Sales, Use and International Tax Activity Update - April 2010

Illinois Contractors — Sales Tax is not Use Tax

For Illinois retailers' occupation (sales) and use tax purposes, when a construction contractor permanently affixes tangible personal property to real property, the contractor is deemed the end user of that property and incurs use tax liability based on the cost price of the property.

Because the contractor's customers incur no use tax liability, the contractor has no legal authority to collect the use tax from them.

However, many construction contractors pass on the amount of their use tax liabilities to customers in the form of higher prices or by including provisions in their contracts that require customers to reimburse them for their tax liability.

This reimbursement cannot be billed as "sales tax," but can be listed on the bill as a reimbursement of tax.

The General Information Letter can be viewed on the Illinois Department of Revenue Web site.

---

Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.

Email Address