would be sourced outside Illinois under Illinois's own rules. Nonprofessional gambling winnings were not treated as out-of-s…
Would IDOR verify a private vehicle title-and-registration publication, and what 2015 motor-vehicle lease change did it flag?
IDOR would not approve the accuracy of a private legal publication. It said the previously published information generally remained correct, but flagged Public Acts 98-628 and 98-1080, which changed t…
Did qualifying Illinois charitable hospitals owe Retailers' Occupation Tax on patient food and medicine or employee cafeterias?
No, under the stated conditions. Hospitals meeting Section 2-9's exemption criteria did not incur Retailers' Occupation Tax on food and medicine sold to patients or on cafeteria food sold through faci…
Could a corporation carry an old Illinois net loss forward only after it missed the return box electing to give up the carryback period?
No. For the pre-December 31, 2003 loss addressed, the election to relinquish the carryback period had to be made on the loss-year return by its extended due date. The corporation did not check the ele…
Could an Illinois resident claim an other-state tax credit attributable only to nonprofessional gambling or lottery winnings?
Generally no credit was attributable to the nonprofessional gambling winnings themselves. Illinois limited the resident credit by the share of base income that would be sourced outside Illinois if eve…
Could a pension payor withhold Illinois tax from a nonqualified pension at a flat 5% without accounting for the recipient's claimed allowances?
No. The payor could withhold Illinois tax from the described nonqualified pension, but Section 701(a)(2) required withholding only on the distribution exceeding the proportionate withholding exemption…
After Illinois eliminated partnership composite returns, did every nonresident partner have to file an individual Illinois return?
No. For the post-2014 rules described, the partnership had to withhold on Illinois-allocated pass-through income, and that payment was credited toward each partner's estimated liability. A nonresident…
Was income earned by an Illinois prepaid funeral trust currently taxable to the trust, or permanently exempt from Illinois income tax?
The income was deferred, not permanently exempt. Section 4a(c) required the trust principal and accrued earnings or losses to be held in suspense because the ultimate recipient was not yet known. The …
Did Illinois separately recognize foreign subsidiaries that had elected federal disregarded-entity status?
No. A subsidiary disregarded as separate from its corporate owner for federal income-tax purposes was also disregarded for Illinois income tax. Its income and loss became items of the owner, and its p…
Did an Illinois employer have to withhold Illinois income tax from a nonresident engineer working mainly from an out-of-state home office?
No, on the described facts. More than 95% of the engineer's work occurred at a permanent out-of-state home office, and the occasional Illinois client meetings and inspections were incidental to those …
Did alarm equipment left at customer sites qualify for Illinois's replacement-tax investment credit when the company kept ownership and charged for monitoring?
Not if the company's only ordinary-course receipts came from alarm-monitoring services and equipment leases. Illinois treated a lessor as the equipment's end user rather than a retailer selling tangib…
Could a retired pastor subtract the federally taxable remainder of a Section 403(b) distribution from Illinois income after using part as a housing allowance?
Yes, if the payments originated from a Section 403(b) plan. The portion properly used as a clergy housing allowance was excluded from federal gross income under Section 107 and therefore was not part …
Did Illinois's Telecommunications Excise Tax exempt all interstate calls?
No. The interstate-commerce entry was not a blanket deduction. Illinois taxed an interstate call originating or received in Illinois when the charge went to an Illinois service address, subject only t…
Could an Illinois-only leg count as an interstate trip for the rolling-stock exemption?
Generally yes. A carrier-for-hire trip solely between Illinois points could count when the passenger's journey or property's shipment originated or terminated outside Illinois. The carrier had to docu…
Could a nonresident use Illinois passive losses before federal law allowed them, and how were released losses sourced to Illinois?
No loss was available for Illinois before it was allowed in federal adjusted gross income. Illinois had no separate modification overriding the federal Section 469 limitation. When a suspended passive…
Would IDOR decide which lodging businesses owed a county accommodations tax and the Illinois hotel tax?
IDOR would not address the county ordinance because it did not administer that local tax. For the state hotel tax, the GIL gave the general rule—6% of 94% of gross room-rental receipts, excluding perm…
Could a nationwide commercial-property owner use separate accounting for one Illinois rental property instead of Illinois's statutory apportionment formula?
Not on the submitted record. Owning an identifiable Illinois rental property and providing a property-specific income schedule did not show that the statutory formula failed to fairly represent the ma…
How did Illinois answer a 2014 sales-tax survey on nexus safe harbors, special charges, local taxes, and virtual currency?
Illinois reported no nexus safe-harbor zones. Retained restocking fees were not taxable gross receipts, but the customer received all sales tax back. Handling was taxable; a genuine separately contrac…
How did Illinois's 2014 Telecommunications Excise Tax guidance treat Internet access, lit fiber, and dark-fiber leases?
During the federal Internet-access moratorium then ending November 1, 2014, qualifying Internet access and lit fiber used by ISPs to provide it generally were not taxable. Other telecom services, incl…
Was federal tobacco excise tax included in the wholesale-price base for Illinois Tobacco Products Tax?
Yes. The federal excise tax was imposed on the manufacturer or importer and treated as the manufacturer's cost of doing business. It was included in wholesale price for Illinois Tobacco Products Tax w…
What did rescinded Illinois GIL ST 14-0041 say about Illinois-only rolling-stock trips?
Historical only—ST 14-0046-GIL rescinded this letter. ST 14-0041 had said an Illinois-only carrier-for-hire trip could generally count when the passenger journey or property shipment originated or ter…
What did rescinded Illinois GIL ST 14-0040 say about nonprofit hospital patient and cafeteria sales?
