Retailers with physical presence in Illinois have long been required to register and collect Illinois sales and use tax. However, beginning October 1, 2018, use tax registration and collection will also be required for retailers who (1) make sales from locations outside Illinois to customers in Illinois; (2) do not have physical presence in Illinois; and (3) meet either of the following "Threshold Requirements":
- the retailer’s cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more; or
- the retailer enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois.
In Quill v. North Dakota, the U.S. Supreme Court ruled that the Commerce Clause of the U.S. Constitution prohibited states from imposing sales and use tax registration and withholding requirements on sellers who had no physical presence in the state. However, on June 21, 2018, the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc. overturned the physical presence test. In response to Wayfair, the Illinois legislature enacted Public Act 100-587, imposing use tax registration and withholding obligations on remote sellers who lack physical presence in Illinois.
The Illinois Department of Revenue (DOR) has issued guidance to help remote sellers determine their obligations and comply with the new requirements. Bulletin 2019-5 provides information on the new requirements and addresses several issues regarding the new rules. Emergency regulation 86 Ill. Admin. Code 150.803 further addresses issues relating to the new rules. It makes clear, for example, that in determining whether the Threshold Requirements are met, the following transactions are excluded: (i) sales for resale; (ii) sales of tangible personal property that is required to be registered with Illinois state agency, including motor vehicles, watercraft, aircraft, and trailers, that are made from locations outside Illinois to Illinois purchasers; (iii) occasional sales; and (iv) sales made by a remote retailer that are subject to Retailers’ Occupation Tax (e.g., sales at an Illinois trade show). Finally, the DOR has issued an Illinois Remote Seller Use Tax Matrix. The matrix lists items typically sold and provides the following information for each: (1) whether the item is taxable or exempt; (2) the applicable tax rate; (3) the definition of the items; and (4) citations to laws and regulations supporting the treatment.
In light of these new rules, remote sellers who make sales from locations outside Illinois and have refrained from registering in Illinois because they have no physical presence in the state will need to reassess their obligations to register and collect use tax.