35 ILCS 115/3 — Tax imposed

Sec. 3. Tax imposed.

# (a)

A tax is imposed upon all persons engaged in the business of making sales of service (referred to as "servicemen") on all tangible personal property transferred, including, on and after January 1, 2025, transferred by lease, as an incident of a sale of service, including computer software, and including photographs, negatives, and positives that are the product of photoprocessing, but not including products of photoprocessing produced for use in motion pictures for public commercial exhibition. Beginning January 1, 2001, prepaid telephone calling arrangements shall be considered tangible personal property subject to the tax imposed under this Act regardless of the form in which those arrangements may be embodied, transmitted, or fixed by any method now known or hereafter developed. Sales of (1) electricity delivered to customers by wire; (2) natural or artificial gas that is delivered to customers through pipes, pipelines, or mains; and (3) water that is delivered to customers through pipes, pipelines, or mains are not subject to tax under this Act. The provisions of this amendatory Act of the 98th General Assembly are declaratory of existing law as to the meaning and scope of this Act.

# (b)

Beginning on January 1, 2026, a serviceman maintaining a place of business in this State that makes sales of service to Illinois customers from a location or locations outside of Illinois is engaged in the business of making sales of service in Illinois for the purposes of this Act. A qualifying serviceman under this subsection (b) is liable for all applicable State and locally imposed service occupation taxes administered by the Department on all tangible personal property transferred as an incident of a sale of service made by the serviceman to Illinois customers from locations outside of Illinois.

# (c)

A serviceman maintaining a place of business in this State that is required to collect taxes imposed under the Service Use Tax Act on sales of service made to Illinois purchasers shall be liable to the Department for such taxes, except when the serviceman maintaining a place of business in this State is relieved of the duty to remit such taxes by virtue of having paid to the Department taxes imposed by this Act in accordance with this Section upon such sales.

# (d)

Beginning January 1, 2026, a marketplace facilitator whose cumulative gross receipts from sales of service to purchasers in Illinois by the marketplace facilitator and by marketplace servicemen selling through the marketplace are $100,000 or more is engaged in the business of making sales of service in Illinois for purposes of this Act for each sale of service made through its marketplace. A marketplace facilitator who meets the threshold of this subsection (d) is required to remit the applicable State service occupation taxes under this Act and local service occupation taxes administered by the Department on all taxable transfers of tangible personal property made incident to sales of service by the marketplace facilitator or facilitated for marketplace servicemen to customers in this State. A marketplace facilitator transferring or facilitating the transfer of tangible personal property incident to a sale of service to customers in this State is subject to all applicable procedures and requirements of this Act. The marketplace facilitator shall determine on a quarterly basis, ending on the last day of March, June, September, and December, whether the marketplace facilitator meets the threshold of this subsection (d) for the preceding 12-month period. If the marketplace facilitator meets the threshold for a 12-month period, the marketplace facilitator is considered a serviceman maintaining a place of business in this State and is required to remit the tax imposed under this Act and all service occupation tax imposed by local taxing jurisdictions in Illinois, provided such local taxes are administered by the Department, and to file all applicable returns for one year. At the end of the one-year period, the marketplace facilitator shall determine whether the marketplace facilitator met the threshold for the preceding 12-month period. If the marketplace facilitator met the threshold for the preceding 12-month period, the marketplace facilitator is considered a serviceman maintaining a place of business in this State and is required to remit all applicable State and local service occupation taxes and file returns for the subsequent year. If at the end of a one-year period a marketplace facilitator that was required to remit the tax imposed under this Act determines that the marketplace facilitator did not meet the threshold during the preceding 12-month period, the marketplace facilitator shall subsequently determine on a quarterly basis, ending on the last day of March, June, September, and December, whether he or she meets the threshold for the preceding 12-month period.

