Section 130.101 Character and Rate of Tax

Section 130

TITLE 86: REVENUE

CHAPTER I: DEPARTMENT OF REVENUE

PART 130 RETAILERS' OCCUPATION TAX

SECTION 130.101 CHARACTER AND RATE OF TAX

Section 130.101  Character

and Rate of Tax

a)         Character of Tax

The Retailers'

Occupation Tax Act (the Act) [35 ILCS 120] imposes a tax upon persons engaged

in this State in the business of selling tangible personal property to

purchasers for use or consumption

, which, on and

after January 1, 2025, includes leasing tangible personal property to lessees

for use or consumption

.  The tax is measured by the seller's gross

receipts from such sales made in the course of such business.  (For further

information concerning gross receipts, see Subpart D of this Part.)

1)         On and after January 1, 2021, a remote retailer that meets

either of the tax remittance thresholds in 86 Ill. Adm. Code 131.115(a) is

considered a retailer engaged in the occupation of selling at retail in

Illinois and is liable for all applicable State and local retailers' occupation

taxes administered by the Illinois Department of Revenue.  (For further

information on the application of the Act to remote retailers, see 86 Ill. Adm.

Code 131.110, 131.115, 131.120, and 131.125).

2)         On and after January 1, 2021, a marketplace facilitator that

meets either of the tax remittance thresholds in 86 Ill. Adm. Code 131.135(a)

is considered a retailer engaged in the occupation of selling at retail in

Illinois and is liable for all applicable State and local retailers' occupation

taxes administered by the Illinois Department of Revenue on all sales to

Illinois purchasers made over the marketplace, including its own sales and

sales made over the marketplace on behalf of marketplace sellers.  (For further

information on the application of the Act to marketplace facilitators, see 86

Ill. Adm

Illinois and is liable for all applicable State and local retailers' occupation

taxes administered by the Illinois Department of Revenue on all sales to

Illinois purchasers made over the marketplace, including its own sales and

sales made over the marketplace on behalf of marketplace sellers.  (For further

information on the application of the Act to marketplace facilitators, see 86

Ill. Adm. Code 131.130, 131.135, 131.140, and 131.145.)

3)

On and after January 1, 2001, prepaid telephone calling

arrangements shall be considered tangible personal property subject to the tax

imposed under the Act regardless of the form in which those arrangements may be

embodied, transmitted, or fixed by any method now known or hereafter developed

(Section 2 of the Act).

For purposes

of this subsection (a)(3), the following definitions apply:

"Prepaid

telephone calling arrangements" means the right to exclusively purchase

telephone or telecommunications services that must be paid for in advance and

enable the origination of one or more intrastate, interstate, or international

telephone calls or other telecommunications using an access number, an

authorization code, or both, whether manually or electronically dialed, for

which payment to a retailer must be made in advance, provided that, unless

recharged, no further service is provided once that prepaid amount of service

has been consumed.  Prepaid telephone calling arrangements include the recharge

of a prepaid calling arrangement.  "Prepaid telephone calling

arrangement" does not include an arrangement whereby the service provider

reflects the amount of the purchase as a credit on an account for a customer

under an existing subscription plan.

"Recharge"

means the purchase of additional prepaid telephone or telecommunications

services whether or not the purchaser acquires a different access number or

authorization code.

"Telecommunications"

means that term as defined in Section 2 of the Telecommunications Excise Tax

Act

[35 ILCS 630]

ount of the purchase as a credit on an account for a customer

under an existing subscription plan.

"Recharge"

means the purchase of additional prepaid telephone or telecommunications

services whether or not the purchaser acquires a different access number or

authorization code.

"Telecommunications"

means that term as defined in Section 2 of the Telecommunications Excise Tax

Act

[35 ILCS 630].

[35 ILCS 120/2-27]

4)         On and after January 1, 2025,

a retailer maintaining a

place of business in this State that makes retail sales of tangible personal

property to Illinois customers from a location or locations outside of Illinois

is engaged in the occupation of selling at retail in Illinois.

[35 ILCS

120/2(b-2)] For the definition of "retailer maintaining a place of

business in this State", see 86 Ill. Adm. Code 150.201. Such retailer is

liable for all applicable State and local retailers' occupation taxes

administered by the Illinois Department of Revenue on all retail sales to

Illinois customers from locations outside of Illinois.  To determine whether a

retail sale to an Illinois customer is made from a location outside of

Illinois, see 86 Ill. Adm. Code 270.115.

