Illinois Administrative Code › Title 86 - REVENUE › Part 131 - LEVELING THE PLAYING FIELD FOR ILLINOIS RETAIL ACT › Section 131.155 - Tax Sourcing Provisions

Current through Register Vol. 48, No. 28, July 12, 2024
a) Under
			 Section 2 of the Retailers' Occupation Tax Act and Sections 2 and 2d of the Use
			 Tax Act, the type of tax liability incurred by a retailer and the manner in
			 which that liability is sourced depends upon the manner in which a retailer
			 conducts its selling activities, as well as the type of nexus (or lack thereof)
			 that a retailer has with the State. Retailers may incur State and local
			 retailers' occupation taxes based either upon the Illinois location to which
			 the tangible personal property is shipped or delivered or at which possession
			 is taken by the purchaser ("destination sourcing") or upon the location in
			 Illinois at which the selling activities occur ("origin sourcing"; see 86 Ill.
			 Adm. Code
			 270.115) .
			 Some retailers, in contrast, may incur only a Use Tax collection obligation.
			 Still other retailers may incur no tax obligations at all. Multichannel
			 retailers may incur a combination of these liabilities. Because of these
			 distinctions, it is critical that retailers evaluate their selling activities
			 carefully to determine their proper tax liability.
b) Except as provided in subsection
			 131.107(c)(1)(C),
			 marketplace facilitators required to remit State and local retailers'
			 occupation tax on sales to Illinois purchasers for sales made on behalf of
			 marketplace sellers. On and after January 1, 2021, marketplace facilitators
			 meeting either of the thresholds in Section
			 131.135(a)(1)
			 or (a)(2) are deemed to be engaged in the
			 business of selling at the Illinois location to which the tangible personal
			 property is shipped or delivered or at which possession is taken by the
			 purchaser for sales made over the marketplace on behalf of a marketplace
			 seller. (See
			 35
			 ILCS 120/2-12(7).)
c) Marketplace facilitators required to remit
			 State and local retailers' occupation tax for their own sales to Illinois
			 purchasers, or sales for which they are considered the seller because the
			 marketplace seller is not identified (see Section
			 131.130(b))
			 . On and after January 1, 2021, marketplace facilitators meeting either of the
			 thresholds in Section
			 131.135(a)(1)
			 or (a)(2) may incur either destination
			 sourcing or origin sourcing on a sale to an Illinois purchaser. A marketplace
			 facilitator is deemed to be engaged in the business of selling at either the
			 Illinois location at which the inventory is located or at which the selling
			 activities otherwise occur ("origin sourcing"). The location at which State and
			 local retailers' occupation tax is incurred must be determined by applying the
			 provisions of 86 Ill. Adm. Code
			 270.115(c) and
			 (d). When a marketplace facilitator makes a
			 sale to an Illinois purchaser that is fulfilled from inventory located outside
			 Illinois and for which selling activities otherwise occur at a location outside
			 Illinois (see 86 Ill. Adm. Code 270.115), it is deemed to be engaged in the
			 business of selling at the Illinois location to which the tangible personal
			 property is shipped or delivered or at which possession is taken by the
			 purchaser ("destination sourcing").
EXAMPLE 1: World of Spices operates a marketplace selling
				various spices on behalf of marketplace sellers. It meets the thresholds for
				tax remittance in Section
				131.135(a)(1).
				Purchaser A places an order for Ceylon Cinnamon, Asafetida and Ajwain from
				Marketplace seller A. She requests delivery to her residence in Chicago, Cook
				County. World of Spices incurs State and local retailers' occupation taxes in
				effect at the location in Chicago to which the spices are shipped or delivered.
				Local occupation taxes would include the Regional Transportation Authority
				Retailers' Occupation Tax at the
				1.25 % rate, but
				would not include any additional local occupation taxes. (See subsection
				(f).)
EXAMPLE 2: A purchaser that resides in Chatham, Illinois,
				orders an espresso machine from a marketplace seller over a marketplace that
				meets the tax remittance threshold in Section
				131.135(a)(2).
				The purchaser chooses an option to pick up the item at a Springfield, Illinois
				brick and mortar store that has partnered with the marketplace seller. The
				marketplace facilitator incurs State and local retailers' occupation taxes in
				effect at the Springfield store location.
