Current through Register Vol. 48, No. 38, September 20, 2024
a) Definitions
"Cost Price" means the consideration paid by a serviceman for
a purchase valued in money, whether paid in money or otherwise, including cash,
credits and services, and shall be determined without any deduction on account
of his or her supplier's cost of the property sold or on account of any other
expense incurred by the supplier. When a serviceman contracts out part or all
of the services required in the sale of service, it shall be presumed that the
cost price to the serviceman of the property transferred to him or her by a
subcontractor is equal to 50% of the subcontractor's charges to the serviceman
in the absence of proof of the consideration paid by the subcontractor for the
purchase of the property. However, if a primary de minimis serviceman who
incurs a Use Tax liability on his or her cost price subcontracts service work
to a secondary de minimis serviceman who also incurs a Use Tax liability on the
cost price, the primary serviceman will not incur Use Tax liability if the
secondary de minimis serviceman has paid, or will remit, Illinois Use Tax on
the cost price of any tangible personal property transferred to the primary
serviceman and certifies that fact in writing to the primary de minimis
serviceman.
"Non-Seminar Materials" means materials or items transferred
incident to the presentation of a seminar but not related to the actual subject
matter of the seminar presentation or necessary for participation in the
seminar. These items would include, but are not limited to, coffee mugs,
briefcases or other promotional items. Pencils, pens, pads of paper and similar
items are considered items necessary for participation in the seminar.
"Seminar" means any presentation, conference, training
program, or continuing education course designed for educational,
informational, professional or recreational purposes.
"Seminar Attendance" occurs when a person is required to be
physically at a specific location at a specific date and time in order to
participate in the seminar. For videoconferences and teleconferences,
attendance occurs only when instant interactive communication with the speaker
is available.
"Seminar Materials" mean any educational or informational
material, and any other items of tangible personal property, prepared, compiled
or otherwise obtained for distribution to seminar customers incident to the
presentation of a seminar, or of a right to attend the seminar. Seminar
materials include, but are not limited to: books, manuals, practice guides,
study guides, outlines, audio and video tapes, compact discs, cassette tapes,
and items related to the subject of the seminar.
"Seminar Provider" means a person, group, organization,
association, or other legal entity that offers, organizes or presents seminars.
A seminar provider does not include an organization or institution granted a
Department issued exemption identification number ("E" number) pursuant to
35 ILCS
120/1g of the Retailers' Occupation Tax Act when
conducting a seminar or course of study in furtherance of its organizational
purpose.
b) Seminar
Materials - Service Transactions
1) Except as
provided in subsection (c) of this Section, a seminar provider will incur
either Service Occupation Tax or Use Tax liability on all seminar materials
transferred during the presentation of a seminar for which a fee or other
charge is made for attendance. See the examples in subsection (b)(3) and
Sections
140.101
through
140.109
of this Part for further information. See subsection (f) for information
regarding the tax liabilities of seminar providers conducting seminars for
which no fee or other charge is made for attendance. A serviceman's liability
may be calculated in one of four ways:
A)
Service Occupation Tax on the separately stated selling price of tangible
personal property transferred incident to service;
B) Service Occupation Tax on 50% of the
serviceman's entire bill;
C)
Service Occupation Tax on the serviceman's cost price of tangible personal
property transferred incident to service if he or she is a registered de
minimis serviceman; or
D) Use Tax
on the serviceman's cost price of tangible personal property transferred
incident to service if he or she is a de minimis serviceman not otherwise
required to be registered under Section 2a of the Retailers' Occupation Tax
Act. To determine the proper tax base for seminar materials transferred
incident to the sale of service, see the examples in subsection (b)(3) and
Sections
140.101
through
140.109
of this Part.
2) A
serviceman is considered a "de minimis" serviceman if his or her aggregate
annual cost price of tangible personal property transferred incident to service
is less than 35% of the aggregate annual total gross receipts from all sales of
service (or less than 75% in the case of servicemen transferring prescription
drugs or engaged in graphic arts production). See Section
140.105
for further information.
