Illinois Administrative Code › Title 86 - REVENUE › Part 140 - SERVICE OCCUPATION TAX › Subpart A - NATURE OF TAX › Section 140.109 - "De Minimis" Servicemen Who Incur Service Occupation Tax on Their Cost Price

Current through Register Vol. 48, No. 28, July 12, 2024
a) If a serviceman
				is below the 35% threshold (or under the 75% threshold for servicemen
				transferring prescription drugs or engaged in graphic arts production) but is
				otherwise required to be registered as a retailer under Section 2a of the
				Retailers' Occupation Tax Act because he incurs Retailers' Occupation Tax
				liability with respect to a portion of his sales, he does not incur a Use Tax
				liability based on his cost price of items transferred incident to service.
				Rather, except as provided in subsection (b), on and after January 1, 1993, he
				incurs and must remit Service Occupation Tax (including local taxes) on his
				cost price of the tangible personal property transferred incident to sales of
				service. Such de minimis servicemen include pharmacists transferring
				prescription drugs and also making over-the-counter sales of non-prescription
				drugs. Also, included would be repairmen transferring parts incident to service
				and also selling parts over-the-counter, or hair stylists transferring hair
				products incident to service and also making over-the-counter sales of shampoo
				and other hair care products. As a result of incurring Service Occupation Tax
				on his cost price, a de minimis serviceman is subject to the following
				conditions:
1) A de minimis serviceman
				incurring Service Occupation Tax liability on his cost price should provide
				Certificates of Resale to his suppliers when purchasing tangible personal
				property that will be transferred to service customers.
2) A de minimis serviceman incurring Service
				Occupation Tax liability on his cost price is also liable for local Service
				Occupation Taxes, which are based upon his location. If he fails to provide
				suppliers with Certificates of Resale and instead pays tax to suppliers, the
				consequence could be an overpayment of local tax to the supplier's location and
				an underpayment of local Service Occupation Tax to the serviceman's location,
				with accompanying penalties and interest.
3) A de minimis serviceman incurring Service
				Occupation Tax liability on his cost price is authorized to claim any of the
				various exemptions provided for in the Service Occupation Tax. For example, he
				may claim the interstate commerce exemption or accept various exemption
				certificates from his customers (e.g., he can accept Certificates of
				Resale).
4) Service Use Tax must be
				collected from service customers by a de minimis serviceman incurring Service
				Occupation Tax liability on his cost price and must be based upon the
				serviceman's corresponding cost price of the tangible personal property
				transferred. Any tax collected over this amount constitutes an overcollection
				of tax that must be refunded to the service customer, or if not refunded to the
				service customer, paid to the Department. The tax need not be separately stated
				on the service billing unless so requested by the service customer.
5) A de minimis serviceman incurring Service
				Occupation Tax liability on his cost price must remit Service Occupation Tax on
				all taxable sales of service for a given fiscal year. He cannot utilize other
				methods of determining his Service Occupation Tax liability on a transaction by
				transaction basis.