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 a truck-stop service package combining climate control, television, internet access, electricity, and a separately sold window adapter?
Services with no transfer of tangible property, including television programming, were not subject to Illinois sales and service occupation taxes under the stated rules, while the separately sold plas…
Does an Illinois seller avoid tax when an out-of-state buyer or its representative picks up goods in Illinois for immediate removal, or when the buyer claims resale?
No interstate-commerce exemption applied when the buyer or its agent took possession in Illinois, even if the goods were immediately carried out of state. The Illinois seller therefore owed tax unless…
Did an Illinois public university owe Retailers' Occupation Tax when it sold its own educational publications to the public?
Illinois gave no specific determination. It said the university's sale of the submitted educational materials appeared likely to further its governmental function and therefore would not incur Retaile…
Could an out-of-state administrative-services company have Illinois income-tax nexus through an affiliate's Illinois employees?
IDOR did not decide nexus because the determination was fact-specific. It explained that a taxpayer generally had Illinois nexus when its agents were physically present in the state providing services…
What 2010 Illinois tax rules did the Department give for cloud computing, travel charges, scaffolding rentals, and fuel, tobacco, and alcohol excise taxes?
There was no single yes-or-no answer. Illinois said cloud transactions with no canned software or tangible property transferred incurred no Retailers' Occupation or Use Tax, but said ASP and software-…
Did Illinois approve a service-company tax matrix, and how did it explain tax on property transferred with services, electronic data, software, and equipment leases?
No. Illinois would not approve the private tax matrix. It explained that services with no tangible-property transfer generally produced no Retailers' Occupation or Use Tax, while property transferred …
Did Illinois approve a seller's export affidavit, and what documents supported exemptions for foreign shipments through freight forwarders or sales for resale?
Illinois did not approve the proposed Statement of Goods for Export. It said an interstate or foreign-commerce exemption could apply when the seller was obligated to deliver the property out of state …
Could Illinois municipalities tax satellite television, and did satellite programming trigger Illinois Telecommunications Excise Tax?
Satellite television programming was generally not subject to Illinois Telecommunications Excise Tax, although retail software sold to access the service could incur Retailers' Occupation Tax. The Dep…
Did a Section 501(c)(3) dog-rescue charity funded only by contributions have to file Illinois Form IL-990-T?
No, on the facts stated. For a federally exempt organization, Illinois base income was unrelated business taxable income determined under IRC Section 512, without deducting Illinois income tax. The ch…
When did Illinois exempt farm machinery and equipment, and how were farm real-estate improvements taxed?
Machinery, equipment, and replacement parts used primarily in production agriculture could be exempt when the purchaser certified the qualifying use. Ordinary real-estate improvements such as fences, …
Did Illinois County School Facility Occupation Tax apply to wholesale oil sales made for resale?
No, when the wholesale oil sale was a validly documented sale for resale. The County School Facility Occupation Tax incorporated the state occupation-tax exemptions, so an item exempt from state Retai…
When was a custom bridge-control system treated as special-order property subject to Service Occupation Tax rather than a taxable retail sale?
A special-order machine was treated as a service transaction only if all three tests were met: the buyer primarily hired the seller's engineering or scientific skill; the property had value only for i…
What happened to Illinois GIL ST 10-0039-GIL on the air-carrier fuel exemption for flights involving a United States possession?
Illinois rescinded ST 10-0039-GIL effective July 27, 2010. The Department was reconsidering whether a United States possession counted as a location outside the United States for the air-carrier fuel …
Did a foreign manufacturer lose P.L. 86-272 protection when it approved its distributor's customers and used an Illinois home-office salesperson?
IDOR did not make a final nexus determination. An Illinois-resident employee's in-home-office marketing to wholesalers to encourage purchases from an unrelated distributor could be protected missionar…
Why did IDOR request Forms W-2 after electronically accepting an Illinois individual return?
Electronic acceptance meant only that the return entered normal processing without a fatal transmission error. It did not verify every item or prevent later edits. IDOR could still request Forms W-2 t…
Did Illinois use a 30-man-hour threshold to decide whether a reseller's in-state training or technical services defeated P.L. 86-272 protection?