3)
Examples
A) Unregistered De Minimis
Serviceman. The seminar provider is an unregistered de minimis serviceman as
provided in Section
140.108
of this Part (e.g., he or she is unregistered because he or she does not sell
tangible personal property at retail, nor has he or she chosen to become
registered and remit Service Occupation Tax). He or she presents a seminar on
antiques appraisal in Illinois, and as a part of the seminar provides attendees
with a manual, a chart and some graphs. The provider purchases manuals at
retail from a bookseller and the charts and graphs are photocopied at the
seminar provider's office. The seminar provider incurs Use Tax liability on his
or her cost price of the manual (i.e., on the amount charged by the bookseller
for the purchase of the manuals). The seminar provider incurs Use Tax on the
cost price of the paper and ink used to produce the chart and graphs (i.e., the
amount charged by the office supply store for the paper and ink). If tax is not
paid to either of these suppliers, the seminar provider must self-assess and
remit tax to the Department. See Section
140.108
of this Part. Please note: if the seminar provider were to make any sales at
retail, such as a videotape of the seminar sold outside the seminar, or an
antiques appraisal booklet sold over the internet, he or she would not be
eligible to pay tax as provided in this Example A and would instead be required
to remit Service Occupation Tax to the Department on all his or her service
sales as provided in subsections (b)(3)(B) through (D).
B) Registered De Minimis Serviceman. A
seminar provider presents a seminar in Illinois, and as part of the seminar
provides the attendees with a manual, a chart and some graphs. The seminar
provider is registered with the Department either because he or she has chosen
to remit Service Occupation Tax or because he or she makes sales at retail and
incurs Retailers' Occupation Tax. He or she otherwise qualifies as a "de
minimis" serviceman. See Section
140.109
of this Part. The seminar provider may remit Service Occupation Tax and any
applicable local taxes to the Department on his or her cost price of the
materials transferred as part of the seminar. In this situation, the seminar
provider is not authorized to pay tax to his or her suppliers. He or she must
instead provide the suppliers (the bookseller and the office supply store) with
a Certificate of Resale for the purchase of materials transferred as part of
the seminar. The seminar provider must register and remit Service Occupation
Tax to the Department on his or her cost price of the manuals, the paper and
the ink. If the seminar provider contracts with a print shop to photocopy the
chart and graphs, the seminar provider would provide a Certificate of Resale to
the print shop and then remit Service Occupation Tax to the Department on his
or her cost price of the charts and graphs (i.e., on a lump sum invoice from
the print shop, tax would be calculated on 50% of the total print shop
bill).
C) Registered Serviceman Who
Is Not De Minimis; Charge for Materials Not Separately Stated. A seminar
provider presents a seminar in Illinois for $500. As a part of the seminar, he
or she provides the attendees with manuals, a chart and some graphs. The
seminar provider is registered with the Department to remit Service Occupation
Tax and his or her annual aggregate cost price of materials transferred
incident to service is 45% of his or her total sales of service (he does not
qualify as a "de minimis" serviceman). The seminar provider does not separately
state a charge for the seminar materials on the invoice to the seminar
attendees. The seminar provider incurs Service Occupation Tax and any
applicable local taxes on 50% ($250) of the total invoice charged to the
seminar attendees. However, the tax base cannot be less than the serviceman's
cost price. If the serviceman's cost price of the materials transferred is
$300, then the serviceman's tax base is $300. See Section
140.106
of this Part. In this situation, the seminar provider is not authorized to pay
tax to his or her suppliers. He or she must instead provide the suppliers with
a Certificate of Resale for the purchase of the manuals, charts and graphs that
are transferred as part of the seminar.
D) Registered Serviceman Who Is Not De
Minimis; Charge for Materials Separately Stated. A seminar provider presents a
seminar in Illinois and provides the attendees with a manual and some charts
and graphs. The total charge to the seminar attendees for the seminar is $125,
which includes the price of the seminar materials. On the invoice to the
attendees, the seminar provider lists a charge for the seminar materials of
$75. The seminar provider is registered with the Department to remit Service
Occupation Tax and his or her annual aggregate cost of materials transferred is
43% of total gross receipts from sales of service (he or she does not qualify
as a "de minimis" serviceman). The seminar provider incurs Service Occupation
Tax and any applicable local taxes on the separately stated charge of $75.