A)        A retailer making sales into Illinois shall determine on a

quarterly basis, ending on the last day of March, June, September, and

December, whether it has met the definition of "retailer maintaining a

place of business in this State" as set out in 86 Ill. Adm. Code 150.201

for the preceding 12-month period.  If the retailer meets any of the criteria

in the definition of "retailer" maintaining a place of business in

this State" for a 12-month period, it is a retailer engaged in the

occupation of selling at retail in Illinois and is required to remit the

Retailers' Occupation Tax and all retailers' occupation taxes imposed by local

taxing jurisdictions in Illinois, provided the local taxes are administered by

the Department, and to file all applicable returns for one year

aintaining a place of business in

this State" for a 12-month period, it is a retailer engaged in the

occupation of selling at retail in Illinois and is required to remit the

Retailers' Occupation Tax and all retailers' occupation taxes imposed by local

taxing jurisdictions in Illinois, provided the local taxes are administered by

the Department, and to file all applicable returns for one year.  A retailer

maintaining a place of business in this State shall begin collecting taxes for

sales beginning on the first day of the quarter immediately following the

12-month lookback period.  Taxes so collected shall be remitted to the

Department no later than the 20

th

day of the calendar month

following the month in which they were collected or as otherwise provided in

accordance with Section 3 of the ROTA.

B)        At the end of that one-year period, during which the retailer

maintaining a place of business in this State was remitting taxes, the retailer

shall determine whether it met the definition of "retailer maintaining a

place of business in this State" as set out in 86 Ill. Adm. Code 150.201

for the preceding 12-month period.  If the retailer met any of the criteria in

the definition of "retailer maintaining a place of business in this State"

for the preceding 12-month period, it is a retailer engaged in the occupation

of selling at retail in Illinois and is required to remit all applicable State

and local retailers' occupation taxes and file returns for the subsequent year.

C)        If, at the end of the one-year collection period described in

subsection (a)(4)(B), the retailer determines that its activities in Illinois

did not meet any of the criteria listed in the definition of "retailer

maintaining a place of business in this State" as set out in 86 Ill. Adm.

Code 150.201 during that year, it must discontinue remitting State and local

retailers' occupation taxes.  If a retailer is no longer required to remit

State and local retailers' occupation taxes, it must notify the Department

activities in Illinois

did not meet any of the criteria listed in the definition of "retailer

maintaining a place of business in this State" as set out in 86 Ill. Adm.

Code 150.201 during that year, it must discontinue remitting State and local

retailers' occupation taxes.  If a retailer is no longer required to remit

State and local retailers' occupation taxes, it must notify the Department.

However, it may alternatively notify the Department that it wishes to change

its registration status to voluntarily collect and remit Use Tax as a courtesy

to its 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.)  All

notifications made under this subsection (a)(4)(C) shall be made electronically

as required by the Department.

D)        If a retailer is no longer required to remit State and local

retailers' occupation taxes, it must redetermine, on a rolling quarterly basis,

whether it is obligated to once more begin remitting State and local retailers'

occupation taxes.  For each quarter ending on the last day of March, June,

September, and December, any retailer making sales into Illinois must examine

its activities in Illinois for the immediately preceding 12-month period to

determine whether it met the definition of "retailer maintaining a place

of business in this State" as set out in 86 Ill. Adm. Code 150.201.  If it

met any of the criteria in the definition of "retailer maintaining a place

of business in this State" for the preceding 12-month period, it must

examine its activities in Illinois, to determine whether it met the definition

of "retailer maintaining a place of business in this State" as set

out in 86 Ill. Adm. Code 150.201, to determine if it must continue to remit

tax

m. Code 150.201.  If it

met any of the criteria in the definition of "retailer maintaining a place

of business in this State" for the preceding 12-month period, it must

examine its activities in Illinois, to determine whether it met the definition

of "retailer maintaining a place of business in this State" as set

out in 86 Ill. Adm. Code 150.201, to determine if it must continue to remit

tax.

b)         How to Determine Effective Rate

1)         For the purposes of the Retailers' Occupation Tax Act, any tax

liability incurred in respect to a sale of tangible personal property made in

the regular course of business shall be computed by applying, to the gross

receipts from such sale, the tax rate in effect as of the date of delivery of

such property, provided that if delivery occurs after the tax rate changes, in

a transaction in which receipts were received before the date of the rate

change and tax was paid on such receipts when received by the seller in

accordance with Section 130.430 of this Part at the rate which was in effect

when the seller received such receipts, no additional tax will be due or credit

allowed because of the delivery of the property occurring after the rate

changes.

For the purposes of this subsection (b), an

item that is subject to a lease with periodic payments is considered to be

constructively delivered, for purposes of determining the effective rate, on

the first day of each billing period.

For

example, if the monthly billing period runs from June 20, 2025 through July 19,

2025, and the tax rate change takes effect on July 1, 2025, that tax rate

change takes effect for this lease for lease receipts received on or after July

1, 2025 for the billing period that runs from July 20, 2025 through August 19,

2025 (i.e., the first date of constructive delivery that occurs on or after

July 1, 2025)

, if the monthly billing period runs from June 20, 2025 through July 19,

2025, and the tax rate change takes effect on July 1, 2025, that tax rate

change takes effect for this lease for lease receipts received on or after July

1, 2025 for the billing period that runs from July 20, 2025 through August 19,

2025 (i.e., the first date of constructive delivery that occurs on or after

July 1, 2025).

