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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Could an Illinois S corporation subtract the federal payroll-expense disallowance tied to the FICA tip credit?
No. Claiming the federal Section 45B FICA tip credit reduced the S corporation's federal payroll-tax deduction. Illinois allowed subtractions only for the federal disallowances specifically listed in …
Was proprietary software licensed for integration into a customer's product exempt from Illinois sales tax merely because it was not stand-alone and would be sublicensed?
Not automatically. Software that was not custom remained taxable canned software even when it was not stand-alone or was delivered electronically. A license avoided Retailers' Occupation Tax only if i…
Would Illinois tax a future Florida resident's gain from selling stock in an Illinois corporation?
Generally not if the gain was nonbusiness income from intangible stock. But IDOR lacked enough facts to decide whether this owner's future sale gain would instead be business income. If it was busines…
Did an out-of-state lessor selling an off-lease vehicle located in Illinois use seller Form ST-556 or have the buyer file Form RUT-25?
The lessor had to file Form ST-556, not rely on the purchaser's Form RUT-25. Illinois treated a lessor selling an off-lease passenger car as a retailer, and a vehicle located in Illinois when sold gen…
Did a hotel-room membership reseller owe Illinois Hotel Operators' Occupation Tax on its full member charge or only the hotel's discounted room price?
IDOR did not answer whether the membership club owed tax on its $40 markup or whether the taxable amount was $100 or the hotel's $60 receipt. It explained that Hotel Operators' Occupation Tax is impos…
Did independent sales managers, local installers, and direct shipments from Illinois require a Missouri LED-sign seller to collect Illinois tax?
IDOR declined to decide the seller's nexus, saying those facts were better developed in an audit. Under the historical framework it described, physical presence included an agent or representative and…
Was a proposed sale of installed distributed-antenna-system equipment a taxable retail sale, a resale transaction, or a construction contract?
IDOR did not classify the proposed DAS transaction. If equipment was bought with the intent to resell it, the first purchase could be for resale and the later sale would be a taxable retail sale, supp…
Did a prescription for asthma or chemical-sensitivity relief make an air purifier or filter eligible for Illinois's reduced medical-appliance tax rate?
Not automatically. A medical appliance had to be intended by its manufacturer to directly substitute for a malfunctioning part of the body. A physician's or other licensed professional's prescription …
When did a charitable remainder unitrust have to file an Illinois fiduciary income-tax return?
A charitable remainder unitrust followed the same Illinois income-reporting and payment rules as another trust. It filed Form IL-1041 when it had Illinois net income subject to tax. A resident trust a…
Could a fabricator rely on an ST-587 manufacturing exemption certificate issued by its customer's customer, or did its direct customer need to certify each purchase?
The fabricator needed exemption documentation from its direct purchaser for each transaction. The purchaser could provide Form ST-587 or another certificate containing the required information. A cert…
Were prescription drugs paid through Medicare Part D exempt from Illinois tax, and how did a pharmacy calculate and collect Service Occupation Tax?
Medicare Part D drug sales were not government-exempt because private prescription drug providers, not the government, purchased the drugs. The pharmacy had to use one of four serviceman methods. IDOR…
Did regularly arranging Illinois repair services through local independent contractors create Illinois income-tax nexus for an out-of-state LLC?
IDOR did not make a definitive nexus determination because the issue was highly fact-dependent and normally resolved in an audit. It warned, however, that regularly arranging and controlling Illinois …
Did an Illinois E number exempt a customer from tax on wireline service billed monthly in advance, as though it were a prepaid calling arrangement?
No. Billing recurring subscription charges in advance did not convert wireline service into a prepaid telephone calling arrangement. Ordinary telecommunications remained subject to Telecommunications …
Could a taxpayer reduce Illinois asset-sale gain because old losses that reduced basis had expired before they could be used as Illinois carryovers?
No. Illinois began with properly computed federal taxable income, including the federally determined sale gain, and Section 203 contained no basis adjustment or equivalent subtraction for losses that …
Did a Minnesota resident owe Illinois income tax on compensation earned entirely from Illinois work?
