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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Is a bundled all-inclusive sporting-event ticket (admission plus food and drink for one price) subject to Illinois Retailers' Occupation Tax, or only to local amusement tax?
It depends on proportion, not a fixed rule: if the food and drink bundled into a single ticket price are just incidental to the sporting event (the service), the transaction is treated as a sale of se…
When a serviceman buys a specimen-collection kit from an out-of-state, unregistered supplier and uses it (rather than transferring it to the customer) to provide a non-taxable service in Illinois, does the serviceman owe Illinois Use Tax on the kit?
Yes. When a serviceman purchases tangible personal property at retail from an unregistered, out-of-state supplier and uses or consumes that property in Illinois rather than transferring it to service …
Does a company that sells molded pulp packaging (like protective boxes and cartons) to businesses who use it to package and ship their own products for sale owe Illinois Retailers' Occupation Tax on those packaging sales?
No tax is owed on the container sale itself, if the purchaser gives the seller a Certificate of Resale. Under 86 Ill. Adm. Code 130.2070, sellers of containers, wrapping, and packing materials to purc…
When a business sells a combined ticket for a dinner-and-entertainment event (like a murder mystery dinner), does it owe Illinois Retailers' Occupation Tax on the food, and does that change if the caterer already charged tax on the food it sold to the business?
Caterers and sellers of meals owe Illinois Retailers' Occupation Tax on their full gross receipts from food sales, with no deduction for service or overhead costs. If a business buys catered food and …
Does Illinois sales or use tax apply when a contractor sells and plants trees and tree shelters for a landowner under a government-sponsored conservation program?
Yes, generally. There is no Illinois sales tax exemption for tangible personal property used for conservation purposes, so trees and tree shelters sold to a customer are taxable unless a different exe…
Is a watercraft purchase from a licensed Illinois dealer exempt from Illinois sales tax if the watercraft itself is exempt from state titling and registration?
No. Buying a watercraft at retail from an Illinois dealer is subject to Illinois Retailers' Occupation Tax/Use Tax (commonly called sales tax) regardless of whether the watercraft is exempt from Illin…
Does Illinois sales tax apply when a nonresident buys a vehicle from an Illinois dealer and has it titled in another state?
It depends on reciprocity and where the vehicle actually went. Illinois exempts a vehicle sale to a nonresident from Retailers' Occupation Tax only if the buyer's titling state gives Illinois resident…
Must an auto glass repair and replacement company include its over-the-counter retail and wholesale glass sales when calculating its 35% 'de minimis' cost ratio, and how must it collect tax on its repair and replacement services?
Retail and wholesale sales of glass are excluded from the cost-ratio calculation used to determine 'de minimis' serviceman status; only the cost of materials transferred as part of a repair or replace…
When a customer returns merchandise, how should an Illinois retailer report the refunded sales tax on Form ST-1/ST-2, and can the amended return show a negative number?
The retailer must refund the sales tax it collected to the customer and may then deduct the corresponding gross receipts on the return for the period the refund was made. But sellers cannot file a ret…
Does an outdoor walking tour company owe Illinois sales/use tax when its tour price includes stops for food and drinks at third-party restaurants and bars?
It depends on whether tangible personal property (food or drinks) is transferred as part of the sale. A walking tour by itself, with no food or drink included, is a nontaxable service. But if the tour…
Does a capital financing lease of qualified data center equipment, treated as a conditional sale, qualify for Illinois' sales-tax data center exemption, and does the answer change depending on when the data center itself became qualified?
Illinois could not give a specific ruling in a GIL, but explained that a capital financing lease treated as a conditional sale is taxed like a sale (full Retailers' Occupation Tax on the payment strea…
Does an Illinois online classified-ads website have to collect Retailers' Occupation (sales) Tax on sales of digital 'credit packs' that customers use to publish, highlight, or promote listings?
No. The Department ruled that because purchasers of the digital credit packs receive no tangible personal property -- no inventory is shipped and nothing physical changes hands -- the sales are not su…
When a finance company buys heavy trucks and trailers from a dealership to lease to customers under a TRAC (terminal rent adjustment clause) lease, does the dealership charge sales tax on that purchase, and who owes tax on the lease payments?
The dealership owes Retailers' Occupation Tax on its sale of the truck or trailer to the leasing company. If the arrangement is a true lease (no guaranteed/nominal buyout), the lessor is treated as th…
When an out-of-state business leases identification signs (tangible personal property) to Illinois car dealers under a true lease, who owes Illinois sales/use tax, and does it matter whether the signs are treated as real property or as tangible personal property?
The lessor, not the dealer-lessee, owes the tax. Under a true lease, Illinois treats the lessor as the end user of the tangible personal property being leased, so the lessor owes Use Tax on its own co…
When a peer-to-peer car-sharing platform lets private "Hosts" rent out their own vehicles to "Guests," who owes Illinois's Automobile Renting Tax -- the platform or the Host -- and does that change once the platform's rental volume crosses certain thresholds?
