Multistate Tax Commission/Association of Fund-Raising Distributors & Suppliers   Illinois

Agency: Illinois Department of Revenue

Contact Person/Department: Keith Staats, General Counsel

Tel. No.: (217) 782-7296

Fax No.: (217) 524-0527

E-mail: kstaats@revenue.state.il.us

Web: www.revenue.state.il.us

  1. If your State exempts fundraising sales by certain groups from sales or use taxes, please indicate which of the following are exempt in your State.

    Organizations that make application to the Department and are determined to be exclusively religious, educational, or charitable, receive an exemption identification "E" number. See the enclosed copy of 86 Ill. Adm. Code 130.2007.  Nonprofit organizations do not automatically qualify for exemption from sales tax for purchases made for fund raising projects. An "E" number evidences that this State recognizes that the organization qualifies as exempt from incurring Use Tax when purchasing tangible personal property in furtherance of its organizational purpose. Whether or not an organization or entity qualifies for exemption from federal income tax under Section 501 of the Internal Revenue Code is not determinative as to whether it is exempt from Illinois Sales and Use Taxes. In addition, sales tax exempt status is generally available to certain not-for-profit music or dramatic arts organizations (see 86.Ill.Adm.Code130.120(aa), enclosed), and youth sports leagues that qualify as exclusively chartiable. If an organization does not have an "E" number, then its purchases are subject to tax. Please be aware that only sales to the organization holding the "E" number are exempt, not sales to individual members of the organization.

    Suppliers must retain a Certificate of Resale or be provided with an "E" number for sales to organizations to be tax exempt.

    Organizations having "E" numbers are also allowed to engage in a very limited amount of retail selling without incurring Retailers' Occupation Tax liability. These limited amounts of selling are described in part (a)(2)-(4) of the enclosed copy of 86 Ill.Adm. Code 130.2005.

    An exempt organization may engage in sales to members, noncompetitive sales, and "occasional dinners and similar activities" (this term allows exempt organizations two fundraisers per calendar year) without incurring Retailers' Occupation Tax liability. See Section 130.2005, subsections (a)(2)-(4),  however, if exempt orgnizations engage in ongoing selling activities (such as Little League concession stands or sales of items in a thrift shop run by a church), they must register with the Department as retailers, provide their suppliers with Certificates of Resale for the items they sell, and collect and remit to the Department the tax due.

    The taxation of sales by teacher-sponsored student organizations is described in the enclosed copy of 86 Ill. Adm. Code 130.2006. These organizations provide their suppliers with Certificates of Resale when purchasing tangible personal property for resale. The group itself, the school, the school district, or the district treasurer must apply to the Department for a reseller's number in the name of the school, the school district, or the student activity fund. Students may then engage in an unlimited amount of selling without incurring Retailers' Occupation Tax liability.

    1a Are local sales and use taxes in your State applied to these groups in the same manner as State sales and use taxes are applied to these groups?

    An exemption number issued by the Department serves to exempt retailers from local taxes administered by the Department on sales to these groups. However, as to the response to Question 2a, if these groups act as retailers and make taxable sales, some of the products they sell are often not taxable at the local level. For example, see the Home Rule Municipal Retailers' Occupation Tax Act, 65 ILCS 5/8-11-1.

    The Home Rule Municipal Retailers' Occupation Tax, like many of the other local taxes, may not be imposed on the sales of food for human consumption that is to be consumed off the premises where it is sold (other than alcoholic beverages, soft drinks and food that has been prepared for immediate consumption) and prescription and nonprescription medicines, drugs, medical appliances and insulin, urine testing materials, syringes and needles used by diabetics.

    1b Please set forth any comments including a list of groups not listed above whose fundraising activities are exempt from sales and use taxation in your State.

    See the answer to Question #1 above.

     

  2. If your State exempts fundraising sales of certain products from sales and use tax, please list below.

    No special rules are applicable to the types of products sold as part of fundraising. General tax rules apply. For your information, we have attached a copy of 86 Ill. Adm. Code 130.310, which is the regulation for food, Drugs, Medicines and Medical Appliances. As you will note from the regulation, qualifying items are taxed at the rate of 1% while non-qualifying items are taxed at the State rate of 6.25%. This low rate applies on all qualifying items of tangible personal property, not just those sold for fundraising purposes. Food that is to be consumed off the premises where it is sold (other than alcoholic beverages, soft drinks, and food that has been prepared for immediate consumption) is taxed at the rate of 1% plus applicable local taxes. Products that do not meet the appropriate definition of food or are food prepared by the vendor for immediate consumption, are taxable at the higher State sales tax rate of 6.25% plus applicable local taxes.

