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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Does Illinois Telecommunications Excise Tax or sales tax apply to a fleet-telematics company's purchased data plans and its monthly customer fee?
No to both questions. The Department concluded that the company's purchased cellular data connectivity qualifies as exempt 'internet access' under the federal Internet Tax Freedom Act, so it is not su…
What does Illinois General Information Letter ST 19-0035-GIL conclude about Computer Software?
A software-as-a-service provider is treated as a 'serviceman,' not a retailer. If the provider never transfers any tangible personal property (including software) to the customer, the transaction gene…
Does Illinois' manufacturing machinery and equipment sales tax exemption cover chemical processing aids used to clean, protect, and prepare production equipment before or after a production run?
It depends on how the chemicals are used, but generally yes. Beginning July 1, 2019, Illinois' manufacturing and assembling machinery and equipment exemption was expanded to cover 'production related …
Does Illinois' manufacturing machinery and equipment sales tax exemption cover cleaning chemicals and detergents used to clean production equipment?
It depends on what gets cleaned. Since July 1, 2019, Illinois' manufacturing and assembling machinery and equipment exemption covers 'production related tangible personal property,' so cleaning chemic…
Does Illinois sales tax exemption for Manufacturing Machinery & Equipment cover oxygen used by a brewery in its brewing process?
It depends on how the oxygen is used. The Illinois Department of Revenue explained that, beginning July 1, 2019, the Manufacturing Machinery and Equipment ('MM&E') exemption was expanded to cover 'pro…
If a perpetual software license meets all five requirements of 86 Ill. Adm. Code 130.1935(a)(1), is the transfer treated as a taxable lease/rental, or as a non-taxable license of an intangible?
A transfer of prewritten computer software under a perpetual license is not a taxable lease or rental if the license meets all five conditions in 86 Ill. Adm. Code 130.1935(a)(1)(A)-(E) -- it is treat…
I rent and sell heavy construction equipment and am setting up to do business in Illinois -- do I charge sales tax or use tax on equipment rentals, and is it calculated on the equipment's value or on the rental charge?
Under a true lease (other than autos leased for a year or less), the lessor -- not the lessee -- is treated as the end user of the equipment, and owes Use Tax on its own cost to acquire the equipment,…
We manufacture custom signs and sell them into Illinois, where we're registered; an independent contractor installs them (attached to a building or a pole set in concrete) and an independent carrier delivers them, with installation and freight separately billed above our cost -- do we charge sales tax or owe use tax, does tax apply to the freight and installation charges, and what happens if we use subcontractors to install?
It depends on whether the sign has 'commercial value' to anyone besides the buyer: a generic sign (for example, one that just reads "real estate" or "insurance" without the customer's name or brand) t…
We're a family farm doing production agriculture and got a Form ST-587 exemption certificate from a local business -- can we use it to buy parts for our semis, tractors, and trailers used on the farm without paying sales tax?
It depends on how the vehicle is used, not on the exemption certificate alone. Illinois exempts machinery and equipment (and their individual replacement parts) from sales tax only when used or leased…
Does Illinois's Telecommunications Excise Tax exemption for 'State governments' cover sales to OTHER states' governments (and their agencies), not just Illinois's own government -- and can a taxpayer get a binding ruling on that?
Yes -- the state-government exemption in the Telecommunications Excise Tax Act applies to Illinois and all 49 other states, and to their executive, legislative, and judicial agencies and instrumentali…
My MLM company charges new distributors a $20 enrollment fee and charges active distributors the same $20 fee annually to renew their status and keep their wholesale discount, support services, and web access -- no physical item is sent in exchange. Is that fee subject to Illinois Retailers' Occupation Tax?
No -- when a membership or enrollment fee doesn't come with any tangible personal property in exchange, it's treated as an intangible and isn't part of the gross receipts subject to Illinois Retailers…
My manufacturing customers buy PPE items like gloves, hardhats, respirators, and disposable clothing from us -- since Illinois expanded the manufacturing machinery exemption on July 1, 2019 to cover 'production related tangible personal property,' can they buy these items exempt using Form ST-587?
Yes, potentially: as of July 1, 2019, Illinois's manufacturing and assembling machinery and equipment exemption was expanded to cover 'production related tangible personal property,' which the Departm…
Our MLM company reformulated its '24K' mental-clarity dietary supplement from a ready-to-drink liquid into a powder that customers mix with water before drinking -- does it still qualify as tax-favored food under Illinois sales tax law?
The Department didn't classify the specific 24K product (no product label was actually enclosed with the request), but it explained the controlling rule: food for human consumption to be eaten off the…
We're a steel-framing manufacturer: we use overhead cranes to take master coil out of storage and load it onto our slitter. Is that loading step part of the production cycle (exempt) or a pre-production activity (taxable) under the manufacturing machinery and equipment exemption?
