Current through Register Vol. 48, No. 12, March 22, 2024
a) Definitions
"Affiliate" or "Affiliated with"
means a person that, with respect to another person:
has a direct or indirect ownership interest of more
than 5% in the other person; or
is related to the other person because a third
person, or a group of third persons who are affiliated with each other, holds a
direct or indirect ownership interest of more than 5% in the related
person.
"Marketplace" means a physical or electronic place,
forum, platform, application, or other method by which a marketplace seller
sells or offers to sell tangible personal property. Examples of
marketplaces include, but are not limited to:
auctions, internet marketplace platforms on which tangible
personal property is offered for sale;
antique malls;
home shopping networks selling tangible personal property
over television, cable, or satellite networks; or
consignment shops selling tangible personal property on
behalf of numerous persons.
"Marketplace facilitator" means a person who,
pursuant to an agreement with an unrelated third-party marketplace seller,
directly or indirectly through one or more affiliates facilitates a sale by an
unrelated third-party marketplace seller by performing both of the
activities outlined in subsection (c)(1).
"Marketplace seller" means a person that sells or
offers to sell tangible personal property through a marketplace operated by an
unrelated third-party marketplace facilitator. (Section 2d of the
Act)
"Retail sales". For purposes of this Section, all sales made
through a marketplace by a marketplace facilitator on behalf of unrelated
third-party marketplace sellers are considered sales made by a retailer at
retail.
"Unrelated third party", for purposes of this Section, means
a person that, with respect to another person, has a direct or indirect
ownership interest of 5% or less in the other person. A person is also
considered to be an unrelated third party when a third person, or group of
third persons who are affiliated with each other, hold a direct or indirect
ownership interest of 5% or less in the other person.
b) General Provisions Applicable from January
1, 2020 through December 31, 2020; Tax Collection
1) Scope of Regulations - Preliminary
Considerations
A) This Section
150.804 applies to marketplace
facilitators and marketplace sellers from January 1, 2020 through December 31,
2020. Beginning January 1, 2021, provisions of Public Act 101-0604 and Public
Act 101-0031 take effect and modify the tax obligations of marketplace
facilitators and marketplace sellers. Beginning January 1, 2021, marketplace
facilitators who meet a tax remittance threshold in subsection (d) are required
to remit State and local retailers' occupation tax and are no longer subject
only to Use Tax collection. Such marketplace facilitators are considered
Illinois retailers for all sales made through the marketplace. For further
information on the application of the Retailers' Occupation Tax Act to
marketplace facilitators, see 86 Ill. Adm. Code
131.130,
131.135,
131.140, and
131.145.
B) The provisions of this Section apply when
the only tax required to be remitted to the Department by marketplace
facilitators for sales made on behalf of marketplace sellers through the
marketplace is Use Tax. A marketplace facilitator is considered the retailer
for those sales and must register, collect Use Tax from purchasers, and remit
that Use Tax to the Department.
C)
Marketplace facilitators are not considered the retailer for sales made on
behalf of marketplace sellers through the marketplace that are subject to
Retailers' Occupation Tax. Marketplace sellers are considered the retailer for
those sales. The manner in which these transactions may be handled is set out
in subsection (i).
D) Marketplace
facilitators and marketplace sellers are not required to remit tax on sales of
tangible personal property that is required to be registered with an agency of
this State, including motor vehicles, watercraft, aircraft, and trailers, that
are made from locations outside Illinois to Illinois purchasers. Taxes on these
items will continue to be paid, as required by Section 10 of the Use Tax Act
[35 ILCS
105 ], by purchasers as a condition of titling or
registering these items.
EXAMPLE 1: Ponchos for Pooches makes sales of rain gear for
dogs through an internet marketplace that meets the requirements of subsection
(d). The rain gear is handmade in Portland, Oregon and then shipped directly to
Illinois purchasers. Beginning on January 1, 2020, the marketplace facilitator,
rather than Ponchos for Pooches, is considered the retailer of the rain gear
and must collect and remit Use Tax to the Department.
EXAMPLE 2: Sales made to Illinois purchasers by Ponchos for
Pooches have skyrocketed. As a result, the company now has several employees
located in Illinois, and the rain gear those employees produce is inventoried
in a warehouse located in Kankakee. Sales to Illinois purchasers are frequently
shipped from the Kankakee warehouse. Any sales fulfilled from inventory in the
Kankakee warehouse are subject to Retailers' Occupation Tax, including local
occupation taxes, because the property sold is located in the inventory of
Ponchos for Pooches in Kankakee at the time of sale. (See, for example, 86 Ill.
