LAWREVIEW
Illinois Taxes on
Seminar Materials
This Law Review was written by
John A. Biek, Esq., and edited
by Jed Mandel, the Association
Forum’s General Counsel. John
is a tax attorney, and practices
with Jed at Neal, Gerber &
Eisenberg LLP.
Q: Does our association have to pay sales
or use tax on materials distributed at seminars and conferences in Illinois?
A: Yes, in most cases. And, determining
what tax to pay is complicated. In 2008,
the Illinois Department of Revenue issued
a new regulation on payment of Illinois
Service Occupation Tax or Use Tax on
sales of materials sold or distributed in
connection with seminars, conferences
and other educational events. Yet, the
new rule represents nothing new in the
state taxation scheme. Rather, it clarifies
existing tax requirements and, for many
organizations, may only change how they
report tax liability for seminar materials.
Others may need to start paying taxes to
Illinois, including taxes for prior periods.
Under the new rule, Section 501(c)( 6) professional or trade associations that charge a
fee to attend seminars must pay tax on the
association’s sales price or cost price of the
outlines, books, manuals, practice guides,
audio and video tapes or compact discs and
other tangible materials that the association
distributes to paying seminar attendees. 86
Ill. Admin. Code § 140.129. Note that nonprofit religious, educational or other charitable organizations classified as tax-exempt
Section 501(c)( 3) organizations and that
have received an “E Number” from the state
are not subject to tax on seminar materials
as long as the seminar furthers the organization’s tax-exempt purposes.
Under Illinois’ “sales tax” scheme,
organizations that provide seminars for a
fee are considered “servicemen” and the
seminar materials provided in connection
with those seminars are “tangible personal
property,” subject to tax. Illinois does not
tax the fees attendees pay to attend the
seminars. In addition, organizations in Illinois selling goods at or outside of seminars also may be required to register as
retailers and pay Retailers’ Occupation Tax
on Illinois retail sale transactions. There
are three categories under which an organization may need to pay and/or collect tax
for seminar materials.
Under the first category, the association
is considered an “unregistered de minimis
serviceman.” If the association is not otherwise making retail sales of tangible personal property in Illinois and therefore, it is
not registered as a retailer, and if the “cost
price” (what it pays to suppliers for the
seminar materials) is less than 35 percent
of the association’s total gross receipts
from putting on seminars and providing
other services, then it is an “unregistered
de minimis serviceman.” Unregistered de
minimis associations must pay Use Tax to
Illinois on the cost price of the seminar
materials (or components thereof) they
purchase to distribute to seminar attendees. For example, an association would
pay Use Tax on the price it pays to suppliers for purchases of finished seminar materials or paper and ink that the association
used to photocopy seminar materials, or
on 50 percent of the price it paid to an outside print shop to photocopy the seminar
materials. As noted above, many organizations already may be paying such Use
Taxes to Illinois. De minimis servicemen
usually do not want to bother their customers by collecting small amounts of use
tax, when the law does not require it.
The second category which an association may fall under is that of a “registered
de minimis serviceman” (because the association makes retail sales of seminar materials or other merchandise to consumers in
Illinois). Registered de minimis association
must pay “Service Occupation Tax” to the
State on the cost price of the seminar
materials sold to attendees, and are then
required to collect “Service Use Tax” from
seminar attendees to reimburse the association for taxes paid to Illinois. In addition,
those associations should provide a resale
certificate (with the association’s Illinois
tax registration number) when they purchase seminar materials (or components
thereof) from suppliers in order to avoid
paying Use Tax to the supplier on the seminar materials -— avoiding double taxation.
The third category under which an
association may have to pay taxes is as a
“registered non-de minimis serviceman”
whose cost price of seminar materials is 35
percent or more of the gross receipts the
association receives from putting on seminars and providing other services. Those
associations will be required to pay Service
Occupation Tax — and may, in turn, collect
Service Use Tax from seminar attendees —
on the separately stated sales price of the
seminar materials, or on 50 percent of the
lump sum the attendee is charged to attend
the seminar and receive the seminar materials, if the cost of the materials isn’t itemized
separately from the seminar fee. Like the
registered de minimis servicemen, these
associations should present a resale certificate to suppliers when purchasing seminar
materials in order to avoid double taxation.
Finally, an association selling non-semi-nar materials at seminars, such as coffee
mugs, T-shirts, tote bags and other novelty
items, or selling seminar materials apart
from the seminar, must register as a retailer
and pay Retailers’ Occupation Tax to Illinois
and collect (and retain) Use Tax from seminar attendees on the gross receipts from
merchandise sales. If the association gives
away novelty items to seminar attendees,
the association will still incur Use Tax liability on its purchase of the novelty items.
The Illinois sales and use taxes rules
are complicated. Each association should
carefully review its seminar, conference
and sales activities within Illinois to determine appropriate compliance.
The answers provided here should not be construed
as legal advice or a legal opinion. You are urged to
consulta lawyerconcerning anyspecificsituations or
legal questions you may have.