Yes. Illinois taxed a nonresident's compensation earned from work in Illinois. The taxpayer could not use Illinois's resident credit to shift the tax to Minnesota because that credit was available onl…
Could a taxpayer amend old Bright Start contribution years instead of adding a nonqualified 2011 withdrawal back at the higher 2011 rate?
No. The 2008–2010 returns were correct when filed because the taxpayer actually made qualifying Bright Start contributions and properly claimed the subtraction. The nonqualified withdrawal occurred in…
Was a university's purchase of a billing server exempt when the server also held records and generated bills for a taxable nonprofit subsidiary?
IDOR did not decide the shared server's exemption. It explained that an organization with an active E number could buy tangible personal property tax-free only when the purchase furthered that exempt …
How was the de minimis serviceman cost ratio computed, and when could a service provider treat transfers to a nonprofit customer as tax-exempt?
The cost ratio used only the annual cost of tangible personal property actually transferred to service customers—not equipment, maintenance, repairs, or supplies that were merely business costs. A 501…
Was a supplier's charge for a website taxable in Illinois when the work was delivered electronically?
The GIL did not classify the particular website invoice. It explained that electronically transferred information or data was not tangible personal property, and a service without a property transfer …
Could an unregistered Illinois printer buy newsprint paper tax-free, and what proof did the paper supplier need?
Potentially, through either of two paths. Paper bought by a graphic-arts producer could be a resale purchase, ordinarily documented by an active registration or resale number and certification; withou…
Did an online deal-of-the-day business owe Illinois sales tax when it sold restaurant vouchers, and what amount was taxed at redemption?
The deal-site's sale of the voucher itself was an intangible sale and was not subject to Retailers' Occupation Tax. The restaurant's later sale of food or drink at redemption was taxable. If the resta…
Was a printing broker exempt from tax because it sold custom-designed printed items as a service and subcontracted the physical printing?
No blanket exemption applied. Custom or special-order printed items were generally sales of service subject to Service Occupation Tax on the tangible property transferred. The printing broker had to u…
How did same-sex civil-union partners adjust employer health-coverage wages on Illinois's historical federal 'as-if-married' return?
Under the historical 2012 procedure, partners completed a pro-forma federal return as if federal law recognized their civil union as a marriage. They excluded from pro-forma taxable wages any employee…
Were a retailer's nonrefundable layaway service fee and fee charged only when the customer canceled subject to Illinois sales tax?
The nonrefundable layaway service fee was taxable. IDOR treated it like a handling charge and a cost of doing business passed to the customer, so it remained in taxable gross receipts. A cancellation …
How was base employment calculated for the additional replacement-tax investment credit when the prior taxable year had only nine months?
Use the nine months and divide by nine, if that short period was the taxpayer's taxable year. Regulation 100.2101 defined base employment as the average monthly Illinois employment during the taxable …
Did Illinois's municipal gas occupation tax apply to alternative gas suppliers or only public utilities?
IDOR did not answer the classification question. Taxes authorized by 65 ILCS 5/8-11-2 were administered by municipalities that elected to impose them, not by the Illinois Department of Revenue. IDOR t…
Were college textbook rental fees taxable when the bookstore allowed a student to buy the book during or after the rental?
IDOR did not classify the bookstore's rental agreement or specifically decide its late and nonreturn charges. A true lease generally had no buyout or only a fair-market-value option; Illinois did not …
How could an Illinois-registered drop shipper document a resale sale to an out-of-state purchaser that lacked Illinois nexus and registration?
The Illinois-registered seller had to collect tax or document an exemption for its Illinois delivery. To treat the sale to the out-of-state purchaser as resale, it needed a valid resale certificate co…
Did regularly dispatching local contractors for Illinois retail repairs likely create income-tax nexus, and could voluntary disclosure limit prior years?
IDOR did not issue a final nexus determination because all facts would need audit review. It nevertheless said that a business built around regularly dispatching Illinois contractors for repair servic…
Did an Illinois school district owe sales tax when it sold textbooks to students and later bought them back, and could it instead structure a tax-free rental?
The described buy-sell-buyback transactions were taxable retail sales. The school district had to register, remit Retailers' Occupation Tax, and buy resale inventory using certificates rather than its…
Was a remotely hosted email-marketing platform taxable as canned software or nontaxable as an online service in Illinois?