Adm. Code 270.115.) Through December 31,
2020, the marketplace facilitator is no longer considered the retailer for
these sales. Ponchos for Pooches is liable for Retailers' Occupation Tax on
these sales and must register with the Department to remit Retailers'
Occupation Tax on those sales. In this example, the marketplace facilitator has
decided to collect all taxes due from purchasers on these sales (including any
local occupation tax reimbursements) and transmits them to Ponchos for Pooches.
Ponchos for Pooches then remits Retailers' Occupation Tax on these sales to the
Department. In this situation, the marketplace facilitator is held harmless for
tax on amounts collected and remitted to Ponchos for Pooches.
2) Tax Collection: On and after
January 1, 2020, except as provided in subsections (b)(1)(C) and (i)(4), every
marketplace facilitator that meets either of the thresholds in subsection (d)
is considered the retailer for each retail sale of tangible personal property
made on behalf of marketplace sellers through its marketplace. The marketplace
facilitator must register with the Department and collect and remit any Use Tax
due for marketplace sales made on behalf of marketplace sellers to Illinois
purchasers. The obligations of marketplace facilitators are more fully
explained in subsection (h). However, beginning January 1, 2021, State and
local retailers' occupation taxes are due on all sales made through a
marketplace (see subsection (b)(1)(A)).
c) Determination of Status as a Marketplace
Facilitator
1) A person is considered a
marketplace facilitator if he or she,
pursuant to an agreement with an
unrelated third-party marketplace seller, directly or indirectly through one or
more affiliates facilitates a sale by an unrelated third-party marketplace
seller by doing both of the following:
A)
listing or advertising for sale by
the marketplace seller, in a marketplace, tangible personal property that is
subject to tax under the Act; and
B)
either directly or indirectly,
through agreements or arrangements with third parties, collecting payment from
the customer and transmitting that payment to the marketplace seller regardless
of whether the marketplace facilitator receives compensation or other
consideration in exchange for its services. (Section 2d of the
Act)
2) A marketplace
facilitator must indicate to purchasers on its marketplace that the tangible
personal property is being sold on behalf of an identified marketplace seller.
If the marketplace seller is not identified to the purchaser on the
marketplace, then, for tax collection and remittance purposes, the marketplace
facilitator is considered the seller of the tangible personal property. If none
of the tangible personal property sold over a marketplace is identified to
purchasers on the marketplace as tangible personal property sold on behalf of
an identified marketplace seller, the requirements of subsection (c)(1)(A) are
not met. (See EXAMPLE 5.)
EXAMPLE 1: Carabibi, a social media network, provides a forum
in which persons using the network can buy and sell used tangible personal
property. Carabibi functions solely as an advertising platform bringing buyers
and sellers together. Once the buyer and seller have contacted each other over
the network, they must negotiate the sale and make payment arrangements
themselves. While the forum provided by Carabibi constitutes a marketplace as
defined in subsection (a), Carabibi is not considered a marketplace facilitator
because it does not engage in the activities described in subsection
(c)(1)(B).
EXAMPLE 2: Paymate is a payment processing business appointed
by merchants to handle payment transactions from various channels, such as
credit cards and debit cards. Its sole activity with respect to marketplace
sales is to handle financial transactions between two parties on the
marketplace. Paymate is not a marketplace facilitator because it does not
engage in the activities described in subsection (c)(1)(A).
EXAMPLE 3: CouponCrowd operates an online platform that sells
coupons that can be redeemed by purchasers at various retail stores that have
contracted with CouponCrowd to promote their businesses. CouponCrowd lists the
coupons for sale, sells the coupons to purchasers, and processes payment for
the purchase of the coupons. CouponCrowd is not a marketplace facilitator. The
sale of a coupon is the sale of an intangible, not the sale of tangible
personal property. Marketplace facilitators must engage in facilitating sales
of tangible personal property.