EXAMPLE 3: Home Appliances is a brick and mortar store in
				Bloomington, Illinois that sells appliances. It recently became a marketplace
				seller on a large multinational marketplace that meets the threshold for tax
				remittance in Section
				131.135(a).
				Home Appliances fills all orders made over the marketplace from its warehouse
				in Bloomington. Purchaser A orders a grilled cheese sandwich toaster over the
				marketplace and chooses delivery to his residence in Kankakee, Illinois. The
				marketplace facilitator incurs State and local retailers' occupation taxes in
				effect at the Kankakee location to which the grilled cheese sandwich maker was
				shipped or delivered.
EXAMPLE 4: Marketplace facilitator A operates a marketplace. It
				meets the tax remittance threshold of Section
				131.135(a)(1).
				It makes sales of its own tangible personal property, as well as tangible
				personal property sold on behalf of marketplace sellers. It offers purchasers
				that pay it a yearly membership fee free and speedy delivery on selected items.
				Customer A in Champaign, Illinois, shops for a coffee grinder on the
				marketplace and compares similar products sold by Marketplace facilitator A and
				Marketplace seller B. He decides to purchase the product sold by Marketplace
				facilitator A because he has paid membership fees and receives faster delivery.
				Marketplace facilitator A does not engage in any selling activities in Illinois
				and fulfills the sale from a warehouse located in Missouri. The marketplace
				facilitator incurs State and local retailers' occupation taxes in effect at the
				location in Champaign where the coffee grinder is shipped or delivered.
EXAMPLE 5: The facts for this example are the same as for
				EXAMPLE 4. However, the marketplace facilitator fulfills the order from a
				warehouse located in Kankakee, Illinois. In this example, Marketplace
				facilitator A incurs State and local retailers' occupation taxes in effect at
				the location of the warehouse in Kankakee from which the order was
				fulfilled.
d) Remote
			 retailers required to remit State and local retailers' occupation tax on sales
			 made to Illinois purchasers.
On and after January 1, 2021, remote
			 retailers meeting either of the tax remittance thresholds in Section
			 131.115(a)
			  of this Part are deemed to be engaged in the
			 business of selling at the Illinois location to which the tangible personal
			 property is shipped or delivered or at which possession is taken by the
			 purchaser.
[35
			 ILCS 120/2-12(6) ]
EXAMPLE 1: Vichy Vines is a vintner in the Columbia River
				Valley that holds an Illinois Liquor Control Commission Winery Shipper's
				License and sells wine to Illinois purchasers over its website. It has no
				physical presence in Illinois and meets the tax remittance threshold of Section
				131.115(a)(1).
				Consequently, for purposes of tax imposed under ROTA, it is deemed to be
				engaged in the business of selling at the Illinois location to which its wine
				is shipped or delivered or at which possession is taken by the purchaser. Vichy
				Vines sells a case of its best grenache to an Illinois purchaser and delivers
				it to an address in Chicago, Cook County. Vichy Vines incurs all State,
				municipal, county, and special district retailers' occupation taxes in effect
				at the location to which the wine is shipped or delivered.
EXAMPLE 2: Katy is an artist in Los Angeles that sells her
				jewelry through the Etc.com. marketplace, as well as through her own website.
				Etc.com is a marketplace facilitator that meets the tax remittance threshold of
				Section
				131.135(a)(2).
				Tax on all sales Katy makes over Etc.com must be reported and remitted by
				Etc.com. as required in subsection (b). Katy must next determine if she has tax
				liability for sales made through her own website. In making this determination,
				Katy should not include either the gross receipts from, or transactions made
				to, Illinois purchasers over Etc.com. Katy has no physical presence in
				Illinois, so she is considered a remote retailer. If she determines that she
				meets either of the tax remittance thresholds of Section
				131.115(a),
				she is considered to be a retailer engaged in the business of selling at the
				Illinois location to which her jewelry is shipped or delivered or at which
				possession is taken by purchaser. She incurs State and local retailers'
				occupation taxes in effect at the different Illinois locations to which her
				jewelry is shipped or delivered or at which possession is taken by the
				purchaser. Alternatively, if Katy determines that she does not meet either of
				the thresholds in Section
				131.115(a),
				she is not required to register and remit taxes (however, she is required to
				monitor her selling activities to determine, on a quarterly basis, if she meets
				either of the tax remittance thresholds). If she does not meet either of the
				thresholds, she may, however, voluntarily register to collect and remit Use Tax
				as a courtesy to her Illinois purchasers, since those purchasers will still
				incur a Use Tax liability that they must otherwise self-assess and remit
				directly to the Department. (See 86 Ill. Adm. Code
				150.805
				for additional information.)