IDOR did not decide whether this hosted platform was taxable. It said application-service-provider, hosted-software, and web-based-software treatment should be resolved through formal rulemaking rathe…
How did Illinois describe sales, nexus, local sourcing, and lease tax rules in response to a Series LLC classification survey?
IDOR did not answer the Series LLC survey yes or no or say that each series was a separate Illinois sales-tax entity. It said Illinois sales and use tax generally looked at transactions between legal …
Did GPS proof that a truck burned fuel inside an off-highway geofence automatically qualify that fuel for an Illinois Motor Fuel Tax refund?
No blanket approval was available. Each refund claim needed verifiable purchase and use documentation showing a nontaxable purpose and a practical calculation and itemization of the fuel amount. Gasol…
Were stand-alone prepaid wireless phone cards worth $5 or less exempt from Illinois's prepaid wireless 9-1-1 surcharge as minimal service?
No. The $5-or-less minimal-service election applied only when a minimal amount of prepaid wireless service was sold with a prepaid wireless device for one non-itemized bundled price. Stand-alone prepa…
How did Illinois tax an optometrist's government-paid and privately paid medical-appliance charges, including shipping above actual cost?
Direct Medicare or Medicaid payments could be exempt when properly documented with an active E number, but patient and private-insurance portions were taxable. IDOR said most optometrists were registe…
Could a cupcake shop with four customer tables charge Illinois's lower off-premises food rate on cupcakes sold by the dozen for later consumption?
Generally the high rate applied to all food sales because the store provided seating. The presumption could be rebutted only if the on-premises area was physically partitioned from the off-premises sa…
Which sales at a university dining facility open to the public may be exempt from Illinois Retailers' Occupation Tax?
Only a narrow category. A school cafeteria confined to students and employees was exempt, but when a dining facility was open to the public, all sales were generally taxable. Illinois allowed the univ…
Did an out-of-state inventory-software company have Illinois nexus when warehouses used its program and it earned a per-pallet spread?
Unresolved. Illinois declined to make a nexus determination in a GIL or PLR, saying those facts are often best gathered by an auditor. It explained that canned software was generally taxable regardles…
Did an out-of-state internet retailer create Illinois sales-tax nexus by sharing a loyalty program with affiliated Illinois stores and accepting online returns there?
Unresolved. Illinois declined to make a nexus determination in a GIL or PLR because it said the necessary facts are often best gathered by an auditor. It instead summarized the 2011 framework: an Illi…
Does an Illinois charitable foundation with an E number avoid Retailers' Occupation Tax on continuous website and fundraising-event sales of logo merchandise to the public?
Generally no. Federal 501(c)(3) status alone does not create an Illinois sales-tax exemption, and an Illinois E number primarily exempts qualifying organizational purchases—not the organization's own …
How does Illinois tax custom printed matter transferred by graphic-arts servicemen, including registered and unregistered de minimis servicemen?
Illinois declined to issue the requested Private Letter Ruling but explained the general rules. Special-order or custom print items generally fall under Service Occupation Tax, while stock or standard…
How did Illinois distinguish a taxable conditional sale from a true equipment lease, and who owed tax in each case?
Illinois declined to rule on the requester's hypothetical contract-sale and funding arrangements, but explained the general distinction. A lease with a nominal or one-dollar purchase option, or a guar…
Could entities use separate accounting for Illinois property sales without showing how the statutory formula distorted their income?
No, not on the petition submitted. Section 304(f) allowed separate accounting only when the statutory method did not fairly represent Illinois activity. Regulation 100.3390 required clear and cogent e…
Could entities use separate accounting for Illinois property sales without showing how the statutory formula distorted their income?
No, not on the petition submitted. Section 304(f) allowed separate accounting only when the statutory method did not fairly represent Illinois activity. Regulation 100.3390 required clear and cogent e…
Could an Illinois taxpayer subtract nonqualified long-term care insurance reimbursements that were included in federal adjusted gross income?
No. Because the nonqualified policy reimbursements were included in federal adjusted gross income, they also entered Illinois income. Section 203(h) allowed only expressly listed subtractions, and Ill…
Are Illinois's state Gas Revenue and Gas Use Taxes alternatives to a municipality's natural-gas tax, or can the local tax apply in addition?