EXAMPLE 4: Mandameal is an online and mobile food-ordering
and delivery service. It works with a variety of partner restaurants by listing
meals available for purchase and delivery. Customers place food orders using
Mandameal, which then processes payments for the purchased meals and delivers
the orders. Although Mandameal is considered a marketplace facilitator because
it engages in each of the activities in subsection (c)(1), the provisions of
this Section do not apply to it because the tax liability incurred for sales
made using Mandameal is Retailers' Occupation Tax liability, not Use Tax
liability. In this example, the business model and contract used by Mandameal
demonstrate that liability for sales made over the platform is properly placed
on the partner restaurants. Consequently, the partner restaurants must be
registered as retailers and remit Retailers' Occupation Tax to the Department
for all sales made using Mandameal. Even if the business model and contract
used by Mandameal demonstrates that the liability for the sales made over the
platform is instead properly placed on Mandameal, the provisions of this
Section would still not apply, since the liability that Mandameal would incur
in this case is Retailers' Occupation Tax liability, not Use Tax
liability.
EXAMPLE 5: Visualeyes operates a specialized online
marketplace that sells various brands of contact lenses to purchasers.
Visualeyes makes purchases for resale from various suppliers of the contact
lenses offered for sale on its marketplace. Its marketplace does not indicate
to purchasers using the marketplace that the sales are made on behalf of any
identified marketplace sellers. In this example, Visualeyes is not a
marketplace facilitator. It is simply an online retailer making its own sales
of contact lenses. Whether it is required to collect and remit taxes depends
upon whether it has sufficient nexus with Illinois. (See, for example, Section
150.803.)
d) Marketplace Facilitators -
Determination of Obligation to Collect and Remit Tax. A marketplace
facilitator, as defined in subsection (c)(1), must collect and remit Use Tax on
all sales through the marketplace and is considered the retailer for each
retail sale of tangible personal property made through its marketplace on
behalf of marketplace sellers (except as provided in subsections (b)(1)(C) and
(i)(4)) if either of the following thresholds is met:
1)
The cumulative gross receipts from
sales of tangible personal property to purchasers in Illinois made through the
marketplace by the marketplace facilitator and by marketplace sellers are
$100,000 or more; or
2)
The marketplace facilitator and marketplace sellers selling through the
marketplace cumulatively enter into 200 or more separate transactions through
the marketplace for the sale of tangible personal property to purchasers in
Illinois. (Section 2d of the Act)
e)
A marketplace facilitator shall
determine on a quarterly basis, ending on the last day of March, June,
September, and December, whether it meets the threshold of subsection
(d)(1) or (2) for the preceding 12-month period. If the marketplace
facilitator meets the threshold of either subsection (d)(1) or (2)
for a 12-month period, it is considered a retailer maintaining a place
of business in Illinois and is required to collect and remit the Use Tax and
file returns for one year for all sales made over its platform.
1)
At the end of that one-year
period, the marketplace facilitator shall determine whether it met the
threshold of either subsection (d)(1) or (2) during the
preceding 12-month period. If the marketplace facilitator met the threshold of
either subsection (d)(1) or (2) for the preceding 12-month
period, it is considered a retailer maintaining a place of business in Illinois
and is required to collect and remit Use Tax (or, on and after January
1, 2021, Retailers' Occupation Tax (see subsection (b)(1)(A))) and file
returns for the subsequent year for all sales made over its
platform.
2)
If,
at the end of a one-year period, a marketplace facilitator that was required to
collect and remit the Use Tax (or, on and after January 1, 2021,
Retailers' Occupation Tax (see subsection (b)(1)(A))) determines that
it did not meet the threshold of either subsection (d)(1) or (2)
during the preceding 12-month period, the marketplace facilitator shall
subsequently determine, on a quarterly basis ending on the last day of March,
June, September, and December, whether it meets the threshold of
either subsection (d)(1) or (2) for the preceding 12-month
period. (Section 2d of the Act)
f) "Gross Receipts" and "Separate
Transactions" Defined. The following definitions must be applied by a
marketplace facilitator when determining if it meets either of the thresholds
in subsection (d):
1) "Gross receipts" means
all the consideration actually received for a sale by a marketplace seller.
(See 86 Ill. Adm. Code
130.401 for additional
information regarding gross receipts.) Subsection (g) describes what kinds of
transactions must be included or excluded when determining whether the
threshold based on gross receipts in subsection (d)(1) is met.
2) "Illinois purchaser" means a
person in Illinois who, through a sale at retail, acquires the ownership of
tangible personal property for a valuable consideration. (See Section
2 of the Act, definition of "Purchaser".)
3) "Entering into a sale" occurs when a
marketplace seller has taken action that binds it to a sale. This may occur,
even though the tangible personal property that has been sold has not yet
shipped to the purchaser.
