Justin Hobson authored an article for the January issue of Journal of Multistate Taxation and Incentives titled “Don’t Bury Your Head in the Sand: Illinois Court Rulings on Use Tax for Shipping Charges.” The article discusses the implications of recent rulings affecting taxpayers who are facing legal action for failing to comply with state sales and use tax regulations.
In early 2016, the Illinois Department of Revenue (IDOR) amended regulations to clarify when transportation and delivery charges are part of “gross receipts” subject to the state’s Retailers’ Occupation Tax or the Use Tax Act, and to conform to the Illinois Supreme Court’s decision in Kean v. Wal-Mart Stores, Inc. The updated regulations state delivery charges are part of the gross receipts when there is an “inseparable link” between the sale of tangible personal property and its delivery. The regulations go on to provide 19 examples of circumstances creating or failing to create an inseparable link. The prior lack of clear guidance resulted in several cases being litigated. The amended shipping and handling regulations should provide taxpayers with clearer guidance and conform to the Illinois Supreme Court’s ruling in Kean.
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