In response to a request from an anonymous taxpayer, the Illinois Department of Revenue (IDOR) issued a General Information Letter (GIL) addressing the taxability of food and beverages provided in connection with party room rentals or indoor playground activities. The taxpayer sought clarification on whether snacks and drinks available at an indoor playground were taxable when purchased in connection with a rented party room. IDOR advised that when a transaction includes both goods and services, taxpayers should consider the true object of the sale. Where the rental of the party room is the true object of the transaction, refreshments that are incidental to the rental and not separately charged are not subject to Retailers’ Occupation Tax, but the business providing the rental is considered the end user and would owe use tax on the cost of the food or beverages. However, if food and beverages are separately charged in addition to the room rental fee or an access fee to the indoor playground, the tax applies only to the selling price of the food and beverages.
This guidance highlights the importance of invoicing practices in determining tax obligations, particularly for bundled transactions. As the GIL illustrates, when a state applies a “true object” test, taxpayers should clearly identify what the customer is primarily purchasing when evaluating taxability. It is also critical to review and be aware of what is on the various contracts and invoices presented to clients and prospective clients throughout the course of business to make sure tax treatment is appropriately handled. (General Information Letter ST 26-0035-GIL, Illinois Department of Revenue, August 18, 2026)