18.6 Sales/Use/Gross Receipts Tax/Goods and Services Tax
Note: This policy is intended for the purpose of informing University of Illinois System employees and other System-related individuals about relevant tax issues. This policy does not constitute legal or tax advice. Individuals should consult with their attorneys or tax professionals for advice on personal issues.
Overview
Sales tax is imposed on a seller's (retailer and serviceperson) receipts from sales of certain tangible personal property for use or consumption (not for resale). For purposes of this section, retailers are individuals engaged in the business of selling tangible personal property, servicepersons are individuals engaged in the business of making sales of service, and tangible personal property does not include real estate or investment assets, such as stocks or bonds.
Sales are subject to Illinois sales tax if tangible personal property is located in Illinois when sold and is delivered to the purchaser in Illinois.
Sales tax is comprised of state and local Retailers' Occupation Tax and state and local Service Occupation Tax, which is imposed on sellers' receipts, and state Service Use Tax and state Use Tax, which is imposed on amounts paid by consumers. Sellers may reimburse themselves by collecting the tax from the consumers; however, sellers are responsible for properly collecting, reporting, and remitting the tax to the Illinois Department of Revenue (IDOR).
References on the four previously mentioned taxes can be found in the Illinois Compiled Statutes (ILCS) and the IDOR Regulations at:
- Retailers' Occupation Tax Act - 35 ILCS 120/1 - 120/14 and Title 86 Ill. Adm. Code Part 130;
- Service Occupation Tax Act - 35 ILCS 115/1 - 115/21 and Title 86 Ill. Adm. Code Part 140;
- Service Use Tax Act - 35 ILCS 110/1 - 110/21 and Title 86 Ill. Adm. Code Part 160; and
- Use Tax Act - 35 ILCS 105/1 - 105/22 and Title 86 Ill. Adm. Code Part 150.
Categories and Definitions
Taxability of Sales
Reportable sales are categorized as either taxable or tax-exempt, which the system is required to report to the IDOR.
Taxable - Reportable sales that do not qualify for a specific exemption provided under the ILCS and/or the IDOR Regulations are classified as taxable reportable sales. For example, sales from fundraisers or selling clothing to students, employees, alumni, or other individuals are reportable sales.
Tax-exempt - Reportable sales that are not subject to taxation due to a specific exemption provided under the ILCS and/or the IDOR Regulations are classified as tax-exempt reportable sales. Examples of exemptions include, but are not limited to:
- Resale - A resale exemption occurs when items are purchased by businesses to resell and the retailer charges sales tax to customers, such as when a unit sells to a retailer. The unit should obtain the resale tax number of the customer to substantiate the exemption.
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Interstate commerce - An interstate commerce exemption occurs when (1) the sale is accepted in Illinois, (2) the unit ships or delivers the sold items to a location in a state in which the system is not registered (see Other States for additional information), and (3) the items sold are not returned to any location in Illinois for use. For this exemption to apply, the items do not need to be shipped from Illinois; however, the items must be shipped to a state in which the system is not registered. Therefore, customers located in states where the system is not registered are not charged sales tax. However, customers located in states where the system is registered are charged sales tax.
A sale does not meet the interstate commerce exemption if the purchaser receives physical possession in Illinois, even if the tangible property is ultimately transferred to another state for use. The state in which the purchaser resides is irrelevant. See Other States section below for additional information.
- Exempt organizations - This exemption occurs when the unit sells to an organization that is formed and operated exclusively for religious, educational, or charitable purposes, or any state, local, or federal governmental body. In order to substantiate the tax-exempt status, the system unit must obtain a copy of the organization's sales tax exemption certificate, which includes the exemption identification number ("E" number) issued by the IDOR. (For organizations located in other states, see Sales to Clients in Other States later in this document.)
- Sales to accredited foreign diplomatic and consular officials, who have been issued tax exemption identification cards by the U.S. State Department, are exempt from taxation as indicated on the individual card. Units need to obtain the exemption card number.
- Unless specifically exempted by the IDOR, sales to otherwise exempt organizations, including system units, are taxable when an individual is the ultimate consumer of the property transferred and the same individual reimburses the exempt organization or system unit for the expense incurred. This reimbursement may take the form of a single registration or conference fee that includes provisions for food and housing.