2)         Furthermore, in the case of sales of building materials to

real estate improvement construction contractors for use in performing

construction contracts for third persons, if such property is delivered to the

contractor after the effective date of a rate increase but will be used in

performing a binding construction contract which was entered into before the

effective date of the increase and under which the contractor is legally unable

to shift the burden of the tax rate increase to the customer, the applicable

tax rate will be the rate which was in effect before the effective date of the

rate increase.  Before a supplier may deliver materials to a construction

contractor after the effective date of a tax rate increase at the rate which

was in effect prior thereto, the purchasing contractor must give such supplier

a written, signed certification stating that specifically described materials

are being purchased for use in performing a binding contract which was entered

into before the effective date of the rate increase (specifying such date) and

under which the contractor is legally unable to shift the burden of the tax

rate increase to the customer, identifying the construction contract in

question by its date and by naming the contractor's construction work involved,

and by giving the location on the job site where the construction contract is being

performed or is to be performed.

c)         Tax Rate in Effect

1)         The effective rate from January 1, 1985, through December 31,

1989, is 5%. On and after January 1, 1990, the effective rate is 6.25%

construction contract in

question by its date and by naming the contractor's construction work involved,

and by giving the location on the job site where the construction contract is being

performed or is to be performed.

c)         Tax Rate in Effect

1)         The effective rate from January 1, 1985, through December 31,

1989, is 5%. On and after January 1, 1990, the effective rate is 6.25%.

Beginning

on July 1, 2000 through December 31, 2000, with respect to motor fuel and

gasohol, the tax is imposed at the rate of 1.25%

. (Section 2-10 of the Act)

2)         Definitions

A)

"Diesel Fuel" is defined as any petroleum product

intended for use or offered for sale as a fuel for engines in which the fuel is

injected into the combustion chamber and ignited by pressure without electric

spark

.  [35 ILCS 505/2]

B)

"Gasohol" means motor fuel that is a blend of

denatured ethanol and gasoline that contains no more than 1.25% water by

weight.

The blend must contain 90% gasoline and 10% denatured ethanol.

A maximum of one percent error factor in the amount of denatured ethanol used

in the blend is allowable to compensate for blending equipment variations.

[35

ILCS 105/3-40]

C)

"Motor Fuel" means all volatile and inflammable

liquids produced, blended or compounded for the purpose of, or which are

suitable or practicable for, operating motor vehicles.  Among other things,

"Motor Fuel" includes "Special Fuel"

. [35 ILCS 505/1.1]

i)         By way of illustration and not limitation, the following are

considered motor fuel:

•           Gasoline

•           Diesel

fuel

•           Combustible

gases (e.g., liquified petroleum gas and compressed natural gas) delivered

directly into the fuel supply tanks of motor vehicles

•           Gasohol

les.  Among other things,

"Motor Fuel" includes "Special Fuel"

. [35 ILCS 505/1.1]

i)         By way of illustration and not limitation, the following are

considered motor fuel:

•           Gasoline

•           Diesel

fuel

•           Combustible

gases (e.g., liquified petroleum gas and compressed natural gas) delivered

directly into the fuel supply tanks of motor vehicles

•           Gasohol.

ii)        By way of illustration and not limitation, the following are

not considered motor fuel:

•           Avgas

•           Jet fuel

•           1-K kerosene

•           Combustible

gases unless delivered directly into the fuel supply tanks of motor vehicles

•           Heating

oil (e.g., kerosene and fuel oil) unless delivered directly into the fuel

supply tanks of motor vehicles, in which case it is considered diesel fuel.

D)

"Special Fuel" means all volatile and inflammable

liquids capable of being used for the generation of power in an internal combustion

engine except that it does not include gasoline as defined in Section 5,

example (A) of the Motor Fuel Tax Law or combustible gases as defined in

Section 5, example (B) of the Motor Fuel Tax Law.  "Special Fuel"

includes diesel fuel.

[35 ILCS 505/1.13]

d)         Effective Date of New Taxes

When something

that has been exempted becomes taxable as to sales that are made on and after

some particular date, the date of sale for this purpose shall be deemed to be

the date of the delivery of the property.  This is true even if such delivery

is made under a contract that was entered into before the effective date of the

new tax.

For the purposes of this subsection (d), an

item that is subject to a lease with periodic payments is considered to be constructively

delivered on the first day of each billing period.  See subsection (c) for more

details.

e)         Relation of Retailers' Occupation Tax to Use Tax

The Retailers'

Occupation Tax is an occupation tax whose legal incidence is on the seller,

rather than on the purchaser

purposes of this subsection (d), an

item that is subject to a lease with periodic payments is considered to be constructively

delivered on the first day of each billing period.  See subsection (c) for more

details.

e)         Relation of Retailers' Occupation Tax to Use Tax

The Retailers'

Occupation Tax is an occupation tax whose legal incidence is on the seller,

rather than on the purchaser.  However, with the enactment of the Use Tax Act

in 1955 [35 ILCS 105], the retailer became a tax collector under that Act and

is required to comply with the bracket systems or tax collection schedules

prescribed in the Department's Use Tax Regulations for the collection of the

Use Tax by retailers from users.