The Department did NOT answer the specific overhead-crane question. It did not say whether moving master coil from storage onto the slitter counts as a taxable 'pre-production activity' or an exempt u…
My company charged Illinois sales tax on a separately-invoiced, no-markup freight charge for delivering glass by common carrier -- the customer could have picked it up in person but we always deliver instead. Is that freight charge taxable, and can the customer get a refund?
No -- the freight charges here are NOT taxable, because the customer had the option to pick up the glass in person instead of paying for delivery. Under 86 Ill. Adm. Code 130.415 and Kean v. Wal-Mart,…
Our company sells an enhanced communications-platform product to Illinois customers, and separately some businesses offer software as a service or resell conferencing/telecom services -- when is computer software a taxable retail sale versus a non-taxable license, when does SaaS/cloud delivery escape sales tax, and when does audio-conferencing trigger the Telecommunications Excise Tax?
The Department did NOT classify the taxpayer's own PRODUCT -- it first declined to issue the binding Private Letter Ruling the taxpayer requested, citing "the lack of information regarding the product…
Does the Illinois prepaid wireless E911 surcharge apply to recharges sold to Illinois customers when the actual phone being recharged is used abroad by family or friends on a foreign network?
Yes, the surcharge applies. The Illinois Department of Revenue held that the Prepaid Wireless 9-1-1 Surcharge attaches to the retail transaction -- the purchase of the recharge in Illinois -- not to w…
Does Illinois Private Vehicle Use Tax apply when a nominee trust holding a motor vehicle is terminated and the vehicle passes to the trust's beneficiary?
Yes. When a nominee trust holding a motor vehicle terminates and the vehicle's ownership passes to the trust's beneficiary, Illinois treats that as a taxable 'transfer,' and the beneficiary owes the P…
Does an aircraft purchased in Illinois and leased to a foreign commercial airline that flies only between Illinois and a foreign country (never touching another U.S. state) qualify for Illinois's rolling stock sales/use tax exemption?
Yes -- the Department agreed that flights in foreign commerce (Illinois to a foreign country) count as flights in "interstate commerce" for purposes of the rolling stock exemption, so routes limited t…
Does the July 1, 2019 expansion of Illinois's manufacturing machinery and equipment exemption cover propane fuel for forklifts, earplugs, protective gloves, quality-control gloves, and nitrogen used in a steel stamping press die?
The Department did NOT individually confirm or deny each of the taxpayer's five specific items. Instead, it restated the general July 1, 2019 rule -- production-related tangible personal property is e…
If a marketplace seller sells exclusively through a registered Illinois marketplace facilitator, does that seller still need to register for an Illinois sales tax permit and file returns, or can it cancel an existing registration?
The Department did NOT answer either question. A sales tax consulting firm asked whether marketplace sellers who sell exclusively through registered marketplace facilitators must still register and fi…
IDOC's inmates fund 'offender debit accounts' by paying money at prison commissaries, and IDOC forwards that money to its telecom vendor to pay for phone service. Does that arrangement make IDOC a 'reseller' of telecommunications services -- entitled to give the vendor a certificate of resale -- and does a separate statute capping per-minute inmate calling charges relieve the vendor of its own Telecommunications Excise Tax liability?
No on both counts. IDOC is not acting as a retailer or reseller of telecommunications services merely because it collects money from inmates at commissaries and forwards it to the telecom provider, so…
Does Illinois source an investment advisor's fee receipts to the location of the investment funds' underlying investors, or to the billing address of the fund itself?
In this Private Letter Ruling, the Illinois Department of Revenue concluded that the taxpayer's investment advisory fee receipts are sourced, for Illinois sales factor purposes, to the office of the i…
What does Illinois Private Letter Ruling IT 19-0001-PLR conclude about Sales Factor?
IT 19-0001-PLR ruled that an investment advisor's gross receipts from advising investment funds are sourced to the billing office of the fund's custodian, not to the location of the funds' individual …
What does Illinois Private Letter Ruling IT 19-0003-PLR conclude about Apportionment - Sales Factor?
Illinois ruled that when an S corporation's stock sale is treated as a deemed sale of all its assets under a federal Section 338(h)(10) election, the resulting gain is business income, but the gross r…
This ruling is filed under 'Miscellaneous,' but it's actually about Illinois's new Parking Excise Tax (effective January 1, 2020): if I'm a commercial landlord and I give my office tenants free parking spaces as a lease amenity -- no separate charge, bundled into their rent -- do I have to collect and remit the Parking Excise Tax on those spaces?
No. Because the landlord doesn't charge its commercial tenants any separate consideration for the parking spaces -- they're a free amenity bundled into unaffected monthly rent -- the landlord is not a…
I bought a vehicle directly from the federal government (GSA) at auction -- do I file Form RUT-50 or RUT-25, and do I owe use tax at all?
