Section 130.101  Character and Rate of Tax

 

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, which, on and after January 1, 2025, includes leasing tangible personal property to lessees 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].  [35 ILCS 120/2-27]

 

4)         On and after January 1, 2025, a retailer maintaining a place of business in this State that makes retail sales of tangible personal property to Illinois customers from a location or locations outside of Illinois is engaged in the occupation of selling at retail in Illinois. [35 ILCS 120/2(b-2)] For the definition of "retailer maintaining a place of business in this State", see 86 Ill. Adm. Code 150.201. Such retailer is liable for all applicable State and local retailers' occupation taxes administered by the Illinois Department of Revenue on all retail sales to Illinois customers from locations outside of Illinois.  To determine whether a retail sale to an Illinois customer is made from a location outside of Illinois, see 86 Ill. Adm. Code 270.115.

 

A)        A retailer making sales into Illinois shall determine on a quarterly basis, ending on the last day of March, June, September, and December, whether it has met the definition of "retailer maintaining a place of business in this State" as set out in 86 Ill. Adm. Code 150.201 for the preceding 12-month period.  If the retailer meets any of the criteria in the definition of "retailer" maintaining a place of business in this State" for a 12-month period, it is a retailer engaged in the occupation of selling at retail in Illinois and is required to remit the Retailers' Occupation Tax and all retailers' occupation taxes imposed by local taxing jurisdictions in Illinois, provided the local taxes are administered by the Department, and to file all applicable returns for one year.  A retailer maintaining a place of business in this State shall begin collecting taxes for sales beginning on the first day of the quarter immediately following the 12-month lookback period.  Taxes so collected shall be remitted to the Department no later than the 20^th day of the calendar month following the month in which they were collected or as otherwise provided in accordance with Section 3 of the ROTA.

 

B)        At the end of that one-year period, during which the retailer maintaining a place of business in this State was remitting taxes, the retailer shall determine whether it met the definition of "retailer maintaining a place of business in this State" as set out in 86 Ill. Adm. Code 150.201 for the preceding 12-month period.  If the retailer met any of the criteria in the definition of "retailer maintaining a place of business in this State" for the preceding 12-month period, it is a retailer engaged in the occupation of selling at retail in Illinois and is required to remit all applicable State and local retailers' occupation taxes and file returns for the subsequent year.

 

C)        If, at the end of the one-year collection period described in subsection (a)(4)(B), the retailer determines that its activities in Illinois did not meet any of the criteria listed in the definition of "retailer maintaining a place of business in this State" as set out in 86 Ill. Adm. Code 150.201 during that year, it must discontinue remitting State and local retailers' occupation taxes.  If a retailer is no longer required to remit State and local retailers' occupation taxes, it must notify the Department.  However, it may alternatively notify the Department that it wishes to change its registration status to voluntarily collect and remit Use Tax as a courtesy to its Illinois purchasers, since those purchasers will still incur a Use Tax liability that they must otherwise self-assess and remit directly to the Department.  (See 86 Ill. Adm. Code 150.805 for additional information.)  All notifications made under this subsection (a)(4)(C) shall be made electronically as required by the Department.

 

D)        If a retailer is no longer required to remit State and local retailers' occupation taxes, it must redetermine, on a rolling quarterly basis, whether it is obligated to once more begin remitting State and local retailers' occupation taxes.  For each quarter ending on the last day of March, June, September, and December, any retailer making sales into Illinois must examine its activities in Illinois for the immediately preceding 12-month period to determine whether it met the definition of "retailer maintaining a place of business in this State" as set out in 86 Ill. Adm. Code 150.201.  If it met any of the criteria in the definition of "retailer maintaining a place of business in this State" for the preceding 12-month period, it must examine its activities in Illinois, to determine whether it met the definition of "retailer maintaining a place of business in this State" as set out in 86 Ill. Adm. Code 150.201, to determine if it must continue to remit tax.

 

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. For the purposes of this subsection (b), an item that is subject to a lease with periodic payments is considered to be constructively delivered, for purposes of determining the effective rate, on the first day of each billing period.  For example, if the monthly billing period runs from June 20, 2025 through July 19, 2025, and the tax rate change takes effect on July 1, 2025, that tax rate change takes effect for this lease for lease receipts received on or after July 1, 2025 for the billing period that runs from July 20, 2025 through August 19, 2025 (i.e., the first date of constructive delivery that occurs on or after July 1, 2025).

 

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.  For the purposes of this subsection (d), an item that is subject to a lease with periodic payments is considered to be constructively delivered on the first day of each billing period.  See subsection (c) for more details.

 

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.

 

(Source:  Amended at 50 Ill. Reg. 1119, effective January 8, 2026)