Common Registration Examples for Remote Sellers and Retailers

Disclaimer:  Recently enacted Public Act 101-0009 includes changes that will be effective January 1, 2020. IDOR will provide additional information and resources as they become available.  


Mr. Tech, Inc. is headquartered in Texas. Mr. Tech does not have warehoused goods in Illinois or employees in Illinois. Mr. Tech, Inc. makes sales of apps and in-app purchases to Illinois users. Does Mr. Tech need to register for Sales Tax in Illinois?

Mr. Tech, Inc. is required to register to collect and remit Use Tax in Illinois if it met either threshold (200 transactions with Illinois purchasers or $100,000 in sales to Illinois purchasers) in the past 12 months as determined by the quarterly reviews (see 86 Ill. Adm. Code 150.803). Sales of canned computer software, including apps and in-app purchases, are subject to tax (see 86 Ill. Adm. Code 130.1935).

 

Best Goods Catalogue, LLC (a single member LLC) is based in Pennsylvania. Best Goods does not have a physical presence or warehouse in Illinois. Does Best Goods Catalogue have an obligation to register?

If Best Goods Catalogue, LLC made sales of tangible personal property to Illinois purchasers meeting either threshold (200 transactions or $100,000 in sales) in the preceding twelve months, as determined by its quarterly review, then Best Goods must register to collect and remit Use Tax in Illinois (see 86 Ill. Adm. Code 150.803).

 

Big Sales, Inc. is a California-based online retail company. Big Sales has warehouses in 4 states, including Illinois. Big Sales make sales to Illinois purchasers. Does Big Sales need to register?

Registration with IDOR is required even if Big Sales, Inc. does not meet either threshold because the warehouse in Illinois creates physical presence nexus (see 86 Ill. Adm. Code 150.201). Big Sales, Inc. must collect and remit Use Tax on sales shipped to Illinois purchasers from inventory in other states. The sales shipped to an Illinois purchaser from the Illinois warehouse are subject to Retailers' Occupation Tax imposed at the location of the warehouse (see 86 Ill. Adm. Code 130.605). Both taxes are reported on Form ST-1, Sales and Use Tax and E911 Surcharge Return.

 

XYZ Supplies is a retailer headquartered in Canada. However, XYZ Supplies does have some employees who work in Illinois. XYZ Supplies also make some sales to Illinois purchasers. Is XYZ Supplies required to register to collect Use Tax?

XYZ Supplies establishes nexus and is a remote seller maintaining a place of business in Illinois due to having employees located in Illinois (see 86 Ill. Adm. Code 150.201). Although XYZ Supplies does not make retail sales from a location in Illinois, it must register to collect and remit Use Tax on sales to Illinois purchasers because it is a retailer maintaining a place of business in Illinois (See 86 Ill. Adm. Code 320.115 for sourcing rules).

 

ABC, Inc. is a Virginia corporation. ABC, Inc. made one sale of $154,000 to an Illinois purchaser. After ABC, Inc. registers and pays the Use Tax, can the account be closed? ABC, Inc. does not have any pending orders for Illinois purchasers.

ABC, Inc. must remain registered to collect Illinois Use Tax for one year. For reporting periods with no sales into Illinois, ABC, Inc. must file a Form ST-1, Sales and Use Tax and E911 Surcharge Return, showing no sales. At the end of the one-year period, ABC, Inc. must review its sales to determine if it met either of the thresholds ($100,000 in sales to Illinois purchasers or 200 transactions with Illinois purchasers) for the preceding 12 months. If ABC, Inc. met either threshold, it must continue to file returns and collect and remit Use Tax on sales to Illinois purchasers for the next 12 months. If ABC, Inc. did not meet either threshold, it may notify IDOR to close its account. However, if ABC, Inc. closes its account, it must continue to review its sales every quarter (the end of March, June, September and December) for the preceding 12 months to determine if either threshold is met requiring ABC, Inc. to reopen its account (See 86 Ill. Adm. Code 150.803). IDOR strongly recommends that remote sellers continue collecting Use Tax as a courtesy to their Illinois purchasers, as those purchasers will still incur a Use Tax liability which they must otherwise self-assess and remit directly to IDOR.

 

Value Products is registered to collect and remit Use Tax in Illinois. Value Products does not have any retail locations or stock of goods located in Illinois. How does it determine what rate to charge on sales to Illinois purchasers? Is it based on the purchaser's shipping address?

The purchaser's shipping address does not impact the rate of Illinois Use Tax. Use Tax in Illinois is collected at only two rates: 6.25% is the rate for general merchandise, and 1% is the rate applied to qualified food, drugs, and medical appliances (see 86 Ill. Adm. Code 130.310 and 130.311). Out-of-state remote sellers registered to collect Use Tax will use only these rates. No local taxes are incurred or authorized to be collected by IDOR.

 

Sam Jones is an Illinois resident who makes and sells fishing lures from his home through his own website. Does he need to register for Sales or Use Tax with Illinois?

Sam Jones will need to register for Retailers' Occupation Tax. Sales made to Illinois purchasers require him to remit sales tax using the tax rate of the location of his home. Sales made to out-of-state purchasers are considered interstate commerce. These sales will be included in Sam's total receipts but will be deducted on Schedule A of Form ST-1, Sales and Use Tax and E911 Surcharge Return.