Historical only—ST 14-0048-GIL rescinded this letter. ST 14-0040 had said an exclusively charitable nonprofit hospital with an IDOR exemption number did not owe Retailers' Occupation Tax on patient fo…
Was a manufacturer's separately stated consolidated freight charge for moving goods between its own plants taxable?
Yes. Moving products from one company facility to another to consolidate a customer's order was incoming freight and a retailer cost of doing business. The charge remained part of taxable gross receip…
What did rescinded Illinois GIL ST 14-0038 say about federal excise tax in the tobacco wholesale-price base?
Historical only—ST 14-0042-GIL rescinded this letter. ST 14-0038 had said federal tobacco excise tax was a manufacturer cost included in wholesale price for Illinois Tobacco Products Tax whether embed…
Could an Illinois school buy required books tax-free for resale and then sell them tax-free to students?
The school could buy the books tax-free for resale by giving its supplier a valid resale certificate, but its sales to students were taxable. IDOR said selling school books and supplies to students wa…
What proof did an Illinois restaurant need for tax-exempt government, nonprofit, or foreign-diplomat sales, and was a Moorish card valid?
The restaurant needed an active Illinois exemption number for an exempt organization or governmental entity, or a valid U.S. Department of State diplomatic tax card recognized by Illinois. The sale ha…
Did a bank owe Illinois sales tax when it sold repossessed nursery-school property after foreclosure?
IDOR did not decide on the limited facts. Lending agencies generally owed Retailers' Occupation Tax on repossessed-property sales. A bank acting only as agent for a disclosed owner and not taking titl…
Did IDOR determine that a reseller's software license met Illinois's five conditions for nontaxable treatment?
No specific determination was made. IDOR said a canned-software license was nontaxable only if all five conditions were met, including a ban on third-party transfer without the licensor's permission a…
Could a corporation combine two federal short taxable years for Illinois and use more than the historical $100,000 net-loss deduction cap in the second period?
No. Illinois followed the corporation's two federal short taxable years, so each period was a separate Illinois taxable year. The first period generated a $7,215,196 Illinois net loss, while the secon…
Was a software vendor's outsourced printing and mailing of customer invoices and late letters taxable in Illinois?
IDOR did not decide without the invoices, license, contracts, registration status, and delivery facts. A service with no tangible-property transfer generally was outside Retailers' Occupation and Serv…
How did Illinois tax forensic data-collection services delivered online, with no results, or on a hard drive, disc, or thumb drive?
Online viewing or downloading of extracted text and data, and a service producing no transferred property, generally involved no taxable tangible property. Delivering the results on a hard drive, CD/D…
Did the University of Illinois have to withhold Illinois income tax from scholarships, contractor fees, honoraria, royalties, and other payments to foreign recipients?
Only compensation treated as employee wages and subject to federal income-tax withholding triggered required Illinois withholding under the provisions discussed. Illinois followed federal employee-ver…
Were electronic textbooks sold or rented entirely online subject to Illinois sales or service tax?
No. IDOR treated the viewing or downloading of books and similar text over the Internet as an intangible transfer, not tangible personal property. An electronically downloaded book was outside Retaile…
Did leasing an aircraft acquired for resale stop or restart Illinois's 18-month interim-use period?
IDOR did not answer either lease-timing question and only directed the dealer to Section 150.306. The GIL's official synopsis states that when aircraft or watercraft demonstration or interim use excee…
How did Illinois tax a company installing and maintaining railroad-track lubricators, including parts, labor, delivery, and travel charges?
IDOR could not classify every charge without the contracts and invoices. If the company permanently affixed property to real estate, it was a construction contractor and end user owing Use Tax on mate…
Could mobile paper-shredding and baling equipment qualify for Illinois's manufacturing machinery exemption?
Potentially. Shredders, compactors, conveyors, and balers could qualify when used primarily to make paper into a substantially different material sold at wholesale or retail or leased. IDOR did not de…
Did changing an aircraft's N-number or moving it from a corporation to an LLC trigger Illinois Aircraft Use Tax?
Changing the N-number did not trigger Aircraft Use Tax when no transfer, gift, or purchase occurred. A transfer between separate legal entities, even related ones, generally was taxable, so a corporat…
Did using hosted servers in Illinois create sales-tax nexus for an out-of-state institution that owned no hardware there?
IDOR made no nexus determination, saying the needed facts were best gathered by an auditor. Under the historical 2014 framework it described, physical presence included an Illinois agent or representa…
How could an Illinois supplier document resale when drop-shipping goods for an unregistered out-of-state purchaser to an Illinois customer?
The Illinois supplier had to collect tax or document the resale exemption with a valid Certificate of Resale from the out-of-state purchaser. A proper certificate with a registration or resale number …
How did Illinois distinguish true equipment leases from conditional sales, and could a collection agent remit the lessor's tax under its own ID?
IDOR did not classify the contracts. A true lessor was the end user, owed Use Tax on equipment cost, could not buy it for resale, and owed no tax on rental receipts. A conditional sale made all receip…
Were colocation and managed-hosting charges for bandwidth, private lines, cross-connects, and software taxable in Illinois?
IDOR did not classify the specific services on the limited facts. Under the historical 2014 rules, taxable telecommunications included private lines, qualifying Internet access was protected only duri…
Could an Illinois business add a credit-card surcharge, and was the fee part of taxable gross receipts?
As of this 2014 letter, Illinois did not prohibit the surcharge described. For a taxable retail transaction, the card fee was a cost of doing business included in taxable gross receipts even if separa…
Did paying an independent Illinois business to teach a remote seller's customers create Illinois sales-tax nexus?
IDOR did not decide, saying nexus facts were best gathered by an auditor. Under the historical 2014 framework it described, physical presence was not limited to employees, offices, or buildings and co…
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These are official tax letter rulings and advisory opinions issued by Illinois's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.