Illinois Administrative Code › Title 86 - REVENUE › Part 150 - USE TAX › Subpart G - REGISTRATION OF OUT-OF-STATE RETAILERS › Section 150.803 - Wayfair Nexus - Nexus Without Physical Presence - Provisions Controlling from October 1, 2018 through December 31, 2020

Current through Register Vol. 48, No. 28, July 12, 2024
a) Background. The concept of nexus in
				Illinois has evolved as a result of several court cases and legislation enacted
				over time. This Section
				150.803 specifically describes
				economic nexus without any physical presence in Illinois and Use Tax collection
				and remittance obligations associated with that nexus beginning on October 1,
				2018. However, beginning January 1, 2021, Public Acts 101-0031 and 101-0604
				implemented a series of structural changes to the Illinois sales tax laws
				requiring remote retailers without physical presence in Illinois who meet a tax
				remittance threshold in subsection (b)(1) to register with the Department and
				remit all applicable State and local retailers' occupation taxes administered
				by the Department, in addition to their existing requirement to collect and
				remit Use Tax as provided in this Section. As a result, beginning January 1,
				2021, these remote retailers' primary tax obligation is Retailers' Occupation
				Tax. For more information on tax remittance obligations based on economic nexus
				without physical presence on and after January 1, 2021, see the administrative
				rules implementing the Leveling the Playing Field for Illinois Retail Act at 86
				Ill. Adm. Code 131.
b) An
				out-of-State retailer making sales to Illinois purchasers from locations
				outside Illinois is required to register with the Department and collect and
				remit Use Tax on those sales if it falls within the definition of a "retailer
				maintaining a place of business in this State" in Section 2 of the Use Tax Act
				[35 ILCS
				105 ]. The Department is authorized to require these
				retailers to act as tax collectors because they have established sufficient
				contacts, or nexus, with Illinois. There are two groups of out-of-State
				retailers that must collect Use Tax on sales to Illinois purchasers:
1) Out-of-State Retailers With a Physical
				Presence in Illinois. Prior to October 1, 2018, out-of-State retailers must
				have a physical presence in Illinois before they can be required to collect Use
				Tax. The types of activities constituting a physical presence, as limited by
				the series of court cases described in this subsection (b)(1), are found in
				Section 2 of the Use Tax Act's definition of a "retailer maintaining a place of
				business in this State". (See
				35 ILCS
				105/2). The physical presence requirement was
				established in a series of United States Supreme Court decisions. See, for
				example, Scripto v. Carson, 362 U.S. 207 (1960); National
				Bellas Hess v. Department of Revenue of the State of Illinois,
				386 U.S.
				753 (1967); Quill Corporation v. North
				Dakota, 504 U.S.
				298 (1992). In 1996, the Illinois Supreme
				Court ruled that remote retailers need only "more than the slightest" physical
				presence to be required to collect Use Tax. See Brown's Furniture v. Wagner,
				171 Ill. 2d 410 (1996). Any out-of-State retailer that has a physical presence
				in Illinois will continue to be required to act as a Use Tax collector.
				Regulations describing these types of retailers are found at 86 Ill. Adm. Code
				150.801 and
				150.802.
2) Beginning October 1, 2018, Out-of-State
				Retailers Without a Physical Presence in Illinois. In South Dakota v. Wayfair,
				Inc., No. 17-494 (U.S. June 21, 2018), the U.S. Supreme Court upheld a South
				Dakota statute that imposed tax collection obligations on out-of-State
				retailers that met specific selling thresholds but had no physical presence in
				the state. This decision abrogated the longstanding physical presence
				requirement of Quill, deeming it "unsound and incorrect". Illinois P.A.
				100-0587 enacted nexus standards, effective October 1, 2018, that are virtually
				identical to those upheld in Wayfair. This Section explains the requirements
				for "Wayfair nexus" in Illinois.
NOTE: The provisions of this Section do not apply to
				  out-of-State retailers with a physical presence in Illinois. However, if an
				  out-of-State retailer loses physical presence nexus, it must evaluate whether
				  it has Wayfair nexus pursuant to subsection (c).