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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My out-of-state company licenses highly customized software and provides equipment to an Illinois customer, but we keep ownership of both and have no employees or offices in Illinois -- is this revenue Illinois-source income for corporate tax purposes?
The Department wouldn't give a final yes or no -- nexus and income-sourcing questions like this are considered too fact-specific for a letter ruling and are resolved only in an audit. It did lay out t…
What did Illinois tell a commercial vehicle-tax-guide publisher in response to its 2026 annual survey about how the state taxes vehicle sales, leases, and out-of-state deliveries?
This isn't taxpayer guidance -- it's the Department's reply to a commercial publisher's annual survey updating a vehicle-tax reference guide. The Department refused to bless or correct the publisher's…
Does a grocer have to charge the higher 6.25% sales tax rate on cold salads, or the preferential 1% low food rate?
It depends on how the salad is made. Under 86 Ill. Adm. Code 130.310, a pre-made cold salad stored in a sealed container qualifies as food not prepared for immediate consumption and is taxed at Illino…
My reinsurance company wants to switch how it sources Illinois reinsurance premiums for apportionment -- from tracking each ceding company's own ratio of Illinois-located risk to simply counting premiums from ceding companies domiciled in Illinois -- can I get permission to make that change?
Yes -- the Department granted the requested election change under IITA Section 304(b)(2) and 86 Ill. Adm. Code 100.3420(e)(2), letting the taxpayer switch from 'Method B' (tracking each ceding company…
Is a solar-panel construction contractor exempt from Illinois Use Tax on materials when its contract is with a third-party owner instead of directly with the tax-exempt school district that will host the panels?
No. Because the contract is with a third-party PPA company that will own the solar panels, not with the tax-exempt school district itself, the construction contractor cannot buy the materials tax-free…
My inherited IRA payments pass from my father's estate, through a trust, and finally to me -- and the 1099-R was issued to the estate, not to me directly. Do I still get Illinois's retirement-income subtraction?
Yes. Illinois's retirement-income subtraction follows the IRA distribution through the estate-to-trust-to-beneficiary chain: whichever entity or person actually retains a given dollar gets the subtrac…
Our family partnership holds Illinois farmland as its only asset -- can the one-time capital gain from selling that farmland be excluded from the Illinois Personal Property Replacement Tax as nonbusiness income and reported on my personal return instead of the partnership's?
No. Because the property sold is located in Illinois, Illinois gets to tax the gain on the partnership's own return regardless of whether it's classified as business or nonbusiness income -- the real-…
Should a direct mail printing company charge Retailers' Occupation Tax or Service Occupation/Use Tax on printing, addressing, and mailing jobs, depending on who controls the mailing and where the items are delivered?
It depends on who controls the mailing and where items go. If the printer prints, addresses, and mails items at the customer's direction (the customer keeps control), the full job is subject to Servic…
Does an Illinois auto body shop owe sales/use tax on shop supplies like sandpaper and masking tape, or can it charge customers tax-free for them as a resale?
Auto repairmen and body shops owe Illinois Use Tax on consumable supplies (sandpaper, masking tape, paint thinner, etc.) that are used up in the shop and never physically leave with the customer's car…
Is a saké-based beverage taxed as wine ($1.39/gallon) or as spirits ($8.55/gallon) under the Illinois Liquor Control Act, especially once distilled spirits are added to it?
Plain saké is generally treated like beer/wine-type fermented beverage, but once brewer's alcohol or distilled spirits are added to it, the Department says it becomes a 'spirit' taxed at $8.55 per gal…
Does a cafeteria operator owe Illinois Retailers' Occupation Tax on the extra subsidy an employer pays it to cover cafeteria losses?
No. Because the employer's year-end subsidy payment is calculated only after the accounting period ends and is not tied to any individual food sale, the Department ruled it is not part of the operator…
When are shipping, storage, and other fulfillment-contract line items subject to Illinois sales tax on a sale of tangible personal property?