The local tax can apply in addition. Illinois's statewide Gas Revenue Tax applied to persons distributing, supplying, furnishing, or selling gas for use or consumption and not for resale at the lower …
What Illinois rules should a wholesaler use to validate resale certificates and customers' certificates of registration?
The GIL did not answer the wholesaler's detailed questionnaire item by item. It directed the seller to 86 Ill. Adm. Code 130.1405 and Subpart N for certificates of resale and sales for resale, and to …
Did using an Illinois third-party marketing company create Illinois sales-tax nexus for an out-of-state e-commerce service provider or its clients?
Unresolved. Illinois declined to determine nexus through a GIL or PLR because it said the relevant facts are often best gathered by an auditor. The company managed websites, warehousing, fulfillment, …
How does Illinois tax fabricated structural steel sold without installation, incorporated under a construction contract, or shipped out of state?
It depends on the product, design work, contract, and delivery. A fabricated item substantially similar to stock or standard property produced Retailers' Occupation Tax on the full selling price witho…
Does an Illinois aircraft dealer owe Use Tax when an inventory aircraft is used for demonstrations and remains unsold for more than 18 months?
Yes. Demonstration or interim use by a retailer was exempt while the aircraft remained inventory and available for sale, but the 18-month period began when the aircraft was purchased. If it was not so…
How did Illinois treat an out-of-state repair manager that hired local contractors for plumbing, electrical, painting, and building repairs?
Illinois did not expressly decide the repair manager's nexus or final tax liability. It explained that contractors permanently incorporating property into real estate were end users owing Use Tax on c…
Do Illinois bulk-sales notice and withholding rules apply when a lender merely repossesses or forecloses on property securing a defaulted loan?
Generally no when the successor does no more than repossess or foreclose on property covered by the note, mortgage, or security interest. Illinois said no statutory 'sale or transfer' then occurs, so …
Could a qualifying industrial vacuum loader bought in 1999 still use Illinois's former pollution-control-facility exemption when the owner later sought title?
Potentially, but the GIL did not rule that this taxpayer's vehicle qualified or waive tax, penalty, or interest. Illinois said the pollution-control-facility exemption covered qualifying sales through…
Are fees for internet access to healthcare recall information, location databases, and unique database prefixes subject to Illinois sales or use tax?
Illinois declined the requested PLR because its regulations addressed the issue, then stated the general rules. Information or data transferred or downloaded electronically was not tangible personal p…
Did an out-of-state employer have to withhold Illinois tax from a temporary nonresident employee working entirely in Illinois?
Yes. The nonresident inspector worked for two or three months entirely at an Illinois fabrication shop. Section 304(a)(2)(B) therefore treated the wages as compensation paid in Illinois, even though t…
What Illinois sales-tax amount applies when grocery customers redeem trading stamps for free or nominal-price cookware?
The retailer transferring the cookware owed Retailers' Occupation Tax and collected Use Tax based on the cookware's retail value, even when the customer received it for stamps or a nominal cash amount…
Did transferring an aircraft from its owner to the owner's revocable trust before death trigger Illinois Aircraft Use Tax even without consideration?
Yes. Illinois treated the transfer from the individual owner to the revocable trust as a taxable transfer between separate legal entities, even though no money changed hands and the owner could amend …
Did marketing corn and beans for patrons make a grain elevator a retailer eligible for the replacement-tax investment credit?
The GIL did not decide. Marketing farm products could be a retailing operation, but IDOR needed to know whether the company sold taxable services, sold tangible personal property at retail, and what o…
Are judgment or guarantor payments recovered after a defaulted equipment lease subject to Illinois sales or use tax?
The GIL did not directly decide whether the proposed judgment or guarantor recoveries were taxable. It declined the PLR because regulations addressed the subject and explained that classification cont…
Could a liquidating C corporation use its Illinois net-loss carryover on a final return during the historical suspension period?
No. The historical Section 207(d) suspension barred a C-corporation net-loss deduction for taxable years ending after December 31, 2010 and before December 31, 2014, with no exception for a final retu…
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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.