- Sales of service - Sales of service occur when tangible personal property is transferred by means of providing service(s) to a customer, such as when service work is performed on equipment and sales tax is charged on the cost of the parts installed. The entire sale is reported to the IDOR; however, the labor portion charged may be claimed as a deduction.
- Sales to Construction Contractors for Exempt Organizations - Sales to construction contractors for purchases under contract for conversion (constructing, improving, altering, or repairing) or incorporation into real estate owned exclusively by the Board of Trustees of the University of Illinois. See the Contractor's Exempt Purchase Certificate. Contractors should retain a copy of this certificate for their records.
- Lease of Tangible Personal Property - Lease or rent of tangible personal property. However, where the lease of tangible personal property is combined in a contract with sales or services which are subject to tax, the income from the lease is only exempt from tax when it is separately stated.
- Other items specifically exempt from sales tax under the ILCS and/or the IDOR Regulations include, but are not limited to:
- Dining facilities located on the system's premises with sales limited to students, faculty, and staff, student contract meal passes/tickets,
- Receipts from meals served to students of qualifying programs in closed dining facilities restricted to only such students or in which receipts from the meals served to students of qualifying programs,
- Sales of school annuals (that is, yearbooks),
- Auctions of tangible personal property (donated or purchased) that the system is not in the business of selling and where the system is disclosed as the principal,
- Cash refunds for taxable sales reported in a previous month,
- All motor fuel taxes included in motor fuel sales,
- Sales involving the redemption of food stamps, and
- Sales of newspapers and magazines.
Taxability of Purchases in Illinois
The system is exempt by law from sales and use taxes when purchasing goods and/or services for official system business in the state of Illinois. Employees purchasing goods and/or services for system use should not pay sales or use tax. Purchases for business meals, alcohol for system events, and gifts for employees (e.g., holiday and retirement gifts) are also exempt in Illinois. Units that fail to properly use the system’s tax-exempt status may be asked to provide University Payables justification for taxes paid.
The system is not exempt from Electricity Excise Tax (IDOR Regulation 511.150(a) ) or Hotel Operators' Occupation Tax (IDOR Regulation 480 ).
Tax Exemption Certificate
The system's tax exemption certificate and/or tax exemption number are not allowed to be posted on websites available to the general public. The tax exemption certificate and/or tax exemption number may only be used when purchasing goods and/or services for official system business. Personal or other unauthorized use of the tax exemption and/or tax exemption number may constitute a crime and may result in disciplinary or legal action.
The system is a governmental entity and its tax exempt status does not expire, nor is it required to file an application for renewal of the exemption. The Illinois Department of Revenue (IDOR) automatically updates the system's exemption number every five years (35 ILCS 120/1g). New exemption certificates are received approximately two weeks prior to the expiration date noted on the certificate.
If a vendor requests an updated certificate with a more current date, inform them that the system has a governmental exemption. If additional verification is necessary, a vendor can contact the IDOR at 217-782-8881 or through the following online validation:
- Go to: https://mytax.illinois.gov/,
- Scroll to Searches,
- Click on “Verify a Sales Tax Exemption Number (E-number)”,
- Enter the University of Illinois’ sales tax exemption number (E9989-9779), and
- Press Search.
State of Illinois Sales Tax Exemption Certificate
Persons using the State of Illinois Sales Tax Exemption Certificate must be familiar with all related policies.
State of Illinois Sales Tax Exemption Certificate [effective 2025-2030]
Purchases for Resale
When the system makes a purchase of products that are intended for resale to another party, the vendor selling the property is required to have a completed IDOR Certificate of Resale, Form CRT-61. A partially completed form is available for the UIC , UIS, and UIUC. This form is required for proof that no tax is due on any sale that is made tax-free as a sale for resale. Units must, at the seller's request, provide the information that is needed to complete this certificate. The certificates may be signed by a designated unit employee who has knowledge on the property being purchased for resale. This form is not filed with the IDOR.