e) Out-of-State Sellers with a Physical
			 Presence in Illinois. Out-of-State sellers with a physical presence in Illinois
			 are not remote retailers. However, they are "retailers maintaining a place of
			 business in Illinois" under Section 2 of the Use Tax Act. As a result, they
			 generally incur only a Use Tax collection obligation (6.25 %) on sales made to
			 Illinois purchasers from locations outside Illinois. However, if sales are made
			 to Illinois purchasers from locations in Illinois, State and local retailers'
			 occupation tax is incurred at the rate in effect where the selling activities
			 occur ("origin sourcing") (see 86 Ill. Adm. Code
			 270.115(c) and
			 (d) to determine the location at which State
			 and local retailers' occupation taxes are incurred). This selling frequently
			 occurs when sales made to Illinois purchasers are filled from inventory located
			 in Illinois.
EXAMPLE 1: Company A is a sushi restaurant supply company
				headquartered in San Francisco. It routinely sends representatives to Illinois
				to market supplies to sushi restaurants. All of its sales to Illinois
				purchasers are filled from inventory in Oakland, California. The
				representatives make no sales from locations in Illinois. Company A is not a
				remote retailer because it has a physical presence in Illinois due the
				activities of its sales representatives. It is required to register to collect
				and remit Use Tax (6.25%) on its sales to Illinois purchasers.
EXAMPLE 2: DanubeDeliveries.com is an affiliate of a large
				multinational marketplace facilitator. The facilitator meets either of the tax
				remittance thresholds of Section
				131.135(a)
				and so is required to remit State and local retailers' occupation tax for sales
				made on behalf of marketplace sellers on the marketplace. DanubeDeliveries.com
				sells 35% of its products over the marketplace, and these sales are fulfilled
				from a warehouse of the marketplace facilitator located in Monee, Illinois. The
				remaining 65% of its sales to Illinois purchasers are made outside Illinois.
				Because DanubeDeliveries.com is an affiliate of the marketplace facilitator, it
				is not considered a marketplace seller. As a result, the marketplace
				facilitator is not authorized to remit tax on sales made over the marketplace
				on behalf of DanubeDeliveries.com. as it does for all its marketplace sellers.
				It may, however, collect the tax and send it to DanubeDeliveries.com to remit
				to the Department, or, if the marketplace facilitator has obtained
				certification as a CSP or CAS, it may assist DanubeDeliveries.com in filing its
				returns and performing other tax functions, as provided in Section
				131.160
				or
				131.165.
				DanubeDeliveries.com must next determine its tax obligations. In making this
				determination, it must first consider whether it is a remote retailer. It is
				not considered a remote retailer because it has a physical presence in Illinois
				due to inventory in Monee, Illinois, from which Illinois purchases are
				fulfilled. As a result, it incurs two different types of tax liability on its
				sales. It incurs State and local retailers' occupation tax at the rate in
				effect in Monee, Illinois for sales made to Illinois purchasers that are
				fulfilled from inventory in Monee ("origin sourcing"). For all sales made to
				Illinois purchasers from outside Illinois, DanubeDeliveries.com is required to
				collect and remit Illinois Use Tax (6.25%). DanubeDeliveries.com must register
				to report and remit tax on all its sales, including those made over the
				marketplace.
f) Retailers
			 that are required to remit State and local retailers' occupation taxes on their
			 sales to Illinois purchasers generally incur no local retailers' occupation
			 taxes on sales of tangible personal property subject to the preferential low 1%
			 rate, since most local taxing jurisdictions lack authority to impose tax on
			 those items. (See 86 Ill. Adm. Code
			 270.101.) However,
			 certain units of local government (i.e., transportation districts) are
			 authorized to impose tax on these items. (See 86 Ill. Adm. Code
			 320.101. For detailed
			 information, see the Illinois Tax Rate Finder on the Department's
			 website.)