File Form RUT-50 -- even though the sale itself, because it was made by the federal government, is exempt from Retailers' Occupation Tax (and so there's no corresponding regular Use Tax on it), you st…
Does Illinois's new Parking Excise Tax apply to parking lots that my municipality operates directly?
The Department did not actually answer this question -- it was left unresolved. The Department confirmed that the Act's definition of 'Person' does not explicitly include the State of Illinois, the fe…
I bought a semi-trailer that I'll pair with my truck leased to an interstate for-hire carrier -- does the trailer qualify for Illinois's rolling stock sales tax exemption, and how do I document it?
Yes, if the trailer is used more than 50% for interstate trucking for hire, is paired with an interstate carrier holding an active USDOT Number with Carrier Operation listed as 'Interstate' and Operat…
I sell and install manufactured product elements for customers -- how do I know whether Illinois taxes it as tangible personal property (sales tax) or as a real estate conversion (use tax on me as a contractor)?
The Department could not tell this taxpayer whether its specific 'PRODUCT' counts as real property or tangible personal property for Illinois sales/use tax purposes -- the facts submitted (a manual an…
Can a conservation nonprofit sell excess animals from its preserve tax-free as an 'occasional sale,' even if it has to do this every year?
This specific batch of sales qualified as an exempt isolated/occasional sale, but IDOR explicitly declined to promise the same exemption for future sales -- because the organization must regularly and…
Do the turbines, pipes, tanks, and other equipment used to build a power plant qualify for Illinois's Enterprise Zone sales tax exemption on building materials?
Yes -- essentially the entire described equipment package for the power plant qualifies as exempt Enterprise Zone building materials, because it will be permanently affixed to the real estate. The onl…
My state government agency buys telecom services used by our staff in Illinois -- does Illinois's telecommunications excise tax exemption for 'state governments' cover MY state, or only Illinois's own government?
Yes -- the Illinois Department of Revenue confirmed that the Telecommunications Excise Tax Act's exemption for 'State governments' is not limited to Illinois's own government; it covers state governme…
If I'm an Illinois resident and both Illinois and Indiana taxed my gambling winnings, can I get an Illinois credit for the tax I paid to Indiana?
No, in most cases the credit works out to zero. Illinois's credit for taxes paid to other states is capped based on how much of your income would be sourced to other states under Illinois's own sourci…
What does Illinois General Information Letter IT 19-0009-GIL conclude about Education Expense Credit?
Consumable school supplies used up in lab-type courses and private piano lessons counted toward a fine-arts requirement can qualify as Education Expense Credit expenses for a home-schooled child, but …
What does Illinois General Information Letter IT 19-0008-GIL conclude about Withholding – Other Rulings?
Yes: for an Illinois resident who works partly in another state but whose out-of-state work is incidental (or Illinois is the base of operations), the full wages are properly reported as Illinois inco…
What does Illinois General Information Letter IT 19-0007-GIL conclude about Refunds – Credit Of Overpayment To Liabilities?
Yes — although the Illinois Income Tax Act uses permissive "may" language, the Department's own regulation (86 Ill. Adm. Code 100.9400) makes crediting an overpayment against an outstanding tax liabil…
What does Illinois General Information Letter IT 19-0006-GIL conclude about Credits – Other?
IT 19-0006-GIL explains how to claim the River Edge Redevelopment Zone remediation tax credit on Schedule 1299-D, but tells the taxpayer that because the credit sunset for tax years beginning on or af…
I sell hemp-derived CBD oils, edibles, beverages, and topical creams -- what Illinois sales tax rate applies to them?
CBD products sold primarily for internal human consumption qualify as "food" under 86 Ill. Adm. Code 130.310 and are taxed at the low 1% state rate (plus applicable local taxes). The Department could …
The company I pay for email marketing services says it must charge me Illinois sales tax, but they don't sell or license me any software -- is that right?
The Department did not resolve this taxpayer's specific dispute with his email-service provider -- it only restated the general rules for how Illinois taxes software and software-adjacent services, si…
State Tax Ruling
Individuals domiciled in Illinois who go abroad on what turns out to be a short-term work assignment generally remain Illinois residents and stay liable for Illinois income tax, though the Department …
I provide prepaid wireless Lifeline service that's fully subsidized so my customers pay nothing -- do I still have to collect the E911 surcharge on those transactions?
No -- the Department confirmed the surcharge does not apply when a customer's Lifeline service is fully subsidized and the customer pays the provider nothing for it. That exemption is specific to 50 I…
Does the taxable cost of group-term life insurance over $50,000 count toward an employee's Illinois base income, and should it be included in Box 16 (state wages) of Form W-2?