It depends on whether an "inseparable link" exists between the sale of the goods and the service charge. If the charge (including delivery) isn't separately identified, or is separately identified but…
Are a travel-marketing company's magazines, direct-mail flyers, and membership fees subject to Illinois sales and use tax?
The Department declined to rule on the specific facts and instead gave general guidance: periodicals published at least twice a year in newsprint-and-ink form (like the company's bimonthly travel maga…
Does Illinois sales tax apply to a membership fee that gives customers access to exclusive dining events and third-party restaurant perks, but no tangible goods?
No. Illinois treats membership fees as intangibles, so they are not subject to Retailers' Occupation Tax or Use Tax when the membership itself transfers no tangible personal property. But if a members…
Can an Illinois retailer legally advertise that customers 'pay no sales tax' on their purchase?
No. Illinois law makes it a Class A misdemeanor for a retailer to advertise, or otherwise tell customers, that it will absorb the tax or that tax will not be added to the selling price -- this letter …
If a seller passes on the cost of a federal tariff to a buyer in Illinois, is that tariff amount subject to sales or use tax?
Yes, if the seller is the importer of record (consignee) who paid the tariff and passes that cost on to the customer, the tariff becomes part of the selling price and must be included in gross receipt…
Is a single-seller e-commerce platform (like a photographer's order and payment site) a 'marketplace facilitator' that must collect Illinois sales tax on behalf of its business customers?
Generally no. If customers reach a seller's page only through a code, link, or unique URL specific to that one seller, and the platform does not let them search or browse for other sellers' products, …
Does a licensed tobacco distributor owe Illinois Tobacco Products Tax on a sale to another licensed distributor, and can it be held liable if that second distributor never remits the tax?
Sales of tobacco products from one licensed distributor to another licensed distributor are not subject to Illinois Tobacco Products Tax. The tax applies only when the last distributor in the chain se…
Are a cable company's lease receipts for set-top boxes and remote controls exempt from Illinois sales tax if the equipment is already taxed under Chicago's Amusement Tax?
Yes. The Illinois Department of Revenue ruled that a cable television provider's lease receipts from equipment (set-top boxes, remote controls) leased to Chicago customers are exempt from state and lo…
If a subcontractor for a tax-exempt organization (like a school or church) rents equipment such as a lift, does the subcontractor have to pay Illinois sales tax on the rental?
Generally yes. Illinois now taxes lease receipts directly (effective January 1, 2025), and a rental to a subcontractor is taxable unless the subcontractor itself qualifies -- for example, as a constru…
Does an out-of-state company that sells cloud-based software and app subscriptions to an Illinois client owe Illinois Service Use Tax or sales tax on those subscription charges?
It depends on what is actually transferred. Illinois does not tax software-as-a-service subscriptions where nothing is downloaded and access is purely cloud-based -- but an out-of-state "serviceman" t…
Does Illinois's Automobile Renting Occupation and Use Tax apply to the rental of watercraft (boats)?
No. The Department ruled that a boat is not an "automobile" under the Automobile Renting Occupation and Use Tax Act, because a boat is not a "vehicle" under the Illinois Vehicle Code -- it is not tran…
We claimed the Employee Retention Credit years ago without reducing our wage deduction, and the IRS is only now letting us recognize the overstated wages as income in the year we actually receive the credit -- can we take Illinois's offsetting subtraction in that same later year instead of the original wage year?
Yes, in this specific situation. Illinois normally ties its ERC-related wage-expense subtraction to the same year the wages were originally paid and the deduction should have been disallowed, and Illi…
Does a company that only shows ads linking to a retailer's own checkout page, without ever collecting or transmitting the customer's payment, count as a 'marketplace facilitator' that must collect Illinois sales tax?
The Department confirmed that an advertising platform is not a 'marketplace facilitator' under Illinois law as long as it never directly or indirectly collects payment from the customer and transmits …
Are a religious school's mandatory laptop rentals to students, billed as part of tuition, exempt from Illinois sales tax as a 'noncompetitive' sale like school yearbooks?