No. IDOR declined to make a fact-specific nexus determination but said Illinois did not use a 30-man-hour safe harbor. Training, technical assistance, design services, accepting orders, and other acti…
Was Illinois withholding for a nonresident who worked 80% in Illinois automatically limited to 80% of wages?
No. IDOR said the 80% Illinois and 20% other-state example could not be resolved by a simple percentage. If the out-of-state work was incidental to Illinois service, all compensation was paid in Illin…
Could an out-of-state contractor create Illinois income-tax nexus by hiring Illinois subcontractors for repair services?
IDOR did not decide nexus because the issue was fact-specific. It explained that a taxpayer generally had Illinois nexus when its agents were physically present in the state providing services on its …
Could a trust succeed to an Illinois net loss incurred by a terminated estate under the federal Section 642(h) carryover rule?
No. Although IRC Section 642(h) allowed specified federal carryovers from a terminated estate or trust to beneficiaries, the Illinois Income Tax Act had no parallel provision transferring an estate's …
Did human- and animal-tissue implants qualify for Illinois's reduced medical-appliance tax rate when used in reconstructive or cosmetic surgery?
The tax rate depended on use. Tissue implants used to substitute for malfunctioning body tissue—such as reconstruction after a mastectomy—generally qualified for the reduced medical-appliance rate. Th…
How did Illinois treat wireless Internet access bundled with voice, data, messaging, information, and consultation services for telecommunications tax?
Illinois gave no plan-by-plan determination. It explained that qualifying Internet access was covered by the then-effective federal tax moratorium, while voice or other telecommunications outside that…
Did selling gift codes or cards through Illinois retailers create nexus, and when was Illinois sales tax due on the gift-code transaction?
Illinois made no nexus determination for the gift-code issuer or affiliated online retailers. It did decide the transaction sequence generally: selling a card or code that only gave the buyer a right …
Could Illinois grant a one-day sales-tax return extension on request, and what items qualified for the reduced medical-appliance rate?
No. Illinois said retailers had to meet the statutory return deadlines and the Department lacked authority to grant the requested one-day extension. It also explained that a medical appliance received…
Did Illinois decide whether a New York maintenance contractor using Illinois subcontractors had nexus or approve its proposed prospective settlement?
No. Illinois declined to determine whether the contractor's use of in-state subcontractors created nexus, because it considered nexus too fact-specific for a letter ruling. It also did not approve the…
Did a utility-maintenance company have to collect Illinois sales tax when it occasionally sold used surplus trucks, vehicles, and equipment?
Generally no, if the company bought and used the assets in its business, later sold them because they were no longer needed, and did not hold itself out as a dealer in those items. A qualifying occasi…
Did Illinois decide whether an out-of-state CAD/CAM software reseller with visits to Illinois still had nexus after closing its Illinois office?
No. Illinois declined to determine whether the CAD/CAM software, training, and services reseller still had nexus after closing its Illinois office. It supplied the 2010 nexus framework and said physic…
Did an implantable vascular access port used for infusions and blood draws qualify for Illinois's reduced medical-appliance tax rate?
Illinois did not expressly classify the implantable vascular access port. It said the reduced rate applied only when the item itself directly substituted for a malfunctioning body part, and that diagn…
Did a state university still need a contractor residence certification under former IITA Section 708?
No. The contract clause referred to former IITA Section 708, which had required withholding from certain personal-service contract payments unless the contract certified that the individuals performin…
How did Illinois tax a medical-record retrieval service that delivered records on paper, by fax, or electronically as PDFs?
Medical-record retrieval appeared to be a service. Electronically viewing, downloading, or transmitting text and data—including PDF delivery—was not a tangible-property transfer and was outside the fo…
Did portable IV infusion pumps used to deliver chemotherapy qualify for Illinois's reduced medical-appliance tax rate?
Generally no. Illinois said infusion pumps normally administer drugs and function as medical treatment tools rather than directly substituting for a malfunctioning body part, so drug-delivery systems …
Did an Illinois governmental body have to renew its sales-tax exemption number, and how did a seller document exempt purchases?