Occasional Sales
Occasional sales apply to tangible personal property sold by a nonprofit organization, such as the system, if the organization can provide support that such sales are not offered on a continuing basis. Occasional sales are tax-exempt sales that are not reported to the IDOR. Occasional is defined by the IDOR as not more than twice in a calendar year. Also, the IDOR views all departments within an organization as part of such organization exempt under the same "E" number. Therefore, each "E" number (that is, the entire system, not each department) is allowed two fundraisers/activities that are exempt under the occasional sales exemption. This means that all departments must collect and pay sales tax on bake sales, dinners, sales of t-shirts or calendars, etc.
Noncompetitive Sales
Noncompetitive sales apply to sales that (1) are not competitive with business establishments and (2) occur infrequently (that is, not more than twice) within a year. An example of a noncompetitive sale includes the sale of yearbooks, which the IDOR refers to as annuals. Very few instances exist where the noncompetitive sales exemption will occur. Units must obtain, in advance, from the Office of Treasury Operations, Tax Compliance and Analysis, a determination that its sales qualify as noncompetitive status.
Storeroom and Service Sales
Storeroom and service sales include transfers within the system, such as between a stores/service unit and a university unit, and occasional sales to external parties. These sales may be classified as either:
- Taxable sales subject to reporting, including:
- Sales to parties outside the system,
- Sales to faculty, students, and staff, and
- Indirect sales to individuals or groups of individuals through sales to a system unit; or
- Tax-exempt sales not subject to reporting, such as nontaxable internal sales between system units that are not reported to the IDOR.
Transportation and Delivery Costs (Shipping and Handling Charges)
Transportation and delivery charges are part of the gross receipts subject to sales tax when the amounts for tangible personal property and transportation and delivery charges are included in the selling price of the property and are not separately stated on the invoice. Even when separately stated, transportation and delivery charges are subject to sales tax when the seller does not offer the purchaser the option to receive the item in any manner except by the payment of transportation and delivery charges added to the selling price of the item. When the transportation or delivery charges are not part of the selling price of the property sold, are separately contracted for, separately stated on an invoice, and the seller offers the purchaser the option to receive the item without paying the transportation and delivery charges, these charges are not subject to sales tax.
Electronically Delivered Information
Information or data that is electronically transferred or downloaded, such as books, musical recordings, newspapers or magazines, is not considered a transfer of tangible personal property and is not subject to Illinois sales tax. However, downloads of canned computer software (existing prewritten or modified computer programs for general or repeated sales) is considered tangible personal property and subject to sales tax, regardless of how it is transferred or transmitted.
Raffle Tickets/Winnings
The purchase of a raffle ticket is not a sale of personal tangible property and is not subject to sales tax. However, in situations where a raffle winning consists of tangible personal property, there is a possibility that sales tax is required to be assessed on the winning. The facts and circumstances of each situation need to be analyzed to make this determination See 18.11 Raffle Winnings.
Tax Rates
Illinois sales tax is comprised of two fundamental tax rates. The first fundamental rate is 6.25 percent, which is for general merchandise and items that are required to be registered or titled. The second fundamental rate is for qualifying food, drugs, and medical appliances, which is a reduced rate of 1 percent. The IDOR's Overview of Sales and Use Tax contains additional information. For purposes of this section, qualifying food items are those not prepared for immediate consumption, qualifying drug items include prescription medicines and nonprescription items that have a medicinal value, and qualifying medical appliances include items that directly replace a malfunctioning part of the human body.
As determined by the location of the sale (including whether or not within city limits), the actual sales tax rate may be higher than the fundamental rate due to combining one or more of the following additional taxes: local home rule taxes and non-home rule taxes, water commission taxes, mass transit district taxes, park and recreation district taxes, and county public safety taxes. To determine the appropriate sales tax rate of the seller’s location, refer to the IDOR Tax Rate Finder. See Other States and Canada for sales outside Illinois.
Note that the city or county must be specified when searching for rates. For example, "Chicago (Cook County)", "Urbana (Champaign County)", or "Champaign (Champaign County)" will show city rates and "Cook County (Cook County)" or "Champaign County (Champaign County)" will show county rates. It is important to utilize the rate finder on a frequent basis as rates may change throughout the year. Unit cash registers and sales tax software need to be updated as changes occur.
