The Illinois Department of Revenue (IDOR) released a significantly revised version of PIO-125. While the prior version focused only on retailers, the 2026 update expands the guidance to address servicepersons, clarify economic nexus rules, and provide more comprehensive sourcing instructions.
For businesses selling goods or taxable services into Illinois, these updates provide much-needed clarification on registration, tax collection, and sourcing obligations. The most notable change is that the guidance no longer applies only to retailers. The 2026 publication expands its scope to include servicepersons that transfer tangible personal property (TPP) as part of providing taxable services. Throughout the document, references to “retailers” have been replaced with the broader term “sellers,” which includes both retailers and service providers. The publication also clarifies that references to a “sale” include transfers of TPP made during a sale of service.
While the previous guide discussed tax remittance thresholds, the 2026 version introduces an entirely new section explaining how to determine whether the $100,000 threshold has been met. The updated guidance explains that
• Retail sales and service receipts cannot be combined when determining whether the threshold has been exceeded.
For example, a business with $75,000 in retail sales and $40,000 in service receipts does not meet either threshold because neither category individually exceeds $100,000.
One of the biggest additions is an entirely new section devoted to servicepersons. The guidance now explains how to determine whether a serviceperson is de minimis, the importance of the 35% cost ratio (or 75% for certain industries), when Service Occupation Tax applies, when Use Tax may be elected instead, registration requirements, annual reevaluation requirements, and optional tax calculation methods available to qualifying businesses. The revised guide now separates compliance obligations into two distinct categories, Rules for retailers and rules for servicepersons. Each category explains registration requirements, tax collection responsibilities, annual reevaluation, and filing obligation after meeting the physical or economic nexus thresholds.
Marketplace guidance has also been broadened. The revised publication explains that marketplace facilitators are responsible for collecting Retailers’ Occupation Tax (ROT) or Service Occupation Tax (SOT) on qualifying marketplace transactions, depending on whether goods or taxable services are being sold. This reflects Illinois’ broader treatment of marketplace transactions involving services.
Although the sourcing methodology itself remains unchanged, the terminology has been expanded throughout. The familiar three-step sourcing analysis, including the “3 of 5 primary selling activities” test, still determines where a sale is sourced. However, the guidance now consistently states that sellers may owe ROT or SOT, rather than only Retailers’ Occupation Tax. The sourcing framework itself remains the same:
The revised publication adds numerous statutory references related to the Service Occupation Tax Act (35 ILCS 110) alongside existing Retailers’ Occupation Tax citations. These additions reinforce that the publication now serves as guidance for both retail sellers and service providers. Businesses that provide both products and taxable services should review these updates carefully, as the new guidance clarifies when Service Occupation Tax, Use Tax, or Service Use Tax applies and how economic nexus standards affect registration and collection responsibilities.
(PIO-125, Determining Physical Presence or When the Tax Remittance Threshold Has Been Met and Where a Sale Is Sourced, Illinois Department of Revenue, March 2026)