The governmental body did not have to apply for renewal because Illinois automatically renewed governmental exemptions. But a seller could treat only purchases by the governmental entity holding an ac…
Were guaranteed manufacturer holdback payments taxable gross receipts when a vehicle's retail sale affected only when the dealer was paid?
No. The Department said the described 3% manufacturer holdback fit the regulation's nontaxable example because the dealer was guaranteed payment even if the vehicle was not sold. A retail sale acceler…
How did Illinois treat service fees, document delivery, electronic data, and computer software for sales and service taxes?
Illinois said a service transaction with no transfer of tangible personal property generally was not subject to Retailers' Occupation, Use, Service Occupation, or Service Use Tax. Transferred copies o…
Did Illinois classify the listed airway, infusion, insulin-pump, TENS, CPAP, suction, and restraint products for the reduced medical rate?
No. The Department did not classify the listed products individually. It said the reduced medical-appliance rate applied only to an item intended by its manufacturer to directly substitute for a malfu…
Did Illinois classify the requester's supplement-labeled drinks and protein powder as soft drinks for sales-tax purposes?
No. The Department did not classify the five products individually. It explained that, beginning September 1, 2009, a sweetened nonalcoholic beverage was a soft drink unless it contained milk or a sim…
Can taxpayers rely on ST 10-0039-GIL's conclusion that a United States possession was not outside the United States for the air-carrier fuel exemption?
No. ST 10-0039-GIL originally said a United States possession was not a location outside the United States for the air-carrier fuel exemption, using a Los Angeles-Hawaii-Guam flight as its example. Bu…
Could a wage earner claim Illinois withholding from a Form W-2 issued under a different name or taxpayer identification number?
Yes, with proof. A taxpayer had to file an Illinois return regardless of legal status when Illinois tax was owed or, for an Illinois resident, when a federal return was required and no stated exceptio…
Did Illinois tax an automotive core charge, and what happened to the tax when the core or the purchased part was later returned?
Yes. A core charge was part of the taxable selling price. If the customer later returned the core, the retailer should refund the full core charge and the tax paid on it. If the customer supplied the …
Did Illinois's interstate-commerce exemption apply when exhibit property shipped out of state was expected to return to Illinois for repair or remodeling?
No, if the return was known when the sale was made. The exemption required the serviceman to be obligated to deliver the property from Illinois to a point outside Illinois and for the property not to …
Were a city library's ongoing sales of used books and other tangible items exempt merely because the seller was a governmental unit?
No automatic exemption applied. Illinois said a governmental unit incurred Retailers' Occupation Tax when selling tangible personal property to the public unless the sale directly performed a governme…
How did Illinois tax installed carpeting, custom draperies, reupholstery, handling fees, and sales spanning a tax-rate change?
Illinois applied different rules by transaction. A contractor permanently installing carpet was the end user and owed Use Tax on its material cost, while an over-the-counter carpet sale was taxable to…
Did tuition paid to a California school for teacher-led online instruction at home qualify for Illinois's education expense credit?
No. Section 201(m)'s definition of a qualifying school required tuition, book fees, and lab fees to be paid to a school located in Illinois. The child received internet instruction at home from teache…
Could an Illinois caterer exclude separately stated service, linen, equipment, setup, or delivery charges from taxable meal-sale receipts?
No. Illinois said a caterer's taxable gross receipts included charges associated with the food sale, including linens, tables, chairs, dishes, glasses, flowers, labor, setup, delivery, and corkage, ev…
Were private REITs owned by a widely held limited partnership captive REITs required to add back their federal dividends-paid deductions?
No, on the stated ownership facts. A captive REIT required more than 50% of its voting power or value to be owned or controlled by a single corporation. IRC Section 318 treated stock owned by a partne…
Did separately stating fabricated steel and erection labor turn a permanent steel-installation contract into a taxable retail sale?
No. If the fabricator also permanently affixed the structural steel to Illinois real property, the transaction remained a construction contract even when steel and erection charges were separately sta…
Was interest from SBA pass-through certificates or SBA-guaranteed loan interests exempt from Illinois income tax as U.S. government obligation income?
