Illinois Appellate Court Holds Acceptance Of Sales Orders In Jurisdiction Is Necessary To Impose Local Sales Tax

The Illinois Appellate Court has affirmed a trial court's holding that a taxpayer's sales were sitused to and taxable at its dedicated sales office located in Mark, Illinois for local Retailers' Occupation Tax (ROT) purposes.1 The court affirmed the trial court's determination that although the taxpayer was headquartered in a city (Forest View), county (Cook) and metropolitan region that imposed local sales taxes, the taxpayer's sales were properly sitused to a sales office located in a village (Mark) and a county (Putnam) that did not impose local sales tax. Proper sourcing for determining state and local ROT liability is based on a determination of where the acceptance of orders occurs.

Background

The taxpayer, a family-owned business headquartered in Illinois, was a supplier of fuel oil. While the taxpayer was headquartered in Cook County, Illinois, it maintained a separate designated sales office in Putnam County, Illinois where all sales transactions were completed. As part of its business, the taxpayer fulfilled daily purchase orders2 and long-term purchase orders.3 Daily purchase order customers were directed to place their orders with the taxpayer's sales representatives at its designated sales office in Putnam County. Similarly, for long-term purchase orders, the Putnam County sales office was used to process the agreements. Therefore all orders for the taxpayer's goods were received and accepted at the sales office in Putman County.

The Illinois Department of Revenue claimed that the taxpayer was subject to the local ROTs imposed by Forest View, Cook County and the Regional Transportation Authority (RTA). The taxpayer argued that it should only be subject to Illinois state sales tax because all of its sales occurred in Putnam County, which had no applicable local sales tax. The trial court ruled in favor of the taxpayer. According to the trial court, the taxpayer showed by a preponderance of the evidence that: (i) the taxpayer's daily purchase orders were completed and accepted at its dedicated sales office in Putnam County; and (ii) the long-term purchase orders became binding upon execution and return to the Putnam County sales office. The Department appealed the trial court's decision.4

Local Retailers' Occupation Taxes

Illinois regulations allow the following local jurisdictions to levy a local ROT: (i) home rule counties;5 (ii) home rule municipalities;6 and (iii) the RTA.7 In order for a seller to incur tax liability under...