The Department did not give a yes-or-no answer. It explained that, effective January 1, 2025, leases of tangible personal property are themselves taxable sales in Illinois, and then walked through the…
When a parking garage uses a third-party booking intermediary that adds a service fee on top of the parking charge, whose gross receipts figure goes on Line 1 of the Parking Excise Tax return — the amount the customer pays, or the smaller amount the intermediary forwards to the garage operator?
It depends on whether the intermediary's fee is separately stated. If the booking intermediary's service fee is not separately stated, the operator must report and pay tax on the full amount the custo…
Since Illinois started taxing lease receipts on January 1, 2025, does a company that rents tower cranes owe tax on the crane rental itself, on the assist cranes and labor used to erect and dismantle it, on a separate maintenance agreement, and on freight charges?
The bare rental of the tower crane itself is taxable under Illinois's new lease-receipts tax, effective January 1, 2025. But the Department did not directly confirm or deny the taxpayer's specific lin…
Does Illinois sales/use tax apply to fees a company pays a vendor for maintenance and support services on open-source database software?
The Department declined to issue a private letter ruling and instead issued this general guidance: if a maintenance agreement's software updates consist solely of open-source software distributed at n…
Does an Illinois wedding and event décor business have to charge sales tax on décor packages that combine the temporary use of owned décor items with design and setup services?
It depends on the 'true object' of the transaction. If the décor items would have no value to the client without the design/installation service, the business is a serviceman and owes Service Occupati…
If a company pays a federal tariff on imported materials and passes that cost on to a customer, does Illinois sales or use tax apply to the tariff amount?
It depends on who is legally responsible for the tariff. If the seller is the importer of record and passes the tariff cost on to the customer as part of the price, the tariff is part of the gross rec…
Now that Illinois taxes leases of tangible personal property as retail sales starting January 1, 2025, how do exemptions for construction contractors, exempt organizations, and resale purchases apply to a company that both rents and sells equipment and materials?
Since January 1, 2025, a lessor's gross receipts from leasing tangible personal property in Illinois are subject to State and local Retailers' Occupation Tax, replacing the old system where the lessor…
My out-of-state S-corp's only Illinois connection is a minority interest in a Chicago hotel partnership -- can I petition to allocate 100% of that partnership's K-1 income to Illinois instead of using the standard apportionment formula?
Not as an alternative-apportionment petition -- the taxpayer's petition didn't provide the evidence Illinois requires (proof the standard formula produces a genuinely distorted, out-of-proportion resu…
Now that Illinois taxes leases as sales starting January 1, 2025, can a Chicago-based equipment-rental company charge tax based on its own Chicago location instead of tracking the tax rate for every city its customers take delivery in?
No — the Department did not grant the origin-based shortcut the lessor asked for. Effective January 1, 2025, lessors owe State and local retailers' occupation tax on lease receipts, and for leases wit…
Under Illinois's new 2025 lease-receipts tax, does a lessor of leased machinery owe sales tax on the cost of repair or replacement parts it buys to fix or refurbish the equipment it leases out?
No. A lessor's purchase of repair or replacement parts that get attached to equipment used solely for leasing (and whose lease receipts are already taxed under the new 2025 lease-receipts tax) is exem…
Can a car buyer get a sales-tax trade-in credit when a manufacturer's Lemon Law settlement money is applied toward a replacement vehicle?
No. Illinois law does not allow a sales-tax trade-in credit for the portion of a new vehicle's price that is covered by a manufacturer's New Vehicle Buyer Protection Act ("Lemon Law") settlement. In t…
Does a small out-of-state online retailer that sells below Illinois's $100,000/200-transaction threshold still have to register and collect Illinois sales tax, and can Illinois simplify its local-tax remittance rules for remote sellers?