Reporting of Sales
Individual units making sales are responsible for (1) collecting the appropriate tax from the customer, and (2) reporting sales and taxes directly to University Accounting and Financial Reporting (UAFR). Contact UAFR or see 22 Self-Supporting/Revenue Generating Activities - Collect and Report Sales and Use Tax for detailed instructions on how to report sales and taxes.
UAFR is responsible for reporting sales at applicable rates, and for remitting collected sales tax to the appropriate governmental bodies.
Tax Status - Proper collection of sales tax first requires an appropriate determination of the taxable status of each transaction. (See Taxability of Sales.)
Deposit of sales tax - The sales tax collected should be deposited into the appropriate system tax account using the appropriate university form to record cash or credit sales. Contact UAFR regarding deposits of sales tax.
Reportable tax-exempt sales to parties outside the system - Certain sales transactions exempt from taxation must, nonetheless, be reported separately to the IDOR. The University of Illinois System's accounting system does not provide an automatic method of reporting these sales. Contact UAFR for detailed instructions on how to report such sales.
Other States and Canada
Sales to Clients in Other States and Canada
Since Illinois agreed to become a member of the Great Lakes Interstate Sales Compact (GLISC), also commonly referred to as the Great Lakes States Tax Enforcement Pact, which is a mutual tax enforcement agreement including Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin, and the system registered as a retailer in each state, the system is required to collect and report use tax on sales of tangible personal property shipped to these additional states.
Also, if the system is physically present in other states or Canada (even on a temporary basis) and sells items outside of Illinois (for example, selling items at a booth/table at a convention held in Georgia), the system might be required to (1) register as a business, (2) obtain license and/or permit, and (3) collect, remit, and report sales/use/gross receipts tax in the U.S. or goods and services tax (GST) in Canada. Each situation must be analyzed on an individual basis. The system is also currently registered in several other states and Canada. See summary of states and Canada for a list with registration numbers.
Specific procedures for determining the appropriate tax rate, collecting taxes and reporting sales for each state/province are available in 22 Self-Supporting/Revenue Generating Activities. Departments are required to submit the reporting form for the previous month’s sales to UAFR by the 10th of the current month.
Every state and province has its own limitations and exceptions. It is important to check each state/province's rules to determine whether certain property is subject to or exempt from sales and use tax/GST. Contact Office of Treasury Operations, Tax Compliance and Analysis 217-244-8359 or UAFR 217-333-4568 for additional information.
References and rate information are as follows:
Purchases from Other States
The GLISC provides the system an exemption from use tax on purchases for system use from the states covered under the GLISC. Purchases made by the system are not guaranteed to be exempt from sales and use tax in all states. The system has obtained exemption from sales tax on purchases in several other states (see summary of states and exemption numbers). The purchaser must provide the letter or completed certificate of exemption to the vendor at the time of purchase, including uniform/multijurisdiction or streamlined sales tax exemption certificates with the summary. The certificates may be signed by a designated unit employee who has knowledge on the property/services being purchased. All states limit sales tax exemption to purchases for system purposes and require payment by P-card or a system check. Some states may limit the products or services to which the exemption applies (see Comments column below).
Registered Out-of-State Vendors
Some out-of-state vendors are required to register in Illinois as retailers. Purchases from these registered vendors are exempt from sales and use tax under the same regulations that govern Illinois businesses. Purchases from out-of-state vendors, who are not registered Illinois retailers, shipped from other states to Illinois generally are exempt from sales tax since such sales are made in the course of interstate commerce. However, when delivery of the product or service is taken at the vendor's non-Illinois location, the sale generally is subject to the laws and regulations of the vendor's state.
Additional Information
Contact Office of Treasury Operations, Tax Compliance and Analysis 217-244-8359, UAFR 217-333-4568, or see 22 Self-Supporting/Revenue Generating Activities - Collect and Report Sales and Use Tax if you have questions about this Sales and Use Tax policy.
First Published: August 2010 | Last Updated: June 2026 | Last Reviewed: April 2023