Publication 113-SOT, Overview of Service Occupation Tax

The focus of this publication is for persons who transfer tangible personal property (TPP) incident to a sale of service (Servicepersons) and who have a physical presence in Illinois or meet the $100,000 Tax Remittance Threshold. These servicepersons are required to register with the Illinois Department of Revenue (IDOR), collect Service Occupation Tax (SOT), file returns, and remit the tax to IDOR.

Note: The service component of a sale of service remains nontaxable. The only part of a sale of service that is taxable is the transfer of TPP as part of that sale of service. This publication gives an overview of basic SOT and Service Use Tax (SUT) matters but does not discuss detailed requirements.

Illinois statutes and regulations related to these topics are available on the Illinois General Assembly website at ilga.gov. Knowing how Illinois tax laws apply to your business can save you time, trouble, and money. The information included in this publication will supply you with the general information most servicepersons need to collect the proper amount of tax due and to file returns correctly.

A Serviceperson is responsible for

• collecting the correct amount of tax on transfers of TPP by sale, lease, or rental incident to a sale of service;
• documenting any tax-exempt transfers of TPP;
• paying use tax on items the Serviceperson purchased tax-exempt and used in its business or removed from inventory and did not sell or transfer incident to a sale of service;
• filing a completed Form ST-1, Sales and Use Tax and E911 Surcharge Return, either electronically or on paper by the due date; and
• keeping complete and accurate records for all TPP transferred incident to a sale of service.

Publications that cover other sales taxes and fees and specific sales tax applications are available on IDOR’s website on the Tax Publications webpage.

You have the right to call the Department of Revenue for help in resolving tax problems.

You have the right to privacy and confidentiality under most tax laws.

You have the right to respond, within specified time periods, to Department notices by asking questions, paying the amount due, or providing proof to refute the Department’s findings.

You have the right to appeal Department decisions, in many instances, within specified time periods, by asking for Department review, by filing a petition with the Illinois Independent Tax Tribunal, or by filing a complaint in circuit court.

If you have overpaid your taxes, you have the right, within specified time periods, to file for a credit (or, in some cases, a refund) of that overpayment.

For more information about these rights and other Department procedures, you may write us at the following address:

Problems Resolution Office
Illinois Department of Revenue
PO Box 19014
Springfield, IL 62794-9014

Retailers’ Occupation Tax Act - 35 ILCS 120/
Service Occupation Tax Act- 35 ILCS 115/
Service Use Tax Act - 35 ILCS 110/
Use Tax Act - 35 ILCS 105/
Leveling the Playing Field for Illinois Retail Act - 35 ILCS 185/

Retailers’ Occupation Tax - 86 Ill. Adm. Code Part 130
Service Occupation Tax - 86 Ill. Adm. Code Part 140
Service Use Tax - 86 Ill. Adm. Code Part 160
Use Tax - 86 Ill. Adm. Code Part 150
Leveling the Playing Field for Illinois Retail Act - 86 Ill. Adm. Code Part 131

1. Registering Your Business
2. Requirements for Servicepersons Who File Form ST-1
3. Keeping Complete and Accurate Records

Cost Ratio - A measure of the amount of TPP transferred with a service. It is calculated by comparing the total annual cost of TPP transferred incident to all the Serviceperson’s sales of service to their total annual income from all sales of service. See 86 Ill. Adm. Code 140.105 for more detail.

De Minimis Serviceperson - A De Minimis Serviceperson is a Serviceperson whose annual aggregate Cost Ratio is less than 35% (75% in the case of Servicepersons transferring prescription drugs or engaged in graphic arts production). See 86 Ill. Adm. Code 140.201(c) for more detail.

Marketplace - A physical or electronic place, forum, platform, application, or other method by which a Marketplace Serviceperson makes or offers to make sales of service.

Marketplace Facilitator - A Marketplace Facilitator is a person who, pursuant to an agreement with an unrelated third-party Marketplace Serviceperson, directly (or indirectly through one or more affiliates) facilitates sales of service by the unrelated third-party Marketplace Serviceperson by performing the following services, regardless of whether it receives compensation or other consideration in exchange for the services:

• listing or advertising in a Marketplace offers for sales of service by Marketplace Servicepersons that are subject to tax under the SOTA; and
• either itself or through agreements or arrangements with third parties, collecting payment from the customer and transmitting that payment to the Marketplace Serviceperson.

Marketplace Serviceperson - A Marketplace Serviceperson is a person who makes or offers to make a sale of service through a Marketplace operated by an unrelated third-party Marketplace Facilitator.

Remote Serviceperson - A Serviceperson that makes sales of service to Illinois customers but does not maintain a place of business in this State.

Sale of Service - A Sale of Service is generally any transaction that is not a sale of property. See 86 Ill. Adm. Code 140.201(g)(1)-(8) for more detail.

Selling Price - The Selling Price is the separately-stated charge made by a Serviceperson for the TPP transferred incident to a sale of service, without any deduction on account of the Serviceperson’s cost of the property sold, the cost of materials used, labor or service cost, or any other expense whatsoever and without including any separately stated interest, finance charges, or any charges added by the Serviceperson on account of its duty to collect SOT from the purchaser. If no charge is separately stated in the Serviceperson’s billing, the Selling Price is 50% of the entire amount billed to the customer. In no circumstance can the selling price be less than the cost price.

Service - The portion of a sale of service transaction which does not represent the transfer of TPP, intangible personal property, or real property.

Service Occupation Tax (SOT) - The SOT is a tax imposed upon persons engaged in the business of making sales of service who transfer TPP as an incident of a sale of service.

Service Use Tax (SUT) - The SUT is a tax imposed on the privilege of using, in this State, TPP that is received anywhere as an incident to a purchase of service from a Serviceperson. However, if the Serviceperson would not be taxable under SOT despite all elements of the sale of service occurring in Illinois, then the tax imposed by the SUTA does not apply to the use of such property in this State. If property is sold and delivered to a person who lives or does business in this State, that sale counts as evidence that the property was meant to be used in this State.

Serviceperson - A Serviceperson is any person who is engaged in the occupation of making sales of service. SOT is only imposed if a Serviceperson transfers TPP as part of a sale of service.

Serviceperson Maintaining a Place of Business in this State - A Serviceperson who has a physical or economic presence in Illinois which requires them to collect and remit State and local SOT and SUT on sales of service to Illinois customers. See “Who must register as a Serviceperson?” below for additional information and definitions related to Servicepersons Maintaining a Place of Business in this State.

Tangible Personal Property (TPP) - All property other than intangible personal property (such as stocks, bonds, and CDs) or real property (such as land and buildings).

Tax Remittance Threshold - Cumulative gross receipts of $100,000 from sales of service to purchasers in Illinois for the preceding 12-month period as determined on a quarterly basis, ending on the last day of March, June, September, and December. For more information, refer to the PIO-127, Determining Service Occupation and Use Tax Liability in Illinois.

Transfer - Any transfer of the title to TPP or the ownership of TPP or any transfer of the possession or control of, the right to possess or control, or a license to use TPP when neither ownership nor title is transferred.

For specific phone number and email contacts see our Contact Us page.

Call us at 800-732-8866, 217-782-3336, or 800-544-5304 (TTY).

Write us at Illinois Department of Revenue, PO Box 19001, Springfield, IL 62794-9001.

Call our 24-hour Forms Order Line at 800-356-6302.

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Pub-113-SOT (N-03/26)