Illinois Retailers' Occupation Tax applies to remote retailers once they hit $100,000 in Illinois sales or 200 separate transactions with Illinois purchasers under 86 Ill. Adm. Code 131, and there is …
What Illinois state sales tax rate applies to sales of food, and how are soft drinks and candy treated?
As of this March 2025 letter, Illinois taxed food for human consumption to be eaten off the premises at a reduced state rate of 1%, rather than the standard 6.25% Retailers' Occupation Tax rate. That …
My partnership owns rental real estate, a lending business, and oil and gas ventures across several states, and Illinois's single-sales-factor formula makes our Illinois apportionment badly out of proportion to our actual Illinois activity -- can we use separate accounting instead?
The Department denied this specific petition because the taxpayer didn't submit enough evidence to meet the demanding 'clear and cogent evidence' standard for alternative apportionment (and even left …
Under Illinois's 2025 lease-tax overhaul, does a party-entertainment company that rents out equipment along with an on-site supervisor owe retailers' occupation tax on the whole package, and how is that tax sourced?
Generally yes. Effective January 1, 2025, Illinois taxes leases of tangible personal property as retail sales (Article 75 of Public Act 103-592), and the Department explained that renting out equipmen…
Do pneumatic compression devices sold to Illinois patients for treating lymphedema and chronic venous insufficiency qualify for Illinois's reduced 1% sales tax rate on medical appliances?
The Department did not decide the question definitively, because a GIL can't resolve a specific taxability question. But it reaffirmed that a medical appliance is an item that directly substitutes for…
Under Illinois's 2025 leasing tax, does a park district owe sales tax on golf cart packages, room-rental add-ons, GPS geocache rentals, mini golf, facility rentals, and locker rentals?
It depends on the "true object" of each transaction. Golf carts bundled into golf packages, GPS units rented for geocache tours, and equipment add-ons to room rentals are generally taxable as leases o…
What are all the different taxes and fees listed on an Illinois landline phone bill, and who collects each one?
A landline bill in Illinois can show up to six separate items: a $1.50-per-connection 911 surcharge, a 0.1% Public Utilities Fund tax, a 0.5% Telecommunications Infrastructure Maintenance Fee, a Unive…
My manufacturing company's Illinois throwback sales are inflating our single-sales-factor apportionment -- can we add property and payroll factors, or alternatively drop throwback sales, to more fairly reflect our actual Illinois activity?
No -- the Department denied the petition because merely showing that a three-factor (property/payroll/sales) formula produces a smaller, different apportionment percentage isn't enough; the taxpayer n…
Does Illinois tax hyperbaric oxygen chambers, and other medical devices, at the reduced 1% medical-appliance rate or the general 6.25% rate?
It depends on the specific device and how it's used: Illinois taxes an item at the reduced 1% state rate only if it is a 'medical appliance' that directly substitutes for a malfunctioning body part (l…
Do wheelchair ramps, stair lifts, and grab bars qualify for Illinois's reduced 1% sales tax rate for medical appliances?
No. The Illinois Department of Revenue concluded that wheelchair ramps, stair lifts, and grab bars are taxed at the regular 6.25% state sales tax rate (plus local taxes), not the reduced 1% rate for m…
How is sales/use tax handled when a mobile home park owner buys, installs, and resells manufactured homes located in the park?
The park owner's purchase of the manufactured home from the manufacturer is a tax-free sale for resale. The park owner then owes tax on the first sale of that home to a purchaser (reported and paid on…
Since Illinois started taxing leases of tangible personal property on January 1, 2025, does a business that rents out scaffolding owe retailers' occupation tax on those rental charges, and can it accept a manufacturing exemption certificate (Form ST-587) for scaffolding rentals?
Generally yes, the lessor owes state and local retailers' occupation tax on scaffolding rental receipts starting January 1, 2025, and no, an ST-587 manufacturing machinery and equipment exemption cert…
Is a roll-off dumpster trash-removal service subject to Illinois sales tax as a lease of the dumpster, or is it a nontaxable waste-disposal service?