EXAMPLE: On December 15, 2019, a marketplace seller takes
actions binding it to a sale that is scheduled for shipment on January 15,
2020. This sale must be included in the calculation used to determine the
marketplace facilitator's sales transactions for its initial lookback period
under subsection (e).
4)
"Separate transactions" means sales transactions that are documented on
separate invoices, regardless of the manner in which the tangible personal
property is delivered to the purchaser.
EXAMPLE 1: A purchaser orders 12 items of clothing from a
marketplace seller. He receives an invoice confirming his order of 12 items.
However, due to a back order, 3 of the clothing items are shipped separately
from the other 9 items. Shipment of the 3 back-ordered items, even with a
separate shipping invoice, is not considered a separate transaction because the
original transaction was invoiced as one sale.
EXAMPLE 2: A purchaser places an order of home repair tools
at 8:00 a.m. from a marketplace seller. She receives an invoice confirming her
order at 8:15 a.m. At 2:00 p.m., the purchaser realizes she needs 5 other tools
to complete the job and orders these tools from the same marketplace seller.
The marketplace seller confirms this order with a separate invoice. In this
example, two different transactions have occurred. This is the case, even if
the marketplace seller sends all the ordered tools to the purchaser in one
package.
EXAMPLE 3: A mother places an order with Marketplace Seller B
for care packages to be delivered to her son's dormitory at 8 scheduled
intervals during the school year. Each delivery is separately invoiced. These
are counted as 8 separate transactions.
g) Transactions that are included or excluded
in determining if either of the thresholds in subsection (d) are met. A
marketplace facilitator must apply the following provisions in determining
whether a transaction should be included or excluded for purposes of
determining if it meets either of the thresholds in subsection (d):
1) Sales for resale must be excluded. (See 86
Ill. Adm. Code 130.201.)
EXAMPLE: Marketplace Seller A makes a sale of seedlings to
Company B over a marketplace. Company B provides a resale certificate
indicating that 60% of the seedlings will be sold to customers at retail (a
purchase for resale) and that it will use 40% of the seedlings in its
landscaping business (a purchase for use). If the marketplace facilitator
calculates its threshold using gross receipts, it should include only 40% of
the gross receipts from this sale. If it calculates its threshold using
transactions, however, the entire transaction with Company B must be
included.
2) Sales of
tangible personal property that is required to be registered with an agency of
this State, including motor vehicles, watercraft, aircraft, and trailers, that
are made from locations outside Illinois to Illinois purchasers must be
excluded. Taxes on these items will continue to be paid, as required by Section
10 of the Act, by purchasers as a condition of titling or registering these
items.
3) Sales made through the
marketplace on behalf of a marketplace seller or by a marketplace facilitator
that are subject to Retailers' Occupation Tax must be excluded. For example,
sales made through a marketplace on behalf of a marketplace seller that are
filled from inventory located in an Illinois warehouse are excluded for
purposes of calculating the thresholds in subsection (d).
4) All sales of tangible personal property,
other than those excluded by this subsection (g), even if they are exempt from
tax, must be included for purposes of calculating the thresholds in subsection
(d).
h) Obligations of
Marketplace Facilitators
1) A marketplace
facilitator shall enter into an agreement with each of its marketplace sellers
to facilitate sales of tangible personal property by that marketplace seller.
The agreement shall contain a certification by the marketplace
facilitator that, except as provided in subsection (i), the
marketplace facilitator assumes the rights and duties of a retailer under the
Act with respect to collection and remittance of Use Tax on all
sales made by the marketplace seller through the marketplace.
(Section 2d(d) of the Act) The marketplace facilitator shall maintain the
agreement in its books and records for review and inspection upon demand by the
Department.
2) A marketplace
facilitator must maintain books and records containing the name, address and
FEIN of all marketplace sellers making sales through its marketplace and
provide those records to the Department upon demand.
3) A marketplace facilitator shall collect
Use Tax as required by Section 3-45 of the Act for all sales made through its
marketplace, based on information provided by marketplace sellers. However,
marketplace facilitators are not required to collect tax on sales of tangible
personal property that is required to be registered with an agency of this
State, including motor vehicles, watercraft, aircraft, and trailers, that are
made from locations outside Illinois to Illinois purchasers. Taxes on these
items will continue to be paid, as required by Section 10 of the Act, by
purchasers as a condition of titling or registering these items. When
Retailers' Occupation Tax is incurred on a sale made through the marketplace on
behalf of a marketplace seller, a marketplace facilitator may, as provided in
subsection (i), collect Use Tax from the purchaser, along with any local tax
reimbursements, and transmit it to the marketplace seller for remittance to the
Department as Retailers' Occupation Tax.