# (e)

A marketplace facilitator shall be entitled to any credits, deductions, or adjustments to the sales price otherwise provided to the marketplace serviceman, in addition to any such adjustments provided directly to the marketplace facilitator. This Section pertains to, but is not limited to, adjustments such as discounts, coupons, and rebates. In addition, a marketplace facilitator shall be entitled to the vendors' discount provided in Section 9 of the Service Occupation Tax Act on all marketplace sales of service, and the marketplace serviceman shall not include sales of service made through a marketplace facilitator when computing any vendors' discount on remaining sales of service. Marketplace facilitators shall report and remit the applicable State and local service occupation taxes on sales of service facilitated for marketplace servicemen separately from any service occupation or service use tax collected on taxable sales of service made directly by the marketplace facilitator or its affiliates. The marketplace facilitator is liable for the remittance of all applicable State service occupation taxes under this Act and local service occupation taxes administered by the Department on sales of service through the marketplace and is subject to audit on all such sales of service. The Department shall not audit marketplace servicemen for their marketplace sales of service where a marketplace facilitator remitted the applicable State and local service occupation taxes unless the marketplace facilitator seeks relief as a result of incorrect information provided to the marketplace facilitator by a marketplace serviceman as set forth in this Section. The marketplace facilitator shall not be held liable for tax on any sales of service made by a marketplace serviceman that take place outside of the marketplace and which are not a part of any agreement between a marketplace facilitator and a marketplace serviceman. In addition, marketplace facilitators shall not be held liable to State and local governments of Illinois for having charged and remitted an incorrect amount of State and local service occupation tax if, at the time of the sale of service, the tax is computed based on erroneous data provided by the State in database files on tax rates, boundaries, or taxing jurisdictions or incorrect information provided to the marketplace facilitator by the marketplace serviceman, including the marketplace serviceman's cost ratio and registration status.

# (f)

A marketplace facilitator shall: (1) certify to each marketplace serviceman that the marketplace facilitator assumes the rights and duties of a serviceman under this Act with respect to sales of service made by the marketplace serviceman through the marketplace; and (2) remit taxes imposed by this Act as required by this Act for sales of service made through the marketplace.

# (g)

A marketplace serviceman shall retain books and records for all sales of service made through a marketplace in accordance with the requirements of Section 11 of this Act.

# (h)

A marketplace serviceman shall furnish to the marketplace facilitator information that is necessary for the marketplace facilitator to correctly remit taxes for a sale of service. Such information includes the cost price of any item transferred incident to a sale of service under this Act when the cost price of an item exceeds 50% of the total invoice price of a sale of service made through the marketplace. The information may include a certification that an item transferred incident to a sale of service under this Act is taxable, not taxable, exempt from taxation, or taxable at a specified rate. A marketplace serviceman shall be held harmless for liability for the tax imposed under this Act when a marketplace facilitator fails to correctly collect and remit tax after having been provided with information by a marketplace serviceman to correctly collect and remit taxes imposed under this Act.

# (i)

If the marketplace facilitator demonstrates to the satisfaction of the Department that its failure to correctly collect and remit tax on a sale of service resulted from the marketplace facilitator's good faith reliance on incorrect or insufficient information provided by a marketplace serviceman, it shall be relieved of liability for the tax on that sale of service and the marketplace serviceman shall be liable for any resulting tax due.

# (j)

A marketplace facilitator is subject to audit on all marketplace sales of service for which it is considered to be the serviceman, but shall not be liable for tax or subject to audit on sales of service made by marketplace servicemen outside of the marketplace.

# (k)

A marketplace facilitator required to collect taxes imposed under the Service Use Tax Act on marketplace sales of service made to Illinois purchasers shall be liable to the Department for such taxes, except when the marketplace facilitator is relieved of the duty to remit such taxes by virtue of having paid to the Department taxes imposed by this Act in accordance with this Section from such sales of service.

# (l)

Nothing in this Section shall allow the Department to collect service occupation taxes from both the marketplace facilitator and marketplace serviceman on the same transaction.

# (m)

If, for any reason, the Department is prohibited from enforcing the marketplace facilitator's duty under this Act to remit taxes pursuant to this Section, the duty to remit such taxes remains with the marketplace serviceman. The imposition of the tax under this Act on tangible personal property transferred by lease by persons engaged in the business of making sales of service applies to leases in effect, entered into, or renewed on or after January 1, 2025. In the case of leases, except as otherwise provided in this Act, the serviceman who is a lessor must remit for each tax return period only the tax applicable to that part of the selling price actually received during such tax return period. (Source: P.A. 103-592, eff. 1-1-25; 104-6, eff. 6-16-25.)