Are shipping charges taxable in Illinois?

Folks in Illinois are quite litigious when it comes to occupation and use (aka sales) taxes on transportation or delivery (aka “shipping”) charges. Back in 2006, Wal-Mart was hit with a class action for collecting tax on shipping where no tax was allegedly due. In more recent years, over 200 retailers have been sued by a Chicago attorney for not collecting tax on shipping.

So, should you collect and remit tax on shipping charges, or should you not collect or remit taxes on shipping? If only the answer were so black and white. Important considerations, as you will find in the regulations, cases, and articles listed below, are whether the shipping charges are stated separately in your checkout process and on your invoices, whether the shipping charged to the consumer exceed the actual cost of delivery, and whether you provide the customer an option to pick up the wine at the winery.

The goal of this post is not to provide legal advice, as the decision to collect and remit taxes on shipping in Illinois is based on several different factors and your own individual circumstances are important in determining taxability based on those factors. Instead, our aim is to share as much information as we can so that the industry is armed with the facts of the situation and can make informed decisions. We will continue to update this post with documents, resources, and other information that we find. If you come across something that is relevant, please post it in the comments section below or email us at illinois@shipcompliant.com.

Resources:

1) Illinois Regulations: Title 86 Part 130 Section 130.415 Transportation and Delivery Charges

If the seller and the buyer agree upon the transportation or delivery charges separately from the selling price of the tangible personal property which is sold, then the cost of the transportation or delivery service is not a part of the “selling price” of the tangible personal property which is sold, but instead is a service charge, separately contracted for, and need not be included in the figure upon which the seller computes his Retailers’ Occupation Tax liability. Delivery charges are deemed to be agreed upon separately from the selling price of the tangible personal property being sold so long as the seller requires a separate charge for delivery and so long as the charges designated as transportation or delivery or shipping and handling are actually reflective of the costs of such shipping, transportation or delivery

2) Illinois Department of Revenue General Information Letter: ST 13-0025-GIL 05/28/2013 LIQUOR TAX

Under the Liquor Control Act of 1934, out-of-state wineries who are going to sell wine directly to Illinois residents must complete an Application For State Of Illinois Winery Shipper’s License (“Direct Shipping Permit”), which I have enclosed for your convenience. Further, a licensee who is not otherwise required to register under the Retailers’ Occupation Tax Act must register under the Use Tax Act to collect and remit use tax to the Department of Revenue for all gallons of wine that are sold by the licensee and shipped to persons in this State.

3) Illinois Compiled Statutes: 235 ILCS 5/5-1 (from Ch. 43, par. 115)

A winery shipper licensee must pay to the Department of Revenue the State liquor gallonage tax under Section 8-1 for all wine that is sold by the licensee and shipped to a person in this State. For the purposes of Section 8-1, a winery shipper licensee shall be taxed in the same manner as a manufacturer of wine. A licensee who is not otherwise required to register under the Retailers’ Occupation Tax Act must register under the Use Tax Act to collect and remit use tax to the Department of Revenue for all gallons of wine that are sold by the licensee and shipped to persons in this State.

4) Booze Rules Blog: Illinois Qui Tam Lawsuits – Private Enforcement of a State Claim: A Bonanza for Plaintiff’s Lawyer and a Rip-Off of Retailers
5) Brann & Isaacson: Some Good News for Retailers Regarding False Claims Act Issues

6) Illinois Supreme Court: Nancy Kean vs. Wal-Mart Stores, Inc.

7) Tax Analysts: Illinois Rules Against Chicago “Whistleblower” in False Claims Case

8) Tax Analysts: Qui Tam Troubles, Part 1: An Illinois Informant With No Inside

9) Tax Analysts: Qui Tam Troubles, Part 2: A Relator Seeking to Second-Guess Audits

10) Crain’s Chicago Business: State blows the Whistle on this Whistleblower

11) Cook County Circuit Court: Schad Diamond and Shedden v. National Business Furniture LLC

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