by Krista A. Cohane
The Illinois Department of Revenue has issued an informational bulletin to remote retailers and marketplace facilitators making sales to Illinois purchasers to provide updated threshold guidance as set forth by the Leveling the Playing Field for Illinois Retail Act. This bulletin supersedes Illinois Dept. of Rev. Info. Bulletin No. FY 2021-02, 09/01/2020, Illinois Dept. of Rev. Info. Bulletin No. FY 2021-02-A, 12/01/2020, and Illinois Dept. of Rev. Info. Bulletin No. FY 2022-04, 10/01/2021. (Illinois Dept. of Rev. Info. Bulletin No. FY 2024-08, 10/01/2023.)
Leveling the playing field.
The Leveling the Playing Field for Illinois Retail Act implemented structural changes to Illinois sales tax laws requiring remote retailers who meet a tax remittance threshold to remit state and local retailers’ occupation taxes (ROT) beginning January 1, 2021. The changes “level the playing field” between remote retailers and Illinois based retailers. Additionally, the legislative changes required marketplace facilitators to remit state and local ROT on sales made over the marketplace and on sales made on behalf of marketplace sellers.
A “remote retailer” is an out-of-state retailer that sells tangible personal property to Illinois purchasers and does not have a physical presence in Illinois. A retailer that fulfills any orders from its inventory in Illinois is not a remote retailer.
Threshold computation for remote retailers.
Beginning January 1, 2021, a remote retailer is considered a retailer engaged in the occupation of selling tangible personal property at retail in Illinois and is subject to state and local ROT if either of the following tax remittance thresholds is met: $100,000 or more in cumulative gross receipts from sales of tangible personal property to purchasers in Illinois; or 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois.
Remote retailers who meet or exceed either of these thresholds are required to register with the Department, file returns, and remit applicable state and local ROT for all sales made to Illinois purchasers.
Excluded sales for remote retailers.
Remote retailers must review their previous 12 months’ sales of tangible personal property to purchasers in Illinois when determining if they meet a tax remittance threshold. When making their determination, remote retailers must exclude the following types of sales: sales for resale; sales of tangible personal property to purchasers in Illinois that a remote retailer makes through a marketplace so long as the remote retailer has received certification that the marketplace facilitator assumes the rights and duties as the retailer with respect to those sales and occasional sales.
Marketplace and marketplace facilitator.
A “marketplace” is a physical or electronic place, forum, platform, application, or other method by which a marketplace seller sells or offers to sell items. A “marketplace facilitator” is a person who, pursuant to an agreement with an unrelated third-party marketplace seller, directly or indirectly through one or more affiliates, facilitates a retail sale by an unrelated third-party marketplace seller by: listing or advertising for sale by the marketplace seller in a marketplace, tangible personal property that is subject to tax under the ROT Act; and 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. Integration of a payment gateway on a marketplace facilitator’s website platform meets certain requirements. A person who provides advertising services, including listing products for sale, is not considered a marketplace facilitator, so long as the advertising service platform or forum does not engage, directly or indirectly through one or more affiliated persons, in specified activities.
A “marketplace seller” is a person that makes sales through a marketplace operated by an unrelated third-party marketplace facilitator. A person that is an affiliate of a marketplace facilitator is not a marketplace seller. A marketplace seller is not liable for state and local ROT for sales of tangible personal property sold to Illinois purchasers through a marketplace, provided that, prior to its sales, it has obtained necessary certification from the marketplace facilitator.
Threshold computation for marketplace facilitator.
A marketplace facilitator is considered a retailer engaged in the occupation of selling tangible personal property at retail in Illinois and is subject to Illinois ROT if either of the following tax remittance thresholds is met: $100,000 or more in 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; or 200 or more separate transactions are entered into by the marketplace facilitator and marketplace sellers cumulatively through the marketplace for sales of tangible personal property to purchasers in Illinois.
Marketplace facilitators that meet or exceed either of these tax remittance thresholds are liable for all applicable state and local ROT on retail sales to Illinois purchasers. The marketplace facilitators must certify to their sellers that they are assuming the rights and duties as the retailer and collecting tax. Marketplace facilitators are required to register with the Department, file returns, and remit tax for all sales made over the marketplace to Illinois purchasers, including their own sales and sales made on behalf of marketplace sellers.
Excluded sales for marketplace facilitators.
To determine if a tax remittance threshold has been met, a marketplace facilitator must review the previous 12 months’ sales of tangible personal property made through the marketplace to purchasers in Illinois. The review includes sales by both the marketplace facilitator and marketplace sellers. When making the determination, marketplace facilitators must exclude sales for resale. Occasional sales are not excluded when determining tax remittance because no sales made over a marketplace are considered occasional sales. All other sales, even if they are exempt from tax, must be included in the calculation of gross receipts along with the number of transactions for purposes of determining whether tax remittance thresholds are met.
The Department’s bulletin also provides information on the following: frequency of reviewing sales; determining what ROT rate to use; certified service providers (CSP); certified automated systems (CAS); and registering with the Department.
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