No. Illinois allowed a subtraction for U.S. government obligation income only when federal law specifically exempted that income from state taxation. The regulation's exhaustive list identified the qu…
Was inbound freight taxable when a distributor separately billed customers for moving inventory to the selling branch before the sale?
Yes. Illinois treated freight paid to acquire inventory, or to move it to the point from which it would later be sold and delivered, as the seller's cost of doing business. The seller could not deduct…
When merchandise was returned for less than the original price because of a restocking policy, did Illinois require a full sales-tax refund?
Yes. When merchandise was returned, Illinois said the retailer should refund all sales tax from the original purchase even if a restocking or reshelving fee meant the customer received only a partial …
Did refrigeration equipment used by a wholesale food or produce distributor qualify for Illinois's manufacturing machinery exemption?
No. Refrigeration used by a nonmanufacturer, such as a wholesale food or produce distributor, merely to maintain products purchased for resale did not qualify. Refrigeration required to maintain a saf…
Could an equipment lessor claim Illinois's manufacturing exemption when its lessee subleased the equipment to the manufacturer using it?
Yes. The rule did not bar the exemption merely because the lessee subleased the machinery to the manufacturer. The lessor's purchase was exempt if the sublessee-manufacturer used the equipment in a qu…
Did leasing manufacturing equipment to an Illinois manufacturer preserve the machinery exemption, and who owed tax on a true lease?
Qualifying manufacturer use could preserve the exemption if the purchaser-lessor gave its supplier a complete exemption certificate. Otherwise, under a true lease the lessor was the end user and owed …
Did a retailer owe Illinois Use Tax when it withdrew products from resale inventory and donated them to an exempt charity?
Yes. A retailer that withdrew an item from resale inventory and gave it away became the end user and owed Use Tax on its cost price. The result did not change because the recipient was an exempt organ…
Which livestock-handling products could qualify for Illinois's farm machinery exemption, and did permanently affixed fencing qualify?
Permanently affixed fences and ordinary real-estate improvements did not qualify as exempt farm machinery. Portable confinement panels, cattle chutes, and crowding tubs could qualify when used primari…
Did mold-release lubricant used in automotive-spring production qualify for Illinois's manufacturing machinery exemption?
Generally no. Illinois treated mold-release or mold-parting substances as taxable consumable supplies rather than exempt manufacturing machinery and equipment. A portion that physically became part of…
How did Illinois treat children's salon parties and spa packages that bundled services with small giveaways, retail add-ons, and invitations?
The Department said the salon's analysis appeared to conform to Illinois procedures: service packages transferring low-cost property could use the registered de minimis serviceman method, while separa…
Did Illinois treat prescribed speech-generating devices as medical appliances eligible for the reduced sales-tax rate?
No. Illinois said speech-generating devices could assist people with physical disabilities but did not directly substitute for a malfunctioning body part. They therefore did not meet the medical-appli…
Could an Illinois IFTA licensee destroy original paper fuel receipts and retain electronic images for audit records?
Generally yes. Electronic imaging was acceptable if the records were complete, supported the quarterly report, remained accessible, and could produce a legible hard copy during audit. If the business …
When a grocery purchase used both a reimbursed manufacturer coupon and food stamps, which part was subject to Illinois tax?
The reimbursed manufacturer-coupon value was taxable gross receipts, while the portion paid with food stamps was not taxable. If the retailer received no reimbursement for its coupon, that coupon valu…
Could an exempt private school's student coffee shop sell only to students and faculty without Illinois Retailers' Occupation Tax?
Possibly. An Illinois exemption number did not generally exempt an organization's own retail sales, but the Department said a school selling only to students and faculty appeared potentially within th…
Could an Illinois-only delivery leg count as interstate use for the rolling-stock exemption when goods first stopped at an Illinois warehouse?
Only if the initial shipment documentation showed that the property was destined beyond the Illinois warehouse to the later Illinois endpoint. If the initial documents named the warehouse as the desti…
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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.