Illinois School Districts Liable for Sales Tax on Purchases of Textbooks

Friday, February 10, 2012

The Illinois Department of Revenue recently issued a general information letter discussing the taxability of textbooks purchased by school districts and subsequently resold to students. (Ill. Gen. Info. Ltr. ST 12-0003-GIL (Dept. of Revenue Jan. 11, 2012)). School districts in Illinois that purchase and sell textbooks to their students must register as a retailer and charge and remit sales tax on those sales. According to the Illinois Department of Revenue, “when governmental units make sales that are not in direct performance of their governmental function, the sales are generally taxable.” This is to ensure that governmental entities do not have a competitive advantage when selling items that are also sold by other Illinois retailers. Thus, school districts may purchase these items tax-free using a resale certificate, but they cannot use their status as an exempt governmental entity to purchase items tax-free. However, a school district may rent textbooks to students tax-free, as Illinois imposes no tax on rental receipts.

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