Illinois Department of Revenue issues new draft rules for sourcing of local sales tax

On Jan. 22, 2014, the Illinois Department of Revenue adopted emergency rules and, on Feb. 7, 2014, proposed permanent rules to implement the Illinois Supreme Court’s ruling in Hartney Fuel Oil Co. v. Hamer. In Hartney, the Court struck down the Department’s long-standing rules governing the sourcing of sales for locally imposed retailers’ occupation taxes. The Court held that the bright-line purchase order acceptance test contained in the rules was contrary to law. Additionally, the Court held that the determination of the proper location for sourcing locally imposed retailers’ occupation taxes requires a fact-specific inquiry into the totality of a retailer’s selling activities. The rules are the Department’s attempt to implement the Supreme Court’s decision by providing guidance in the form of a fact-intensive inquiry for retailers with multiple Illinois locations.

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