Public Acts 101-31
amended the Retailers' Occupation Tax and enacted the Leveling the Playing Field for Illinois Retail Act to implement a series of structural changes to the Illinois sales tax laws to require "remote retailers" to collect and remit State and local retailers' occupation taxes. These examples are effective January 1, 2021
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, Carabibi is not considered a marketplace facilitator because it does not collect payment from the customer and transmit that payment to the marketplace seller.
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 list or advertise for sale by the marketplace seller in a marketplace, tangible personal property that is subject to tax under the Retailers' Occupation Tax Act.
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: Visualeyes This operates a specialized online marketplace that sells various brands of contact lenses to purchasers. Visualeyes This 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 This is not a marketplace facilitator. It is simply an online retailer making its own sales of contact lenses. Its tax liability will depend on its activities.
EXAMPLE 5: Mandameal.com is an online and mobile food-ordering and delivery service that enters into over 200 transactions with Illinois purchasers. It contracts with a variety of partner restaurants by advertising meals available for purchase from partner restaurants; it also offers delivery service for the food orders. Customers place food orders using the Mandameal.com app or through its online website. Mandameal.com accepts payments from customers, completes the orders with the restaurants, and transmits payment on a regular basis to the restaurants. Mandameal.com engages in activities that make it a marketplace facilitator. Mandameal.com is required to register with IDOR and remit Retailers' Occupation Tax, including applicable local taxes, on sales made on its marketplace on behalf of partner restaurants. State and local retailers' occupation taxes are incurred at the rate in effect at the delivery location of the purchaser. For example, if the food order is delivered to a customer address, Mandameal.com incurs State and local retailers' occupation taxes in effect at the location where the order is delivered. If the order is picked up at the restaurant, however, Mandameal.com incurs State and local retailers' occupation taxes in effect at the restaurant location.
EXAMPLE 6: CanineCorner.com is a marketplace that sells dog gear. Its gross receipts from sales to Illinois purchasers are over $100,000. Ponchos for Pooches.com decides to sell its rain gear over this marketplace. Some of the inventory Ponchos for Pooches.com sells over the marketplace is fulfilled from its manufacturing plant in Portland, Oregon, while other sales are fulfilled from its warehouse in Kankakee, Illinois. CanineCorner.com incurs Retailers' Occupation Tax, including all applicable local retailers' occupation taxes, for all sales of rain gear made over the marketplace on behalf of Ponchos for Pooches.com. Tax on all sales, both those fulfilled from Portland, Oregon and from the Kankakee, Illinois warehouse, is incurred at the rate in effect at the Illinois location to which the tangible personal property is shipped or delivered or at which possession is taken by the purchaser.
EXAMPLE 7: Antiquities, Inc. is an auction house located in Edwardsville, Illinois. All of its auctions and all of its selling activities occur in Edwardsville, Illinois. It enters into agreements with individuals wanting to sell items at a weekly, in-person auction. A week before the auction, Antiquities, Inc. advertises the items that will be sold in an online posting. Once an item is sold, Antiquities, Inc. collects payment from the purchaser and pays the original owner of the item sold, minus an agreed-upon commission. Antiquities, Inc. is a marketplace facilitator operating a marketplace. Provided that it meets either of the marketplace facilitator tax remittance thresholds, it is required to remit State and local retailers' occupation taxes on all sales made through the marketplace. If purchasers take possession of the items sold in the auction house in Edwardsville, State and local retailers' occupation taxes are incurred at the rate in effect at the location of the auction house in Edwardsville. If the items sold are shipped to a purchaser in Chicago, State and local retailers' occupation taxes are imposed at the rate in effect at the auction house in Edwardsville, since all its selling activities occur at this location. If the items sold are shipped to purchasers in California by Antiquities, Inc. and all the other requirements of 86 Ill. Adm. Code 130.605 are met, no State and location retailers' occupation taxes are incurred, because this is an exempt sale into interstate commerce.
EXAMPLE 8: Seconds for Less is an upscale resale shop in Evanston, Illinois. It buys and sells gently used clothing for children and adults. After inspecting the clothing offered by an individual for sale, it pays the individual, either in cash or with store credit, for the clothing it wishes to purchase. The clothing is then cleaned, pressed, and displayed for sale. In this example, Seconds for Less is not operating a marketplace and is not a marketplace facilitator because it owns the clothing it offers for sale.
NOTE: All facts set forth in EXAMPLE 1 and all subsequent examples apply to each of the following examples.
EXAMPLE 1: Ponchos for Pooches.com is a retailer of rain gear for dogs. Its sales are made exclusively from its manufacturing facility in Portland, Oregon. It has no physical presence in Illinois. Its annual gross receipts from sales to Illinois purchasers exceed $100,000. Ponchos for Pooches.com is a remote retailer and is required to register with the Illinois Department of Revenue (IDOR) and remit State and local retailers' occupation taxes in effect at the address to which its products are shipped or delivered or at which possession is taken by the purchaser ("destination sourcing").
EXAMPLE 2: Rain gear sold to Illinois purchasers by Ponchos for Pooches.com has skyrocketed. As a result, the company has begun sending sales representatives to Illinois to market its products through local pet stores. Because of the presence of its sales reps, Ponchos for Pooches.com has a physical presence in Illinois and is no longer considered a remote retailer. At this point, its tax liability changes because Ponchos for Pooches.com has a physical presence in Illinois. It is now obligated to collect and remit Use Tax regardless of meeting the Wayfair nexus thresholds. It no longer incurs State and local retailers' occupation taxes on its sales. It instead incurs an obligation to collect and remit only the Use Tax (6.25%) on its sales.
EXAMPLE 3: Ponchos for Pooches.com has become so popular with Illinois purchasers that the company decides to open a manufacturing facility in Illinois. Sales to Illinois purchasers are sometimes fulfilled from this facility. For all sales to Illinois purchasers that are fulfilled from its Illinois manufacturing facility, Ponchos for Pooches.com incurs State and local retailers' occupation taxes in effect at the location of the manufacturing facility ("origin sourcing"). In addition, Ponchos for Pooches.com incurs only a Use Tax collection obligation (6.25%) on sales made from its Oregon manufacturing facility. As illustrated in Example 2, Ponchos for Pooches.com is not considered a remote retailer because it has a physical presence in Illinois (its manufacturing facility and its sales representatives in Illinois).
EXAMPLE 4: Ponchos for Pooches.com decides to sell its products over a marketplace. The marketplace meets the tax remittance requirements for marketplace facilitators and so is required to remit State and local retailers' occupation taxes to IDOR on all sales made to Illinois purchasers by its marketplace sellers. For these sales, Ponchos for Pooches.com is not responsible for reporting and remitting tax to the State of IL; the marketplace facilitator is liable for remitting Illinois Retailers' Occupation Tax, including local taxes in effect at the address to which its products are shipped or delivered or at which possession is taken by the purchaser ("destination sourcing"). However, Ponchos for Pooches.com is responsible for tax on sales not made through the marketplace as outlined in Examples 1, 2, and 3.
For more information, return to the Resource Page for the "Leveling the Playing Field for Illinois Retailers Act"