Rental Purchase Agreement Occupation Tax

• Statutory - 35 ILCA 180/1 et seq.

• MyTax Illinois

Rental Purchase Agreement Occupation Tax is imposed on the gross receipts received on or after January 1, 2018, from the renting of tangible personal property under a rental purchase agreement, an arrangement typically known as a “rent-to-own” transaction. You must pay the Rental Purchase Agreement Occupation Tax if, in the ordinary course of your business, you regularly lease, offer to lease, or arrange for the leasing of merchandise under a rental purchase agreement. You also must pay this tax if you have been assigned an interest in a rental purchase agreement.

“Renting” is considered any transfer of the possession or right to possession of merchandise to a user for a valuable consideration under a rental purchase agreement. Gross receipts include the total rental price or leasing price but do not include receipts received for delivery, reinstatement, processing, waiver, or club program fees.

“Rental price” means the consideration for renting merchandise valued in money, whether received in money or otherwise, including cash, credits, property, and services. Rental price shall be determined without any deduction on account of the cost of the property rented, the cost of materials used, labor or service cost, or any other expense whatsoever.

Rental price does not include the following:

• charges added by a merchant on account of the merchant’s tax liability under the Rental Purchase Agreement Occupation and Use Tax Act or on account of the merchant’s duty to collect from the consumer the Rental Purchase Agreement Use Tax imposed by the Act;
• compensation paid to a merchant by a consumer in consideration of the merchant’s waiver of any right of action or claim against the consumer for loss or damage to the merchandise rented;
• separately stated charges for insurance; or
• other separately stated charges that are not for the use of tangible personal property, including charges for Chicago’s Personal Property Lease Transaction Tax.

A “rental purchase agreement” is an agreement for the use of merchandise by a consumer for personal, family, or household purposes for an initial period of four months or less that is automatically renewable with each payment after the initial period and that permits the consumer to become the owner of the merchandise. These transactions are governed by the Rental-Purchase Agreement Act, 815 ILCS 655/0.01 et seq.

Note: Rental Purchase Agreement Occupation Tax does not apply to items that must be titled or registered by an agency of the state of Illinois ( e.g., motor vehicles, watercraft, etc.).

Tax Rate
The Rental Purchase Agreement Occupation Tax rate is 6.25 percent (.0625).

Form/Filing & Payment Requirements

You must submit Form ST-201, Rental Purchase Agreement Occupation Tax Return, to report and pay the Rental Purchase Agreement Occupation Tax. Illinois law requires Form ST-201 to be filed electronically, and the tax to be paid electronically. Use MyTax Illinois to file your Form ST-201 and pay any tax due.

To request a waiver of the electronic return filing and payment mandate, complete Form IL-900-EW, Electronic Waiver Request, which is available from the Department by request at 217 782-7897, 1 800 732-8866, or 217 782-3336. If granted and unless renewed, this waiver shall not exceed two years.

You must submit Form ST-201, along with your payment for any tax due, on or before the 20th day of the month following the end of your reporting period.

Multiple Sites
If you have one business but rent merchandise at more than one location (site), you must combine the receipts from each particular location on Form ST-201.
If you have more than one business that rents merchandise, you must register each business separately to report and pay the Rental Purchase Agreement Occupation Tax.

Who is subject to Rental Purchase Agreement Occupation Tax, and how is this tax paid?

A merchant must pay the Rental Purchase Agreement Occupation Tax. A “merchant” is a person who, in the ordinary course of business, regularly leases, offers to lease, or arranges for the leasing of merchandise under a rental purchase agreement, an arrangement typically known as a “rent-to-own” transaction. A merchant is also a person who is assigned an interest in a rental purchase agreement. 35 ILCS 180/5. 

The Rental Purchase Agreement Occupation and Use Tax Act defines a "rental purchase agreement" as an agreement for the use of merchandise by a consumer for personal, family, or household purposes for an initial period of four months or less that is automatically renewable with each payment after the initial period and that permits the consumer to become the owner of the merchandise. 35 ILCS 180/5. These transactions are governed by the Rental-Purchase Agreement Act, 815 ILCS 655/0.01 et seq.

A merchant must submit Form ST-201, Rental Purchase Agreement Occupation Tax Return, to report and pay Rental Purchase Agreement Occupation Tax. Form ST-201 must be filed electronically, and the tax must be paid electronically. 35 ILCS 180/20. Use MyTax Illinois to file Form ST-201 and pay any tax due.

Form ST-201 is due, along with payment for any tax due, on or before the 20th day of the month following the end of the reporting period. 35 ILCS 180/10-15; 35 ILCS 120/3. If the rent-to-own business entity operates from more than one location/site, the business entity must combine the gross receipts from each location on Form ST-201, Rental Purchase Agreement Occupation Tax. However, if each location/site is operated by different business entities, each business entity must register separately to report and pay the Rental Purchase Agreement Occupation Tax.

What amounts in a rental purchase agreement are considered part of the rental price and are subject to Rental Purchase Agreement Occupation Tax?

“Rental price” means the consideration for renting merchandise valued in money, whether received in money or otherwise, including cash, credits, property, and services. Rental price shall be determined without any deduction on account of the cost of the property rented, the cost of materials used, labor or service cost, or any other expense whatsoever. See 35 ILCS 180/5.

Rental price does not include the following:

• charges added by a merchant on account of the merchant’s tax liability under the Rental Purchase Agreement Occupation and Use Tax Act or on account of the merchant’s duty to collect from the consumer the Rental Purchase Agreement Use Tax imposed by the Act; 
• compensation paid to a merchant by a consumer in consideration of the merchant’s waiver of any right of action or claim against the consumer for loss or damage to the merchandise rented;
• separately stated charges for insurance; or
• other separately stated charges that are not for the use of tangible personal property (e.g., Chicago’s Personal Property Lease Transaction Tax).

What receipts are subject to Rental Purchase Agreement Occupation Tax?

The Rental Purchase Agreement Occupation Tax is imposed on the gross receipts received on or after January 1, 2018, from the renting of tangible personal property under a rental purchase agreement. “Renting” is any transfer of the possession or right to possession of merchandise to a user for a valuable consideration under a rental purchase agreement. Gross receipts include the total rental price or leasing price but do not include receipts received for delivery, reinstatement, processing, waiver, or club program fees. See 35 ILCS 180/5.

Note: Rental Purchase Agreement Occupation and Use Tax does not apply to items that must be titled or registered by an agency of the state of Illinois (e.g., motor vehicles, watercraft, etc.). 35 ILCS 180/35.

How do I make tax-exempt purchases of merchandise that is subject to Rental Purchase Agreement Occupation Tax?

To make tax-exempt purchases under the Retailers’ Occupation Tax Act and Use Tax Act of merchandise that is subject to Rental Purchase Agreement Occupation Tax, the purchaser must certify that an item is purchased to be rented subject to a rental purchase agreement, as defined in the Rental-Purchase Agreement Act, and provide proof of registration under the Rental Purchase Agreement Occupation and Use Tax Act. 35 ILCS 120/2-5(43); 35 ILCS 105/3-5(38).

Use Form ST-261, Exemption Certificate for Property Subject to Rental Purchase Agreement Tax, to claim an exemption from retailers’ occupation and use tax on purchases of merchandise that is subject to the Rental Purchase Agreement Occupation Tax.

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