The platform (the "Car Rental Facilitation Company") is treated as a marketplace facilitator under the Automobile Renting Occupation and Use Tax Act, the same way an online marketplace is a marketplac…
Does an out-of-state company that has an Illinois employee and buys personalized debit/prepaid cards from printers owe Illinois Retailers' Occupation, Use, or Service Occupation Tax on those cards, depending on where the printer ships them and whether they are resold, given away, or destroyed unfinished?
It depends on where the printer ships the finished cards. Because the company has an Illinois employee, it is an out-of-state "serviceman maintaining a place of business" in Illinois, and the Departme…
Does an outsourced veterinary pharmacy business owe Service Occupation Tax or Retailers' Occupation Tax on the products it supplies through participating veterinary hospitals to pet owners, and who is responsible for remitting that tax?
The Department could not give a definitive answer because the facts were unclear, but it explained the framework: if the pharmacy company sells to veterinary hospitals at wholesale and the hospitals r…
Does a company that dehydrates, powders, and encapsulates a customer's own product into vitamin capsules owe Service Occupation Tax, and if so, how is the tax base calculated?
Yes. The Department concluded the company is acting as a "serviceman" under the Service Occupation Tax Act and owes tax on the tangible personal property (the capsules and packaging) transferred incid…
Is software that guides an entire steel-building fabrication process from design through production — replacing printed blueprints — exempt from Illinois sales and use tax as 'software used to operate exempt manufacturing machinery and equipment'?
The Department did not decide whether this particular fabrication-guidance software qualifies, because a GIL cannot make a taxability determination on specific facts. Instead, it laid out the framewor…
Does an out-of-state digital advertising company owe Illinois Use Tax or Service Occupation Tax on payments it receives from Illinois-based customers for serving mobile ads that lead to app installs?
It depends on whether tangible personal property (including taxable computer software) actually changes hands. The Department explained that Illinois does not treat viewing, downloading, or streaming …
When a company installs cell-tower/telecom transmission equipment (wiring, cabling, and related materials) onto real property under time-and-materials or lump-sum contracts, is the company treated as a construction contractor subject to Use Tax, or as a retailer that must charge sales tax, and does using or acting as a subcontractor change the answer?
A firm that permanently affixes tangible personal property (such as telecom transmission equipment, wiring, and cabling) to real property is a construction contractor, not a retailer, and owes Use Tax…
Does a SaaS company owe Illinois sales, use, or service occupation tax on a free connector applet and on subscription fees for its cloud-based service?
No. The Department ruled the company owes no Illinois Use Tax on the free applet it lets customers download from out-of-state servers, and no Retailers' Occupation Tax, Use Tax, or Service Occupation …
Does a permanently anchored racking system installed in a building qualify for Illinois's Enterprise Zone building materials sales tax exemption?
It depends on whether the racking has actually become part of the real estate. The Department explained that the Enterprise Zone building materials exemption only covers building materials incorporate…
Does an Illinois business have to pay tax on the training manuals it hands out at a paid customer seminar, and how is that tax calculated?
Yes. Because labor is not taxable but the training manuals handed out at the seminar are tangible personal property, the company (acting as a "serviceman") owes Service Occupation Tax or Use Tax on th…
Does an out-of-state online retailer owe Illinois Retailers' Occupation Tax (ROT) or Use Tax on sales fulfilled from its subsidiary's Illinois stores or from unrelated third-party inventory in Illinois?
Use Tax, not ROT. The Department concluded that when an out-of-state internet retailer's Illinois sales are fulfilled from inventory owned and possessed by its subsidiary's stores or by unrelated thir…
If an Indiana resident buys a car in Illinois and trades in another vehicle, does Illinois tax apply, and does the $10,000 trade-in credit cap still apply?
Yes to both. Illinois Retailers' Occupation Tax and Use Tax apply to a first division motor vehicle sold to an Indiana resident who takes delivery in Illinois but will register the vehicle in Indiana,…
When a dealer sells a motor vehicle with a trade-in, can the buyer and dealer lower the sale price and the trade-in value by equal amounts to get around the $10,000 cap on the tax-free trade-in credit?
The Department did not say the practice is flatly illegal, but it warned that selling price and trade-in value have to reflect real, objective values — if a dealer's reported numbers deviate from what…
Is an out-of-state online retailer a 'marketplace facilitator' under Illinois law if it processes payment for third-party sellers' goods but never names those sellers on its website?
No. The Illinois Department of Revenue concluded that a retailer is not a marketplace facilitator if it never identifies the third-party sellers to purchasers on its website (the marketplace) — even t…
How does Illinois sales/use tax apply to a company that leases equipment (like traffic control trailers) to customers, when the equipment is bought and shipped from state to state?
