At a Glance...
On September 11, 2018, the Illinois Department of Revenue proposed emergency regulations to implement Illinois's remote seller law. The Illinois remote seller law requires vendors with more than $100,000 in sales or 200 or more separate transactions into Illinois to register and collect sales tax beginning October 1, 2018. For remote sellers determining whether to register and begin collecting sales tax in Illinois, these emergency regulations more clearly articulate how to determine whether the two statutory thresholds are satisfied.
Following the U.S. Supreme Court's Wayfair decision and Illinois Public Act 100-0587 (eff. June 4, 2018) (35 ILCS 105/2), expanding the statutory definition of a "retailer maintaining a place of business in [Illinois]" for purposes of state use tax, the Illinois Department of Revenue filed on September 11, 2018 with the Illinois Secretary of State emergency regulations. The emergency regulations are effective upon filing and require remote sellers who have for a preceding 12-month period either (1) generated cumulative gross receipts from Illinois sales of $100,000 or more, or (2) completed 200 or more separate Illinois transactions, to collect and remit Illinois use tax for sales made on or after October 1, 2018.1
For the October 1, 2018 use tax collection start date, remote retailers are to review their Illinois gross receipts and transactions for the period September 1, 2017 through August 31, 2018. For this 12-month period, if a remote retailer satisfies either the $100,000 or 200 transaction thresholds, then the retailer is required to register, collect, remit and file Illinois use tax returns with the state for one-year.2 At the end of that year, the remote seller should again review its Illinois sales to determine if it meets either Illinois nexus threshold. If the remote retailer does not satisfy either nexus threshold (and does not otherwise have nexus with Illinois), then the remote seller may de-register with the Department and stop collecting use tax, but is required to determine thereafter on a quarterly basis (i.e., the last day of March, June, September and December) based on the immediately preceding 12-month period, whether it has nexus and is therefore obligated to again start collecting Illinois use tax.
The Department has published on its website sales tax guidance for remote sellers, including informational bulletin FY 2019-05 (Aug. 2018), responses to Frequently Asked Questions and a very helpful remote seller taxability matrix. See tax.illinois.gov
The emergency regulations remain in effect for 150 days (i.e., until February 8, 2019), unless replaced earlier with permanent regulations.
Reed Smith observations
Due to the complexity of the remote seller provision as enacted, the Department's emergency regulations and informational publications provide needed clarification and illustrative examples regarding how remote retailers should evaluate and determine their use tax collection and filing responsibilities for Illinois. We do not anticipate significant differences between the emergency regulations and the Department's permanent regulations. Accordingly, to ensure compliance with the October 1, 2018 deadline, remote retailers should make their nexus threshold determinations as soon as possible and, if nexus is met, register with the Department to collect use tax prior to October 1, 2018. Registration can be completed on-line.
1. A "remote seller" is an out-of-state retailer that sells tangible personal property to Illinois purchasers from an out-of-state location, and does not have physical presence in Illinois.
2. Sales for resales, sales of titled property (e.g., motor vehicles, aircraft, watercraft and trailers) made from locations outside of Illinois, and occasional sales are excluded from these nexus threshold determinations.
This article is presented for informational purposes only and is not intended to constitute legal advice.