    Further, we have enclosed a copy of 86 Ill. Adm. Code 130.2105 describing the taxation of newspapers, magazines, books, sheet music, and phonograph records. Sellers of books, sheet music, and phonograph records incur Retailers' Occupation Tax liability when they sell those items to purchasers for use or consumption and not for resale. Sales of newspapers and magazines are not subject to tax.

    2a Are local sales and use taxes in your State applied to these products in the same manner as State sales and use taxes are applied to these products?

    Local taxes administered by the Department generally utilize the same tax base (i.e., exemptions) as the State Retailers' Occupation Tax. However, there are some differences. For instance, the Home Rule Municipal Retailers' Occupation Tax Act is imposed upon all items of tangible personal property except those items of tangible personal property titled or registered with an agency of Illinois State government and sales of food, prescription and nonprescription medicines, drugs, medical appliances and insulin, urine testing materials, syringes and needles used by diabetics. Other types of local taxes (for instance, those imposed by transportation authorities), however, apply to most of the items excepted above.

    2b Please set forth any comments including a list of products not listed above that are exempt from sales and use taxation for fundraising purposes in your State.

    See answer to Q2.

     

  3. If some or all fundraising groups or products qualify for exemption from sales and use tax in your State, please indicate any exceptions to or limitations on such exemptions.

    Organizations that have "E" numbers are also allowed to engage in a very limited amount of retail selling without I incurring Retailers' Occupation Tax liability. These limited amounts of selling are described in the 86 Ill. Adm. Code 130.2005(a)(2)-(a)(4). An exempt organization may engage in sales to members, noncompetitive sales, and certain occasional dinners and similar activities (two fundraisers per calendar year) without incurring Retailers' Occupation Tax liability.

    In regard to sales to members by exempt organizations, please note that the population to which sales are made is limited to persons specifically associated with that exempt organization and must be for the primary purpose of the selling organization. If such sales are made to the public at large, the selling activity is subject to the Retailers' Occupation Tax. See Section 130.2005(a)(2)-(4). In determining whether the sales are for the primary purpose of the selling organization, the nature of the tangible personal property sold and how that tangible personal property is used must be examined. If an exempt organization sells items of tangible personal property that would place them in competition with other retailers, those sales generally would not be primarily for the purpose of the selling organization.

    Further, if exempt organizations engage in ongoing selling activities (such as Little League concession stands or sales of items in a thrift shop run by a church, etc.) those organizations must register with the Department as retailers, file returns and remit tax.

     

  4. If some or all fundraising groups qualify for exemption from sales and use tax in your State, please set forth the procedure through which a group may establish its qualification for the exemption. Attach relevant statutes, regulations, procedures, etc.

    An entity seeking exemption from sales tax should furnish the Department with the information set forth at 86 Ill. Adm. Code 130.2007(b)(1-8), and send such information to Mark Varner, Replacement Tax Certification Division, 3-520, Illinois Department of Revenue, 101 W. Jefferson, Springfield, IL 62794. See also the answer to Question #1 above.

     

  5. If some or all fundraising products qualify for exemption from sales and use tax in your State, please set forth the procedure for establishing a product’s qualification for the exemption. Attach relevant statutes, regulations, procedures, etc.

     

  6. In instances where a fundraising product or group is not exempt from sales or use tax, please indicate who bears the responsibility for collecting and remitting the tax.

    If the exempt organization makes sales of tangible personal property that are subject to tax, the exempt organization would be required to register with the Illinois Department of Revenue as a retailer and would be responsible for Retailers' Occupation Tax. Further, such retailers would be required to collect the corresponding Use Tax from purchasers.

    If organizations possessing exemption numbers engage in ongoing selling activities (such as Little League concession stands or sales of items in a thrift shop run by a church), they must also register with the Department as retailers, file returns and remit tax. Such organizations must provide their suppliers with Certificates of Resale when making purchases for resale. Illinois law requires a Certificate of Resale to contain the information set out in 86 Ill. Adm. Code 130.1405(b).

    If organizations do not possess exemption identification numbers and make purchases of tangible personal property for use or consumption and not for resale, such purchases are subject to Use Tax and the retailers from which such purchases are made are subject to Retailers' Occupation Tax.

     

  7. In instances where a fundraising product or group is not exempt from sales or use tax, what is the basis for calculating the sales/use tax?

    The State rate of tax is 6.25% plus local taxes. See the above discussion under Question 2 regarding the rates applicable to food.

     

  8. Provide any additional information regarding the sales and use tax treatment of fundraising transactions and/or groups in your State. Also set forth any statements, disclosures, disclaimers, etc., to be provided as part of the clearinghouse regarding your state’s practices and procedures. Attach additional sheets if necessary.