4) A marketplace facilitator shall register
with the Department and file returns in accordance with procedures required by
the Act.
5) A marketplace
facilitator shall maintain for review and inspection upon demand by the
Department books and records for all sales made through a marketplace on behalf
of marketplace sellers consistent with the requirements in Section 11 of the
Use Tax Act.
6) A marketplace
facilitator shall file a separate return for its own sales made over the
marketplace, apart from the return for sales made through the marketplace on
behalf of marketplace sellers.
7)
An affiliate of a marketplace facilitator shall file its own return for sales
it makes over the marketplace provided it is a retailer maintaining a place of
business in this State pursuant to Section 2 of the Act.
8)
If, for any reason, the Department
is prohibited from enforcing the marketplace facilitator's duty under the Act
to collect and remit taxes pursuant to this Section, the duty to collect and
remit such taxes reverts to the marketplace seller that is a retailer
maintaining a place of business in this State pursuant to Section 2 of the
Act. (Section 2d(l) of the Act)
i) Obligations of Marketplace Sellers
1)
A marketplace seller shall furnish
to the marketplace facilitator information that is necessary for the
marketplace facilitator to correctly collect and remit Use Tax on each retail
sale. The information may include a certification that an item being sold is
taxable, not taxable, exempt from taxation, or taxable at a specified
rate. (Section 2d(f) of the Act)
2) Books and Records. Each marketplace seller
shall maintain books and records for all sales made through a marketplace in
accordance with the requirements of the Act. Each marketplace seller shall
furnish those books and records to the marketplace facilitator upon the
reasonable request of the marketplace facilitator.
3) A marketplace seller that makes sales to
Illinois purchasers in addition to those made through a marketplace must
determine if it is required to separately register and collect and remit Use
Tax on those sales. If the marketplace seller is a "retailer maintaining a
place of business in this State" under Section 2 of the Act, it is required to
separately register and remit Use Tax on those sales to Illinois purchasers. In
determining if it has Wayfair nexus (see 86 Ill. Adm. Code 150.803),
neither the gross receipts from nor the number of separate transactions
for sales of tangible personal property to purchasers in Illinois that a
marketplace seller makes through a marketplace facilitator and for which it has
received a certification from the marketplace facilitator as provided in
Section 2d of the Act shall be included for purposes of determining whether it
meets the Wayfair thresholds. (Section 2d of the
Act)
4) A marketplace seller must
separately register and remit tax on all sales of tangible personal property,
including those made over a marketplace, that result in Retailers' Occupation
Tax. For sales made over the marketplace that result in Retailers' Occupation
Tax, the marketplace seller is considered the retailer and must remit tax on
those sales as provided in the Retailers' Occupation Tax Act, as well as
applicable local occupation taxes. The marketplace facilitator is not
considered the retailer with respect to those sales.
5) If a marketplace seller is required to
remit Retailers' Occupation Tax for sales to Illinois purchasers made through a
marketplace, the marketplace facilitator is authorized to collect all taxes due
from the purchaser on those sales, including local tax reimbursements, and
transmit them to the marketplace seller for remittance to the Department as
Retailers' Occupation Tax. If a marketplace facilitator collects and transmits
tax in this manner, it is not liable for tax on amounts so collected and
remitted.
j) Hold
Harmless Provisions
1) A marketplace seller
shall be held harmless for liability for the collection and remittance of Use
Tax when a marketplace facilitator fails to correctly collect and remit tax
after having been provided with information by a marketplace seller to
correctly collect and remit tax.
2)
If a marketplace facilitator demonstrates to the satisfaction of the Department
that its failure to correctly collect and remit Use Tax on a sale resulted from
its good faith reliance on incorrect or insufficient information provided by a
marketplace seller, it shall be relieved of liability for the tax on that sale.
In this case, a marketplace seller is liable for any resulting Use Tax
due.
k) Nothing in this
Section affects the tax liability of a purchaser. If the tax is not collected
and remitted as required, the purchaser shall remit the Use Tax to the
Department.