However, the tax base cannot be less than the serviceman's cost price. If the
serviceman's cost price of the materials transferred is $85, then the
serviceman's tax base is $85. See Section
140.106
of this Part. In this situation, the seminar provider is not authorized to pay
tax to his or her suppliers. He or she must instead provide the suppliers with
a Certificate of Resale for the purchase of materials transferred as part of
the seminar and remit tax to the Department as provided in this subsection
(b)(3)(D).
4) Servicemen
incurring Service Occupation Tax (e.g., subsections (b)(3)(B) through (D) of
this Section) shall collect the Service Use Tax from customers. Although not
required unless requested by the service customer, the Service Use Tax may be
separately stated as a distinct item on the service bill. See 86 Ill. Adm. Code
160.115
for additional information.
5)
Credit for Taxes Paid in Error to Supplier. Servicemen in subsections (b)(3)(B)
through (D) are required to remit Service Occupation Tax to the Department and
are not authorized to pay tax to suppliers. However, if tax has been paid to a
supplier, the serviceman may take a credit against his or her Service
Occupation Tax liability for taxes paid in error to a supplier for the same
tangible personal property that was transferred to seminar attendees incident
to service. It should be noted, however, that the serviceman will remain liable
for any additional local taxes, if applicable. This would be the case, for
instance, if a not-for-profit professional association makes bulk purchases of
paper and ink for general administrative purposes, pays Use Tax on those
purchases, and then later uses a portion of that paper and ink to photocopy
graphs or charts for distribution at a seminar as provided in subsections
(b)(3)(B) through (D).
c) Seminar Materials - Retail Transactions
Transactions in which a seminar provider transfers seminar
materials to a person without requiring his or her attendance are subject to
Retailers' Occupation Tax liability. The Retailers' Occupation Tax 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. See 86
Ill. Adm. Code 130. The tax base is the selling price of the seminar materials
transferred to the purchaser. A seminar provider, however, does not incur
Retailers' Occupation Tax liability for materials that are provided to a person
who is registered to attend a seminar but who is unable to attend because of
illness, inclement weather, or similar event. Examples:
1) A seminar provider presents a seminar on
how to capitalize on investments through use of the internet. The charge to
attend the seminar is $400. However, the seminar provider makes the seminar
materials available, without requiring attendance, for $175. Sales of the
seminar materials to persons who do not attend the seminar are subject to
Retailers' Occupation Tax, and any applicable local taxes, on the $175 selling
price of the seminar materials.
2)
A seminar provider presents a seminar for $400 on how to buy real estate.
During the seminar, the provider transfers manuals to the attendees. The
transfer of manuals to attendees during the seminar is considered a sale of
service. However, the provider also sells a videotape of the seminar
presentation along with the manuals at a table outside the seminar room for a
reduced selling price of $200. The sale of the video presentation and manuals
is subject to Retailers' Occupation Tax liability, and any applicable local
taxes, on the $200 selling price. The provider's sale of the videotapes
disqualifies him or her from electing to handle the service tax liability by
paying Use Tax to suppliers, as provided in subsection (b)(3)(A) of this
Section. He or she must instead remit Service Occupation Tax to the Department
as provided in subsections (b)(3)(B) through (D).
d) Non-Seminar Materials - When Subject to
Retailers' Occupation Tax or Use Tax Liability
The sale of non-seminar materials by a seminar provider is
subject to Retailers' Occupation Tax liability. The gift of non-seminar
materials by a seminar provider will result in the seminar provider incurring
Use Tax liability on the cost price of those non-seminar materials.
Examples:
1) Sales. A seminar provider
sells briefcases, coffee mugs, t-shirts, tote bags, and other novelty items.
The seminar provider would incur Retailers' Occupation Tax liability, including
any applicable local tax liability, on the selling price of those items. See 86
Ill. Adm. Code
130.100.
2) Gifts - Items. A seminar provider
purchases calendars, coffee mugs and tote bags and gives the items to the
seminar attendees without charge. The seminar provider incurs Use Tax liability
on the cost price of the items given as a gift. See 86 Ill. Adm. Code
150.305(c).
