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 a mobile home park owner/dealer owe Illinois sales tax when it resells a used, previously-titled manufactured home out of its park inventory?
Yes. Once a mobile home park owner becomes a licensed dealer and holds a manufactured home in its park inventory, its sale of that home to a purchaser -- whether it's the home's first sale or a later …
Can a business place vending machines selling vapes and nicotine pouches inside bars, and what Illinois licenses does that require?
Yes, placing vape and nicotine-pouch vending machines in a bar is permitted under Illinois law -- these products can be sold from a machine only if they aren't mixed with non-tobacco items (other than…
Which city's local sales tax applies when a company's headquarters processes an order but the customer picks up the item at a different warehouse in another town?
It depends on where the selling activities actually happen: sales that a company's headquarters receives, processes, prices, and bills are sourced (and local sales tax is owed) to the headquarters cit…
Is a telephone cooperative's dark fiber lease subject to Illinois's Telecommunications Excise Tax or sales tax, and is its wholesale local loop service exempt?
Dark fiber (unlit fiber optic cable carrying no signal) is NOT subject to the Telecommunications Excise Tax, because it doesn't transmit any information. Buried dark fiber cable is treated as real pro…
Do a medical device company's bone growth stimulation devices qualify for Illinois's 1% reduced sales tax rate as 'medical appliances,' or are they taxed at the general 6.25% rate?
No -- the Department ruled that the taxpayer's bone growth stimulation devices (marketed as combined magnetic field and low-intensity pulsed ultrasound devices) do not qualify as 'medical appliances' …
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 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…
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…
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…
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 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 …
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…
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…
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 …
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…
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…
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…
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 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…
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 …
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…
Starting January 1, 2025, does Illinois still charge state sales tax on leases already subject to Chicago's Personal Property Lease Transaction Tax?
No. Once Illinois' new lease tax takes effect January 1, 2025, gross receipts from a lease already subject to Chicago's Personal Property Lease Transaction Tax are exempt from the State and Department…
Is equipment used to manufacture prototype products under a federal contract exempt from Illinois sales and use tax?
It depends on what happens to the finished product. Machinery and equipment used primarily to manufacture tangible personal property that will be sold or leased at wholesale or retail is exempt from I…
If an out-of-state vendor already charged sales tax on equipment shipped to Illinois, does the buyer still owe Illinois Use Tax on it?
Usually not in full. To prevent double taxation, Illinois gives a credit for tax already properly paid to another state on the same purchase: if that other-state tax was at a rate of 6.25% or greater,…
Does a construction contractor owe Illinois Use Tax or Retailers' Occupation Tax on materials, like solar panels, that get permanently installed into real estate?
Construction contractors are treated as end users of the materials they permanently affix to real estate, so they owe Use Tax on the cost price of those materials rather than collecting sales tax from…
Does Illinois sales tax apply to a photographer's digital photo files and an optional custom-made photo album sold along with them?
Electronically delivering digital photo files by themselves is generally not subject to Illinois Retailers' Occupation or Use Tax, because transferring data electronically isn't a transfer of tangible…
What Illinois sales tax rate applies to a powdered drink-mix product marketed as a whole food?
Illinois taxes most retail sales at 6.25%, but food for human consumption to be eaten off the premises where it's sold is taxed at a lower 1% rate unless it's an excluded category (alcohol, cannabis-i…
Once an out-of-state remote retailer drops below Illinois's $100,000/200-transaction economic nexus thresholds and stops collecting tax, does that trailing nexus obligation ever come back, and how often must the retailer check?
Yes, it can come back, and the retailer must keep checking every quarter. Once a remote retailer stops being required to remit Illinois state and local retailers' occupation tax, it must re-test its t…
Does a medical device company's implant system and companion surgical tool for treating obstructive sleep apnea qualify for Illinois's reduced 1% sales tax rate as a 'medical appliance,' and how do local taxes apply?
A medical appliance -- an item that directly substitutes for a malfunctioning part of the human body -- is taxed at Illinois's lower 1% state rate instead of the general 6.25% rate, and local taxes (i…
When a jewelry retailer lets a customer trade in old jewelry toward a new purchase, can the retailer exclude the value of that trade-in from the "gross receipts" it owes Illinois sales tax on?
Yes, but only if the traded-in item is of "like kind and character" as the item being sold -- for example, a customer trading in a ring toward a bracelet purchase. When that test is met, the value of …
How does a retailer calculate Retailers' Occupation Tax when a customer pays with a discount coupon, a manufacturer's coupon, a radio-station or third-party gift certificate, or a buy-one-get-one-free deal?
Tax is based on gross receipts actually received by the retailer, including any reimbursement it gets for a discount -- an unreimbursed discount (a coupon or card the retailer isn't paid back for) red…
Can a pastor use his church's tax-exempt (E-number) status to buy furniture for himself, tax-free, for the parsonage he lives in?
Yes, if it's done correctly: the purchase must be paid for with the church's own funds or a credit card billed directly to the church (not the pastor personally), the retailer must be given a copy of …
Do gates permanently set in concrete at a construction site inside an Illinois enterprise zone qualify for the enterprise zone building materials sales tax exemption?
It depends on whether the gates are permanently affixed to the real estate -- the Department's GIL says the items 'may qualify' if they are permanently incorporated into the realty (applying the same …
Is the ink and solvent a steel-framing manufacturer mixes and applies inline to identify and trace parts during roll forming exempt from Illinois sales/use tax as manufacturing machinery and equipment, or as production related tangible personal property?
