Current through Register Vol. 48, No. 12, March 22, 2024
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. 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. 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 ]. (Section 2-27 of the Act).
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.
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 %. 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.
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.
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.