Yes. The taxable cost of group-term life insurance coverage over $50,000 is included in federal adjusted gross income, so it is also part of Illinois base income, and for an employee who works entirel…
We're an out-of-state seller of subscription training software and downloadable video-conferencing software -- does Illinois sales tax apply to either product?
The Department did not rule on either specific product. It only laid out the general framework for post-Wayfair economic nexus and for taxing canned vs. custom computer software and licenses -- it nev…
My tax-prep software vendor charges sales tax on the annual license, which I accept, but also on a separate 'REP access' fee each time I use an add-on module for a client -- is that REP fee taxable?
The Department could not answer this taxpayer's actual question -- it said it was unable to determine, on the facts given, whether the per-use REP access fee is a charge for computer software or is pr…
What does Illinois General Information Letter ST 19-0005-GIL conclude about Nexus?
The Department declined to fill out a multistate nexus survey, saying nexus is too fact-specific for a General Information Letter -- but it laid out the general framework: remote sellers with no physi…
What does Illinois General Information Letter ST 19-0004-GIL conclude about Food?
The high (general merchandise) rate applies. Illinois taxes food 'prepared for immediate consumption' -- food a retailer makes ready to eat without substantial delay -- at the high rate, not the low g…
Does pallet racking, a conveyor system, or forklifts qualify for Illinois's Enterprise Zone building materials sales tax exemption?
Picking carts, a floor scrubber, cherry pickers, and reach trucks do NOT qualify for Illinois's Enterprise Zone building materials exemption, because they are mobile equipment, not items permanently a…
Does Illinois charge sales tax on digital art files that customers download electronically?
No. Illinois Retailers' Occupation Tax and Use Tax (the state's 'sales tax') apply only to sales of tangible personal property, so a home-based designer's digital art files sold and downloaded electro…
What does Illinois General Information Letter IT 19-0003-GIL conclude about Subtraction Modification (Retirement Income)?
No: dividends paid on company stock held in a regular taxable brokerage account (as opposed to an IRA or qualified retirement plan) are not retirement income and may not be subtracted from adjusted gr…
Can an Illinois partnership claim a refund or credit itself when it overpaid pass-through withholding on behalf of its nonresident partners?
No. Under 86 Ill. Adm. Code 100.7035(e), a partnership (or other pass-through entity) may not claim a refund or credit for an overpayment of pass-through withholding made on behalf of a partner; the i…
What does Illinois General Information Letter IT 19-0001-GIL conclude about Credit — Hospital Credit?
The Department explained that the Section 223 hospital income tax credit for a given taxable year equals the lesser of the real property taxes paid that year on hospital property (for use in the prior…
Does an older, non-current comic book issue lose Illinois's sales-tax-free 'newsprint and ink' exemption just because it's not the newest issue?
No. As long as the comic book title is currently published at least twice a year and this particular issue is sold at or below cover price, it stays exempt from Illinois Retailers' Occupation Tax as '…
Do charitable organizations owe Illinois sales tax when they sell snacks to the students they serve?
It appears yes, taxable. The organization hoped its snack sales to students would qualify for the nonprofit noncompetitive-sales exemption, but IDOR found the students' dominant motive was buying food…
What does Illinois Private Letter Ruling ST 18-0013-PLR conclude about Automobile Renting Tax?
The Department ruled that a company leasing used vehicles through a mobile app on a 45-day, monthly-renewing term is a 'rentor' subject to Illinois Automobile Renting Occupation and Use Tax (5% of gro…
Is shipping tax-free in Illinois if it's listed as a separate line item from the price of the item?
No. Under Illinois GIL ST 18-0044-GIL, listing shipping and processing fees as separate line items does not by itself make them tax-exempt. They're taxable as part of the retailer's gross receipts unl…
Can an airplane used for precision-agriculture crop imagery qualify for Illinois's farm machinery and equipment sales tax exemption?
It depends on how the aircraft is actually used. Illinois's farm machinery and equipment exemption can cover an aircraft IF it is used primarily for a qualifying production-agriculture activity, such …
If our out-of-state company has no offices in Illinois but has one remote employee working from home in Chicago in customer service, do we have to register and collect Illinois sales tax?
Yes. Illinois told this company that having even one employee working in Chicago -- even in customer service with no sales duties -- gives it physical presence in Illinois, which satisfies the Commerc…
Are fuel trailers sold for farm use exempt from Illinois sales tax, and does sales tax apply to a GPS subscription on leased farm equipment?
It depends for the fuel trailers: they qualify for Illinois's farm machinery and equipment exemption only if used primarily in production agriculture, not if used mainly for transportation or other no…
Do livestock shade systems (permanent or mobile) qualify for Illinois's farm machinery and equipment sales-tax exemption?
No. The Illinois Department of Revenue said both the permanent and the mobile livestock shade systems are treated as improvements to real estate, like fences or barns, not as exempt 'farm machinery an…
Browse Illinois rulings by topic
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.