The Department did not say yes or no for this taxpayer's specific ink and solvent -- as a GIL, it only explained the manufacturing machinery and equipment (MM&E) exemption framework under 35 ILCS 120/…
Is selling corn oil and other non-petroleum fuel additives for use in farm tractors during off-road tractor pulls taxable under Illinois's Motor Fuel Tax Law, and does the seller need to register under that law?
It depends on how the product is sold: corn oil or other non-petroleum additives are not "motor fuel" under the Motor Fuel Tax Law merely because they're purchased and resold, but if they are sold (al…
Is a mobile app that lets truck drivers buy discounted fuel from partner fuel stops -- without itself selling, holding, or delivering the fuel -- a 'marketplace facilitator' that must collect and remit Illinois sales and use tax?
The Department could not say, on a GIL, without seeing the actual contracts between the app company and the fuel stops -- it explained the Retailers' Occupation Tax and marketplace-facilitator framewo…
Does a company that operates a mobile app connecting truck drivers to discounted fuel at partner fuel stops -- without itself buying, selling, or distributing the fuel -- owe Illinois Motor Fuel Tax or need a motor fuel license?
The Department could not say, because it could not determine from the letter alone the actual contractual relationship between the app company and the fuel stops; based on the limited facts given, the…
Can a construction contractor that can't tell at the time of purchase whether materials will be installed into real estate or sold over the counter buy everything tax-free from its supplier and self-report a flat percentage of tax later?
Only partly. Under 86 Ill. Adm. Code 130.2075(b), a contractor who genuinely can't tell at purchase whether materials will be installed into real estate or sold at retail may certify to its supplier t…
Does a company that sells motor vehicles only for resale (never at retail) have to file transaction reporting returns and risk the $100 Uniform Penalty and Interest Act penalty for not filing them?
No. The Department ruled that the taxpayer is not liable for the $100 Uniform Penalty and Interest Act penalty (35 ILCS 735/3-3(a-15)) for not filing transaction reporting returns (Form ST-556 or ST-5…
Is granola taxed at Illinois's lower grocery/food sales tax rate or its higher general-merchandise/candy rate?
It depends on the form: granola sold as a loose cereal (not in bars, drops, or pieces) is taxed at the low 1% food rate no matter what it contains, but granola sold in bar form is treated as "candy" -…
Do solar panels and related wiring, incorporated into the ground with concrete at a solar farm inside an Illinois enterprise zone, qualify as exempt 'building materials' under the enterprise zone sales tax exemption?
Possibly, but the Department would not say for sure in this GIL -- solar panels are not specifically listed in the building materials exemption regulation, but the Department noted that other equipmen…
If a company manufactures signs, hires a third party to install them, and bills its dealers for the supply, freight, and installation, does it owe Illinois Retailers' Occupation (sales) Tax, Use Tax, or Service Occupation Tax on the sign -- and does the answer change once the sign is bolted to a concrete foundation?
It depends on whether the sign has "commercial value" to buyers generally and whether it becomes permanently affixed to real estate. A sign with commercial value (e.g., one reading generic words like …
Does an online reseller have to charge and collect Illinois sales tax on a "buyer's premium" it adds on top of the sale price of each item?
Yes. A buyer's premium is part of the seller's taxable gross receipts / selling price under the Retailers' Occupation Tax, because no deduction from gross receipts is allowed for the seller's costs of…
Does Illinois sales/use tax exemption for aircraft maintenance parts still require the seller or repairer to hold an FAA Air Agency Certificate and operate a Part 145 repair station?
No, not after January 1, 2024. Public Act 103-0009 removes the FAA Air Agency Certificate, Class IV Rating, and Part 145 operations requirements from the Illinois aircraft-parts exemption (35 ILCS 120…
How should a construction contractor that also sells tangible personal property over-the-counter (a 'combination' or 'dual-purpose' contractor) handle Illinois sales and use tax on the materials it buys and the ST-1 return it files?
A construction contractor is treated as the end user of materials it permanently affixes to real property, so it owes Use Tax on the cost price of those materials -- but if it gave its supplier a resa…
Is a yearly subscription fee for using computer software (not owning it) subject to Illinois sales tax?
It depends on how the software is delivered and licensed: cloud-based software that is never downloaded to the customer's computer is not taxable, and a properly-documented software license meeting fi…
Does machinery and equipment used to blast freeze, slow freeze, cool, and cold-store perishable food products for a manufacturer's customers qualify for Illinois's manufacturing machinery and equipment (MM&E) sales/use tax exemption?
Yes. The Illinois Department of Revenue ruled that the freezer, cooling, and cold-storage machinery and equipment described by the taxpayer qualifies for the manufacturing machinery and equipment exem…
Does an out-of-state vehicle seller create Illinois nexus just because it hires a third-party company to calibrate equipment at customers' locations in Illinois after delivery?
The Department wouldn't say definitively -- nexus is too fact-specific for a GIL -- but it explained that an out-of-state retailer with an ongoing physical presence in Illinois (including through an a…
How long does the Illinois Department of Revenue have to assess additional Retailers' Occupation Tax (sales tax) or Use Tax after a return is filed, and is there a special 6-year rule like the one for income tax understatements?
Generally 3 to 3.5 years from when the taxable gross receipts were received under the Retailers' Occupation Tax Act (extended to as much as 3 years after a filed amended return), and 6 to 6.5 years un…
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.