Under Illinois's 2021-era rules, a lessor renting equipment under a true lease does not charge sales tax on the rental payments. Instead, the lessor itself owes Use Tax on its own cost price of the eq…
If a company buys equipment from an Illinois vendor and has a freight forwarder pick it up in Illinois and ship it to the company's own warehouse in a foreign country, is that sale exempt from Illinois Retailers' Occupation Tax as interstate/foreign commerce?
It depends on the facts, and the Department could not decide this specific case in a GIL. Illinois Retailers' Occupation Tax generally does not apply when a seller ships goods by carrier or mail, unde…
If an out-of-state seller ships goods into Illinois but the Illinois customer arranges the freight and title passes outside Illinois, who owes Illinois tax and at what rate?
It depends on whether the remote seller meets Illinois's economic nexus thresholds ($100,000 in sales or 200+ transactions in the trailing four quarters). If it does, and it is listed as consignor/shi…
Does Illinois Retailers' Occupation (sales) Tax apply to farm machinery and equipment bought for use in production agriculture or federal/state agricultural programs?
No. Illinois Retailers' Occupation Tax does not apply to farm machinery and equipment that is used or leased for use primarily (over 50% of the time) in production agriculture or in state or federal a…
When does a marketplace facilitator have to register and collect Illinois state and local sales tax on behalf of its marketplace sellers?
Once a marketplace facilitator's and its sellers' combined Illinois sales hit $100,000 or 200 separate transactions in a year, the facilitator (not the individual sellers) must register with the Illin…
Does Illinois Rental Purchase Agreement Occupation and Use Tax, Use Tax, or Retailers' Occupation Tax apply to an out-of-state company's subscription-based "try before you buy" merchandise service?
It depends on the arrangement. Illinois taxes subscription-style rent-to-try programs under the Rental Purchase Agreement Occupation and Use Tax (6.25% of subscription receipts) rather than sales tax,…
Is a sale exempt from Illinois sales tax as a sale in foreign commerce when the goods are delivered in Illinois to a freight forwarder for export, rather than directly to the purchaser?
Yes, if the freight forwarder — not the purchaser — takes physical possession in Illinois and ships the goods to a foreign country for good, the sale is exempt as a sale in foreign commerce under 86 I…
Does an equipment-leasing company owe Illinois Retailers' Occupation Tax when it transfers its leased equipment to an affiliated company as part of a corporate reorganization?
No. Because the leasing company does not habitually sell equipment at retail (its occasional equipment sales were only about 1.5% of revenue) and is not otherwise holding itself out as a retailer, its…
Are the explosives, blasting agents, and detonator equipment a quarrying/mining company sells or uses exempt from Illinois sales and use tax as manufacturing machinery and equipment?
Yes, generally. Illinois' manufacturing machinery and equipment exemption specifically covers blasting agents, high explosives, detonators, lead-in line, and blasting machines used in the extractive p…
How does Illinois decide which local Retailers' Occupation Tax applies when a business sells products shipped directly from an out-of-state manufacturer to customers?
It depends on where the retailer's own selling activities occur, not on where the item ships from or to. Illinois local sales tax is sourced to the jurisdiction where the retailer is 'engaged in the b…
If a company leases computers to a sublessor who in turn leases them to a government agency, and the computers pass in and out of Illinois warehouses for provisioning and reshipping, when is Illinois Use Tax owed?
The government lease exemption did not apply because COMPANY1 leased to a sublessor (COMPANY2), not directly to the government agency. Under the temporary storage exemption, devices that went from Ill…
Is kombucha taxed as a "soft drink" under Illinois sales tax law, or as ordinary (lower-taxed) food?
Based on the ingredients described, no — the Illinois Department of Revenue concluded that this particular kombucha product line (25 flavors made from kombucha culture, black tea, green tea, kiwi juic…
Does Illinois sales tax apply to a records-management company's document storage, shredding, scanning, software, and related service fees?
Generally, no. The Department confirmed that if a transaction does not involve transferring tangible personal property to the customer, no Retailers' Occupation Tax, Use Tax, Service Occupation Tax, o…
If an Illinois business buys goods from an out-of-state supplier and has them shipped to customers or locations both inside and outside Illinois, who owes Illinois sales or use tax?
It depends on where the property physically is when the sale happens. If the goods are delivered to a purchaser in Illinois, the sale is taxable there even if the buyer immediately takes the goods out…
Does an out-of-state furniture retailer with no Illinois office have to collect Illinois Retailers' Occupation Tax as a remote retailer, or just remit Use Tax?
It depends on sales volume. A remote retailer with no Illinois office or warehouse must collect and remit the full local Retailers' Occupation Tax (destination-based, so it can be 10.25% in Chicago) o…
When a company drop-ships goods into Illinois, are those sales exempt from Illinois sales tax if the goods are being resold or exported out of the country?