A seminar provider may discharge his or her tax liability on these items by
paying tax to an Illinois-registered supplier. If the supplier is not
registered to remit tax to Illinois (e.g., the items were purchased over the
internet from a supplier not registered to remit tax to Illinois), the seminar
provider must self-assess and remit Use Tax directly to the
Department.
3) Gifts - Food and
Beverage. A seminar provider presents a seminar on the art of origami. During
the seminar, the provider makes coffee and doughnuts available to the attendees
at no charge. The seminar provider incurs Use Tax liability on the cost price
of the coffee and doughnuts. If the seminar provider purchased the doughnuts
and coffee at a local supermarket and paid tax at the time of purchase, his or
her Use Tax liability has been discharged. If the coffee and doughnuts were
purchased from a caterer (or other provider of food and beverages, including,
but not limited to, a hotel), the seminar provider's liability is discharged
when he or she pays tax to the caterer. If the seminar provider does not remit
tax to a supermarket or caterer as noted in this subsection (d)(3), he or she
must self-assess and remit Use Tax to the Department. See 86 Ill. Adm. Code
150.305(c)
for further information.
e) Exempt Organizations - When Subject to
Retailers' Occupation Tax, Service Occupation Tax, or Use Tax Liability
An organization that has been granted a Department issued
E-number pursuant to
35 ILCS
120/1g of the Retailers' Occupation Tax Act may incur
Retailers' Occupation Tax, Use Tax, or Service Occupation Tax liability as
described in this Section if the seminar presented by the organization is not
in furtherance of the organization's purpose. Organizations granted Department
issued E-numbers that present seminars that are in furtherance of
organizational purposes are not considered to be "seminar providers" for
purposes of the tax liability incurred on seminar materials as explained in
this Section. However, if an exempt entity engages in selling tangible personal
property at a seminar, Retailers' Occupation Tax liability will be incurred on
the sale of the tangible personal property unless the selling is one of the
three types of limited selling authorized for exempt entities as provided in 86
Ill. Adm. Code
130.2005(a)(1)
through (4). Examples:
1) A health services group that has been
granted a Department issued E-number presents a seminar on automobile repair.
The health services group would be subject to tax under this Section because
automobile repair is not an organizational purpose of the group.
2) A church that has been granted a
Department issued E-number presents a seminar in furtherance of its
organizational purpose on the teachings of religious scholars. The church would
not incur tax liability because it is not included in the definition of a
seminar provider under this Section when presenting a seminar in furtherance of
its organizational purpose.
3) An
organization whose purpose is to promote heart health, and that has been
granted a Department issued E-number, sponsors a heart health seminar on
Valentine's Day. During break, the organization sells red roses as a
fundraiser. The charges for the seminar are not taxable because the
organization is not considered a seminar provider under this Section when
presenting a seminar in furtherance of its organizational purpose. However, the
sale of the roses is subject to Retailers' Occupation Tax unless it is one of
the organization's two annual authorized tax exempt fundraising
events.
f) Seminars for
Which No Charge Is Made for Attendance
If a seminar provider does not impose a charge for
attendance, no sale of service occurs under the Service Occupation Tax.
However, the seminar provider is considered the end user of tangible personal
property that he or she uses to conduct the seminar, including materials that
are distributed to attendees, and generally incurs Use Tax liability on his or
her cost price of such items. Such items could include tangible personal
property that the provider itself uses to conduct the seminar (e.g., a CD used
to record information for a presentation; a laser pointer) or items that are
provided to attendees (e.g., a binder; legal pads for notes; pencils; pens). In
the former instance, the seminar provider is considered the end user of such
items because it consumes them in conducting the seminar. In the latter
instance, the seminar provider is considered to be the end user of these items
because it is a donor of the items to attendees. As a donor, it incurs a Use
Tax liability. See 86 Ill. Adm. Code
150.305(c).
If the seminar provider does not pay tax to its suppliers on these items (e.g.,
it purchased them over the internet from a supplier not registered to collect
and remit tax to the Department), the seminar provider is required to
self-assess and remit tax to the Department. A seminar provider that has
obtained an E-number from the Department and conducts a seminar in furtherance
of its organizational purpose may make tax-free purchases of tangible personal
property for use at the seminar, including donations, by providing suppliers
with its E-number.
