ST 16-0062 GIL 11/03/2016 SALE AT RETAIL

Most retailers will not act as a construction contractor. If a purchaser buys an appliance from a

retailer and the purchaser contracts with the retailer separately for installation, the seller must

pay ROT on receipts received from the sale of the dishwasher. Installation would only be

taxable if it was included in the selling price of the product. 86 Ill. Adm. Code 130.1940. (This

Dear Xxxxx:

This letter is in response to your letter dated February 25, 2016 in which you requested

information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are

issued by the Department in response to specific taxpayer inquiries concerning the application of a

tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the

taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR

are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in

The nature of your inquiry and the information you have provided require that we respond with

a GIL. In your letter you have stated and made inquiry as follows:

I am writing you today as a result of the Department’s Compliance Alert of 2015

regarding construction contracts and the application of the Retailer’s Occupation Tax

(ROT) pursuant to Administrative Code 86/130.1940. Specifically, ASSOCIATION

would request an expedited review of three questions.

1. Why dishwashers appear to be treated separately from the likes of gas

believes the same problem exists in that refrigerators, stoves, ovens,

dishwashers, and other appliances can all be built-in.

2. There appears to be a disparity in the tax treatment of appliances depending

upon whether they were purchased from a retailer and installed by the

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retailer, whether directly or through a preferred contractor, or purchased

applies. For the purposes of this regulation, the treatment should be identical.

Either the appliance in question is taxed at cost-price or sale price regardless

of who purchased and installed them. To do otherwise place similarly

situation actors in the marketplace on unequal footing.

3. Finally, when considering Part 130.2075, can a retailer be a contractor?

ASSOCIATION would look forward to meeting with the Department at the earliest

possible date to resolve these questions. Thank you in advance for the consideration

we know you will give this request. I look forward to hearing from you.

Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this State, any kind of

tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code

150.101. These taxes comprise what is commonly known as “sales” tax in Illinois. If the purchases

occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase. The

retailers are then allowed to retain the amount of Use Tax paid to reimburse themselves for their

Retailers' Occupation Tax liability incurred on those sales.

If a customer purchases tangible personal property over-the-counter without installation, for

example an appliance or counter tops, then the retailer owes Retailers' Occupation Tax and must

collect the corresponding Use Tax from the customer. If a customer purchases appliances or counter

retailer or other installer, the receipts from such installation charges must be included in the gross

receipts upon which his Retailers’ Occupation Tax liability is measured if such installation charges are

included in the selling price of the property being sold. If, however, the seller and buyer agree upon

the installation charges separately from the selling price of the tangible personal property which is

sold, then the receipts from the installation charges are not a part of the "selling price" of the tangible

personal property which is sold. Instead such charges constitute a service charge, separately

contracted for, which need not be included in the figure upon which the seller computes his Retailers’

Occupation Tax liability. See 86 Ill. Adm. Code 130.450. For example, a person may purchase a

dishwasher at an appliance store and the seller and purchaser enter into a separate agreement for

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the installation of the dishwasher. The seller in this case would pay ROT on the receipts from the

incorporated into a structure include bathtubs, sinks, lavatories, cabinets built into the structure, water

heaters and water softeners. Stoves and refrigerators that are not free standing and are built into the

structure are additional examples. Regulations governing the tax liabilities of construction contractors

in Illinois may be found at 86 Ill. Adm. Code 130.1940 and 130.2075 on the Department’s website.

The term “construction contractor” includes general contractors, subcontractors, and specialized

contractors such as landscape contractors. The Department does not consider a sale of a

dishwasher by a retailer with a separate agreement or listing on the invoice for installation to be a

construction contract. In Illinois, construction contractors are deemed end users of tangible personal

property purchased for incorporation into real property. As end users of such tangible personal

property, these contractors incur Use Tax liability for such purchases based upon their cost price of

Very truly yours,

Richard S. Wolters

Associate Counsel

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