Yes, potentially. A drop shipment can be tax-exempt either as a sale for resale (if the purchaser gives a valid Certificate of Resale) or as an interstate/export sale (if the seller is contractually o…
Are the chemicals a metal-plating and passivation business uses to clean, plate, coat, and treat customers' parts exempt from Illinois sales and use tax as manufacturing chemicals?
It depends on the chemical's role. Chemicals that directly and immediately change the customer's parts (cleaning, plating, chromate coating, sealing, passivation acids) can qualify for Illinois's manu…
Does Illinois Retailers' Occupation Tax apply when a leased rail car or truck is destroyed and the lessee pays the stipulated loss value and takes title?
Generally no. When a true-lease lessor who is not otherwise in the business of selling like-kind property has leased equipment destroyed, the lessee's payment of the stipulated loss value and the less…
Can a cash-basis Illinois used motor vehicle dealer that prepays a customer's sales tax get a credit or refund when the customer defaults on the financing?
Yes, but only in a limited way. Illinois denied the dealer's request for a full refund of prepaid tax on defaulted accounts, but ruled that because the dealer can actually claim a federal bad-debt ded…
Can an auto dealership claim the Illinois Use Tax interim-use exemption for vehicles it titles to a captive finance company and uses as service loaners?
The Department did not rule on whether this dealership's loaner vehicles qualify for the Use Tax interim-use exemption. It declined to issue a Private Letter Ruling because the matter was already befo…
Does a federal construction contractor owe Illinois Use Tax on materials and equipment it buys to fulfill federal government contracts?
Generally yes. The Department explained that a government contractor who buys items to fulfill a contract with a governmental unit is using those items and owes Illinois Use Tax, even if ownership of …
Does Illinois sales tax apply to lease payments or fees charged to a lessee, such as a vehicle lease disposition fee?
No, not under Illinois law. Illinois taxes the lessor's cost of the leased property (as a Use Tax on the lessor as end user), not the lease payments or fees charged to the lessee. Illinois imposes no …
What does Illinois General Information Letter ST 20-0032-GIL conclude about Computer Software?
Generally, no. A software-as-a-service provider is treated as a 'serviceman,' and if it does not transfer any tangible personal property (including computer software) to the customer, the charges are …
What does Illinois General Information Letter ST 20-0031-GIL conclude about Nexus?
It depends on which sales count. Illinois's GIL explains that under 'Wayfair nexus,' a remote retailer must collect Illinois Use Tax once its cumulative gross receipts from Illinois sales hit $100,000…
What does Illinois General Information Letter ST 20-0029-GIL conclude about Nexus?
It depends on the retailer's contacts with Illinois. A retailer with physical presence in Illinois (even 'more than the slightest') must collect Use Tax, and since October 1, 2018, an out-of-state ret…
What does Illinois General Information Letter ST 20-0028-GIL conclude about Construction Contractors?
Construction contractors in Illinois are treated as end users, not resellers, of the tangible personal property they buy to permanently incorporate into real estate, so they owe Use Tax on their cost …
What does Illinois General Information Letter ST 20-0026-GIL conclude about Construction Contractors?
Construction contractors who permanently affix tangible personal property (like cleanroom walls, doors, flooring, or filtration systems) to real property are treated as the 'end user' of that property…
Does a not-for-profit college that trains optometrists owe Illinois sales or service occupation tax on the prescription eyewear it provides to patients as part of student training?
No. The Illinois Department of Revenue ruled that the college does not owe Retailers' Occupation Tax or Service Occupation Tax on prescription eyeglasses and contact lenses transferred to patients as …
What does Illinois General Information Letter ST 20-0030-GIL conclude about Computer Software?
It depends on what is actually transferred to the customer. Illinois taxes sales of tangible personal property, and 'canned' (pre-written) computer software counts as tangible personal property, so se…
Does an out-of-state seller owe Illinois sales tax on a sale that is drop-shipped to an Illinois customer if the out-of-state buyer never gave a resale certificate?
Yes, generally. Under Illinois rules, a drop-shipped sale can qualify as a tax-exempt sale for resale, but only if the out-of-state buyer gives the seller a valid Certificate of Resale (or other adequ…
What does Illinois General Information Letter ST 20-0022-GIL conclude about Construction Contractors?
Construction contractors in Illinois are treated as end users, not retailers: they owe Use Tax on their cost price of materials permanently incorporated into real property (like an installed gas stati…
What does Illinois General Information Letter ST 20-0021-GIL conclude about Enterprise Zones?
Sales of tangible personal property used or consumed in operating a pollution control facility are exempt from Illinois Retailers' Occupation Tax (and therefore Use Tax) only if the facility is locate…
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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.