Illinois – Taxability of Custom-Printed Magnetic Cards

SALT Report 1745 – The Illinois Department of Revenue issued a general information letter regarding the taxability of custom-printed magnetic cards such as gift cards, hotel room keys, and customer loyalty cards. Generally, a manufacturer who manufactures and sells custom-printed magnetic cards is engaged in a sale of service and is subject to the service occupation tax.

Under the Service Occupation Tax Act, businesses providing services (servicemen) are taxed on tangible personal property transferred during the service. The serviceman’s liability may be calculated in one of four ways:

  • Service Occupation Tax on the separately stated selling price of tangible personal property transferred incident to service,
  • Service Occupation Tax on 50% of the servicemen’s entire bill,
  • Service Occupation Tax on the servicemen’s cost price if the servicemen are registered servicemen, or
  • Use Tax on the servicemen’s cost price if the servicemen are not required to be registered under Section 2a of the Retailers’ Occupation Tax Act

Therefore, a manufacturer who manufactures and sells custom-printed magnetic cards is engaged in a sale of service.  Any tangible personal property transferred incident to that sale of service is subject to tax and the taxpayer must use one of the methods above to pay the tax.

For Further Information:

Illinois Department of Revenue – General Information Letter ST 12-0034-GIL