It's taxable, but as a service transaction, not a flat exemption. The Department ruled that a roll-off dumpster provided as part of a trash-removal service is a lease of tangible personal property inc…
Is an online auction listing service a 'marketplace facilitator' in Illinois if the seller processes payment directly?
The Department read the definition broadly and would not adopt the narrow reading the requester proposed. Under 35 ILCS 120/1 and 86 Ill. Adm. Code 131.130(a)(1)(B), a marketplace facilitator both lis…
Since Illinois started taxing equipment leases on January 1, 2025, whose location sets the tax rate, and does Chicago's lease tax stack on top of the new state tax?
The lease is sourced to the equipment's primary location (usually where the lessee tells the lessor it will be used), not the lessor's or lessee's business address. And no, the new state and local lea…
Does a dumpster rental business have to charge Illinois sales tax on the rental, delivery, and waste-removal charges, or is it a nontaxable sale of service?
It depends on how the dumpster's cost compares to the total bill. Renting out a dumpster is a lease of tangible personal property, and effective January 1, 2025, leases transferred as an incident of a…
Can a business buy tangible personal property tax-free from a seller by claiming it is for resale, and what must a valid Certificate of Resale contain?
Yes, but only if the purchaser has an active Illinois registration or resale number and gives the seller a properly completed Certificate of Resale (Form CRT-61 works) containing everything required b…
Does a manufactured (mobile) home dealer owe sales tax or use tax when it sells a home that gets permanently installed on a lot, versus one it just delivers without installing?
It depends on installation. If the dealer permanently incorporates the manufactured home into real estate (wheels, tongue, and hitch removed), the dealer acts as a construction contractor and owes use…
Does paying Chicago's Personal Property Lease Transaction Tax on e-bike and e-scooter rentals exempt a micromobility company from Illinois sales and use tax, both before and after the state's new January 1, 2025 lease tax takes effect?
Through December 31, 2024, Illinois imposes no state sales/use tax on true-lease receipts at all, so a company already paying Chicago's Personal Property Lease Transaction Tax owes no additional state…
Starting January 1, 2025, does Illinois Retailers' Occupation Tax apply to leases of tangible personal property, and how is the tax on lease payments sourced?
Yes. Effective January 1, 2025, Illinois treats most equipment leases as taxable retail sales, so lessors owe State and local Retailers' Occupation Tax on lease receipts (with an exception for titled …
Does Illinois charge sales tax on a video game's online subscription, in-game items, and virtual currency?
No. Illinois ruled that a video game publisher's monthly online subscription fees, in-game items (cosmetics, boosts, name changes, expansions), and virtual currency are all exempt from Retailers' Occu…
What Illinois sales tax rate applies to food, and does that rate apply to tobacco-free snuff-alternative products?
Food sold at retail for off-premises consumption is taxed at Illinois's low State rate of 1% plus applicable local taxes, per 86 Ill. Adm. Code 130.310 -- but this GIL does not actually decide whether…
Starting in 2025, do Illinois retailers have to collect sales tax based on where a customer receives the goods, and do businesses that lease equipment now owe Retailers' Occupation Tax on lease payments?
Yes to both. Effective January 1, 2025, retailers with a physical presence in Illinois must source sales to the Illinois location where the customer takes delivery or possession (not just their own lo…
Can a payment processor's fees, or the retailer's own credit card fees, be excluded from gross receipts subject to Illinois Retailers' Occupation Tax?
No. Illinois treats processing charges, credit card fees, and other costs of doing business as part of a retailer's taxable gross receipts, even if they are separately stated on the customer's bill. U…
Does Illinois Retailers' Occupation (Sales & Use) Tax apply to out-of-state retailers selling to Illinois customers, and to leases of registered trailers, starting in 2025?
Yes. Starting January 1, 2025, an out-of-state retailer that maintains a place of business in Illinois is treated as selling at retail at the Illinois delivery location and owes Illinois Retailers' Oc…
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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.